The Bruce Willis blockbuster Armageddon (partially) became reality last month, nearly a quarter of a century after its release. On Nov. 24, NASA launched its Double Asteroid Redirection Test, or DART — an unmanned spacecraft that has to crash into the asteroid Dimorphos at 22,000 kilometers per hour. This target practice serves as a test, in case a meteorite is ever on a collision course with Earth, and the world can only be saved by blasting the space object off course.
U.S. President Joe Biden’s popularity has tumbled, and he could do with his own DART (Depressing Approval Ratings Turnaround) to reverse the collapsing trend. Voters are growing increasingly negative about the government’s COVID-19 policies, while largely blaming high inflation on the Democratic leader.
A threat from an asteroid racing towards Earth in movies such as Armageddon and Deep Impact tends to unite people, but Biden — whose problems are piling up — needs an enemy to get voters to rally behind him.
Popular presidents in the past would always have a mediagenic threat or challenge that was easy to capture in slogans. For example, Reagan branded the Soviet Union as an “evil empire” and labeled the government itself as an opponent (“Government is not the solution to our problem; government is the problem.”). Legendary Democratic strategist James Carville recently told The Atlantic: “As of now the White House does not have good storytellers. Good stories need villains.”
In his campaign, Biden had the perfect antagonist in Trump: rude, impulsive, ill-mannered, devoid of any form of self-reflection, with an ego bigger than the Pentagon and a misaligned moral compass. Democrats were able to present a more amiable, polite, respected and highly experienced candidate. Following his election win, however, Biden spent too much time portraying himself as the antithesis of Trump. For a long time, the message essentially remained ‘Look what calm, stability and decency you have now,’ thereby looking in the rearview mirror instead of ahead.
The White House now tries to retain and (re)gain voters with the twofold plan to thoroughly rebuild, renovate and modernize U.S. infrastructure (in the broad sense of the word) and the social system.
A good to very good case can be made for most of Biden’s plans in the Bipartisan Infrastructure Framework and the Build Back Better initiative. Yet Team Biden has failed to effectively market its plans. To many voters, it is unclear what exactly the plans entail. When individual parts of BBB are presented to Americans, they are generally enthusiastic. When asked if they believe the whole package will work, however, faces grow gloomy.
Biden now tries to sell his stimulus plans as means to stop inflation, but this does not make sense. Current supply chain problems will not be solved with infrastructure investments that will only have an impact in a few years from now.
Biden’s downward spiral is unlikely to be broken for the time being. As yet, there will be no dart in the bull’s eye; the motto seems to be Disappointing At Reaching Targets. Yet it is essential for Democrats to quickly find new momentum, as the midterms are less than a year away. The Democrats are heading for a pasting:
- Support for Biden is fairly low, but Congress is held in even less esteem among voters. This reflects the most on the Democrats, as they rule in both Houses.
- Quite a few Democrats in Congress will quit, while an incumbent politician has historically always had an easier time getting reelected than a novice getting elected. In addition, many congressional districts will be redistricted following the recent census. This is the task of the states, and the GOP is in charge in most of those states. In addition, the party of the incumbent president usually fares poorly in the midterms.
- High inflation could level off somewhat in the coming quarters, but it will probably stay high. Voters are clearly concerned, and Republicans are doing everything they can to fuel these concerns. In addition, high inflation generally has a greater electoral impact than high unemployment: If 12 percent of the people are unemployed, 88 percent of voters will have no problem; inflation affects virtually every voter. Moreover, people with the lowest incomes are the most sensitive to high inflation, and the majority of this voter group tends to vote Democrat.
- The U.S. is bound to be impacted severely by COVID-19 over the next few months. Graphs that chart COVID-19 infection rates in Europe and the U.S. show that the U.S. follows in the wake of almost every European wave. It only seems a matter of time before another U.S. wave starts (if it has not already started), given the lower vaccination coverage compared to Europe, fewer restrictive measures and far more resistance in Republican states against potential new COVID measures. This is compounded by the effect of Thanksgiving: 50-60 million Americans said they would travel for this national holiday and air travel increased by 80 percent compared to last year.
- With the Fed taking tentative steps towards tightening, far less fiscal stimulus in the offing than last year and consumer confidence at the lowest levels in a decade, the U.S. economy is unlikely to offer a positive surprise any time soon. The economy is the subject of most concern among US voters.
If Republicans are indeed heading for a resounding midterms victory, the usual market optimism about a divided Washington might not hold true this time:
- Climate change, COVID-19, a more assertive China, a crumbling infrastructure, growing inequality — these are all challenges that require a strong and proactive government rather than a political climate in which parties do not achieve anything, except for jilting each other and beating each other up.
- The GOP has increasingly deviated from the reasonable middle, with Congress members like Paul Gosar (R-Ariz.) and Marjorie Taylor Greene (R-Ga.).
- If the GOP does well during the midterms, this might urge Donald Trump to make another stab at the presidency in 2024. I doubt whether the financial markets will welcome a second Trump term.
Andy Langenkamp is a senior political analyst at ECR Research which offers independent research on asset allocation, global financial markets, politics and FX & interest rates.