Eric Levitz has a typically smart column today about the election in NT Mag, some of which I kind of disagree with but will have to sit with a while to fully absorb.
This I thought was a fascinating analysis:
After the 2008 financial crisis, Democrats decided to enact a stimulus that the party’s own economists considered inadequate, in deference to concerns about the national debt. As a result, the unemployment rate remained near 10 percent when voters went to the polls for the 2010 midterms.
In 2021, Democrats decided not to repeat their mistake. Even before Biden took office, Congress had already enacted historically large relief bills, which had prevented the COVID crisis from triggering a depression. Nevertheless, with the virus still rampant, Democrats decided to err on the side of providing American households and state governments with excessive financial support, over the objections of many economists and commentators.
This was probably an unwise allocation of legislative capital. Given that Joe Manchin’s tolerance for new government spending proved highly limited, Democrats probably should have allocated more of the $1.9 trillion American Rescue Plan’s funds to permanent programs and high-impact public investments, rather than one-off checks.
Still, the Democrats’ approach now looks much more politically defensible than it did 24 hours ago. For over a year now, polls have consistently found overwhelming disapproval of the economy and discontent with rising prices. This led proponents of full employment (like myself) to despair. In our view, paying for the real economic costs of the pandemic through inflation, rather than mass unemployment, was the just thing to do. It distributes the material burdens of the COVID shock more equitably instead of concentrating it on the most disempowered members of the labor force. But for precisely this reason, it appeared to be politically toxic: Since everyone feels the sting of rising prices, while only a minority of the public suffers from high unemployment, voters looked poised to punish Democrats for prioritizing tight labor markets over low prices.
If voters did this, however, the punishment looks awfully mild. Although there are many other variables that could explain the divergent outcomes, Democrats did far worse in the “low inflation, high unemployment” environment of 2010 than in the “high inflation, low unemployment” one of 2022.
It is possible that the Biden economy makes voters cranky without rendering them desperate for change. Yes, prices are annoyingly high. But wages have almost kept pace with them and jobs are abundant. It’s plausible that these conditions conferred a sufficiently strong sense of material security to prevent many swing voters from reflexively demanding change. (The fact that the GOP’s only explicit plan for reducing inflation is heinously unpopular might have also helped.)
It’s also possible that people just prioritized some other issues over their personal material needs, particularly since pretty much everyone who wants to work is working which makes everyone feel less desperate even with the high prices.
Maybe that old mantra, “job, jobs,jobs” is really the potent economic message. Inflation is terrible but high unemployment can be terrifying. And if that’s so I think we need to be concerned about the Fed’s crusade to break inflation with higher unemployment. We’d better hope they can curb this quickly and level off unemployment at a low level. It’s political poison and we don’t need that going into 2024.