Roughly four in ten American adults say they are certain or almost certain to vote in the midterms this November. Expect this percentage to increase come autumn, as both parties unload hundreds of millions of dollars in campaign advertisements to push voters to the polls.
So, what is on the mind of voters?
As always, it’s a mix. The perception of leading political figures, crime and gun violence, the Dobbs decision, concerns of political polarization, and numerous other factors will play a role at the ballot box.
Perhaps more so than other election cycles, however, economic and financial trends will be top-of-mind issues. The country is still finding its economic footing after the onset of the pandemic. Everyday financial hardships remain a kitchen table topic for many Americans, even as positive traction can be traced via certain economic measures.
To tap the pulse of voters, we distilled the data and polls on five key economic and financial trends that will shape the makeup of the next two years in Washington, DC.
Inflation
Inflation remains the top issue for Democrats, Republicans, and Independents heading into the midterms, according to an Ipsos/FiveThirtyEight survey. Despite a positive CPI report and falling gas prices from a July peak, common expenditures such as food and rent continue to increase in price.
Although voters typically blame inflation on lawmakers, it is primarily a function of Federal Reserve policy. Chair Jay Powell signaled additional interest rate hikes to continue efforts to cool inflation during his recent speech at the Jackson Hole Symposium. As expected, capital markets and the major equity exchanges, and by extension Americans’ 401(k)s, turned red on the news.
This illustrates the tough path forward: The interest rate hike slated for late September will likely create a new round of negative economic indicators in the closing weeks of campaigns, even if it is necessary for inflation reduction.
A return to normalized price levels, even if inflation continues to decrease, will take time. While voters demand action to reduce inflation, it is difficult to deliver the message of additional near-term economic discomfort as part of the path towards this goal. This topic will remain the top midterm elections issue and both Democratic and Republican candidates will need to convince voters of their respective action plans for reducing everyday financial pain points.
Recession Risk
After two consecutive quarters of economic contraction, there is disagreement over whether the United States is currently in a recession. Absent new data sets - third quarter GDP data will not be released until December - politically driven arguments will remain the primary source for supportive or dissenting views. According to the latest Economist/YouGov poll, 55 percent of Americans feel the United States has already entered a recession. Notably, the same poll found that only four percent of Americans feel the U.S. is not currently in a recession nor is a recession likely in the next year. In a sign of a slightly improved outlook, Americans’ pessimism regarding the economy’s direction recently fell from a June peak of 66 percent to 54 percent in August.
For elected officials, the actual existence of a recession is less important than if voters perceive we are entering a recessionary environment, and uncertainty remains prevalent as we enter September. Democratic candidates are pressing the importance of patience, already-in-motion solutions, and staying the course, while Republicans are quick to remind voters of pre-pandemic economic successes.
The Economics of Legislative Wins
The Democratic Party achieved several major legislative wins in recent months, including the Inflation Reduction Act and the CHIPS and Science Act. This brings increased optimism for their midterm prospects. However, polling data reflects the partisan debate that defined these bills in Congress: The wins have broad support among Democrats, but only produced a small bump in President Biden’s general approval numbers. According to Morning Consult, only 24 percent of voters believe the Inflation Reduction Act will lower inflation. The Administration’s subsequent student loan forgiveness further muddied the waters. A YouGov poll found that 44 percent of Americans believe student debt relief will help the economy, while 40 percent believe it will be harmful. The upside for Democratic candidates is student debt relief has long held wide support within the Democratic party and could support voter turnout.
The economic impact of the Inflation Reduction Act, the CHIPS and Science Act, and other legislative wins will be less of a midterm factor than the signal it provides voters: Congressional Democrats and the Biden Administration are showing a streak of momentum. Whether voters believe it’s momentum in the right or wrong direction will be made clear at the ballot box.
Americans’ Personal Financial Status
A recent Gallup survey found that a majority of Americans, and 73 percent of low-income individuals, are worried about maintaining their current standard of living. Not having enough money to retire, keeping up with the cost of living, and managing debt levels are also cited concerns. According to an Economist/YouGov poll, 40 percent of Americans view their personal financial situation as worse than a year ago. While still high, this is a significant reduction from the July peak of 49 percent, which was the highest level of economic pessimism since the 2008 recession. Another sign of positive change in the personal finance tides comes from a 2.6 percent increase in improved personal financial outlook from July to August, according to an IBD/TIPP poll.
The economy has largely recovered from the economic restrictions and high unemployment of the early days of the pandemic, but the actual or perceived financial status of Americans has not stabilized. The party in power inevitably receives the blame for personal financial hardship, so if this trend continues, moderate voters may be less likely to embrace Democrats in the midterms.
The Economic Standing of Key States
According to the Bureau of Labor Statistics, CPI inflation is most concentrated in the South and Midwest. This creates a scenario in which the top midterm issue overlaps with the critical Senate races in Arizona, Nevada, Georgia, and Wisconsin. Fortunately for these states, the percentage change of average weekly wages increased at a higher rate than the national average. Inflation is also countered by strong labor markets in these states; Arizona, Georgia, and Wisconsin all have unemployment rates below the national average of 3.5 percent. Additionally, Nevada and Georgia both rank in the top five states for the percentage of nonfarm jobs added year-over-year, and Arizona ranks in the top 15 states.
The economic standing of key battleground states will significantly influence the outcome of the midterm elections, and consequently, which party holds the Senate. Rural and low-income Americans have been disproportionately impacted by high inflation, particularly in terms of energy prices. However, if energy prices continue to fall, as they have for over 80 straight days, the impact of inflation in these states could be mitigated. Time is ticking for good economic news to help these states’ Democratic candidates across the finish line; meanwhile, Republican candidates have the upper hand on the issue.
The Bottom Line
Nearly all recent polling indicates the Democratic Party is likely to cede control of the House of Representatives to Republicans. The Senate remains too close to forecast, though Democrats are gaining the upper hand. Regardless of whether one or both bodies flip Republican, the Biden Administration will likely have to contend with a divided Congress. More broadly, as the second session of the 117th Congress commences in January 2023, both the Administration and congressional members – Democratic and Republican alike - will need to navigate Americans’ concerns over their financial wellbeing and the uneven economic status of our country.
This brings forth Mario Cuomo's popular dictum, “campaign in poetry, govern in prose.” The lofty economic visions heavily woven into this cycle’s stump speeches have set expectations for the next two years. If Republicans do regain control in Congress, campaign promises must be reflected in the more difficult, results-driven business of governing. And beyond question, the credit for an economic turnaround, or the blame for sustained economic malaise, will be the opening stanza for both parties during the run up to the 2024 Presidential election.