Economics and Elections (US edition)

In the months leading up to the US midterm elections on Tuesday November 6th, my social media was full of reminders from friends, family, and celebrities pushing for people to exercise their voting rights. Given that I hold US citizenship, I wanted to know every aspect of the elections – which seats could be flipped, the many new “firsts” being elected and the issues being discussed along the campaign trails with one of them being the economy.

This post is a very general discussion about certain points in the 2018 midterms and if personal views are shared, they are my own and should not be attributed to CTaLE, UCL or any other organisation that I am associated with.

In October 2018, Gallup recorded 13% of US voters stating economic problems as being an important issue. This reveals a steady decrease regarding that issue throughout the year while on the other hand there has been a rise in the prevalence of non-economic problems such as “dissatisfaction with government/poor leadership”. Undeterred by the latter, President Trump has been holding on to the fact that the US economy has been booming during his presidential term. Unemployment has been low, wages are higher, stock markets have been hitting record numbers, and trade deals and certain tax policies have been going Trump’s way.

Drawing from this World Economic Forum article, Professor Michael J. Boskin writes that electoral models predict that a strong economy benefits the party in office whilst a weak economy does not. Putting this into context, this would mean that the current success of the US economy would favour the Republicans. Republicans should then be able to hold on to their majority in both the House of Representatives and Senate in the midterms. However, this was not the case – Democrats took control of the House of Representatives. Boskin reasons through various explanations: maybe the electoral model isn’t as relevant any more with economic issues holding less sway in elections, maybe it’s even the party in office and their actions/views that have affected the outcome. This matches Gallup’s reports on the decreasing prominence of economic issues in voter’s minds and an increase in scepticism of the country’s leadership.

Having a divided government could hamper the passing of any legislation especially in the trade policy arena. As this article by Dr. Ira Kalish outlines, Trump’s US Mexico Canada Agreement (USMCA) needs the approval of both the House of Representatives and Senate to become law. Now that could be held back. Trump’s initiation of tax cuts might also be prevented leading to lower interest rates in the US and a slower economy. Another view summarised by the Guardian, is that having a divided government could actually benefit the US as it could limit Trump from increasing the country’s deficit. Many things are up in the air (and definitely not restricted to the issue of the economy) and it will be interesting to see how it will play out over the next weeks and years. Even in just the days following, the US dollar has already fallen in response to the midterms.

It’s been eye-opening doing bits of research on the effects the midterms could have on the economy and vice versa, and has definitely deepened my understanding of what is at stake every time we go out to vote. Hopefully this provides a useful little snapshot of what is going on. If anyone is interested, the Guardian provides a comprehensive breakdown of the results.

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