Shot across the bow? Shot across the bow?\images\insights\article\voting-booths-flag-small.jpg November 17 2023 November 17 2023

Shot across the bow?

Despite Biden’s terrible polling, Democrats performed well in off-year elections, which should worry the GOP.

Published November 17 2023

Bottom line 

It’s T-minus one year and counting to what likely will be an ugly and contentious presidential election. While President Biden’s dismal polling numbers suggest a pendulum shift to the right, Democrats performed in the midterm 2022 and the off-year 2023 elections. They have done a masterful job of framing the political debate as a choice between the social-policy agendas of the two parties, including abortion, rather than the pocketbook and kitchen-table issues moderate Republicans favor.

Key off-year 2023 election results:

  • Virginia Democrats picked up a narrow majority in the House of Delegates and maintained control of the Senate, despite popular Republican Governor Glenn Younkin, who took office only two years earlier. 
  • Kentucky Moderate Democratic Governor Andy Beshear won a second term in a deep-red state that former President Trump carried by more than 25 points in 2020.
  • Ohio Voters in this solidly red state approved a ballot measure enshrining abortion rights in its constitution by 56% to 43%.

Biden’s approval keeps sinking The focus on important social issues allowed Democrats to avoid discussing the elephant in the room. Gallup reports Biden’s overall approval rating plunged from 40% in September to a cycle low of 37% in late October. Among Democrats, it declined from 86% to 75%; among independent voters, it fell from 39% to 35%; and among Republicans it remained at 5%.

Why so gloomy? Polls point to a variety of reasons for why voters are souring on Biden:

  • Age and health President Biden turns 81 on Monday, and some are concerned he might be in cognitive decline.
  • Federal debt The federal government’s outstanding debt has soared from $26 trillion to $33 trillion in three years, due to excessive fiscal spending. The debt-to-GDP ratio is now 122%. 
  • Inflation Biden inherited nominal CPI of 1.4% y/y (half the 40-year average of 2.8%), but it soared to a 41-year high of 9.1% in June 2022, in part due to overly generous fiscal stimulus. 
  • Southern border More than eight million illegal aliens have crossed since Biden took office.
  • Energy policy The administration has misused our Strategic Petroleum Reserve and discouraged exploration and production, leaving us vulnerable to Iran, Russia and China, among others. 

Threatening to invoke the 25th amendment? Given Biden’s precipitous decline in the polls and growing concerns about his age, health and policy stewardship, some Democratic thought leaders are openly wondering if he will be able to successfully discharge the powers and duties of his office. 

If Biden should announce he will not run for re-election, he could pass the baton to a younger generation of Democratic leaders, such as governors Gavin Newsome (California), Gretchen Whitmer (Michigan), J.B. Pritzker (Illinois), and Phil Murphy (New Jersey).

Double trouble While Republicans hope to make the 2024 election an economic referendum on President Biden’s first term in office, they have their own political albatross. Former President Trump is their leading candidate, despite not participating in any official debate. Since Democrats launched the first of several civil and criminal indictments of Trump in March 2023, his approval rating has risen from 45% to 58%. His subsequent trials and judicial appeals are likely to run through the entire election season, preventing him from campaigning in the individual state primaries. In fact, he may find himself left off many state ballots due to his legal woes, potential putting the Republicans at a disadvantage if it turns out that he remains their standard bearer for president next November.

Enter Nikki Haley? The former two-term South Carolina Governor and Ambassador to the U.N. has broken ahead of the pack of Republican presidential candidates not named Trump. In a recent New York Times/Siena College poll, Trump led Biden in five swing states (Pennsylvania, Georgia, Michigan, Arizona and Nevada) and trailed in Wisconsin by only two points. In contrast, Haley leads Biden in all six states, and by margins double those of Trump.

Down-ballot impact on the Senate? Importantly, five of those six swing states also have likely close elections for U.S. Senate seats. Because 80% of voters today tend to vote straight ballot, capturing the White House likely means running the table and winning both chambers of Congress.

Independents will determine the 2024 election Voter demographics have shifted dramatically over just the past 15 years. In 2008, when Barrack Obama first won the presidency, 49% Americans were Democrats, 26% independents and 25% Republican. Today, Democrats account for only 25%, with most of those lost becoming independent, which now holds 45% of voters. Republicans have largely held serve at 27%.

Third-party bid? Senator Joe Manchin (D-W.Va.) announced last week he will not run for re-election. He’s trailing his likely Republican opponent in the polls in deep-red West Virgina by 30 points, so he was unlikely to win.

But the moderate Manchin left the door open for a third-party run for president. Speculation is that he might run with retired Republican Governor Larry Hogan, who successfully served two terms in deep-blue Maryland. In the polarized political environment in which the U.S. has been mired the past 15 years, voters might very well crave the centrist ticket that a Manchin/Hogan pairing might offer. In fact, 60% of Americans have no interest in seeing a Biden/Trump rematch in 2024. So whether it’s a new Democratic governor, Nikki Haley or a third-party Manchin/Hogan ticket, we believe there’s growing odds that new blood with fresh ideas has a real chance of winning the White House next November.

Connect with Phil on LinkedIn

Tags Politics . Markets/Economy . Monetary Policy . Equity .

Views are as of the date above and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector.

Gross Domestic Product (GDP) is a broad measure of the economy that measures the retail value of goods and services produced in a country.

Consumer Price Index (CPI): A measure of inflation at the retail level.

Issued and approved by Federated Advisory Services Company