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Newsletter | November 11, 2022

What Tasty Egg On Our Faces!

2022 ElectionCorporate CrackdownExecutive Branch
What Tasty Egg On Our Faces!

This is an edition of the Revolving Door Project’s newsletter. Subscribe on Substack.

Well! That was a nice surprise!

At time of writing, it’s unclear which party will control Congress next year, but it’s clear they will have won a very narrow victory. Far from the predicted red wave, Democrats and Republicans appear to have dueled to a draw in this year’s midterms. The emerging media narrative is one of surprised relief for Democrats in general, and genuine hope for progressives specifically. Outspoken opponents of monopolization, financialization, the corporate trade regime, and more are headed to Congress. Meanwhile, feeble candidates who refused to take a side on corporate power — including the Democratic Congressional Campaign Committee chairman himself, Sean Patrick Maloney — will be packing up their desks in Washington.

This wasn’t how any politics professionals or media figures thought the midterms would go…including, we admit, ourselves. A few days before election day, we circulated a memo and embargoed press release analyzing what we found lacking about the Democrats’ message this campaign. We premised the memo on an assumption that Democrats would lose the midterm (based, in no small part, on spending decisions by both parties suggesting that both campaign committees foresaw a pending Red Wave). We figured that political reporters and influential pundits were already pre-writing their obituaries for the party, and we wanted to make sure that corporate centrists — like the think tank Third Way, which made its whole obituary package public days before the election — wouldn’t be the only voices in the milieu.

Surprise surprise, it turns out that Washington elites, including both campaign committees and, well, ourselves, were out of touch with the American people. We couldn’t be more glad to slurp up every delicious drop of the egg on our faces. We’d fallen into the same traps we often criticize in others: presumed savviness, too much faith in conventional wisdom — desperation, as John Maynard Keynes would tell us, for some certainty in a terrifyingly uncertain world. Let it be a welcome lesson to us about the dangers of being too certain about prognostications.

Someone Think Of The Fundamentals!

This is particularly ironic, since critique of prognostication about the midterms specifically is part of the DNA of the Revolving Door Project. In 2018, our Executive Director Jeff Hauser wrote for The Baffler about how political scientists who took it as an absolute statistical certainty that Democrats would lose the 2010 midterms essentially spoke their predictions into reality. These cleverer-than-thou academics asserted that all of the give and take of a political campaign, and the many issues and social forces that influence our political decisions, were essentially all distractions. They claimed they could predict any election based on just a few economic metrics and presidential approval ratings. Moreover, the political scientists assured us all, it’s simply a law of political nature that the President loses their first midterm in office.

In 2010, the Obama White House took these poli-sci predictions as gospel. The White House barely raised a finger to try to retain its nearly filibuster-proof control of Congress. The result was a catastrophic midterm for Democrats, the first of a string of bruising losses in any election where Barack Obama’s name wasn’t personally on the ballot. Almost everyone who works in and around Democratic politics shrugged that this was inevitable, given the sluggish state of the Great Recession economy. Surely that was an enormous part of the story, but to say that economic metrics determine electoral outcomes, as our frequent critic Matt Yglesias wrote in 2011, is to abandon the idea that persuasion itself matters at all in a democracy.

Fast-forward 11 years, and the deterministic argument doesn’t look so strong. The most infamous booster of this “fundamentals”-based modeling, political scientist John Sides, anticipated 40-45 Democratic Party losses in the House and 1-3 losses in the Senate for Democrats. Bloomberg’s Jonathan Bernstein, also a political science professor, concurred that, “With a Democrat in the White House and with perceptions of the economy so negative, the chances for an overall winning year for Democrats have always been slim.”

The election results seem to show that these assumptions just aren’t true. It turns out — to even our own surprise — that nothing, not even inflation, is destiny in politics. The country appears to be staring down some electoral results that truly upend the conventional understanding of how American politics is supposed to work.

What’s Employment Got To Do With It?

We’ll limit our analysis here to the economic issues which we know best, though defense of democracy and reproductive rights were clearly indispensable to Democratic successes in this election. We don’t make any claims about how important any one of these three issues was to the outcome, but to the extent that the economy impacted voters’ choices, we’re interested in how. We encourage readers to check out other groups’ takes on other subjects.

The Democratic Party has been panicking about inflation for over a year, since the Carter-to-Reagan election of 1980 supposedly proved that inflation is an assassin’s bullet for the political party in power. This perception is partly just a simple misremembering of the 1980 election: while inflation had been high for years during the oil crisis,  most of the 1980 race was a dead heat in the polls, until Reagan decisively won a late October debate. There were also plenty of other issues influencing voters besides the economy, most notably the Iran hostage crisis. 

One of the main reasons that election is such a fraught memory to Democratic economics types in particular, though, is that November 4, 1980 is as clean of a start-date to the age of neoliberalism as anyone is likely to identify (though Carter himself began the era’s deregulatory zeal.) But to the extent that economic conditions influenced the 1980 election, Democrats should now remember that those conditions weren’t merely inflationary, but stagflationary

It was the combination of high prices and high unemployment that opened a door for neoliberalism to overturn New Deal Keynesianism. Today, we face an inflation spike, but not an unemployment spike — exactly the opposite, actually. We’re not claiming that unemployment is the real deterministic variable in elections, but if Democrats are afraid of another 1980, maybe they’ve been obsessing too much about one side of the stagflation equation. 

Jobs reports continue to show more Americans being brought into the workforce month after month, despite the Fed’s best efforts. Though a majority of voters polled late last month believed we are in a recession, they aren’t experiencing the symptom working people suffer most from in a recession — being laid off.  As Representative Alexandria Ocasio-Cortez put it, this election seems to show that “full employment is politically stronger than inflation.”

There has been so much job growth over the past year that millions of Americans have been able to leave jobs they disliked for the first time in years. We’ve even seen employers forced to leave their biases against disabled workers behind, allowing far more disabled Americans to find jobs than prior to the pandemic. While inflation is outpacing wage growth, lowering real wages, it is clearly doing less harm to everyday people than the proposed solution – a self-imposed recession. Democrats shouldn’t accept either economic condition, but if forced to choose between high inflation and high unemployment, inflation eating the public’s wage growth is clearly preferable to millions of people suddenly receiving no wages at all.

That’s not at all to say that economic factors, including inflation, were unimportant in this year’s election. On the contrary, Republicans hammered Democrats on the issue non-stop. So it’s no surprise that many of the most successful Democrats in the toughest races are those who had a strong economic message of standing unflinchingly against corporate power as a driver of high prices.

David Dayen of The American Prospect documented that candidates who attacked corporate price-gouging saw strong support. Austin Ahlman at The Intercept pointed out that the most crucial Democratic victors in swingy Pennsylvania ran as economic populists. Moreover, young voters turned out in droves for Democrats nationwide, forcing even the Iraq War propagandist-turned-Atlantic pundit David Frum to admit that student debt cancellation is a political winner. 

It appears that voters were enthusiastic to support candidates who actually identified and shamed the specific villains causing the economic problems they were facing. Wouldn’t you know it, that’s precisely the strategy we argued that Democrats should pursue in our premature memo.

It’s also precisely the opposite of what some of the most covered economic pundits are calling for. Larry Summers says he wants an unemployment rate of up to 10% to defeat inflation. This cure will wind up being more harmful than the inflation itself — and could cost Democrats the 2024 election if they aren’t careful. 

The underlying causes of inflation — particularly housing costs, platform monopolization, and supply chain issues — cannot be solved by raises in interest rates. To the contrary, both building more homes and building more stable supply chains require large-scale investments to expand long-term supply. Even Obama’s Chair of the Council of Economic Advisors Austan Goolsbee agrees that raising interest rates without solving the supply issues is bad policy, stating recently that “higher unemployment is not going to bring down prices if a large component of that inflation is coming from these kind of supply things.” With a Fed-imposed recession looming, we might be witnessing the Democrats avoid their 1980’s stagflation fears this midterm election only to blunder headlong into them come 2024.

As the impact of inflation on the election was seemingly overstated by the media at every turn, we must be curious what generated this coverage. Were reporters earnestly convinced by voters and polls that this would be the defining issue of the race? Was the media unable to understand the economic realities of normal voters? Or did the financial world’s concern with high interest rates convince reporters that this issue was of such importance that voters could not ignore it?

The reality of the current moment is that Americans are working at unprecedented rates. They have been able to increase their savings — to the point that centrist economist Jason Furman has argued the Fed should make the elimination of excess savings a goal. The Democrats would be wise to recognize that the media’s thirst for inflation stories — and the paternalistic narrative of the Fed “doing what it needs to do” — could cost the Democrats the 2024 election.

The Power Of Punching Up

Democrats instead need to learn from their best-performing swing-seat candidates this cycle, particularly Pennsylvania Senator-elect John Fetterman, and change the narrative. Instead of a media slobbering over Powell and discussing inflation as an incomprehensible abstract, we need a media castigating corporate greed and praising government leaders who stand up to the powerful, instead of stripping economic security from the powerless. A narrative shift, plus the nuts-and-bolts policy work of stabilizing the supply chain and expanding housing, is the best way to tackle the politics of inflation, not charging headfirst into an unemployment crisis.

Best of all, the Biden executive branch — regardless of how Congress itself ultimately shakes out — already has fantastic tools in its arsenal for pursuing this strategy. Biden castigated “junk fees” in the waning days of the campaign, flanked by Federal Trade Commission Chair Lina Khan and Consumer Financial Protection Bureau Chair Rohit Chopra. Both of their agencies have fantastic powers for attacking ripoffs, price-gouging, and monopoly power, and both Khan and Chopra are determined to use those powers intelligently and bravely. Factor in the Department of Justice’s Antitrust Division under Jonathan Kanter, and Biden already has plenty of tools at his disposal to build a narrative of fighting inflation without sacrificing the little guy.

Hell, why stop at inflation? Our climate-focused Corporate Crackdown Project report offers a whole suite of executive actions Biden can take to fight climate change and create jobs at the same time. The Biden executive branch can learn from Obama’s mistakes not just by hitting the campaign trail or maintaining campaign infrastructure (though it absolutely must do both). It can wield the enormous powers of the federal executive branch to take on corporate villains and take home wins for working people. Most of the executive branch as we know it was assembled in the New Deal era under Franklin Delano Roosevelt, whose memory is truly the animating spirit of so much of the Democratic Party right now. Especially after this midterm, following in FDR’s footsteps is good politics, good policy…in all ways, just the right thing to do.

Once you acknowledge how wildly useless “fundamentals” models are, you can begin to wonder if the results of this election, better than expected as they were for Democrats, are actually the high end of what was possible. Perhaps Democrats could have had an even stronger election cycle? Perhaps they ought to have been playing not to outperform narrow statistical expectations generated by political scientists, but in hopes of genuinely winning?

The country will never get to run the counterfactual where the national Democratic Party did as we’d advised and held widely-publicized Congressional votes on abortion, voting rights, and anti-price-gouging measures in October instead of adjourning Congress. But especially given how reproductive rights, democracy, and corporate profiteering appear to have motivated voters, we have a hard time believing such Congressional votes would have hurt. They very well could have tipped the scales for Democrats to lap up those crucial one or two seats that would have kept them in full control of Congress. We’ll never know for sure, but we’ve yet to hear a persuasive case to the contrary.

In any case, the point is that conflict drives narratives, and narratives drive votes. Whether it’s conflict between your bodily autonomy and the state asserting control of it; conflict between the ideal of democracy and the threat of authoritarianism; or conflict between working people’s needs and greedy corporations’ wants, Democrats won when they had a story to tell in which they were good guys standing up to highly unpopular bad guys. We continue to recommend that they increase the volume and frequency with which voters hear that type of good vs bad conflictual storyline over the next 24 months.

PHOTO CREDIT: “Washington DC – Capitol Hill: United States Capitol” by wallyg is licensed under CC BY-NC-ND 2.0.

2022 ElectionCorporate CrackdownExecutive Branch

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