It is long viewed that what the electoral populace thinks of the state of the economy is an important factor in how they vote and electoral outcomes. Prior to 2000 the state of the economy as measured by real per capita GDP growth explained presidential election outcomes except in cases where there was a war (!940) or there was a party split (1912). Personal scandals also played roles, with Ford’s defeat in 1976 at least partly due to his pardoning of Nixon. 2000 and 2016 had personal scandal issues involved in outcomes that went against the state of the economy (although 2016 a closer call on that), although in both of those elections we had the electoral college installing a president not favored by the national popular vote.
Midterm elections are not so closely tied to economic conditions as they have certain patterns based on the president and when he was elected, with midterms generally not favoring presidents. Nevertheless, economic conditions do play a role, with Reagan taking a big hit in 1982, even as he won big two years later when the economy turned around.
So now we have the economy doing well in terms of GDP growth, a 4,2% growth quarter followed by a 3.5% one, looking better than many forecast, despite some negative signals such as recent bad performance of the stock market. How will all this play out in the upcoming midterm elections?
To be honest, I do not know. But it strikes me that most of the electoral populace is not in touch with actual current economic reality. It goes on both sides. So, the side that I tend to favor tends to understate the returns people received from the GOP tax cut. Now I did not and do not support this tax cut for various reasons, but indeed it did hand out money to the vast majority of the population. But now by nearly 2 to 1, the US populace says they got nothing from it, and they oppose it as mostly giving money to the rich and adding to the budget deficit. All the latter is correct, of course, so it the populace are not complete fools. But in fact most of them did get some gain from this tax cut. But then, back in 2009-10 when Obama gave most of the population a tax cut, most of them did not notice it and were unaware they had gotten it. The hard fact is that people only notice big changes in their take home income, and neither Obama’s nor Trump’s tax breaks were big enough for most people for them to notice it.
Needless to say, while many did not notice the tax cut Trump gave them, those favoring Trump are not noticing that the vast majority of the US population has not seen increases in real per capita income. Trump’s tax cut for the majority of the population was too small to overcome the hard fact that real wages have remained largely stagnant. GDP growth has been high in the last two quarters, but is declining, and for a variety of reasons is likely to continue downwards. The recent volatility of the stock market shows these concerns, ranging from Trump’s trade wars, creeping inflationary trends, and rising interest rates, not to mention bad markets and slowdowns abroad.