by Greg Valliere, AGF Management Ltd.
Insights and Market Perspectives
Author: 8
November 3, 2021
Two Reasons for the Democrats’ Election Fiasco
November 3, 2021
WE THOUGHT GLENN YOUNGKIN WOULD WIN in Virginia, but the near-tie in New Jersey is a genuine shocker. The recriminations have already begun among Democrats — mostly directed at Sen. Joe Manchin — but he wasn’t the major factor last night. There were two bigger reasons for the Democrats’ dismal showing:
First, Republicans latched onto the year’s sleeper issue — angry parents, who resent the control of school boards on issues ranging from masks to subjects that are taught. Democrats like Terry McAuliffe assumed that furious parents shown yelling on the evening news are all out on the fringe, but most aren’t — and he never understood why they are angry. McAuliffe didn’t get it.
Second, Joe Biden never recovered from his deep slump, which began with the inept U.S. withdrawal from Afghanistan. Americans were expecting more competence from this administration, but on issue after issue — the stimulus bill, inflation, crime, and illegal immigration — Biden seemed out of touch and slow to react.
THE ELECTION WASN’T ABOUT DONALD TRUMP, who was adroitly marginalized by Youngkin. Trump boasted about Virginia last night, but this may hasten his gradual decline; he’s still demanding that Republicans endorse his claim of massive voter fraud last year, but that’s getting stale. Youngkin didn’t need Trump.
THE IMPLICATIONS FOR 2021: The two infrastructure bills — the heart of Biden’s agenda — look closer to enactment after an agreement yesterday on prescription drug prices. Sen. Kyrsten Sinema is on board, leaving only the erratic Manchin as undecided. The legislation is quite popular among Democrats and moderate voters; they’re angry it’s taken so long.
THE IMPLICATIONS FOR 2022: We don’t disagree with the consensus that Democrats will lose the House — perhaps by 20 seats — and could lose the Senate as well. Biden will have dominant veto power in his second two years, and the resulting gridlock wouldn’t be a bad scenario for the markets.
A MAJOR THEME LAST NIGHT was a repudiation of the progressive left in Virginia, New Jersey, Minneapolis, Buffalo and probably Seattle. Progressives won a handful of victories, but their agenda — including a wealth tax, packing the Supreme Court, and changing filibuster rules — has been rejected. And the party’s new star, ex-NYC cop Eric Adams, is relatively moderate.
REPUBLICANS SIMPLY HAVE TO SIT BACK and watch Democrats fight among themselves. Our unsolicited advice to the GOP is to not overplay their hand, while keeping Trump at a distance. They’re on the verge of reclaiming independents and the suburbs — and they have their finger on the pulse of the key social issue: it’s not abortion or race, it’s parents who want a greater say in their kids’ education.
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