Dems Continue To Sink Despite Improving Economy

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Yves here. We are heavy on politics tonight because truth be told my WiFi went down, my hotspot isn’t working and I am scarfing bandwidth at the local JCC. This being the South, Starbucks, the other backup, are down too. Terrible to have this happen in the middle of the fundraiser of all times, but a reminder of how fragile our personal infrastructures can be.

Substantively, this post assumes that employment will continue to improve. That picture depends on how Covid behaves over the winter. But it also misses that consumer sentiment has fallen considerably, and if that holds, it creates its own reality.

By Barkley Rosser, Professor of Economics at James Madison University in Harrisonburg, Virginia. Originally published at EconoSpeak

On the first page of today’s Washington Post was reported a poll showing that when a random sample was asked, 46% said they would vote for a generic Republican candidate for Congress versus 43% for a generic Democratic candidate. Given reported further pro-GOP gerrymandering, if this were to hold for next year’s midterms, GOP would certainly take solid control of the House, if not the Senate. Not looking good for the Dems or Biden and Harris.

Now there certainly some things that are not looking good. Covid-19 cases have started to increase again, if not dramatically, but in 35 states at latest report, and deaths seem to have stopped declining, if not started rising again. Of course, it may be that given that we now have 80% of adults having had at least one vax shot, we may be able to handle some increase in cases without hospitalizations and deaths rising, given that over 90% of those in hospitals and dying are unvaxxed. But this is something Biden has emphasized and worked hard on, with bad news appearing, even if this is partly due to bad non-behavior (getting vaxxed, wearing masks) among his critics.

Probably foreign policy is not part of the most recent decline, but the messy nature of the end of the Afghan war dropped Biden’s ratings by about 5% some months ago, damaging his previously generally favorable foreign policy rating. That is probably not that big a deal now, although the damage seems not to be undone, despite an apparently generally successful trip to the G20 and the Glasgow summits.

It may be that the whole noise about education and CRT spilling out of the Virginia governor’s race is adding to the Dems’ problems, but more clearly serious problem, dominating the headlines, is inflation, with the recent year to year 6.2% annualized rate report for October probably the punctuation point for today’s especially poor poll ratings. This couples with reports of impending Christmas shortages, including even for Santas, with none of this looking good. It remains unclear fully what is going on with some of these shortages, such as ports and truckers, and so on, but problems with these are now entrenched with not much improvement in sight, not to mention ongoing chip shortages pushing up prices in in the auto industry. And this price spike was especially led by energy, with rising gasoline prices in Virginia reported to have been a factor in the GOP governor’s race win, and that was something I heard a lot about just prior to the election here.

So there are certainly things that look bad or actually are bad out there on various fronts. But do they really justify these bad polls? Do people really want to elect people who are currently running around trying to kowtow to Donald J. Trump as hard as they can? There were reports about the Glasgow climate summit, but much of that got undercut by reports that it was just going to exacerbate oil and gas prices. Real climate activists found it insufficient, and others found it inflationarily scary. Ugh.

Anyway, there is a lot that looks plenty good. One is the employment front. While it has not yet gotten back to pre-pandemic levels, it continues to rise and there has been upward movement of wages. In September we had an all-time record number of quits, which presumably indicated people feeling so confident about getting a better job they quit their current job. These people are not quitting to drop out of the labor force, or not most of them, although there remain s aubstantial number of people out of the labor force for a variety of reasons, and there are still some unemployed who are having trouble getting re-employed. So this is not perfect, but mostly massively improving and mostly quite good.

Then we have the stock market, which Trump claimed would crash if Biden were elected. It did decline from all-time highs this past week, but the Dow still remains above the famous Glassman-Hassett level of 36,000. This is in the eyes of many still a rather overvalued market, certainly not one that has crashed. But, of course, lots of people are not so directly affected by the market.

Furthermore, Biden just signed the hard infrastructure bill today, something most polls show is highly popular, and which even drew some GOP support in Congress, although GOP leaders and Trump are out to purge or punish those who did vote for it. Unfortunately, the Dems have done a poor job of publicizing this achievement and what is in it. Obviously they need to do more on that, although we know all sorts of GOP Congress members will brag about parts of it delivering money to their states and districts, even though they voted against it.

Finally, although there seems to be zero media recognition of this, it looks like the big surge of gasoline prices may be over. Crude oil prices have declined over the last three weeks from about $85 per barrel to about $80 per barrel, and crude prices are the main driver of retail gasoline prices with a lag. Indeed, although I have not seen national data, it looks like gasoline prices may have stopped rising at all in recent weeks, with it possible they may even decline a bit, if crude prices do not return to rising again. Where I am this has happened, a freeze at $3.29 per gallon with a 5 cent drop over the weekend. None of this is in the news, just more talk about rising gasoline prices. We shall have to see on this, but there may be a substantially lower inflation report next month. If so, will anybody notice, or will we start hearing about some other supposed horror?

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57 comments

  1. Heidi’s Walker

    Ugh, gas prices have doubled in the last few months and you are applauding a drop of 5 cents to $3.29 a gallon?. Do your homework.

    Reply
    1. Michael Ismoe

      Crude oil prices have dropped. Retail prices at the pump are at new highs here in Arizona.

      The AZ redistricting commission screwed the Dems on the congressional maps and we went from 5-3-1 Dems to 3-3-3 including a new congressional district for the Q guy in ruby red Northern AZ.

      Oh, by the way, Mark Kelly is going to lose his re-election bid too. The border situation is destroying him. They ran 2000 Haitian immigrants through Tucson while there is a 5 year backlog on locals trying to get their relatives across the border legally. Not a good look Brandon.

      In the Governor’s race our leading Dem candidate has just been called a racist and “Kristen Sinema without the intellect” by a former employee who sued and got a judgement for $2.75 million for racial discrimination.

      Don’t expect anything out of AZ next year except a bunch of crazy Republicans.

      Reply
      1. Arizona Slim

        Okay, that explains why I recently got an unsolicited email from the Kelly campaign. I could almost smell the desperation.

        And then I unsubscribed.

        Reply
    2. Jeff

      Avg gas price in Los Angeles is $4.60. Just paid $4.90/gallon as it was the cheapest in the area.

      Price decrease? Where? Many items at Costco up 10% in the last month.

      Reply
      1. Questa Nota

        Insult to injury for those gassing up to leave California. Family, friends and colleagues report more interest in, and actual moves to, other states. They speak of permanent two-tier, or worse, economies, lack of affordable opportunities to make a living and worsening dysfunction in Sacramento and around the state. They are voting with their feet and gas pedals.

        Reply
        1. Quobono

          Democratic supermajority.
          How’s that working out for you?

          The human whiteboard for financial policy makers, aka “Joe Biden”, and the ridiculous KEmbarrass waiting in the wings, don’t help any.

          Reply
    3. Carolinian

      Right. The above a bit Panglossian eh? How about Biden’s threats against Iran and Russia not to mention the incoherent policy toward China? Then there’s the equally incoherent vaccine policy that affects many Americans directly by threatening their jobs. And finally don’t pretend people aren’t talking about Biden’s senior moments and wondering whether he is even in charge at all.

      Perhaps what’s really surprising is that his approval rating isn’t even lower. The Dems in general are going down with Biden’s ship.

      Reply
      1. NotTimothyGeithner

        My sense is Biden on his own doesn’t have much of a foreign policy view, hence the reported productive meeting with Putin. He’s likely just leaving it in the hands of advisors without a Lavrov type to be in charge.

        As a result, Biden will largely without direct meetings work in the framework of the NYT and WashPost opinion pages which are largely fantastical.

        Reply
    4. Kurtismayfield

      #1. Gas prices still haven’t hit their historical highs, which in real dollars would be alot.

      #2. Gas prices are a blip in my household budget. No one has cried one bit about my housing cost, food, or health care inflation.. which eats up around 50% of my budget.

      Reply
  2. MFK

    Also assumes that stock market and real estate bubbles will not crash. Financial crashes very often lead to major recessions with increases in unemployment.

    Energy costs have not yet diffused through economy and labor costs are increasing rapidly. Finally, the long price decline driven by the “China price” may be coming to an end.

    Higher inflation will eventually lead to higher interest rates.

    In fact, the economy appears to me to be very precarious with the threat of a powerful recession lurking.

    Reply
    1. ambrit

      General inequality is now baked in to the stock market. When the ‘economy’ goes up, the Oligarch’s rake in the majority of the “excess profits.” When the market drops, the rest of us suffer from the “economic shock” that ensues. This has previously been framed as a Republican Party characteristic. Now, it is clearly seen as a Democrat Party trait as well.
      Privatize the profits, socialize the losses. That’s how everything is structured now. The old Robber Barons would be green with envy.

      Reply
    2. Mikel

      “Higher inflation will eventually lead to higher interest rates.”

      That all depends on metrics for inflation.
      Apparently by leaving out the most important things, certain things, or more things from the equation and you can deny inflation is happening and keep interest rates low.
      Then stock prices can be propped up and those assets can be used as collateral for low interest loans.
      And those low interest rates don’t trickle down to everybody.

      Reply
      1. Grumpy Engineer

        And those low-interest loans can be used to gobble up real estate or competing businesses (yay monopoly!!). Or simply to buy more stocks to play the highly-profitable asset appreciation game on an even grander scale.

        IMO, the ultra-low interest rates we’ve had since 2008 have been the dominant factor of pushing income (or more accurately, wealth) inequality through the roof. They’ve done more harm than good, and Fed should have starting moving rates back up as soon as the job situation turned the corner in 2009.

        When people can borrow money, buy something, wait for it to appreciate, and then sell it for net profit, you’ll see an explosion of people using debt to buy things they don’t actually need. And when interest rates are significantly lower than inflation (like they are today), that applies to almost everything.

        Back in late 2020, I bought my wife a new car for $25k. According to Kelly Blue Book, it’s worth $33k today. Gee, if I’d only borrowed $25k to buy a second one, I could have made $8k profit. Good grief.

        Reply
  3. Benny

    The sweet, earnest bafflement of the tenured professor of economics from the woodsy Virginia suburbs.
    My prim little list of partial/dubious/decontextualised “wins” must surely be sufficient to sooth the waking nightmares of the voting masses! What, indeed, is the problem? It’s a real head scratcher!

    Reply
    1. cnchal

      You beat me to it. I want to congratulate Yves for running a comedy post . . . er . . . the bubble vision view of an insulated servant to the .01%

      No, gigantic blow molded Santas won’t be coming over from China any time soon with container shipping prices as they are now.

      Where I am the gas stations yoyo the prices by 5 cents per liter daily, up in the morning then down in the evening in what appears to be collusion. They never call it price fixing, it’s the natural law of supply and demand.

      Price here translates to USD $4.50 per US gallon for regular and $5.50 for premium.

      As for the stawk market, can the professor spell distortion?

      Reply
      1. megrim

        It’s more likely attempts at price undercutting, and not collusion. I used to work at a supermarket gas station many years ago, and if I was working the first shift my first task was to drive to all the other gas stations in town and write down the gas prices. Then I had to call some regional manager I’d never met and give him all the prices. He would then tell me how much to undercut, and then I had to go and use a suction cup on a thirty foot pole and change the numbers. I assume it’s done via text or email now, but I bet it’s still the same basic system.

        Reply
    2. Katniss Everdeen

      What, indeed, is the problem?

      “Bad messaging” of course.

      The rabble just won’t stop believin’ their lyin’ eyes.

      Reply
    3. flora

      We were sold the same bill of goods a year or two after the GFC, when Congress bailed out the tbtf banks and Wall St, but left Main Street to wither. The great and good just couldn’t understand what OWS was about. After all, the economy was growing again… for everyone… except the bottom 50% of wage earners… and people who lost everything in the fraudulent house foreclosures. Biden was VP then.

      Reply
    4. albrt

      This is why I will be voting against the Democrats in 2022 (unless they miraculously turn it around, which they won’t because this is exactly what the leadership intended).

      Sorry Mark Kelly, you seem like you might have been a nice guy, but you’ve fallen in among thieves.

      (This was intended as a reply to ALM below – not sure how it landed here)

      Reply
      1. tegnost

        exactly what the leadership intended
        yep
        This is how the ratchet works.
        dems get in and hold the line preventing any leftward movement, their voters abandon them and repubs get in and move right, dems get in and hold the line again…
        It’s despicable.

        Reply
    5. lyman alpha blob

      This was quite the howler –

      Furthermore, Biden just signed the hard infrastructure bill today, something most polls show is highly popular, and which even drew some GOP support in Congress, although GOP leaders and Trump are out to purge or punish those who did vote for it. Unfortunately, the Dems have done a poor job of publicizing this achievement and what is in it.

      Just spitballing here, but maybe the reason they aren’t publicizing it is because it is a small fraction of what was promised, is mostly giveaways corporations/donor class who likely don’t need the help, and doesn’t do much in the way of providing concrete material benefits directly to those non-corporate actual people who need them?

      Also, Biden owes me $600. Let’s go Brandon.

      Reply
      1. Hepativore

        You, too? I never got my $600 dollars as well despite sending in my return in February and pointing out to the IRS that they never sent me my check on it like they wanted me to.

        I heard that there is further watering-down planned on the BBB. It looks like the childcare subsidy is going to be left up to individual states to decide how to allocate it in addition to making it means-tested (Of course!)

        The gas tax also looks like it is still included which is rubbing salt in the wound for people who can only find affordable housing far away from where they work. There is also the fact that many people live in very rural areas like myself where there is no public transportation and you need a vehicle just to drive several miles to the nearest grocery store. In short, the gas tax seems like it is specially designed to punish people who can least afford it.

        Reply
  4. ALM

    Dems have sunk in my opinion because of all of their broken campaign promises. No $15/hr minimum wage or student debt relief or public option or expanding Medicare eligibility and benefits or paid leave or drug pricing reform or $2,000 stimulus checks or free community college or taxing the rich or tax reform or return to the JCPOA or immigration reform etc. As far as Dem threats to cut drug prices, things are going in the opposite direction with Medicare’s announcement of a big premium hike to pay, in part, for the expected demand of a dodgy Alzheimer’s drug (Anduhelm) which was recently approved by the FDA over the objections of it own panel of experts. (https://www.cnn.com/2021/11/12/health/medicare-premium-hike/index.html)

    The Democratic party leadership has shown itself to be a bunch of corrupt liars. The Forever Wars continue. Dems are just fine with poverty wages. Dems support tax cuts for the rich with the proposed reinstatement of the SALT tax deduction. The Post Office is still under the control of a Trump appointed jackass who is determined to ruin the service by dismantling and delaying mail deliveries. Efforts to privatize Medicare in a Trump pilot program continue apace. Gross income inequality has become even grosser as billionaire wealth and corporate profits have exploded under both administrations. A Republican just introduced a bill to remove marijuana from Schedule 1. Biden’s deportations exceed Trump’s. There is still no Covid plan. And so on.

    So how are the Dems any different than Trump aside table manners?

    Reply
    1. NotTimothyGeithner

      A temporarily improving economy doesn’t make up for 40 years of problematic underlying conditions.

      An improving economy for Republicans won’t help Biden or Team Blue with his potential voters. Gross inequality and partisanship have to be included. The lack of enthusiasm for both HRC and Biden especially among young people largely explains the problem. The Obama years started with a call for change and at best became a worse version of the prior Shrub years in many ways.

      Promises were made, and promises aren’t being kept. If you don’t keep up with promises, you better have something, and a gas going from 3.89 to 3.85 isn’t cutting it.

      Plenty of people are realizing their student loans are going to restart.

      Reply
    2. Jason Boxman

      As I recall, the Democrats owe everyone $600. That was about the most baldfaced lie I’ve ever seen, the mental gymnastics required to claim it was actually going to be $1400 all along. But this is from the party that brought us all Russiagate, so it is consistent.

      Reply
      1. polar donkey

        Democrats- Always promises and never kept. Corrupt leaders like Pelosi and Schumer who are not held accountable for failures. Nepotism and corruption in the family’s of party leaders. Why are Kerry’s, Pelosi’s, Biden’s, Bulgers’ kids messing around in Ukraine and China. Manipulating/censoring through establishment media and social network platforms. Vaccine mandates that feels like purges of deplorables. Collapsing social fabric. Shortages. The future stars of the party 28% Kamala and 36% Mayo Pete knifing each other in public. Oh, and real income decline of 2.2% since January. I mean with a starter list like that you’d have to be a total purity politics jerk not to vote democrat. Democrats-Bringing you the neo-feudal New Deal.

        Reply
      2. Left in Wisconsin

        That was about the most baldfaced lie I’ve ever seen

        How about Trump on health care: “Solving health care will be sooo easy” “Cheaper and better insurance”….

        Reply
    3. drumlin woodchuckles

      Well . . . they have stopped the Republican effort to “Deconstruct the Administrative State”. They have put some non-vandals and non-arsonists in charge of some of the Cabinet Departments and Bureaus and Agencies.

      Thank god for small favors? Or view it as a “time-out” to begin organizing and doing other movements and other things? Use this time to get personally and micro-locally ready for the next Republican attack-wave? Maybe even work on long-range successors and/or gravediggers to the Democratic party?

      But the Bears Ears National Monument did get restored back to its intended size. That’s not nothing for the Indian tribes involved. And I feel confident that the next Trump figure will shrink it right back down again, or abolish it altogether, if elected.

      Reply
    4. lance ringquist

      anyone ever hear of the scam medicare advantage? thank nafta billy clinton

      The government’s purpose is to transfer its insurance risk to those for profit companies.

      These managed-care companies must then manage that risk through rationing, limiting choice and negotiating provider payments.

      To the extent they’re allowed, they deny coverage or charge higher rates to those with preexisting conditions.

      https://humbledollar.com/2021/10/managing-to-profit/

      the democrats are up to their necks in the post office debacle.

      https://medium.com/@nharpermn/stop-panicking-about-the-post-office-8bcd689b9601

      actually the democrats were the majority that wanted the post office privatized. 104 Democrats and only 58 Republicans sponsored the bill to gut the post office to privatize it.

      https://www.democraticunderground.com/10022335782

      Reply
    1. Louis Fyne

      Illinois Democrats say, “no, hold my beer”

      And gerrymandering isn’t just a D vs R thing….it’s a tool to favor incumbents and the connected at the expensive of others. See Illinois and its D. legislature drawing districts that not only favor Dems, but white neoliberal Dems. who so many progressives purportedly want to vote out

      Reply
    1. Arizona Slim

      I am going to make the bold prediction and say that Brandon will be most popular name for baby boys born in 2021 and 2022.

      Reply
  5. Jackiebass63

    The American electorate could be compared to the weather where I live. It frequently changes, often going from one extreme to another extreme. Voters waffle back and forth based on an irrelevant issue they are fed. They will vote a certain way because of a minor issue while ignoring the issues that really count.

    Reply
    1. flora

      I think the old generality that “Americans vote their pocketbook” still holds true. By that yardstick, people were still angry with the O admin in 2016 for the way it handled the GFC bailouts of the rich and almost nothing for the 99%. The good the ACA did for some couldn’t make up the difference in the ire of the many, imo.

      T was doing OK in the polls until the shutdowns continued long enough to disproportionately hurt Main Street. The 2020 summer “mostly peaceful” protests destroyed mostly small business properties. The big, national chain businesses could withstand a few sites vandalized, small businesses were destroyed. B won.

      That’s my armchair political analysis, and it’s worth what you paid for it. / ;)

      Reply
      1. Eris377

        With respect, I think you have it very wrong about the bailouts. I will not dispute that the bailout of the financial industry left many incredibly disreputable people whole. Some argue there was no other way to do it quickly and effectively enough. Regardless, the idea of wholesale “bailouts” of “the 99%” ran into exceptionally significant public resistance and mainly because the specific ideas floated up turned out to be bailouts for 5%, not for 99%. Stuff like “lets use public funds to write down underwater loans” kept running up against “Are you kidding? You want to backstop those guys but not me when the $90K price drop on my house was all my equity and on theirs it was all loan?”

        Reply
        1. flora

          I fully understand the ramifications of the paper market and the repo market seizing up. I do. However, the rescue of the financial paper market and repo market did not have to come at the expense of Main Street, imo. Adding, the bailouts were not for the 99%, imo, and most people on Main Street knew that, else they wouldn’t have objected so strongly.

          Reply
          1. flora

            Much shorter: Throwing Main Street under the bus for an easy, short term way save the financial commercial paper markets and repo markets was a mistake. The problems aren’t solved.

            Reply
    2. NotTimothyGeithner

      The American electorate isn’t composed of a group of people who might go back and forth between parties but voting and non voting. It’s like Republican voters in 2000. Bill was a monster, and they didn’t vote for the guy promising 4 more years. Bill had high approval ratings despite the dot Com situation.

      The simple answer is Biden made promises, winning a close election and now his voters want results. He can’t cry foul because they had Obama do it. Obama isn’t the distant past. In these kinds of cycles, promises work once. They don’t work twice. Strikers are helping themselves and others. It’s not Biden. There is some good regulatory stuff, but it’s going to take years for noticeable improvements or to undo damage. The Disney madness isn’t going to go away.

      The problem is the potential Democratic electorate has a critical mass that knows the filibuster is bs, has been skeptical for a long time, and has had phony promises made. Who remembers Obama’s promise to not be heinous if reelected? Even HRC’s campaign picked up on that she needed to lie sent herself as a break. She was promising donors she wouldn’t be as inept as the Obama managed party.

      The potential electorates aren’t the dullard, “average” consumer of economist models.

      Then we have to address the electorate and obstacles to voting. These addressee issues. Renters move and have their registration expire. They don’t get polled or vote reliably without organizing. The Democrats recently have relied on their partisan voters and disgust from Trump to eke out wins, but other electorates will look different.

      Reply
      1. Jeff

        Agreed. Unless inflation dramatically changes, Biden is toast and so are the Dems. But that’s the least of our problems.

        Reply
    3. Noone from Nowheresville

      How about elections and the electorate are like weather and politics is like climate.

      If I use DeGrasse Tyson’s example of weather & climate

      Tyson compares weather to the irregular, sporadic pattern of his dog. Though it’s difficult to predict where the dog is going, we can know the range of his meandering because he’s on a leash. Conversely, Tyson’s straight path is like the climate, which is broadly predictable by observing long-term changes in global forces.

      The electorate is like the irregular, sporadic pattern of a dog on a leash. Said electorate is confined to the path by its leash. Whereas political handlers / politics / perhaps class war is a straight mostly pre-determined path like climate, broadly predictable by observing long-term changes and consistencies in global forces.

      Now if the electorate were to break its leash or get the handler to see something interesting off the path. That could introduce a bit of chaos into the mix.

      Reply
      1. drumlin woodchuckles

        What would happen if the leashed electorate tried ( or even succeeded) in running back to the handler, jumping up on the handler, and gnawing the handler’s face off?

        Reply
  6. marku52

    Typical Clueless Economist. Wage increases totally eaten up with inflation. Social Security increase eaten up by Medicare increases. Price increases all over the board. Car batteries at Costco used to be $79, now $99. A vacuum tube my business uses, the 6V6, used to be $16. Now is $21.

    These are not small increases.

    And then the spectacle of the useless dems trying once again to claim it’s not their fault, that “The Budgie Ate My Homework” and “We forgot to ask President Manchin” . Trick Handcuffs, like the man said.

    No. You made promises. And you didn’t even try. FU.

    Reply
  7. Claudia

    Whether it’s coffee or gasoline, (in my experience) retailers tend to keep prices high even when their costs go down. Short-hairs syndrome.

    Reply
  8. Bellatrix

    I read a lot of economic and market commentary, and quite frankly Barkley Rosser’s contributions have negative value. That last paragraph is just embarrassing. Throw him back, he’s too small!

    Reply
  9. Sound of the Suburbs

    We haven’t adapted to the new reality.
    The benefits of economic success go to the few.
    Thomas Frank actually looked at the figures, and the gains since 2008 haven’t benefited the majority.
    Economic success doesn’t mean political success anymore.

    Is my life getting better or worse?
    Better – vote for those in power at the moment
    Worse – vote for the other lot

    Reply

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