Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. An earlier version appeared at Project Syndicate and LA Times.
— Americans will go to the polls November 8. It appears probable that they will give the Republican party majority control of the House of Representatives, and possibly the Senate as well. The same for Secretaries of State and other statewide offices. The consequences could be enormous. Especially worrying is the future of US electoral democracy, if the result is further distortions of voter eligibility rules, congressional redistricting, the electoral college, and other structural features. How could such an outcome of the mid-term elections be explained, seeing as how the Republican party is now dominated by its extremist MAGA faction?
- The MAGA party
Before attempting to address the explanation, it is incumbent on me to say what I mean by “extremist.” I have in mind politicians who claim (or, in some cases, claimed in the past, before the recent primaries for their party’s nomination) that Donald Trump won the 2020 presidential election, that global climate change is a hoax, that Covid-19 was a conspiracy, or that Barack Obama was not born in America.
To be sure, many fine Republicans do not say any of these things. (And many Republican politicians who say them probably do not actually believe them, though this is not to their credit.) But the MAGA extremists now dominate the party.
Some Democratic politicians, including some on the far left, say things with which I strongly disagree. But their role comes nowhere near the other side. There are many fewer of them and they are far less prone to factual falsehoods.
- “It’s the economy, stupid”
The outcome of this election, like most, will be determined by those who are neither die-hard MAGA loyalists nor determined left-wing progressives. The question becomes, why would uncommitted voters consider casting their ballots for today’s version of the Grand Old Party?
The answer, of course, is that voters deem the economy to be the number one issue, far more important than conspiracy theories regarding past or future elections. Some of them are under the mistaken impression that Republican presidents have a better track record on the economy. Many cite current inflation and a supposed recession as evidence that the Democrats are mishandling the economy and that the job should be given to the opposing party.
It is true that the Biden government has made some real mistakes in its policies. But the economy is currently strong. It is remarkable that so many Americans believe that the economy is in awful shape at a time when the unemployment rate is a low 3.5 %. To find lower US unemployment, one has to go back more than 50 years, to May 1969. The Beatles were still recording.
The Federal Reserve has been raising interest rates rapidly. Largely as a result, the probability of a recession coming in 2023 or 2024 is substantially higher than usual. This is especially true in Europe, where the jump in energy prices over the last two years is having a greater impact than in the United States. But it is unlikely that the US is already in recession. Nor is it certain that a recession is imminent.
- It’s inflation, stupid!
What upsets voters the most is inflation, which ran at 8.2 per cent over the last 12 months as measured by the Consumer Price Index. The inflation rate was lower, at 6.6 per cent, if one takes out the volatile food and energy components; but this is of no consolation to households, who feel those costs even more acutely than the rest of the CPI.
People are as angry about inflation today as they were in the 1970s and early 1980s, the last time it was this high. It is not hard to see why. Start with visceral sticker shock. A gallon of milk (3.8 liters) cost more than $4.40 last month. Milk prices are up 30% since before the pandemic (when measured as a component of the Consumer Price Index).
As prices go up in dollar terms, so do incomes. It may be surprising to learn that, in the aggregate, US nominal income is keeping up with prices (whether measured by Gross Domestic Income or Personal Income Less Transfers).
For the typical worker, however, wages are not going up as fast as prices. Workers’ real weekly earnings have declined over the last year. Instead, the share of US income going to the top has been rising. In fact, this has been true for more than 40 years. The trend since 1980 has been toward greater inequality within the United States.
But concerns about the gap between the rich and the rest are a reason to support Democratic policies, not Republican ones. Inequality was exacerbated by Republican legislation such as the tax cuts of 1981 (Reagan), 2001 (Bush), and 2017 (Trump) or the blocking of attempts to expand health care coverage.
Policies that Democrats have enacted in the recent past, and are likely to continue in the future if they have the power to do so, operate to reduce inequality. They include, among others:
- making the US tax system more progressive, starting with abolishing the carried-interest loophole;
- increasing the number of Americans who have health insurance, by extending Obamacare;
- lowering prescription drug prices, in the recently passed Inflation Reduction Act;
- and expanding access to education, for example, making high-quality pre-school
Thus, if the economy is the number one issue, I will have no explanation if the MAGA-dominated party indeed prevails in the mid-term elections.
 The September 2022 unemployment rate of 3.5 % was tied with that of January 2020.
 The statistic has been collected since August 2007.
 $4.18 in September 2022 versus $3.20 in February 2020.
This post written by Jeffrey Frankel.