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Election 2022: All About the Economy?


Voters are increasingly worried about inflation and other economic indicators. That's not good news for Democrats.


Four words uttered thirty years ago perhaps best capture the lens through which to view presidential and midterm elections: “It’s the economy, stupid.”


That now-famous line was uttered by Bill Clinton adviser James Carville in 1992 to describe how his candidate, a relatively unknown governor from a small southern state, could topple a popular war-time president, George H.W. Bush.


Carville was right. Amid a recession, President Bush was booted from office even though his approval ratings had soared to around 90 percent during Operation Desert Storm in Iraq.


Before Carville, Ronald Reagan asked voters in the 1980 election if they were better off than they were four years ago. They were not and Reagan beat incumbent Jimmy Carter in a landslide. The Great Depression saw Herbert Hoover lose re-election in 1932 to FDR. For at least the last century, voters’ views on the state of the economy have guided their choices at the polls.


Until 2020, that is.


In November 2019 — a year out from the 2020 presidential election — the financial news network CNBC declared the 2020 contest would not be about peoples’ pocketbooks. Two-thirds of voters at that point said an issue other than the economy was the top problem facing the country. A relatively low number of Americans, only 21 percent, said they were not better off economically under President Donald Trump and more than half of Democrats didn’t actually think a president from their party would help their personal financial situation. Things weren’t much different by Election Day. A Yahoo headline that hit just days before the election read, “Election 2020: The economy fades as a top voter concern.”


How are Americans feeling about the economy today — and is it likely to matter when they cast their ballots in the 2022 midterm elections?


We think so, but let’s look past the headline numbers on employment and growth to understand why.


Economy Has Voters in a Bad Mood

The IBD/TIPP Economic Optimism Index, a national poll of consumer confidence, declined for the fourth straight month in October and has been in negative territory for two months. (“Negative territory” means more than half of Americans are feeling pessimistic about the economy.)


That survey followed a CNN poll released in early September that found about 70 percent of Americans said things in the country were generally “going badly,” up from 60 percent in March of this year. Sixty-two percent of respondents said that economic conditions in the country were “poor,” up from 45 percent earlier this year.


That reading is nearly as high as it was in May 2020, near the start of the pandemic. At that point, 65 percent of Americans thought the economy was doing poorly … because it was. Unemployment in May 2020 was 13.3 percent. It sits at 5.2 percent today.


The country’s jobless rate has fallen rapidly, and most polls indicate Americans think it’s a great time to find a job. Economic growth is fairly robust.


So what has Americans so worried about the economy?


High Housing Prices Could Deter the American Dream

If owning a home is the American Dream, then today it’s a dream that many might have to defer until a heated housing market cools.


That does not bode well for Democrats next year.


Nearly two-thirds of Americans own homes. Millions more want to, but according to the Federal Reserve Bank of Atlanta, that goal is harder to achieve now than at any time in the last 13 years. Specifically, in a report issued this month, the Atlanta Fed said the median U.S. household would need 32.1 percent of its income to cover its mortgage payments on a median-priced home. That share is at its highest level since November 2008 and is up from 29 percent at the outset of 2021.


Year-over-year median home prices are up 23 percent, but incomes have risen only three percent. Americans are only slightly better off if they continue to rent. According to Axios, the average U.S. monthly rent is up 9.6 percent from the beginning of the year. Americans now pay an average $1,649 a month in rent.


While Americans selling their homes might cheer rising home prices (though, presumably, those people are trying to buy new homes as well), they will have the effect of making millions of Americans feel less well off — even if they are making slightly more money than they were before. In other words, even in comparison to inauguration day nine months ago, more voters will answer “no” to President Reagan’s question about whether they are better off under the Biden administration.


Americans Also Concerned About Inflation

Housing prices are, of course, not the only costs that are rising for American families. Consumer prices rose 5.3 percent from August 2020 to August 2021, the fastest pace in nearly a dozen years.


Many analysts think the pace of inflation will ease before Election Day 2022, but they also acknowledge it might be around for longer than they originally predicted.


As The Wall Street Journal reported, in their September meeting Federal Reserve officials admitted that they “now think inflation will run hotter than previously expected this year.” Specifically, the Fed’s rate-setting committee said they expect an annual inflation rate of 4.2 percent by the end of 2021. That prediction was up from the 3.4 percent inflation rate the panel forecasted just three months ago in June.


These numbers are taking a toll on President Biden’s approval ratings. As Morning Consult reported this morning, 52 percent of voters now say they disapprove of President Biden’s job performance, up nine points since just June. Only 45 percent approve. Morning Consult said the numbers are “part of a slow but steady decline since the summer amid concerns about inflation, the COVID-19 delta variant and the withdrawal from Afghanistan.”


Supply Chain Shortages Impact Consumers

Here’s a term that does not often come up in election-related conversations: the supply chain. But pollsters are starting to ask how this issue is impacting everyday consumers, and they’re finding out Americas are not happy.


This past August the polling firm Gallup declared, “Americans have clearly felt the global supply chain disruptions wrought by COVID-19.” Specifically:

  • Sixty percent of U.S. adults said they had not been able to get a product they wanted because of shortages;

  • Fifty-seven percent said they had experienced significant delays in receiving a product they ordered; and

  • Eighty-three percent said they thought shortages had resulted in them paying higher prices for the products they were able to get.

Gallup is not alone. Last week, Oracle said it found:

  • 77 percent of adults said the Delta variant had increased their supply chain concerns;

  • 92 percent said they believe more disruptions are coming and 66 percent are scared disruptions “will never end”; and

  • Eight in 10 said delays and shortages could cause them to cut ties with a favorite brand.


While that last statistic has sparked concern in corporate America, Washington lawmakers also are on alert. According to Gallup, “U.S. policymakers across the political spectrum have taken note of the supply chain vulnerabilities … and are trying to correct them through renewed focus on U.S. manufacturing and trade policies.”


If voters can’t get the car they want — or have trouble getting everyday items like milk or toilet paper — supply chain issues could be a dominant force in next year’s election.


Economic Fights on the Horizon

All of these negative feelings are brewing while Washington is in the middle of several debates about economic and fiscal policy.


According to a Morning Consult poll released late last month, 31 percent of registered voters said they would blame Democrats if Congress fails to raise the debt ceiling and the country defaults. Twenty percent said they would blame the GOP while 39 percent said they would blame both parties equally.


While they may be more likely to blame Democrats for a debt default, Americans are broadly on board with the party’s plan to raise taxes. Another Morning Consult poll found 58 percent approved of the Democrats’ $2 trillion tax plan in general; 68 percent supported raising taxes on wealthy Americans; and 62 percent supported increasing the corporate tax rate.


There also is the upcoming debate about who should chair the Federal Reserve. President Biden still hasn’t decided if he will reappoint Jerome Powell and things are looking shaky. The Fed is contemplating ending many of its COVID-era stimulus policies and several top officials are mired in a scandal related to personal financial trades.


Indeed, Sen. Elizabeth Warren (D-Mass.), no fan of Fed Chair Jerome Powell, has used the scandal to raise questions about public confidence in the Federal Reserve. In remarks on the Senate floor this week, Sen. Warren said, “Setting the right culture at the Fed and making sure safeguards are in place to prevent self-dealing and protect the public’s confidence should be the minimum standard any Federal Reserve chair should meet.”


Sen. Warren clearly understands that Americans lack confidence in the economy in general. Normally, lawmakers might think the Fed is too esoteric of an issue for voters to care about. But with Americans worried about inflation and the inner workings of the supply chain, Election 2022 is likely to be a referendum on the state of the economy.

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