Update 644 — It’s the Economy… Again
Navigating the Top-Ranking Voter Issue
Midterm election voters have 18 days to weigh issues and candidates, decide, and vote. 2022 has seen a war in Ukraine, worldwide inflation, and a Supreme Court ruling ending national abortion protection. Some issues have riveted and rallied voters — notably abortion for Democrats and independents in late summer and early fall — but rising costs are the number one issue across the spectrum this midterm election.
Democratic candidates must and do engage with voters on the economy — despite chronically, if undeservedly, low marks from the voters on the issue. Misperceptions in the face of the macroeconomic record are reinforced if they go unchallenged. In today’s update, we cover the affirmative Democrats’ record on the economy, suggest rejoinders to damaging misperceptions, and cite lessons learned on economic stump speaking during the cycle thus far.
Good weekends, all.
As we enter the final weeks before the election, more than 90 percent of voters are concerned about the economy, with 71 percent of voters very concerned about inflation. Forty-two percent see economic issues as their top priority when heading to the polls. Seventy percent of voters believe the country is on the wrong track. While it might seem like this spells bad news for the Democrats, it’s clear Republicans will continue to blame the party in power for inflation, so the onus is on Democrats to take back the narrative.
Macro on the Merits
Voters give the Democratic Party low marks on the economy despite the sizable and significant legislation and investments Democrats have enacted and implemented. According to the latest Marist National Poll, 62 percent of Americans think the U.S. is in a recession. Little wonder, then, why economic issues dominate the political dialogue. Republicans point the finger at Democrats for increases in the cost of living, yet the GOP’s plan is…AWOL. Loud GOP voices call for tax cuts for corporations and the wealthy and cuts to entitlements. Plus ça change.
The biggest misperception about the economy is no less than its basic condition. Democrats can point with pride to and run affirmatively on their economic record, including stellar performance in terms of:
- Job Creation: Monthly job growth has averaged 420,000 in 2022, compared with 562,000 in 2021. This impressive increase has led to the creation of over 1.1 million jobs since May and the economy has now recovered all the jobs lost to the pandemic and then some.
- Wages: Nominal wages rose by 0.3 percent and have risen by 5.0 percent over the last year. September revealed average hourly earnings for all employees on private nonfarm payrolls in the United States stood at $32.36, seasonally adjusted. This number is up $1.54 from September 2021 and continues to steadily increase.
- Unemployment: The unemployment rate sits at a record low 3.5 percent, surpassing its pre-pandemic peak and highlighting the rapid pace of the recovery following the COVID-19 pandemic.
Federal Reserve Bank of Atlanta Wage Growth Tracker
Sources: Federal Reserve Bank of Atlanta, BLS
As we mentioned in our previous update, low unemployment has manifold economic and social benefits, increasing worker’s bargaining power and consequently pushing up wages. High quit rates paired with a large number of open vacancies have forced employers to compete for workers with higher wages and longer hours. Democrats can’t run on the rapid recovery from the pandemic without reforms to costs, but should be emphasizing their successes in macroeconomic terms, particularly their historically low unemployment.
While inflation is undeniably hitting consumers globally, Democrats can do a better job of touting the affirmative contributions of this administration and the Congressional majority. With inflation beginning to cautiously recede, it is critical that Democrats capitalize on their recent historic achievements, including but not limited to the passage of:
- CHIPS and Science Act: A bill meant to “strengthen American manufacturing, supply chains and national security, and invest in research and development, science and technology, and the workforce of the future.”
- Inflation Reduction Act: Legislation that “makes investments to lower prescription drug costs, health care costs, and energy costs to create opportunities for America’s small businesses and innovative startups.” The bill is also meant to reduce inflationary costs passed on by pharma.
- Infrastructure Investment and Jobs Act: A bill meant to “grow the economy, enhance competitiveness, create good-paying, union jobs and make our economy more sustainable.” The investments are expected to add, on average, around “2 million jobs per year over the course of a decade.”
These monumental pieces of legislation, alongside Biden’s recent student loan forgiveness, will help American families in the long run by lowering costs, creating jobs, and generating a greener and more sustainable future for generations to come. Democrats must speak straightforwardly so constituents show up at the polls on November 8th.
A Difficult Defense
While the macro story is one to tell and sell, Democrats still need to offer responses to voters’ most salient concern of the cycle: inflation. Rising prices are gnawing at pocketbooks and degrading pay checks, with pain felt most by low- and fixed-income households. The real inflation culprits are the pandemic, resulting supply chain snarls all over the world, and a Fed that initially dismissed inflation as “transitory.” Many countries have reopened, leading demand to normalize but supply has lagged, leading to significant inflationary pressures throughout the last year and a half.
Investing in production to restore supply across the macroeconomy would stabilize prices, but in the United States, the Federal Reserve is generally tasked with fighting inflation. And the central bank’s main tool to fight inflation is hiking interest rates — a demand-side intervention. The Fed has already said it is willing to sink demand — and cause a recession — to bring price stability. As the Fed aggressively raises interest rates, mortgage rates also rise, placing additional pressure on tens of millions of families.
Democrats have real responses to inflation and have seen them through to passage despite daunting politics. Through burden-reducing economic aid from the American Rescue Plan, production-expanding industrial policy in the Infrastructure Investment and Jobs Act, CHIPS and Science Act, and Inflation Reduction Act, and cost-cutting measures in the IRA, Democrats have enacted a comprehensive package of legislation to bring our economy in line without sacrificing the miraculous recovery we have seen. Meanwhile, the GOP slams the solutions offered but propose no solutions themselves .
Importantly, evidence shows the Democrats’ policies are beginning to work, with signs that inflation is cooling as we approach the midterm elections. To wit:
- Housing Prices: Median sale prices have fallen to $402,000 from their May 2022 peak of $430,000.
- Shipping Freight Costs: The World Container Index from Shanghai to Los Angeles, a barometer for global shipping costs, has fallen from its September 2021 peak of 12,424 to 2,497, a nearly 80 percent decrease.
- Gas Prices: Gas dropped from $5.02 in June 2022 to $3.82 with more downward pressure expected to cut prices even further. This should ease the pain at the pumps, the most visible sign of high prices, and if prices continue to fall over the next few weeks as expected, it could provide a critical number of votes to Democrats in tight races.
Views about inflation are largely baked in with most voters, but Democrats have just under three weeks to hammer home their cost-cutting investments and the real price drops that are occurring across the economy.
A Lengthy ‘To-Don’t’ List
Voters’ concerns about the economy stem, in part, from their view that Democrats’ spending is the main suspect for growing inflationary pressures. Candidates confronting voters say the best advice is to address voters’ concern in the terms presented.
Other lessons of what not to say:
- Discussing policies that only make impacts on the margins are not salient to voters;
- Pushing gimmicks that avoid meaningful fixes to our inflationary and pocketbook pressures;
- Evading or deflecting responsibility to other actors;
- Or waxing poetically in abstractions that do not acknowledge the real pains people are facing.
For example, the White House is working diligently to complement the work of Congress by releasing oil from the Strategic Petroleum Reserve. But this is marginal at best and is hard to distill to voters. While we can still use this policy, it is just not the strongest foot to put forward.
The party in power has struggled to find an economic message that resonates. Today, the chronic perception gap is as wide as it ever has been. From pushing through top priorities to setting a vision for the future of the economy, Democrats must confront inflation head on and champion their successes in order to maintain the majorities. The good news is they have far more to run on now than they did six months ago, before the IRA and the vertical drop in gas prices.
The picture is improving for Democrats and President Biden’s approval rating is rising, now at 40 percent, up from 30 percent in July. This shift in momentum does not mean Democrats have their economic message in the bag. Passing these historic bills is a step in the right direction, but Democrats must continue to respond to voters’ concerns and show they are doing the work for American families. While messaging may differ candidate-to-candidate, the party itself must work together to establish a national message, one that is inclusive, speaks about the Democrat’s positive record, touches on the Republican’s lack thereof, and illustrates the America that lies ahead.