Opinion – Paul Krugman: Will it be the dawn in Joe Biden’s America?

If the midterm elections could be rerun this month, the Democrats would likely end up in full control of Congress. President Biden’s approval ratings are rising. Inflation is low and consumers feel more optimistic. And Americans are getting a better look at the true political agenda of the Republican Party, which is deeply unpopular.

Okay, we don’t give politicians who lost an election the opportunity for a second chance, even if they falsely claim that the election was stolen. But I think it’s worth noting how much the economic and therefore political environment has changed in recent months and starting to think seriously about the possibility that the Democrats will be in a surprisingly strong position next year.

It’s hard to quantify how bad things looked for Biden’s party on the eve of the midterm elections late last year. The last consumer price report released before the “midterms” showed an inflation of 8.2% in relation to the previous year, a terrible number for any country.

The unemployment rate was still very low by historical standards, but the news media was full of warnings of tough times ahead, and a large majority of likely voters believed (falsely) that we were in a recession.

Given the perceived severity of the economic environment, Republicans and many political analysts were confidently expecting a huge Republican election wave.

Why didn’t this happen? Part of the answer may be that Americans weren’t feeling as bad about the economy as some polls suggested. True, the University of Michigan’s respected consumer sentiment index had fallen to levels last seen only after the 2008 financial crisis, during the worst crisis since the Great Depression.

But Michigan’s index was probably skewed by partisanship: Did Republicans really believe, as they claimed, that the economy was worse off than it was in June 1980? (At that time, the economy really was in a recession, inflation was 14% and unemployment was above 7%.)

And another old Conference Board consumer confidence index told a very different story, with consumers feeling pretty good about the economy. I’m not sure why these measures were so different, but the Conference Board seems to have done a better job of predicting the vote — although the backlash over Roe v Wade, and against some terrible Republican candidates, certainly played a part, too.

In any case, in mid-January – about two months after the election and with three consumer price reports published – things look very different. There is still no recession. Consumer prices actually dropped in December; more specifically, they have increased at an annual rate of just 2% over the past six months.

And although consumer expectations have not caught up with financial markets, which seem to believe that inflation will remain subdued for the foreseeable future, consumer inflation expectations have returned to the levels of a year and a half ago.

Which raises a question few would have asked even a few months ago: Could Joe Biden — who, incidentally, had a much better midterm election than Ronald Reagan in 1982 — be headed for a “dawn in America” ​​moment?

A few months ago I looked at the “misery index” – the sum of unemployment and inflation, originally suggested by Arthur Okun as a quick summary of the state of the economy. I used to think this index was silly; there are several reasons why it shouldn’t make sense. But historically, it’s done a surprisingly good job of tracking consumer sentiment. And, as I have already noted, the poverty rate seemed to be going down.

Well, now it’s fallen off a cliff. If we use the inflation rate of the last six months, the poverty index, which in June was at 14, has now dropped to 5.4, or almost what it was on the eve of the pandemic, when Donald Trump confidently believed that a strong economy would ensure his re-election.

And that’s not the only thing the Democrats have going for them. The green energy subsidies in the Inflation Reduction Act are leading to a lot of new investment in domestic manufacturing; it’s not clear how many jobs will be created, but the next two years will give Biden plenty of opportunities to preside over factory openings and make speeches about how America is, um… getting great again.

I’m not suggesting that the Democrats will crush the Republicans in 2024. On the one hand, a lot can happen in the next 22 months, although I don’t think the Republicans, even with the cooperation of many in the media, will convince Americans that the Biden administration is full of corruption.

On the other hand, elections generally depend not so much on how good things are as on the perceived rate of improvement, and with inflation and unemployment already low it is not clear how much room there is for growth.

Furthermore, extreme political polarization has likely made land-crushing elections a thing of the past. Republicans could perhaps nominate George Santos and still get 47% of the vote.

But as the economic landscape shapes the political landscape, things are looking much better for Democrats now than almost everyone imagined until very recently.

_{Translated by Luiz Roberto M. Gonçalves}