Most Read by Bloomberg A new study by Bloomberg Economics takes a gauge with an ability to predict ballot results — the misery index, calculated by adding together inflation and unemployment rates — and projects it up to Election Day. The result: Based on past polling patterns, President Joe Biden’s party can expect to lose 30 to 40 seats in the House and some in the Senate as well, easily wiping out thin Democratic majorities. Of course, economics is only one part of the calculation voters make. Democrats will hope that anger over abortion and gun laws and the January 6, 2021 attack on the US Capitol by a right-wing mob will energize their supporters. There are many forecasting models, using all kinds of inputs—not just financial—and predicting a range of outcomes. Analytics firm Inside Elections, for example, sees likely Democratic losses in the House of between 12 and 30 seats. Others suggest anything from a washout, with both parties ending up roughly where they started, to GOP gains of 45 or more seats. Another Shellacking? Still, the consensus is that Democrats face an uphill battle. Most days of late, there has been enough in the financial headlines to suggest that a reversal for the establishment party is all but baked. Last week, the Federal Reserve made its biggest consecutive rate hikes since the early 1980s as it tries to tame rising prices by squeezing consumers and homebuyers. And the administration has reported that the U.S. economy has actually been contracting since the start of this year, sparking a bipartisan debate in Washington over whether the country is already in recession. The story continues Read more: A Fed-triggered recession could cost Biden a second term Officially, it probably isn’t — in part because it still creates a lot of jobs. Low unemployment and plenty of job openings will be Democrats’ strongest talking point on the economy in the upcoming campaign. It’s the other component of the misery index that’s causing their problems and making many Americans feel like they’re already struggling through some kind of recession. Inflation hit a 40-year high of 9.1% in June, pushing the impoverishment index to 12.7%. It probably won’t drop that much before Americans go to the polls. Bloomberg Economics predicts the index reading at 12% in October. Take out the worst months of the pandemic crisis in early 2020, and that’s close to the highest levels seen in a decade-plus — rivaling the aftermath of the Great Depression, when unemployment hit 10 percent and Democrats took what then-President Barack Obama is called “broken” in the interim. “Difficult to interpret” Since then, the once-in-a-generation upheaval of Covid-19 has led some analysts to question the predictive power of economy-based models. “It’s very difficult to interpret the economic numbers right now,” says Larry Bartels of Vanderbilt University. “In the 2020 presidential election, the huge surge in income due to the pandemic stimulus meant a landslide for Trump, while the huge drop in GDP meant elimination. Obviously, the truth was somewhere in between.” The latest so-called general poll, which strips out the specifics of individual contests, isn’t disastrous for Democrats. They trail the GOP by less than a percentage point in the RealClearPolitics average, compared to a 4-point gap six months ago. Those national numbers are difficult to translate into seats because of quirks in the electoral map, including congressional seat redistricting after the 2020 census. They suggest Democrats may be doing better than the index would predict misery, helping Biden push back against the idea that the party needs a different presidential candidate in 2024. “Genuine Misery” But the index has had a decent track record since it was coined by President Lyndon Johnson’s adviser, Arthur Okun, in the 1960s. It marked a window of opportunity for Donald Trump in 2016 and a Biden victory four years later. The unhappiness index is a powerful predictor because it’s based on things that touch everyone, says Frank Luntz, a pollster who has often helped create Republican talking points on economic issues. “The reason the misery index still matters is that it’s really genuine misery for so many Americans,” says Luntz. “Food and fuel inflation is so high and so global it affects every voter in every community in every state.” The state-level numbers also make grim reading for Democrats. Some key battleground states like Ohio and Nevada have misery indices higher than the national version. In Nevada, the GOP has a chance to make a comeback in a state Trump narrowly lost twice. There is a primary Senate race between incumbent Catherine Cortez Masto and her Republican challenger Adam Laxalt, as well as several competitive House contests. The current House has 220 Democrats to 211 Republicans — meaning a shift of just a few seats could give the GOP a majority — while the Senate is split 50-50. “I can’t afford my rent” Impoverishment caused by inflation is at the heart of Nevada voters, with many seeing Biden as the culprit — though there is also some sympathy for Democrats’ argument that price gouging by oil companies or landlords is partly to blame. The rising cost of housing is hitting particularly hard. “I just got a raise and I still can’t afford my rent,” says Sierra Farley, a 31-year-old single mother of two who says she will have to move out of her rental home in suburban Las Vegas. of Summerlin until the end of August. “Rising $450 a month.” Farley, like many other Nevadans, says she hasn’t started focusing on the election yet and doesn’t know who she’ll vote for in November. By then, Biden’s Democrats should have more economic achievements under their belt. Last week’s surprise deal on a spending and tax bill with Sen. Joe Manchin, who had been blocking the package, gives the party a chance to show it can deliver on key issues like lowering prescription drug prices and expanding energy production. Read more: Manchin-Schumer shock deal started in basement, unfolded in secret Democrats have tried to blame inflation on Russia’s invasion of Ukraine, which has sent energy and food prices soaring, while Republicans have pointed to the pandemic stimulus that Biden gave the green light shortly after taking office. of. “No removal” Representative Gwen Moore of Wisconsin, another swing state, has been among the most vocal Democrats in confronting the misery index argument head-on. He says the party should stop arguing over definitions of recession, remind voters of the Democratic-led programs that helped them get through the pandemic, acknowledge today’s economic pain — and explain how they’ll make it better . “People are experiencing this. This is not an abstraction for these people,” says Moore. “When they get to the gas pump, the grocery store, they’re experiencing their own personal depression or recession, regardless of the numbers.” Gasoline has been falling for more than a month, offering some relief – but other prices, notably for food and rent, are still rising rapidly, pushing the misery index higher. There are also some regional variations that explain why views of the economy are much more negative among Republicans. The unhappiness index is rising faster in red states than in blue states. This is due to the different trajectories that local economies have followed in the pandemic. Back in the early days of 2020, lockdowns in red states were generally less strict, so those areas saw less growth in unemployment. It was the blue states that had the highest unemployment rates – and thus the highest misery index readings. This year, it’s inflation, not unemployment, that’s driving the index higher — and big rent increases mean many red states, as well as battleground states like Nevada, are seeing a steeper rise in the cost of living. Adding to the risks for Democrats, most analysts estimate that a misery index driven by high prices – as it is now – is worse news for incumbents than those pushed higher by the unemployment rate. While some people lose their jobs in a recession, and even more worry that it might happen to them, nearly every American feels the sting of inflation. “When everyone is affected,” says Luntz, the pollster, “the electoral impact gets worse.” Most Read by Bloomberg Businessweek ©2022 Bloomberg LP