The Democrats appear to be clinging to the neo-liberal status quo and have no real viable plans for the economy
Michael Roberts is an Economist in the City of London and a prolific blogger.
Cross-posted from Michael Roberts’ blog
The Democrats won the 2026 US mid-term Congressional elections by a landslide. Before the vote, President Donald Trump told voters to think of him and his record when they voted – it seems that they did so.
About 124 million people voted in the elections, according to preliminary data from the University of Florida Election Lab. That’s up from the 112 million in 2022 and 118.6 million in 2018. But while the overall number of votes cast was up, the voter turnout rate for 2026 still lagged behind both the 2022 and 2018 mid-terms. So that means that more than half of Americans eligible to vote failed to do so in this drubbing of Trump and the Republicans.
Of the less than 50% that did vote, there was massive swing to the Democrats. On the national vote, the Democrats led by around a huge 13% points, the largest lead recorded since 1982. It was biggest congressional landslide in 50 years, marking the heaviest Republican defeat since the 1974 Watergate era. The Democrats will end up with up to 255 seats in the lower House of Representatives, marking their largest majority in nearly two decades (218 seats is the pass mark). And they will take 55 seats in the 100 seat Senate and thus control the upper house too.
In every state and every demography the Democrats led. This was particularly the case with those voters aged 18-29. Whereas there was a small majority of white males who voted Republican, that was not the case with the under 30s, where white males polled 57-40 for the Democrats. In every other category the lead was higher, with 96% of black females under 30 years voting Democrat.
Moreover one-third of ALL voters under 30 self-identified as themselves as “democratic socialist” according to NBC’s exit poll — three times as many as those under 30 who considered themselves as Trumpist-MAGA supporters.
And the issues were clear. According to data compiled by the Pew Research Center in October 2026, the economy was the number one priority for 84% of all voters, followed by 47% of all voters who ranked the Iran conflict started by Trump. Healthcare was also high up the scale of issues. The vote for the Democrats was against Trump’s unnecessary war against Iran; the rising cost of living in food and energy; his brutal attacks on immigrants in the streets; and disgust at his corruption, lies and bombastic hubris. Opinion polls showed that Trump has the lowest approval rating for a US President ever.
So a Congress now controlled by the Democrats is in a position to investigate and challenge Trump’s activities and policies and to propose alternatives. Leftist liberal economist Daren Acemoglu saw the Democrat victory as ”a lifeline for US democracy”. But only a lifleline, because voters who took Trump to power in 2024 and have now turned against him, could easily swing back if the Democrats cannot deliver on the issues of the “obscene levels of inequality in this country, with the real affordability crisis and with the vexing problem of creating good jobs for Americans of all skills..” Acemoglu reckons that “neither progressive Democrats’ reliance on taxes, transfers and traditional regulations, nor centrists’ attachment to the status quo, nor the wishful thinking of those banking on AI-driven “abundance” is radical enough.” That’s because things are going to get worse under the AI-led economy.
What is the answer, according to the Nobel prize winner? Americans need “well-paid, career-building jobs for all workers, and especially those without a college degree, who have been left behind in the postindustrial economy of the last half century.” There should be a “workable plan for redirecting AI, so that this promising technology isn’t shaped by the dreams of a small cadre intent on artificial superintelligence and automation of most of what humans do. We must instead articulate why it is feasible and desirable to build pro-worker AI and how this can create jobs and decent incomes for workers.”
Meanwhile, the ‘affordability crisis’ is acute, not just in the US. Households worldwide are struggling with cost-of-living increases due to the wars and the aftermath of the Covid-19 outbreak, with wages struggling to keep up with persistent price pressures. Global prices for many commodities have remained elevated for several years, fuelled first by the pandemic-induced supply chain shortages and then by the wars in Ukraine and Iran.The war in the Middle East, which began last February, has raised the annual global rate of inflation towards 5%, well above the 2% target set by many central banks around the world. Price increases in necessities like food and energy have been particularly sharp. The global food price index is up 42% since the pandemic-led slump of 2020. And in just the last year, crude oil prices are up 57% while diesel is up 50%. The danger is that inflation could accelerate further next year if the Middle East conflicts continue until the end of this year and beyond. The global supply chain is already under renewed pressure and international trade growth is dropping back.
There are many areas of spending for American consumers like health, education and child care where costs have been racing past wage increases in the last 20 years. But now, since the pandemic, price inflation in food, fuel and other necessities are also shooting past wage increases. One year ago, consumer prices in the US were rising by 2.7% year-over-year. US workers’ average hourly pay was growing by 4%. Fast forward to now: prices are now rising 3.5% yoy, but wage growth has slowed to just 3.2%. Pay after accounting for inflation turned negative back in April. In the last year before the election, average real hourly earnings decreased 0.7%.
Average mortgage rates have doubled since the end of the pandemic to over 7% a year. As a result, in the US (and across Europe), the housing market has dived. The IMF’s mortgage-based affordability index (which measures the ratio of actual income to required income for a typical home loan) shows sharp declines. In the US, the index fell from roughly 150 down to the mid-80s (where values above 100 represent affordability).
In contrast, under Biden and Trump, the richest 10% of households saw their median net worth jump from $2.8M to $3.67M, about $872k or 30% up, from 2022 to 2025. The bottom 40% of households (by income) lost ground. Then Trump signed his ‘big beautiful’ bill handing the biggest tax cuts to those at the very top.
No wonder Americans voted out Trump’s Republicans. But what now? The Democrat leaders are now in control of Congress, but what are they proposing to do? What are the chances that the Democrats have any idea how to stop the rise in inflation and the cost of living? And can or will they end the wars in the Middle East and Ukraine that have contibuted to the affordability crisis?
Democrats claim they will roll back Trump’s tariffs, reverse cuts to Medicare, lower healthcare and housing costs, and increase regulation on tech sectors like AI. But there will be no cuts in the grotesque level of ‘defence’ spending. Indeed, support for Ukraine in the war against Russia will probably be increased. In his new book, Twilight of American Imperialism, Jack Rasmus calculates the astounding rise in US government ‘defence’ spending and costs. According to his estimates, total US defence spending has more than doubled from 2019 at $1.5trn to a staggering $3trn next year.
It seems the Democrats have no idea about how to control accelerating inflation except to rely on the Federal Reserve to raise interest rates – a policy that will only increase the likelihood of a recession. And there are no proposals to reverse accelerating inequality.
Much is made in the mainstream media and among mainstream economists that the US economy is motoring along. It’s true that US real GDP growth is stronger than in Europe or Japan, but that is hardly a high benchmark. US real GDP increased at an annual rate of 3.4% in the third quarter of 2026 – a seemingly big bounce from Q2. But this hides the trend. Year-on-year real GDP growth is slowing. At 2.1% in Q3 2026, it was near a low since the pandemic. The US economy is still growing, but at no more than 2% a year.
Moreover, US real GDP growth, investment and with it, jobs, are almost totally dependent on the AI investment boom. As former White House economic adviser Jason Furman showed: “The only big real construction increase in the United States over the last year has been data centers, up 64 percent. The power plants that feed them are up a more modest 4 percent, and everything else is down—with a particularly large decline in manufacturing, down 24 percent, which is off what had been a very high peak in 2024.”
These mega investments are managing to drive up output per worker. The productivity of labour rose 3.6% in the third quarter. That meant the trend growth in productivity now matches the long-run postwar average and is well ahead of the 1.5% pace of the 2007–2019 cycle.
But will this last? There are already signs that the AI investment boom/bubble is beginning to leak, if not burst – at least in Asia. And now the Democrat victory has sparked a sell-off in broad-based tech and AI stocks, with the Nasdaq sinking 5.5% in a single session, as investors worry that a Democrat Congress will stop or slow data center builds.
The question now is whether investor fears about over-investment and declining prospects for profits from AI will spread. Unless the massive investments in data centers and other AI-connected equipment, chips and software start delivering increased profitability, then a bust is not far away.
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KEEP RESISTANCE MEDIA ALIVE IN 2027
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