America’s economy grew by an annualised rate of 2.6% in the three months to September. But the positive news is unlikely to give Democrats a much-needed boost
of the country say it is their top concern; four-fifths say the economy will be “very important” to their voting decisions in next month’s midterm elections. It is little surprise, then, that America’s two major political parties have long battled for voters’ trust in their. When GDP figures for the three months to September were released on October 27th, Joe Biden, the president, was quick to highlight the seemingly cheery report. The economy grew by an annualised rate of 2.
Two factors explain this. First, the GDP figures are not built on solid ground. Key indicators, such as housing prices and consumer spending, are flagging. Instead, last quarter’s growth was fuelled by a narrowing trade deficit. Imports fell as consumers continued to shift their spending away from goods and towards services. Meanwhile exports increased for much of the quarter thanks in part to record crude-oil sales. The resulting decline in the trade deficit added 2.
Second, and perhaps more surprising, favourable GDP figures do little to benefit the president’s party in midterm elections. In fact, only twice since 1950—in 1998 and 2002—has the party holding the White House gained seats in the House of Representatives in a midterm year. Nor do good GDP numbers limit the damage. An analysis by, going back to 1950, finds no correlation between year-on-year changes in third-quarter GDP and changes in seat tallies.
For example, in 1950, when Democrats controlled the White House, real third-quarter GDP growth was around 13%—the highest figure in our model—yet the party lost 29 House seats in that year’s polls. In 1978 GDP growth was around 6.7% in the third quarter; the Democrats lost 15 seats. In a parallel with today that they might find uncomfortable, inflation was soaring at the time, with prices up more than 8% on an annual basis, just as they are now.
A model of the data suggests that even if the economy were to grow by a breakneck 10% year on year, the president’s party could still expect to lose 23 House seats . If GDP contracted by the same amount, the incumbent party would still lose only 27 seats. The economy may be a priority for Americans. But sentiment trumps economic growth—and inflation is running at the highest rate many voters have ever known.