How Will the Economy Affect Midterm Elections?

More

It is by now conventional wisdom that the economy is going to cost Democrats big in the midterm elections . . . so it's refreshing to see folks like James Surowiecki challenge that wisdom.  After all, the economy has started growing again, and, in what must be an astonishing coincidence, we're just about to get a big river of stimulus money sluicing through voter pockets.

Possibly.  But conventional wisdom has a lot going for it.  I agree with Surowiecki that what matters is not the headline numbers on the newspaper page, but peoples' actual felt experience with the economy, particularly real income growth.  That felt experience is maybe improving a tiny amount.  Consider the following, however:

  • At this point, there is not enough time for employment to recover significantly.  We lost a lot of jobs, and if analysts are right that this represents mostly structural change in the economy (rather than a temporary collapse in aggregate demand), employment will rebound only slowly.  It took years under the Bush administration to work off the relatively modest collapse around 9/11.
  • Most peoples' major asset will still be worth a whole lot less than it used to be.  And people who are pinched will not have the housing piggybank to cushion their anxiety.
  • Delinquencies are finally slacking of, but the backlog of foreclosures is eventually going to come on the market, further pushing down home values in many areas.
  • We can't really afford to expand the various forms of housing support much further . . . but if we stop them, housing markets will look even worse.
  • Low inflation means the cost of living doesn't go up . . . but people are now conditioned to expect nominal wage increases.  Money illusion is going to make people perceive the labor market, and income growth, as worse than they actually are.
  • Health care costs are going up due to selection effects in individual and small business markets--healthy people are cutting the expense when they lose their jobs, landing companies with a smaller, sicker pool.  That's going to further cut into any wage growth.
  • Budget deficits are almost certainly going to keep going up in the short term.  People get especially touchy about deficits when they are personally strapped.
  • Oil prices are still rising.

I'm not saying the Democrats can't pull it out.  Nothing is impossible, and they have GDP growth on their side.  On the other hand, they're facing some pretty strong headwinds--much stiffer than Bill Clinton faced when he lost the House to the Republicans in 1994.  And contra what I was assured by many Democrats, health care reform has not gotten more popular since it passed; arguably, it's gotten slightly less popular.

That base had better be very motivated.

Jump to comments
Presented by

Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

Get Today's Top Stories in Your Inbox (preview)

The Remote Warehouse Where Confiscated Wildlife Ends Up

A government facility outside of Denver houses more than a million products of the illegal wildlife trade, from tigers and bears to bald eagles.


Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

Where the Wild Things Go

A government facility outside of Denver houses more than a million products of the illegal wildlife trade, from tigers and bears to bald eagles.

Video

Adults Need Playtime Too

When was the last time you played your favorite childhood game?

Video

Is Wine Healthy?

James Hamblin prepares to impress his date with knowledge about the health benefits of wine.

Video

The World's Largest Balloon Festival

Nine days, more than 700 balloons, and a whole lot of hot air

Writers

Up
Down

More in Business

Just In