Republicans appear to have plenty of reasons to tout the strong US economy ahead of the midterm elections.
Real GDP increased at an annual rate of 4.2 per cent in the second quarter of 2018 (the highest since 2014), the unemployment rate dropped to 3.7 per cent in September (the lowest since 1969), and – despite the recent market turbulences – US stock indices have broken record highs since the election of Donald Trump. The president likes to take credit for the success of the US economy, and his approval rating for handling the economy – standing at – far exceeds his general approval rating.
But Republicans on the campaign trail do not boast about the strong US economy as much as one might expect. Only one in five campaign ads by Republicans have mentioned the economy or jobs in recent weeks.
Why aren’t Republicans running predominantly on a positive message about the booming economy and tax cuts as their party’s signature legislative achievement?
One reason is that it is tough to campaign on policies that have not benefited most Americans; 64 per cent of Americans say that they have not seen an increase in their take-home pay as a result of the $1.5 trillion tax cuts of the Trump administration. And those Americans with lower incomes are even more likely to report no increase than those with higher incomes.
On trade, President Trump’s tariffs and trade disputes with China, Mexico, Canada, the EU and others have rattled Republicans and given Democrats in key races ammunition. The latter have described the Trump administration’s actions as causing ‘a reckless trade war’ that hurts farmers, manufacturing firms and consumers. Retaliatory tariffs by the US trade partners have been implemented strategically to cause political pain – for example on Harley-Davidson motorbikes from Wisconsin, the home of outgoing speaker of the House of Representatives, Paul Ryan, and bourbon made in Kentucky, where Senate Majority Leader Mitch McConnell is from.
While Republicans could point to the recently renegotiated NAFTA (now the United States-Mexico-Canada Agreement or USMCA) as a bright spot, the economic risk stemming from the US tariffs and retaliatory action is a major political drag for Republicans.
Finally, Republicans realize that the economy is becoming less important as a driver of the election result. While the economy has traditionally been the top voting issue, during this year’s midterms the issues of Supreme Court appointments and health care rank higher. Moreover, though conventional wisdom says that a strong economy favours the incumbent party, this does not hold true for midterm elections, for which there seems to be ‘no relationship between the nation’s growth rate and Senate (or House) seat loss’.
Midterms may hamper the Republican economic agenda
Still, the results of the 6 November elections will have important ramifications for the Republican economic agenda. Democrats are favoured to take back the House of Representatives, while Republicans are expected to retain control of the Senate.
In this scenario, Democrats would likely block any proposals that would lead to further tax cuts for corporations and the wealthy, or deep cuts to Social Security, Medicare and Medicaid. With Democrats in control of the House of Representatives, there could also be efforts to repeal some of the Trump administration’s tax cuts.
Moreover, Democrats would likely attempt to shore up the Affordable Care Act (nicknamed Obamacare) and the Dodd-Frank financial rules – both of which Republicans have tried to dismantle during the first two years of Trump’s presidency.
Democrats will also closely scrutinize the USMCA, and given how toxic President Trump is with Democratic voters, some representatives might calculate that it is not worthwhile to support the administration’s trade agenda.
One area that might garner bipartisan support in a divided Congress – though it is very unlikely – is an infrastructure programme, which both parties have talked about for years.
A Democratic takeover of the House of Representatives would bring subpoena powers and more aggressive oversight of the executive branch. This – combined with a thwarted legislative agenda – suggests that President Trump will likely look for action that can be taken unilaterally. One area where that is possible is through executive orders designed to cut the number of regulations – for instance concerning the environment. Another one is trade.
Congress has delegated tariff and other trade-related powers to the president over the years. President Trump has used this authority to raise tariffs on imports of steel and aluminium in the name of national security. Under the same provisions, the president is considering raising tariffs on imports of automobiles and auto parts. These might materialize after the November elections if the president wants to take action that does not require congressional approval.
The president could also follow-through with the threat of additional unilateral tariffs in response to China’s unfair trade practices. An escalating trade war could hamper the strong US economy.
As these issues pile up in the run-up to the 2020 presidential election, Republicans may wish they had talked up a good economy when they had the chance.
Marianne Schneider-Petsinger, Geoeconomics Fellow, US and the Americas Programme, Chatham House.