No 'red wave'

Democratic Party does better than expected in midterms

In the United States, “midterm” elections — held two years into a President’s term — are generally not very good for the incumbent President’s party. Motivated opposition voters turn out in numbers to protest the President’s actions and legislation, and ruling party supporters are typically complacent or overconfident. Thus, there is almost always a significant swing towards the opposition party. This had been the case in the midterm elections in 2018, in 2010, and in 1996. Only in 2002, with 9/11 still a major political factor, did the incumbent party beat off the opposition’s challenge. And also, now, in 2022.

The Democratic Party had been steeling itself for a “red wave”, which would sweep an extensive Republican majority into both chambers of the US Congress and also switch multiple state-level positions and legislatures. No “red wave” materialised. In fact, the Democratic Party flipped many state legislatures and governors’ positions blue. Ultimate control of the House of Representatives and the Senate is still uncertain, given the US’ inability to count its votes in a timely fashion. But there is a good chance that the Democrats will retain control of the Senate at least. This would prevent President Joe Biden from becoming a complete lame duck and allow him to, for example, continue appointing officials that require Senate confirmation.

The reasons and implications of this unexpected strength of support for the Democratic Party are not immediately obvious. Part of the reason must surely be that the US economy is not as weak as some of the headline numbers would suggest. While inflation has remained at levels not seen for decades, it is also true that job growth has been robust. Real incomes, particularly at the bottom of the income distribution, have in fact increased substantially during the course of the pandemic. This may have strengthened the Democratic Party’s case. The US Supreme Court’s reading down of abortion rights may also have played a major role in energising the Democratic Party’s core voters. One exit poll suggested that the Democrats’ victory margin among unmarried women was an enormous 37 per cent — and that they, in fact, lost among married men, married women, and unmarried men, but their enormous margin among unmarried women was sufficient to prevent a red wave.

Increased stability in the United States is good news for the markets and the world. Even if the House flips Republican, the majority will not be so large that it will be easy to create economic chaos through divided government. There will continue to be solid majorities for existing external policies of the US such as engagement in the Indo-Pacific and support for Ukraine. Meanwhile, the Republican Party will no doubt engage in some soul-searching. Many candidates handpicked by former President Donald Trump lost badly at the polls this week, while some of his rivals within the party — in particular Florida Governor Ron DeSantis — had a very good election. Some hope that this spells the end of Mr Trump’s undisputed rule over the Republicans, though whether it also will reverse that party’s decline into anti-democratic conspiratorial populism is less clear. It may be too soon to declare a return to business as usual in America, but that is certainly what both the markets and the rest of the world would be glad to see.