Whether in Karl Marx’s theory of struggle between workers and capitalists, or the folksier American dictum that people “vote their pocketbooks,” economic determinism — the belief that material interest dictates political behavior — has a seemingly permanent hold on our culture. With reason: Obviously, economic conditions influence how people think about public policy and, in times of economic crisis, such issues are especially salient. Nevertheless, intangible concerns — “values” such as freedom, dignity and identity — matter as much or more. Right now in the United States, they seem especially determinant. Anyone who doubts it need only consider the big losses Republicans just suffered in the House of Representatives.
We don’t know the precise net shift in seats from the GOP to the Democrats yet, but it appears to number in the mid- to upper 30s, transferring partisan control of the chamber. Considering the extraordinarily prosperous conditions under which the voting occurred, and the fact that President Trump and the Republican-controlled Congress could point to their 2017 tax bill and say it at least theoretically deserved some of the credit, Tuesday’s results count as a significant exception to James Carville’s famous rule that “it’s the economy, stupid.”
How significant? Michael Cembalest, the chairman of Market and Investment Strategy for J.P. Morgan Asset Management, has developed the following chart that plots midterm House results against an index of employment and inflation trends and trends in the equity and housing markets.
Midterm elections since 1908 show there is a rough correlation between prosperity and support for incumbents, and, conversely, between hard times and a “throw the rascals out” mentality. For example, President Herbert Hoover’s Republicans lost 52 seats in 1930, reflecting the fact that the stock market had crashed a year earlier, accompanied by a depression and mass unemployment. Just four years earlier, the Republicans in what was effectively President Calvin Coolidge’s second term had lost only nine seats because unemployment and inflation barely existed and asset prices were rising.
Tuesday’s election took place under practically the most benign conditions imaginable for the Republican Party: Inflation is hovering almost at the Federal Reserve’s 2 percent target rate; unemployment is at 3.7 percent, the best rate since 1969; and, as Cembalest’s chart shows, owners of stocks and houses have realized better than a 10 percent real return over the last two years — 401(k) accounts are flush.
And yet the Republicans hemorrhaged votes and seats. Yale Economist Ray Fair’s oft-cited model of how economic conditions affect voting predicted that the Democrats would get 50.7 percent of the two-party vote in the House this year; their actual share is more like 53 percent, according to data compiled by the Cook Political Report. Perhaps even more telling, the GOP lost 10 more seats than it lost in 1982, when the United States was in the midst of what was then the second-worst recession since the Great Depression. But Ronald Reagan was president at the time, and projected an optimistic, fundamentally conventional and civil leadership style. He offended many Americans’ policy values, to be sure, but not their need for stability and their sense of decency, as President Trump does.
Republicans must now reflect on how much better they would have fared this year if their standard-bearer had been perceived as somewhere within the historical norm for presidential behavior. Instead, he was a deeply polarizing figure, someone whose divisive and bizarre words and deeds large numbers of erstwhile GOP voters in the suburbs — the key voting bloc for the future of Congress, it appears — simply cannot countenance, no matter how much he’s fattened their wallets or raised their portfolio values. They would not be bought off.