Medium-term misery for Biden as the key economy indicator signals the loss of 30 places

(Bloomberg) – Whatever else is on Americans’ minds – and that’s a long list right now – the state of the economy looms large in every US election. This poses a major problem for the Democrats in the November midterm vote.

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A new Bloomberg Economics study takes an indicator with a knack for predicting voting results – the misery index, calculated by adding up rates of inflation and unemployment – and projects it forward to election day.

The result: Based on previous voting patterns, President Joe Biden’s party can expect to lose 30 to 40 seats in the House and some even in the Senate, easily wiping out the very thin Democratic majorities.

Of course, the economy is only part of the calculation that voters make. Democrats hope anger over abortion and gun laws and the January 6, 2021 attack on the US Capitol by a right-wing mafia will energize their supporters.

There are many forecasting models, which use all types of inputs, not just economic ones, and predict a variety of outcomes. Analysis firm Inside Elections, for example, sees likely democratic losses in the House of between 12 and 30 seats. Others point to anything from a wash, with both sides ending roughly where they started, to GOP gains of 45 or more seats.

Another slap?

However, the consensus is that Democrats face an uphill battle. Most days lately, there is enough in the economic headlines to suggest that a downside for the reigning party is anything but rusty.

Last week, the Federal Reserve recorded its largest consecutive hikes in interest rates since the early 1980s as it tries to tame the price spike by crushing consumers and home buyers. And the government reported that the US economy has indeed shrunk since the beginning of this year, sparking a partisan squabble in Washington over whether the country is already in a recession.

Read more: A Fed-triggered recession could cost Biden a second term

Officially, it probably isn’t, partly because it’s still creating a lot of jobs. Low unemployment and an abundance of open positions will be the Democrats’ strongest point of discussion on the economy in the upcoming election campaign.

It is the other component of the misery index that is causing their problems and that makes many Americans feel like they are already fighting some sort of crisis.

Inflation hit a 40-year high of 9.1% in June, bringing the misery index to 12.7%. It probably won’t drop long before Americans go to the polls.

Bloomberg Economics expects an index reading of 12% in October. It takes away the worst months of the pandemic crisis in early 2020, and that’s close to the highest levels seen for a decade or more, rivaling the aftermath of the Great Recession, when unemployment hit 10% and Democrats got what there was. ‘then President Barack Obama called “shellacking” in mid-term.

“Difficult to interpret”

Since then, the once-in-a-lifetime upheaval of Covid-19 has led some analysts to question the predictive power of economy-based models.

“It’s very difficult to interpret the economic numbers right now,” says Larry Bartels of Vanderbilt University. “In the 2020 presidential election, the huge increase in revenue due to the pandemic stimulus resulted in a landslide from Trump, while the huge drop in GDP resulted in his demise. Obviously, the truth was somewhere in between. ”

The latest so-called generic poll, which eliminates the specifics of individual contests, is not disastrous for Democrats. They are less than a percentage point behind the GOP in RealClearPolitics’ average, compared to a 4-point gap six months ago.

These nationwide numbers are difficult to translate into seats, due to quirks in the electoral map, including the reshuffle of Congressional seats after the 2020 census. Biden to reject the idea that the party needs a different presidential candidate in 2024.

‘real misery’

However, the index has a decent track record since it was coined by President Lyndon Johnson’s adviser Arthur Okun in the 1960s. It marked a window of opportunity for Donald Trump in 2016 and a Biden victory four years later.

The Misery Index is a powerful predictor because it is based on things that affect everyone, says Frank Luntz, a pollster who has often helped create Republican talking points on economic issues.

“The reason the misery index still matters is that it really is misery for so many Americans,” says Luntz. “The inflation of food and fuel is so high and so universal and it impacts every voter in every community in every state.”

The numbers at the state level are also a grim reading for the Democrats. Some key battlefields like Ohio and Nevada have poverty rates higher than the national version.

In Nevada, the GOP has a chance of comeback in a state that Trump has lost twice briefly. There’s a key Senate contest between incumbent Catherine Cortez Masto and her Republican challenger Adam Laxalt, as well as several competitive House contests.

The current House has 220 Democrats out of 211 Republicans – meaning a shift to a handful of seats could provide a majority of the GOP – while the Senate is split 50-50.

“I can’t afford my rent”

Inflation-induced misery ranks first for Nevada voters, with many seeing Biden as the culprit, although there is also some sympathy for the Democratic argument that oil companies’ price devaluations or landowners is partly to blame.

Rising housing costs are hitting particularly hard. “I just got a raise and I still can’t afford the rent,” says Sierra Farley, a 31-year-old single woman, mother of two, who says she will have to move out of her rented home in the Las Vegas suburb of Summerlin by. the end of August. “It’s going up $ 450 a month.” Farley, like many other Nevada residents, says she hasn’t started focusing on elections yet and doesn’t know who she’ll vote for in November.

At that point, Biden’s Democrats should have more economic results behind them. Last week’s surprise deal on an expense and tax bill with Senator Joe Manchin, who was blocking the package, gives the party a chance to demonstrate that it can accomplish key issues like lowering drug prices from prescription and expansion of energy production.

Read more: The Manchin-Schumer shock affair started in the basement, explained in secret

Democrats tried to blame inflation on the Russian invasion of Ukraine, which pushed up energy and food prices, while Republicans pointed to the pandemic stimulus that Biden gave the green light right away. after his inauguration.

‘Not abstraction’

Representative Gwen Moore of Wisconsin, another fluctuating state, has been among the most vocal Democrats in addressing the misery index topic head-on. She says the party should stop arguing over definitions of recession, remind voters of the Democrat-led programs that helped them overcome the pandemic, acknowledge today’s economic pain and explain how they will improve it.

“People are experiencing this. This is not an abstraction for those people, “says Moore.” When they stop at the gas station, at the grocery store, they are experiencing their own personal depression or recession, regardless of the numbers.

Gasoline has been falling for more than a month, offering some relief, but other prices, particularly for food and rent, are still rising rapidly, pushing the misery index higher.

There are also some variations by region that help explain why views on the economy are so much more negative among Republicans. The misery index is growing faster in the red states than in the blue ones. This is due to the different trajectories that local economies followed during the pandemic.

In early 2020, lockdowns in the red states were generally less severe, so those areas had a minor increase in unemployment. It was the blue states that had higher unemployment rates and therefore higher misery index readings.

This year, it is inflation rather than unemployment that is driving the index up – and huge increases in rents mean that many red states, as well as battlefields like Nevada, are seeing a steeper rise in the cost of housing. life.

Adding to the risks for Democrats, most analysts believe a high price-driven misery index – as it is now – is worse news for incumbent policymakers than one pushed up by the unemployment rate. .

While some people lose their jobs due to a recession, and worry even more about it happening to them, virtually all Americans feel the pinch of inflation.

“When everyone is affected,” says Luntz, the pollster, “the electoral impact is aggravated.”

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