Watch the economy, the decisive factor in the 2018 election

Summary: While the Democrats party over their victories on Tuesday, let’s examine one of the great forces deciding elections. What is the trend of the US economy, and how might it influence the major elections in 2018?

Stand by for a boom!

The Republican’s incompetence gave the Democrat’s some rare victories on Tuesday. Today Democrats rejoice, relieved that they need not re-think their political platforms or alliances. They will continue with the strategy that has brought their party to near ~85-year low point in political strength: love for foreign wars, the health care industry, Wall Street, and identity politics. See the data here, here, and here) — plus the new CNN poll showing that favorable views of the Democratic Party have dropped to their lowest mark since this survey began in 1992. (Across the aisle, the GOP has had great success with its outright extractive program (benefiting the 1%), marketed with lies (e.g., tax cuts are great!).

This is beyond odd. With even moderately competent political leadership, the economy has the decisive effect on US national elections. That a stable and moderately strong economy did not put Hillary Clinton in the White House reflects the incompetence Donna Brazile reports in her new book, Hacks: The Inside Story of the Break-ins and Breakdowns That Put Donald Trump in the White House.

The ebbs and flows of US politics are driven to a large (not exclusive) sense by the following graphs. If the economy continues on this path, the Republicans might suffer only the usual minor losses in the mid-term elections — and do well in 2020 (perhaps led by President Pence).

These graphs show the first nine months of Trump (from his January 20 inauguration though the most recent data) — and the 8 years of Bush Jr. and then Obama, for comparison. Note that Trump has had almost no effect on the economy yet, and will not until the legislation and budgets from the GOP Congress and him take effect during the next year or two. These graphs

Real GDP per person

Real gdp is useful in many ways. But individuals do not benefit if GDP increases due to population growth. GDP per capita is a better measure of how well Americans are doing. Like all measures, it provides only a partial truth. This does not tell us how well the increased national income is divided. In fact, the 1% (or the top few percent) are skimming off most of it.

Conclusion: so far, more of the same stable moderately slow growth.

GDP per capita


Median real weekly earnings for wage and salary workers

How Hillary could lose with median real wages growing for the past two years at the fastest rate since the tech boom? If this continues, do not assume the GOP will display such incompetence, especially under the leadership of President Pence.

Median weekly real earnings


Job Growth

Fours years of sustained moderately strong job growth — and Hillary still managed to lose (in the electoral college, with a small win in the popular vote — instead the landslide a competent Democrat probably would have received). As for the GOP and Team Trump, this is the one major economic that is slowing (decelerating). It is not a leading indicator, but one of the most important economic metrics. Watch it.

Job growth (non-farm payrolls)


For More Information.

Important: To see why the Democrats have been unable to capitalize on the zany antics of Trump, see Matt Taibbi’s typically brilliant analysis.

If you liked this post, like us on Facebook and follow us on Twitter. See all posts about the Federal Reserve, about monetary policy, about inequality and social mobility, and especially these…

  1. What every American needs to know about the Federal Reserve System.
  2. What are the limitations of the Fed’s power? It’s neither impotent nor omnipotent!
  3. The Fed sees years of slowing growth. Prepare for years of political turmoil.
  4. Today’s mythbusting: the Fed is not suppressing interest rates.
  5. More proof of rising inequality, perhaps our greatest threat.

To better understand what lies ahead for America…

I recommend reading The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War by Robert J. Gordon (Prof economics, Northwestern U). From the publisher…

The Rise and Fall of American Growth
Available at Amazon.

“In the century after the Civil War, an economic revolution improved the American standard of living in ways previously unimaginable. Electric lighting, indoor plumbing, motor vehicles, air travel, and television transformed households and workplaces. But has that era of unprecedented growth come to an end?

“Weaving together a vivid narrative, historical anecdotes, and economic analysis, The Rise and Fall of American Growth challenges the view that economic growth will continue unabated, and demonstrates that the life-altering scale of innovations between 1870 and 1970 cannot be repeated. Gordon contends that the nation’s productivity growth will be further held back by the headwinds of rising inequality, stagnating education, an aging population, and the rising debt of college students and the federal government, and that we must find new solutions.

“A critical voice in the most pressing debates of our time, The Rise and Fall of American Growth is at once a tribute to a century of radical change and a harbinger of tougher times to come.”


7 thoughts on “Watch the economy, the decisive factor in the 2018 election”

  1. I think it will be based on a lot more than economic growth. Trump has been so divisive – and incompetent – that he has alienated far more people than during the campaign. The mid-terms will be a chance for the electorate to vent their anger – and vent they will.

    He has also managed to alienate several key Republicans so has now hardened the divide between those who espouse his values and those who will not want to be associated with him at all during their campaigns.

    1. Larry Kummer, Editor


      “I think it will be based on a lot more than economic growth.”

      I didn’t say it economic growth was the only factor. Historically, however, it has often been the decisive factor.

      “that he has alienated far more people than during the campaign.”

      Nope. WaPo: “12 months later, Trump would probably still win the 2016 election“, 6 Nov 2017. Money paragraph:

      “The Washington Post-ABC News poll asked respondents how they’d vote in a redo of the 2016 election, and, if anything, Clinton seems to have lost more ground than Trump. Among those who voted, 46% say they picked Clinton last year and 43% picked Trump — a slightly more favorable sample than the 2016 election, in which Clinton won the popular vote by two percentage points. But in a head-to-head rematch, Clinton’s support drops even more than Trump’s does, and they wind up in a 40-40 tie. Given that Trump overperformed in key, blue-leaning swing states, that means he’d probably have won again.”

      1. Larry

        Yes, but it is pointless citing a pole comparing Trump and Clinton when the Democrats will be fielding a new candidate. Even some Democrats disliked Clinton so a new face on the block completely changes the electoral dynamics.

      2. Also on Trump I don’t think there is just a dislike of him amongst many voters, but now a visceral hatred – just take a look at many of the replies to his tweets as an example.

        If he was able to extend his support amongst his core base he might have a chance but he has completely failed to reach out. In fact I would say he had gone of of his way to alienate these potential voters so he is a one-term President.

  2. Larry, there’s a couple of blogs that I read that I you’d be really interested in. They talk about the same kind of stuff do on a meta level (the growing dysfunction of government), but one does it from a state level perspective, and the other from the local level.

    Would you be interested?

    1. The first one is “Saying the Unsaid in New York” by Larry Littlefield

      He writes mostly about New York, and New York City, but much of what he says applies nationally. He also brings a dense thicket of statistics (The most relevant to this post probably being that earnings really peaked for those born in 1957, and has declined since then.) to back up his arguments. The core of his argument is that government services at the local level are going to collapse due to bad decisions by previous generations.

      The other is “Granola Shotgun” by Johnny Sanphillipo

      Unlike Littlefield, Johnny Sanphillipo has his base out west. And Compared to Littlefield, Johnny’s is primarily a combination of Photoblog with interviews and stories. While much more anecdote heavy, much of the stuff that Johnny talks about is backed up by Littlefields data. I would his core message is “local governments today have a broken OODA loop, and thus are unable to the problems facing them. And that this is going to cause them to go down the same process that Detroit went down.”

      Between the two, one gets a picture of much more fragile local economy than the official data shows.

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