Midterm misery for Biden as key economic gauge flags loss of 30 seats

(Bloomberg) – Whatever else Americans think – and it’s a long list right now – the state of the economy looms large in any US election. That means big trouble for Democrats in November’s midterm vote.

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A new study from Bloomberg Economics takes a gauge capable of predicting election results – the Misery Index, calculated by adding the rates of inflation and unemployment – ​​and projects it through to Election Day.

The result: Based on past voting patterns, President Joe Biden’s party can expect to lose 30-40 House seats and a few in the Senate as well, easily wiping out wafer-thin Democratic majorities.

Of course, the economy is only part of the math that voters make. Democrats hope anger over abortion and gun laws and the Jan. 6, 2021, attack on the U.S. Capitol by a right-wing mob will energize their supporters.

There are many forecasting models, using all kinds of inputs – not just economic – and they predict a range of outcomes. The analysis firm Inside Elections, for example, sees likely Democratic losses in the House between 12 and 30 seats. Others point to anything from a washout, with both parties ending up roughly where they started, to GOP gains of 45 seats or more.

Another Shellack?

Still, the consensus is that Democrats face an uphill battle. For the most part lately, there are enough economic headlines to suggest that a setback for the ruling party is anything but cooked.

Last week, the Federal Reserve made its biggest consecutive interest rate hikes since the early 1980s as it seeks to rein in soaring prices by squeezing consumers and home buyers. And the government has signaled that the US economy has actually contracted since the start of this year, sparking a partisan row in Washington over whether the country is already in a recession.

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

Officially, it probably isn’t, partly because it still creates a lot of jobs. Low unemployment and plenty of job vacancies will be Democrats’ main talking point on the economy in the upcoming campaign.

It’s the other component of the misery index that causes their problems and makes many Americans feel like they’re already going through some kind of crisis.

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

Bloomberg Economics predicts an index at 12% in October. Strip away the worst months of the pandemic crisis in early 2020, and it’s close to the highest levels seen in a decade and more — rivaling the aftermath of the Great Recession, when unemployment hit 10% and Democrats got what then-President Barack Obama called a midterm “shellacking.”

“Difficult to interpret”

Since then, the once-in-a-generation disruption 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 rise in revenue from the pandemic stimulus involved a Trump landslide, while the huge drop in GDP involved wipeout. Obviously, the truth lay somewhere in between.

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

These nationwide numbers are difficult to translate into seats, due to oddities in the electoral map, including the reshuffling of congressional seats after the 2020 census. They suggest Democrats may fare better than they do. predicted the Misery Index, helping Biden push back against the idea that the party needs a different presidential candidate in 2024.

“The Real Misery”

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

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

“The reason the misery index is still important is that it really is real misery for so many Americans,” Luntz says. “Food and fuel inflation is so high and so universal, affecting every voter in every community in every state.”

The state-level numbers also make grim reading for Democrats. Some key battlegrounds like Ohio and Nevada have higher misery ratings than the national version.

In Nevada, the GOP has a chance to come back to a state that Trump narrowly lost twice. There is a key Senate race between incumbent Catherine Cortez Masto and her Republican challenger Adam Laxalt, as well as several competitive contests in the House.

The current House has 220 Democrats to 211 Republicans — meaning a change of just a handful of seats could give the GOP a majority — while the Senate is split 50-50.

“I can’t pay my rent”

Inflation-induced misery is a priority for Nevada voters, with many seeing Biden as the culprit – though there’s also some sympathy for the Democratic argument that price gouging by oil companies or landlords is partly to blame.

Soaring housing prices are hitting particularly hard. “I just got a raise and still can’t afford my rent,” says Sierra Farley, a 31-year-old single mother, who says she’ll have to move out of her rental home in suburban Las Vegas. of Summerlin by the end of August. “It increases by $450 a month.” Farley, like many other Nevada residents, says she hasn’t started focusing on the election yet and doesn’t know who she’ll be voting for in November.

By then, Biden’s Democrats should have more economic accomplishments under their belts. Last week’s surprise agreement on a spending and tax bill with Sen. Joe Manchin, who blocked the package, gives the party a chance to show it can address key issues such as the lower prescription drug prices and increased energy production.

Read more: Shock Manchin-Schumer deal started in basement, happened in secret

Democrats sought to blame the inflation on the Russian invasion of Ukraine, which drove up energy and food prices, while Republicans pointed to the pandemic stimulus Biden gave its green light shortly after taking office.

“No abstraction”

Rep. Gwen Moore of Wisconsin, another swing state, was among the most vocal Democrats to confront the misery index argument head-on. She says the party should stop arguing over definitions of a recession, remind voters of the Democratic-led programs that got them through the pandemic, acknowledge today’s economic pain — and explain how they will improve it.

“People live it. It’s not abstraction for these people,” says Moore. “When they stop at the gas pump, at the grocery store, they experience their own personal depression or recession, whatever the numbers are.”

Petrol has been falling for more than a month, offering some relief – but other prices, including for food and rent, continue to climb at a rapid pace, pushing the misery index higher .

There are also some regional variations that help explain why views on the economy are so much more negative among Republicans. The misery index increases faster in red states than in blue states. This is because of the different trajectories that local economies have taken during the pandemic.

At its start in 2020, lockdowns in red states were generally less strict, so those areas saw a smaller rise in unemployment. It was the blue states that had higher unemployment rates – and therefore higher misery index readings.

This year, inflation rather than unemployment is driving the index up – and outsized rent increases mean many red states, as well as battlegrounds like Nevada, are seeing a bigger rise in the cost of life.

Adding to the risks for Democrats, most analysts believe a misery index driven by high prices – as it is now – is worse news for political incumbents than one pushed higher. by the unemployment rate.

While some people lose their jobs in a downturn and fear even more that it could happen to them, almost all Americans are feeling the pinch of inflation.

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

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