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Economy trumps feelings in the US inflationary climate - for The Australian – 20.10.22

by Adam Creighton

“Remember how you felt … the day the extreme Dobbs decision came down,” US President Joe Biden urged a crowd of supporters in Washington on Tuesday, referring to June 24, when the Supreme Court decided to return the right to make laws on abortion to the 50 states.

Fewer than three weeks out from midterm elections, which will determine whether Biden can have any legislative agenda in the last two years of this presidential term, feelings are indeed the Democrats’ best political weapon.

Their summer of hope, buoyed by a media maelstrom of criticism following the court’s decision to reverse a 49-year-old precedent, is fading into a gloomy autumn reality.

Bill Clinton’s aphorism about the primacy of economic matters in elections is having a renaissance as record inflation, rampant illegal immigration on the southern US border and rising crime loom larger in the minds of American voters than abortion, voting rights and climate change, let alone the ridiculous spectre of “fascism”.

Two national polls out in recent days make for grim reading for Democrats, putting Republicans easily ahead on what’s known as the generic ballot – will you vote Republican or Democrat this November?

CommSec’s Tom Piotrowski says some elevated inflation figures in Europe have “put pressure” on European stocks. “That translated to weakness where the US session was concerned as well,” he told Sky News Australia. “In addition to comments made by the head of the Minneapolis Federal Reserve, Neel Kashkari, More

The fine print was arguably worse reading, though. A new poll conducted by The New York Times, a publication not prone to any pro-Republican bias, and Siena College found only 5 per cent of voters thought abortion rights were the most important issue facing the nation.

Even women, that 51 per cent of the population often supposed to hold the same view on everything, had swung towards Republicans by an admittedly difficult to believe 18 percentage point margin. Memory of Dobbs appears to be fading, perhaps aided by the fact in practice abortion rights have changed for very few women, as the practice was already legal for the vast bulk of the US population and will remain so.

At the same time, 44 per cent said inflation, which has been at 40-year highs for more than six months, and the economy, widely believed to be on the cusp of a slump, were the most important issues.

To add insult to injury, Donald Trump, a man deemed the most deplorable in US history, 24/7, for more than five years, beat Biden in a hypothetical 2024 presidential matchup.

You can almost hear the teeth being pulled at the reporting desk at the Grey Lady (the NYT).

One aberrant poll might be dismissed, but the Harvard CAPS-Harris Poll of more than 5000 voters (a big sample for a political poll) released a day earlier was arguably worse for the ruling party.

When asked what issues they thought most concerned Democrats, respondents opted for the January 6 riots on Capitol Hill (an event that occurred more than 600 days ago), women’s rights and climate change.

Joe Biden has continued to see backlash for telling a reporter the US economy is “strong as hell” after a recent poll…

But the three top issues that respondents themselves most cared about were inflation, the economy and immigration – exactly the same three issues they said they thought Republicans were most concerned about.

Some other ominous nuggets: 55 per cent of voters doubted the President’s mentalfitness, 84 per cent believed the US was headed for recession next year and 73 per cent thought inflation – 8.2 per cent across the year to September, a 40-year high – would shortly get worse.

Absent a natural disaster or war, it’s hard to see how the next three weeks might shift US opinion.

Biden just announced a further 15 million barrels of oil to be released from the country’s Strategic Petroleum Reserve, reducing it to about 400 million, the lowest level in its history.

Saudi Arabia’s orchestration of an OPEC supply cut has put, deliberately perhaps, upward pressure on US petrol prices, which have a powerful negative relationship with the President’s approval rating, at the worst possible time for Democrats.

The cynical move could backfire politically, though, given the petroleum reserve was set up for economic and security emergencies, not political emergencies.

A Republican win in congress next month won’t have much direct consequence for Australia, whose alliance with the US will remain rock solid, with our free trade deal set in stone.

And our biggest disagreement with the US, over the need to appoint appellate judges to the World Trade Organisation, won’t be resolved by a Republican victory, let alone one dominated by pro-tariff Trump supporters.

But the first election in an English-speaking country since inflation soared will offer some political lessons for the others. The fastest decline in living standards in 40 years, as inflation gallops ahead of wage growth and interest rates soar, isn’t only an American phenomenon.

Margaret Thatcher once said the facts of life were conservative, and after a long hiatus, they are about to become so again, as the massive costs of years of conducting policy by feelings manifest themselves.

US President Joe Biden is dragging down the “entire Democratic ticket” in the lead-up to the midterm elections, says The Megyn Kelly Show host Megyn Kelly. “As we get to these midterm elections, the numbers are all going in the opposite way of these Democrats,” she told Sky More

The unhinged response to Covid-19, at least according to any pre-2020 pandemic plan published anywhere, has burdened the world with costs unrivalled in peacetime history, and which only now are starting to become apparent as broken supply chains and rampant inflation and rising interest rates exact their toll.

The widespread fervour to try to stop climate change whatever the cost may hit a political brick wall too, especially in Europe if thousands of people freeze to death this winter as a direct result of policies to switch off perfectly good coal and nuclear power stations.

Biden hasn’t spoken much about fighting climate change in the last months of the campaign, which is surprising only until reading the results of the Harris poll. A remarkable 80 per cent of respondents said having lower petrol prices and energy independence were more important than fighting climate change. Almost 60 per cent said climate change was a long-term threat or not one at all.

Unfortunately for Biden, not enough Americans will vote on feelings alone.

Economy trumps feelings in the US inflationary climate by Adam Creighton for The Australia
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Adam Creighton is an award-winning journalist with a special interest in tax and financial policy. He was a Journalist in Residence at the University of Chicago’s Booth School of Business in 2019. He’s written for The Economist and The Wall Street Journal from London and Washington DC, and authored book chapters on superannuation for Oxford University Press. He started his career at the Reserve Bank of Australia and the Australian Prudential Regulation Authority. He holds a Bachelor of Economics with First Class Honours from the University of New South Wales, and Master of Philosophy in Economics from Balliol College, Oxford, where he was a Commonwealth Scholar.

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