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Divided We Stand

Divided We Stand
New book about the 2020 election.

Monday, July 11, 2022

Economic Red Flag for Democrats

 Our new book is titled Divided We Stand: The 2020 Elections and American Politics.  Among other things, it discusses state and congressional elections  RDI is a key indicator and it ain't looking good for Dems. 

Driving the news: Real per capita disposable income — the money consumers can spend after accounting for taxes and inflation — is dropping sharply, according to government data released Thursday.

Why it matters: Pollsters, political scientists and economists consider this measure of the household buying power to be, perhaps, the single best economic predictor of election results. Rising real incomes tend to predict rising vote share for the president's party during the midterm elections, and vice versa.

By the numbers: Real — meaning inflation-adjusted — per capita disposable income fell to $45,490 in May, down 3.6% from the previous year.In fact, since March 2021 — when the last round of stimulus checks artificially puffed personal disposable income to a record high level of nearly $57,000 — real incomes are down 20%.

The big picture: In a recent note attempting to ballpark the outlook for Democrats in the November elections, Goldman Sachs analysts found that "real disposable income is the strongest predictor of election results among the economic variables we consider.""It is also particularly relevant in the current election cycle, as elevated inflation and a decline in fiscal transfers have weighed it down compared with a year ago," they wrote, adding that the direction of income data suggests "a large loss" is in store for Democrats in the elections.

Longtime Democratic pollster Mark Mellman said on the political podcast "Hacks on Tap" earlier this year that "people look at all kinds of economic indicators unemployment, GDP, growth. The one that is most important politically that people never look at, is change in real disposable income."