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President Joe Biden speaks during a meeting of the Investing in America Cabinet in the Roosevelt Room of the White House in Washington, DC, US, on Friday. May 5, 2023.
Rate cuts could help Biden and Trudeau’s reelection prospects
The polls are grim these days for incumbent governments. Both President Joe Biden and Prime Minister Justin Trudeau are trailing their challengers, Donald Trump and Pierre Poilievre, particularly when it comes to economic matters.
A new NBC News poll suggested only 36% of Americans approve of Biden’s handling of the economy, compared to 61% who disapprove. Trump held a 5 percentage point lead when it came to voting intentions. Similarly, two in three Canadians believe Trudeau is taking the country in the wrong direction, while Poilievre holds a lead of up to 15 points on voting intentions for an election that could be 18 months out.
Both men have seen the corrosive impact of rising prices on their popularity. Biden's approval ratings are lower than any president since George W. Bush’s second term.
It may be that both leaders have outstayed their welcome. But they may yet be saved by tumbling inflation, an easing of interest rates, and the short memories of voters.
In the US, the second half of 2023 saw prices rising at around 2%, down from a high of 7.7%. That has happened, even as America sees strong job growth, creating double the forecast number of jobs in January at 353,000 new positions. The unemployment rate is just 3.7%.
Biden has already been selling that message. “Experts said that to get inflation under control, we needed to drive up unemployment. We found a better way,” he tweeted.
The Canadian picture is not quite as robust but still healthy. Unemployment is near historic lows at 5.8%, and poverty levels have halved in recent years, thanks to generous income transfer initiatives like child benefit and a national child care program. But, according to RBC Economics, rising interest rates have caused real pain.
Per capita household income rose by 2.8% from the fourth quarter of 2022 to the third quarter of 2023, while debt repayments rose by 6.4% in the same period, it said.
RBC predicts 2024 will remain a tough year, but with central banks looking to pivot to interest rate cuts, the ratio of household debt to income should rise less this year than in 2023. With polls showing that the rising cost of food and fuel are the preoccupation of up to three in four voters, any relief could have an impact on coming election campaigns.
Gloom could spell doom for Biden and Trudeau
Voters from the Rio Grande to the Arctic are deeply pessimistic about the economy, which means both Justin Trudeau and Joe Biden are facing an uphill battle for reelection.
The horse race polls are worrying for both men. Some 56% of Americans disapprove of the US president, while only 39% approve, and a recent NYT/Siena poll shows him trailing Donald Trump in five of six battleground states. Trudeau’s approval rating is worse — only 33% approve of him, while 61% disapprove. He has trailed the opposition Conservatives by double digits in polls for months.
But polls about the economy contain even worse news for both leaders. History shows that incumbents typically suffer when voters believe bad times are ahead – a lesson Jimmy Carter and George H.W. Bush learned the hard way. Trouble is, that is exactly what today’s voters think right now in both Canada and the US, says pollster Quito Maggi, of Mainstreet Research, a Canadian firm that polls in both countries.
“In both Canada and the US, it's about a net negative 20, people saying they're pessimistic versus optimistic” about their own personal financial prospects in the months ahead.
“What we found in the past is when we ask people about their own personal financial circumstances, they tend to be more optimistic than they are about the global economy or the economy of the country or a region. So it's pretty bad when it's that bad.”
Reality versus perception
In the United States, the actual economic indicators are mixed. Unemployment numbers are not terrible – employers added 150,000 jobs in October, but that was lower than expected – but voters are intensely focused on affordability. The latest numbers show inflation declining, but that doesn’t mean prices are going down fast enough, and there is no guarantee that voters will decide life is more affordable by late next year.
A new poll conducted for the Financial Times shows that only 14% of Americans think Biden has made them better off, which is historically a crucial test for voters come election time. In comparison, in November 2019, when Biden was campaigning for the job, 35% thought they were better off after four years of Trump.
“Biden is not getting in any way sort of credit for … the resilience of the US economy,” says Graeme Thompson, a senior analyst with Eurasia Group's global macro-geopolitics practice. “Everybody thought that if you were going to raise rates this quickly, there would be a downturn or softening growth of some variety much sooner if not a pretty significant one.”
Instead, the economy is proving to be resilient, but voters are not attributing that to Biden. Whatever else is happening in the contest — and next year’s presidential race looks less predictable than most — Biden had better hope voters are more optimistic by November.
Canadian mortgage shock
The underlying economic facts are tougher for Trudeau, whose polling is going from bad to worse. Trudeau’s position looks more precarious because a massive mortgage price shock is on the way. About 45% of Canadian mortgage holders face renewal under sharply higher rates in the next two years, the Canada Mortgage and Housing Corporation warned last week. Sales slowed down in October, and prices have softened. If the trend continues, homeowners who bought at the top of the market could end up paying more than they can afford for properties that are losing value.
Central banks in both countries have boosted rates to try to bring down inflation, but more Americans have 30-year, locked-in mortgages, so Canadians are more vulnerable to rate increases.
Still, voters in both countries are focused on their pocketbooks.
“Housing affordability is number one, food and other general affordability is number two, both in Canada and the US,” says Maggi. “It's been a long time since we've seen economic issues at the top of the ballot, and I really can't remember the last time that it was this prominent.”
People with modest incomes find it hard to focus on anything else when they are struggling to pay for shelter and sustenance, says Thompson. “Those are things that take up a majority of people's capacity to pay and are a higher percentage of household expenditures the poorer you are.”
A recent study by Eurasia Group found that in 57 inflation shocks since 1970, governments turned over in 58% of cases.
There is no reason to think Biden and Trudeau can beat the odds, says Thompson.
“The combination of slow growth on the one hand, and sticky inflation and cost of living pressures on the other is toxic for incumbents.”
Speaker of the House of Commons Anthony Rota during Question Period on Parliament Hill in Ottawa, Ontario, Canada September 25, 2023.
A tale of two speakers
It’s been an extraordinary few weeks for speakers in both the House of Representatives and the House of Commons.
One is fighting to keep his job; the other just resigned.
US House Speaker Kevin McCarthy is trying to navigate between the shoals of the Democrats and far-right Republicans. His hold on the speakership was tenuous from day one, but with a government shutdown looming, and a continuing resolution to keep it operating seemingly out of reach, at least for now, he’s facing a tough struggle to hold onto the gavel.
North of the border, House of Commons Speaker Anthony Rota resigned on Tuesday after welcoming Nazi war veteran Yaroslav Hunka to parliament, calling him “a Canadian hero” and “a Ukrainian hero” and thanking him for his service.
Hunka was in the visitor’s gallery during Volodymyr Zelensky’s speech to the joint session of parliament. Rota introduced Hunka as having fought against Russia during World War II, apparently unaware this meant he had fought for Nazi Germany. Rota apologized and took responsibility for the invitation before resigning.
On Wednesday, PM Justin Trudeau offered his own apology for the harm caused by Hunka’s visit. The House of Commons will choose a new speaker next Tuesday by secret ballot.
We’re watching to see if a new Canadian speaker can restore trust and authority to the speakership – and maybe a bit of decorum in the raucous House. Meanwhile, McCarthy will be working to get his far-right caucus on side to pass a bill to fund the government and end the shutdown that is set to begin Sunday. Could this blow up and cost McCarthy his role as speaker?
Clayton Allen, US director for Eurasia Group, doesn’t think so. He says McCarthy “hasn’t lost his ability to govern the House,” though he’s facing the worst internal divisions and narrowest margin of control in “at least a decade.” While it’s “a bit of a parlor game in Washington to speculate about McCarthy’s downfall … the risk is somewhat overstated,” since his removal would require majority support, including all Democrats.
Is the clock ticking on Biden and Trudeau?
It’s worse in the US, where every elected official seems to be raising money and running for reelection all the time, but leaders north of the border feel the pressure, too.
With President Joe Biden set for a reelection bid in November 2024 and Prime Minister Justin Trudeau due to meet voters by October 2025 at the latest, the already frenetic pace of electoral politics is picking up in both countries.
A pendulum swing may be in the works
Right-wing candidates in both countries aim to unseat the progressive incumbents, which means Biden and Trudeau face stiff competition. Biden’s chances, at the moment, seem far better than Trudeau’s despite some recent polling that may be giving the Democrats cause for pause – or maybe not.
Earlier this week, an ABC/Washington Post poll showed Biden’s approval rating at just 37%. What’s more, it found Donald Trump, the probable Republican nominee, leading Biden 51 to 42.
The poll, however, was such an outlier that even the pollsters who ran it recognized it as such. Criticism followed, and it’s safe to say that it is almost surely not an accurate representation of the electorate. Most polls show a much closer race, with Trump and Biden tied or within a few points of each other.
The picture in Canada is clearer. Trudeau is gunning for his fourth election win in a row – something that hasn’t been done by a prime minister in Canada in over a century – but opposition leader and head of the Conservative Party Pierre Poilievre leads by a lot. Poilievre stood out in a recent poll that found 40% of Canadians think he’d be the best prime minister compared to 31% who chose Trudeau. Canada is a multiparty democracy, so hitting 40% with several leaders on option is a strong showing.
Federal polls in Canada have the Conservatives up by four points on average, with some individual polls showing them up by double digits. According to 338 Canada, which tracks polls and models electoral projections, Poilievre’s side currently would stand to win 174 seats compared to 105 seats for the Liberals, which is enough for a majority government. The Conservatives are currently showing a 96% chance of winning the most seats.
Economic, aging, and legal matters
In the US, voters are expressing concern about both Biden and Trump – they aren’t exactly thrilled with their presidential options. A recent NBC poll echoes the ABC/Washington Post poll’s assessment of Biden’s flagging approval rating. It also shows that fewer than 40% feel Biden is handling the economy well despite job growth and the country heading for a soft landing. People are still feeling significant economic pressure.
Nonetheless, Biden might be safer on the economy than a quick glance suggests, especially since economic hopes are on the upswing. Clayton Allen, US director for Eurasia Group, says “The economy is doing just well enough for Biden.” He points out there’s just enough optimism out there with people’s personal economic outlooks that there’s “some positive sentiment among voters around the economy.” If things keep improving, such as the declining probability of a recession and the Fed’s ability to hold interest rates steady, that will boost Biden’s chances in 2024.
But any recent good news for Biden on the economy has to be tempered by the risk that economic sentiments take a turn. Recent numbers show optimism softening.
Beyond pocketbook issues, however, the electorate is also concerned by the candidates’ ages. According to NBC’s poll, a combined 74% have major or moderate concerns about the president’s “necessary mental and physical health to be president for a second term.”
Biden is 80 years old. Trump is 77.
Trump is also facing multiple indictments and was just found to have committed fraud in New York state. The NBC poll found that 62% of respondents had major or moderate concerns about Trump’s many legal woes.
Media coverage of the two is shaping a 2024 election narrative that is priming voters to evaluate each candidate on particular metrics. “The narrative around Biden has been for quite a while that his age is the most important factor for assessing his fitness for office,” Allen says. The one about Trump “has focused on his legal challenges and his position in the party.” The looming showdown for 2024 seems to be Biden’s age and fitness versus Trump’s (un)lawfulness.
In response, the White House has crafted a plan – parts of which pre-existed recent polling – to keep Biden fit and, just as importantly, looking fit. Of note, Democrats have had a recent run of favorable election results, which could serve as a proxy for the upcoming presidential race, suggesting an edge for Biden over Trump.
Canada focuses on affordability
Canadians are expressing their own fatigue with the current leadership and economic frustrations, particularly on housing and affordability. In recent weeks, the Trudeau government has gone all-in on the housing file, removing the sales tax from the construction of purpose-built rental units. They’ve also made a push to “stabilize” the cost of groceries – which grew 8.5% year over year in July. Food prices have been a significant issue in the country.
The government seemed to be gaining some traction on affordability issues of late – concerns that will determine the outcome of the next election. But events conspired last week to shift the national focus and some of the government’s attention.
Trudeau’s allegation last week that India assassinated a Canadian on Canadian soil shocked the country and the world. Days later, during a visit to address parliament by Ukrainian President Volodymyr Zelensky, the speaker of the House of Commons, Anthony Rota, welcomed a World War II veteran in the gallery who “fought for Ukrainian independence against the Russians.” He noted the man was a “Canadian hero” and a “Ukrainian hero” before the chamber, including Trudeau and Zelensky, and the chamber gave him a standing ovation. But it turns out that the veteran in question was in a Nazi SS division.
Rota has since resigned, and while Trudeau had nothing to do with the scandal, Conservatives are blaming him for the debacle – and there’s a good chance some voters will, too. This was the last thing Trudeau needed, particularly since questions about whether he can even last until 2025 are already circling. An August poll found a majority of Canadians thought he should go ahead of the next election.
With more than a year to go before the presidential election and as many as two years before a Canadian contest, no outcome is guaranteed. Elections matter, and the time ahead of them leaves plenty of opportunities for events and shifting fortunes to do their thing. Plus, not everyone has made up their mind.
“Polling this far out from the general election is inherently compromised,” notes Allen. “People are still very much deciding what their position is going to be, especially voters who are persuadable to either side.” This is true on both sides of the border, but current numbers suggest that by 2025, we’re more likely to see Biden in the White House than Trudeau in the prime minister’s chair.
The pendulum may end up swinging, but Biden stands a better chance of holding on for another term.