It’s been a big week for economic news, most of which has been bad news for Democrats’ prospects in the midterm elections.
Over the past few days, we have learned that consumer confidence is near an all-time low and that the United States is now in a technical recession. In addition, the Federal Reserve raised interest rates significantly on Wednesday, indicating that inflation remains a persistent, not transitory, concern for the central bank.
Despite Democrats’ best efforts to shift the national conversation away from inflation and toward issues like abortion rights, gun safety and climate change, these recent developments make it clear that voters’ concerns about economy will still dominate this year’s legislatures.
Recent polls on the issue further underscore Democrats’ policy challenges on the economy: While a majority (51%) of voters list economic problems as their top concern, only 29% of voters, including only 17% of independents approve of President Biden’s handling of the economy.
Indeed, economic pessimism is clearly widespread: On Tuesday, the Conference Board reported that its consumer confidence index declined for the third month in a row, now at its lowest level since February 2021. In addition, the index of ‘expectations, a measure of Americans’ short-term outlook. for their personal income, as well as business and labor market conditions, fell to the lowest reading since 2013.
Another widely followed indicator of how Americans feel about the economy, the University of Michigan’s survey of consumer sentiment, also hit an all-time low in June, and preliminary data from this but they showed little improvement.
According to the Consumer Sentiment Survey, Americans feel worse about the economy now than they did in 1980, when inflation was nearly 15%, worse than after 9/11, worse than in 2007-2009 during the financial crisis and worse than in the spring of 2020 at the height of the lockdowns and unemployment due to COVID-19.
Also, Wednesday saw arguably the most important economic event of the week, as the Federal Reserve announced its fourth interest rate hike of the year, raising rates by 0.75% to combat the ‘increase in inflation which currently stands at 9.1%, a 40-year increase. high.
Fed chief Jerome Powell has pledged to “follow the data” when deciding how far to set rates in an effort to reduce inflation. However, the data the Fed uses to make its forecasts is problematically contradictory.
For example, the US economy experienced negative growth in the second quarter of the year; however, the labor market is strong and the unemployment rate is near an all-time low of 3.6%. Similarly, Americans are historically pessimistic about the state of the economy, but continue to spend even in the face of record inflation.
These inconsistent data ultimately increase the risk that the Fed will do too much and trigger a deep recession, or that it will do too little and drag inflation into the red, and therefore that this economic crisis will drag on well beyond the medium term. .
To that end, on Thursday, it was announced that the US had slipped into a technical recession as GDP fell nearly 1% in the second quarter, marking two consecutive quarters of negative growth, giving Republicans a new line of ‘attack to use against Democrats in the midterms.
In an effort to preemptively avoid such political attacks, the Biden administration published an awkward blog post on Thursday to try to convince Americans that, while meeting the technical definition of a recession, the United States is not necessarily in one
That retort ultimately underscored that the White House is still struggling to connect with the public about its economic anxieties and offer solutions to ease their concerns, a failure that will spell the downfall of the Democratic Party in the midterms.
At the moment, the administration’s attempts to tout its macroeconomic achievements, such as low unemployment, as National Economic Council chief Brian Deese did on Twitter earlier this week, are perceived as off of contact as Americans struggle with higher prices every day.
As if the economic news released on Tuesday, Wednesday and Thursday wasn’t bad enough, on Friday the personal consumption expenditure (PCE) index for June, the Fed’s preferred gauge of inflation as it is the broadest measure , will be made public.
While many expect the index to fall slightly from May’s 6.3%, if the report shows inflation holding steady, or worse, rising, Democrats’ chances of holding on to both houses of Congress will be crushed.
While the Democratic Party already faced an uphill battle in November, overall, these latest economic developments put the party even more at risk of a historic defeat.
Douglas Schoen is a longtime Democratic political consultant.
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