Will the Economy Help the GOP Keep Its Majority in the Midterms?
The Republican Party is headed into the midterm elections armed with a powerful economic case in favor of keeping its majorities in the House of Representatives and the Senate
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Unfortunately for Republican candidates, it’s unlikely to move many voters.
The U.S. economy’s growth is surging. The economy expanded at a 3.4 percent annual rate in the third quarter of the year. That momentum appears to have continued into the fourth quarter, with S&P Global saying last week that its purchasing managers’ survey results are consistent with five percent growth in October. A barometer of the manufacturing sector released Monday by the Institute for Supply Management showed the strongest production in nearly five years.
Midterm elections, however, are not typically decided on questions of economic growth. While an expanding economy helps an incumbent president or his party in presidential election years, it appears to have little to no direct effect on midterm elections.
While inflation has run much lower under President Donald Trump and the GOP majorities than it did during the Biden years, it is still uncomfortably high. And the Iran war has pushed up gasoline prices and sent the various inflation indexes climbing again this year, with the personal consumption expenditure price index rising 3.6 percent year-over-year in September. This has given the Democrats and their media allies a reason to talk endlessly about an “affordability crisis” afflicting America.
This too might not matter much. Most studies of the impact of inflation on midterm elections have found it carries almost no weight. It’s possible that this year will be different, with many voters telling pollsters that inflation and affordability are the top issue facing the country, but history gives us reason to doubt that the difference between, say, two percent inflation—the Fed’s target—and 3.6 percent inflation will make a difference in the outcome this week.
A study of the 2022 midterms by University of Pennsylvania political scientists Diana Mutz and Edward Mansfield found that despite severe inflation, perceptions of inflation or other recent economic developments did not change votes, and that what people call their most important issue mostly just reflects their partisanship.
Purchasing Power Matters More Than Growth or Inflation
The measure of the economy that historically performed best as a leading indicator of midterm elections is the change in real disposable income per capita—income after adjusting for inflation and taxes. Way back in 1975, Princeton political scientist Edward Tufte published a paper titled "Determinants of the Outcomes of Midterm Congressional Elections” in the American Political Science Review showing that two factors explained about 91 percent of the variation in the president's party's midterm House vote from 1938 to 1970: Gallup approval and the change in real disposable income per capita. In a follow-up book on the subject a few years later, he specified that a one-point change in real disposable income per capita growth in the year before the election improved the president’s party’s House vote total by about 0.6 percent.
Tufte’s findings could give some hope to Republicans. It is true that President Trump’s approval ratings are struggling. Gallup has not publicly released a presidential approval poll result since last December, when Trump’s rating was at 36 percent. Polls by several other organizations, however, have Trump around that level or even lower.
But this does not necessarily indicate a blue wave is about to sweep over the nation. Back in the 1982 midterms, when Reagan’s approval rating was similarly low, the Democrats cemented their control of the House, adding 26 seats to their majority. But Republicans maintained their Senate majority, losing only one seat.
One of the reasons for this was likely that although the economy was struggling—unemployment rose to 10.1 percent and inflation clocked in at around 6.2 percent—real disposable income was rising. From the third quarter of 1981 through the third quarter of 1982, it rose around 0.5 percent. For all of 1982, however, its average growth was an even higher 1.2 percent.
From the third quarter of last year through the recently ended third quarter of this year, real disposable income per capita is up 1.0 percent. So far this year, it has grown at an average annual rate of about 1.3 percent, up from last year’s 1.1 percent growth. That’s not spectacular, but it does show that the purchasing power of voters is rising. That typically bodes well for the party whose president is in the White House, according to Tufte’s work.
Of course, all attempts to measure the accuracy of various economic indicators for midterm elections suffer from the same weakness: the small sample makes sweeping conclusions hazardous. When Tufte first produced his data, he had just seven midterm elections to look at since World War II. We now have 20, but that’s still a small sample. And the last midterm, in 2022, is a problem because purchasing power was falling sharply—down 6.2 percent—and Biden’s approval rating was not much better than Trump’s is now, but the Democrats lost fewer than 10 House seats.
Republicans can point to an economy growing faster than expected and purchasing power that is still rising despite inflation. What they cannot count on is voters giving them credit. Democrats learned in 2022 that a bad economy need not produce an electoral disaster. Republicans may learn this week that a good one offers no guarantee of political salvation.
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