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The case for keeping Congress red

It’s the economy, stupid.

Rep. Jason Lewis
At a recent get-out-the-vote event in Eagan, Rep. Jason Lewis opened his remarks to GOP volunteers by rattling off the good things that are happening with the economy.
MinnPost photo by Sam Brodey

Republicans’ message as they work to hold on to thin majorities in the U.S. House and Senate might best be summed up by that time-honored political adage: “it’s the economy, stupid.”

With less than two months to go before the November midterms, Republican incumbents are pointing to a set of glowing economic markers — a 50-year low in jobless claims, three percent GDP growth on the year within reach — and they are arguing that their “pro-growth” policies have been the fuel that jump-started a stalling U.S. economy.

In the two Minnesota battleground U.S. House races where incumbent Republicans are facing re-election, 2nd District Rep. Jason Lewis and 3rd District Rep. Erik Paulsen are leaning hard on the stronger economy. They’re plugging the GOP’s tax cut bill at every turn, arguing it’s making people better off, and they’re telling voters that if they like what they’re seeing, Republicans deserve another two years in the House majority.

The conventional wisdom in electoral politics is that if voters are feeling the effects of a good economy, they’ll be inclined to reward the party in power for it. Yet, it’s Democrats, not Republicans, who are odds-on favorites to win control of the House in November, and that’s largely because these midterms are shaping up as a referendum on President Donald Trump and his popularity more than anything else.

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Recent political history shows that midterm elections tend to be dominated more by how voters feel about the president than they do about the economy. This year’s election could see the biggest gulf between those attitudes in decades: not since the Harry Truman presidency has consumer confidence in the economy been so high while a president’s popularity has been so low.

‘Humming with confidence’

At a recent get-out-the-vote event in Eagan, Lewis opened his remarks to GOP volunteers by rattling off the good things that are happening with the economy, framing his reelection bid — and the broader effort to hold the House — as an effort to continue on a path of economic growth.

He mentioned 3 percent wage increases, 4.1 percent economic growth, what he called the best job market in 17 years, and the average tax cut a family in the 2nd District is slated to receive under the GOP’s tax cut legislation, which he cited as $3,000.

There’s certainly no shortage of positive economic indicators for Republicans to point to: in the second quarter of 2018, the U.S. economy grew by 4.2 percent, the biggest increase in four years, which puts it on track for an annual growth rate of 3 percent, a benchmark that has not been surpassed since 2005. In August, the national unemployment rate was 3.9 percent, down nearly a point from the beginning of 2017. (Minnesota’s unemployment rate was estimated at 3 percent in July 2018.)

The Dow Jones Industrial Average, an index of the handful of big companies that make up a big chunk of the stock market, has hit record highs in 2018, and consumers’ confidence in the economy is at its highest point in 18 years. (Wage growth is currently at 3 percent — a figure many Republicans tout as a sign of progress — but inflation is rendering that rate of wage growth basically moot.)

“Our economy is humming with confidence, it is shining with with growth and optimism,” said Paulsen in an interview with MinnPost. “The psychology of folks feeling good about their own situation economically is important, but more importantly, they feel good about their neighbor.”

Paulsen, who faces wealthy Democratic businessman Dean Phillips in what could be his toughest re-election bid yet, said the economy is a central component of his message to voters in CD3, a west metro district that is home to several Fortune 500 companies and is, on average, the state’s most affluent district.

“I just make the case I’m following through on what I promised I’d work on,” he said. “We were told for years that the economy would never perform above 2 percent. Now we’re at 4 percent economic growth. The economy is booming again.”

Clearly, Lewis — who faces former medical device executive Angie Craig in a rematch of the 2016 election — is talking a lot about the economy as he persuades voters to grant him a second term.

“We have done everything that we said we were going to do and the result is, when the government gets out of the way, labor and capital come together, markets respond, and you get this rising tide of economic growth that benefits everybody,” Lewis at the Eagan event in August.  “Understand,” he added, “if we lose the House, all of that goes away.”

Rep. Tom Emmer, who is not expected to face a tough reelection fight in his 6th District, helps Republicans craft election strategy as a top official at the National Republican Congressional Committee. He says he asks voters two questions: if they feel safer than they did two years ago, and if they feel better off than they did two years ago.

“That answer is, clearly, yes,” he said. “All the jobs that have been created, all the job openings, real wages are rising, these are all good things… We had over 4 percent economic growth. If we continue on that trend, I think that’s the message.”

Center on the tax bill

To explain how GOP governance has led to an improved economy, Republicans point to regulation-cutting moves in Congress and the White House and how those have contributed to a broadly more fertile climate for business.

But mainly, Republicans like Lewis and Paulsen are touting the tax cut bill Republicans passed in 2017 to tell the story of increased economic growth — though that strategy is not without risks.

The bill, which permanently slashed tax rates for corporations and cut individuals’ taxes for the next decade to the tune of $1.2 trillion, was hailed by the business community, which says it has used the capital to reinvest in workers. (Most companies have largely rewarded their shareholders with savings generated by the tax bill.)

“We’ve been waiting for 31 years for tax reform under the auspices it would get the economy booming again,” said Paulsen, who helped to craft the legislation as a member of the powerful House Ways and Means Committee. “And that’s what it’s done.”

Though most people won’t feel the full impact of the tax bill’s changes until they file their 2018 taxes, Paulsen said the restructuring of corporate taxation has led to investments in the U.S. economy and is leaving people feeling better about where they are financially.

But the tax bill was an unpopular piece of legislation when it was being considered, and it has only gotten less popular over time. A June poll from Monmouth University found that 34 percent of Americans approved of the legislation, while 41 percent disapproved — a breakdown that critics of the legislation say is remarkable for a bill that cuts taxes, among the most popular things a government can do.

Rep. Erik Paulsen
MinnPost file photo by Bill Kelley
Rep. Erik Paulsen said the economy is a central component of his message to voters in CD3.
According to Vanessa Williamson, a fellow at the Brookings Institution think tank, though the tax bill is Republicans’ primary legislative achievement, turning it into something that helps them keep their majorities in Congress, and safeguard endangered incumbents will be very difficult.

“Republicans are in a hard place if they want to run on this tax bill,” she said, “because major provisions are unpopular even with the Republican base. And it wasn’t a real priority for American voters, or even Republican voters, to have a major piece of tax legislation be an achievement they’d be running on.”

She also issued a broader warning about the limits of a good economy: while the it matters a lot in presidential elections, she argues that it is not a good indicator of which party has an advantage in midterms, partially because voters are less likely to reward or punish their individual member of Congress based on how they feel about the economy.

“People think the economy matters a lot for elections — that’s true,” she said. “It just doesn’t hold in midterms… If I were a Republican strategist, I wouldn’t bank on the economy helping this year because on average, you wouldn’t expect it to help in a midterm that much.”

The Trump factor

Then there’s the issue of Trump. Historically, midterm elections — especially those during a president’s first term — tend to be referendums on the president, with the outcomes a reflection of their popularity.

Trump’s historic unpopularity is enough to create serious headwinds for Republican incumbents like Lewis and Paulsen. But there’s concern among Republicans that the president’s actions aren’t making it any easier for them to spread the good news about the economy.

For one, the president’s aggressive approach on trade, which has entailed slapping steep tariffs on imported products from Canada, China, and elsewhere, has sparked trade conflicts that have seen countries impose tariffs of their own on U.S. goods.

Workers and businesses in the agriculture and manufacturing sectors have been particularly hard-hit, forcing tough decisions about worker layoffs and future business investment, and raising the possibility of higher prices for consumers. The trade conflicts have given Paulsen and Lewis’ opponents an opening to puncture the GOP’s economic growth balloon and paint them as bad on the economy.

But Trump has cast the trade wars as necessary to strengthen the economy. He and his administration are frequently talking up the economy, with the president himself taking plenty of opportunities to contrast certain statistics with those of his predecessor, Barack Obama. At a campaign rally last week, Obama criticized of Trump for taking credit for economic growth, which escalated into a feud between the two presidents. That could make the issue more galvanizing for both parties’ bases of supporters ahead of the election.

Still, there’s evidence that Trump believes that the midterms will swing on other issues besides the economy. The president’s signature issue of immigration, for example, is one that he believes will help the GOP safeguard its majorities in Congress. Beyond that, Republicans are seeing value in turning to a strategy based on inflaming culture-war flashpoints, like kneeling during the national anthem at pro sports events, to galvanize the GOP base to the polls.

Republicans like Paulsen would like to see Trump focus more on the economic message. “He has a tendency to want to stay on offense and move on to the next thing right away,” Paulsen said of Trump. “Those tendencies can be distractions from some of the economic benefits people are feeling right now.”

“It’d be nice if he would just sit back, take credit, and go, ‘What’s next?’” Paulsen said. “I think some of the trade and tariff policies have a tendency to backfire, we’ve seen that already… I’m going to continue to voice my concern about that. We don’t want to lose this momentum going into next year.”

Democrats: Not the GOP’s economy

Democratic candidates running against GOP incumbents are talking about a lot of different things in this election, from health care to immigration to Trump. But they are finding ways to put a damper on the economic case Republicans are making .

Phillips, the DFL challenger to Paulsen in CD3, says there’s no doubt the economy is strong, but he questioned how much Trump and the GOP had to do with it. “The economy was doing well before Trump’s election, and it would have continued to grow,” he told MinnPost, echoing arguments from many Obama-supporting Democrats.

He also is criticizing the tax bill, which he said he would not repeal but revise, so that more benefits flow to working-class and middle-class taxpayers. Phillips said the tax bill boosted the economy, but called it a “sugar high.” “It’s no surprise that when you take a trillion to a trillion and a half dollars and add it to our national credit card debt, it’s going to be a boost to our economy,” he said.

Craig, running in CD2, has framed the tax bill as a historically bad piece of legislation that “lit a match” to income inequality in the U.S., and said she would repeal it.

But the U.S. economy is probably at its strongest point in any midterm election since 2006, said Stan Veuger, a political economist at the American Enterprise Institute, a center-right Washington think tank. “Obviously, the economy is good and it should help incumbents,” he said. “The economy is doing this well, and Republicans are still looking like they’re doing very poorly.”

In 2006, however, Democrats won control of the House in a landslide, thanks to public dissatisfaction with the George W. Bush administration and the Iraq War. They are hoping that opposition to Trump and the GOP — over their economic policies and beyond — will fuel a similar wave.

Republicans have a different election year in mind: 1998, when voters tuned out a Republican Party beating the drum of impeaching President Bill Clinton and instead gave new seats to Democrats on the heels of several years of strong, sustained economic growth.

Today, Republicans believe Democrats focus on Trump at their own peril. “People are more concerned with economic growth than a negative message,” Emmer said. “Democrats are making those same mistakes that Republicans made back in 1998.”

“A lot of this election is going to be about the referendum on Trump,” said Brookings’ Williamson. “But you have to run on something. If you’re an incumbent running in a good economy, you’re going to run on the economy. If you’re an incumbent in a bad economy, you’re going to run on something else.”