Uh-Oh: Warning Signs For Republicans?

There are some lessons that must be learned by Republicans from the elections this week. 

Republicans did quite poorly across the board. There’s a point Matthew Continetti of The Wall Street Journal made. He wrote: 

The off-year Democratic wave flooded Republican safe harbors. Democrats flipped at least 13 seats in Virginia’s House of Delegates. They plan to use their governing trifecta—control of the governor’s mansion and both legislative chambers—to redraw the state’s congressional map in their favor. New Jersey Democrats will enjoy their largest Assembly majority in 52 years. And Georgia Democrats won two seats on the Public Service Commission, the state’s utility board. No Democrat has served on it since 2007.

That was 18 years ago. 

When you look at the 2026 election and the importance of Republicans retaining the House and the Senate, it looks as if Republicans are in a fairly decent position to retain the Senate. In order for Democrats to take the Senate in the next election cycle, they would have to flip a rather unlikely seat, e.g., Iowa. 

But in the House, where Republicans basically have zero margin at this point, Democrats do not need to flip very many seats in order to take over. According to the Cook Political Report, of the 16 toss-up seats, 10 are held by Republicans. When you look at another eight that lean Republican and 10 that lean Democrat, you’re talking about a total possible variance of 34 seats. 

Republicans would have to do really, really poorly to lose all of those. But they don’t have to lose many of those to lose control of the House. And if they lose control of the House, all you’re going to get all day long are hearings and investigations and impeachment. 

We know all of this to be the case, and we also know it wouldn’t be solely due to anything that President Trump is doing. 

Midterm elections, since World War II, have almost always gone in the direction of the party that is out of power, according to Newsweek. The president’s party has lost an average of 26 House seats and three to four Senate seats in midterms. When the president’s approval rating is below 50%, the losses tend to be more severe. Presidents with a 50% job approval have seen their parties lose an average of 37 House seats, as opposed to when the president is popular, where they lose about 14 seats on average.

Republican enthusiasm seems not to be nearly as high as when President Trump was on the ballot, and a sinking economy, or at least an economy that doesn’t feel as though it is soaring, is having a significant downstream impact.

There are audiences President Trump brought in who are beginning to move against him. One of those is Latino audiences, who went very heavily toward President Trump in the last election cycle, but seem to be bleeding away in New Jersey and in Virginia.

That’s not because Democrats are doing an extraordinary job. It’s because there has been so much focus on the immigration crackdowns. It’s one thing to shut the border. It’s another thing if there’s stuff all over your TV about your abuela being taken out and then deported.

I do think that all of that media coverage has been terrible, overblown, and inaccurate. Obviously, it’s not redounding to the benefit of Republicans among Latinos.

But with all that said, the real issue here is the economy. We all know it. Every exit poll from this week, every single one, said the economy was the number one issue.

Our economy is on some shaky footing, not only because of the continued government shutdown — which will end at some point — but because of a generalized feeling that the economic growth that we are currently seeing is not a broad-based economic growth.

When we are looking at the stock market, for example, the vast majority of stock market gains have accrued to the top seven companies in the market, all of which seem to be focused on tech and AI industries, where jobs are being created, but not industries where the vast majority of people are holding jobs.

The tech industry is really important, but if it’s the entirety of your economic growth, you’ve got a bit of a problem. The reason that is happening is because investors don’t know where to put their money. That is due to tariffs, bizarre regulations, and a generalized feeling of too much government involvement in private industry.

The more the government is involved in the economy, the more investors are likely to try and discern where the government’s hand is likely to come down next and then place their money there.

And that is a major problem.

This is something that Republicans should be considering as they head into the next year.

Employers are apparently not adding many jobs, but they’ve avoided resorting to widespread layoffs. Everyone is holding steady, which is why it feels as though the economy is on the edge. Polls are showing that people are deeply worried about the state of the economy. 

This week, there’s been a relatively significant decline in the Dow Jones Industrial Average. One of the reasons is nobody knows where to put their money. They don’t know how to invest in industries.

Typically, if you’re going to buy a stock, you’re supposed to buy a piece of a company that you like because you think it’s a good company and it is likely to succeed in the foreseeable future.

But that is not the way a lot of people are treating the stock market right now. They’re treating it the way they’re treating crypto. If you’re going to buy crypto, you should buy crypto as a hedge against inflation, for example, which is why I own some Bitcoin and some Ethereum, but nothing else. If you’re treating crypto as a get-rich-quick scheme, if you’re treating the stock market as a way of making a quick buck, that is not a solid way to treat your stock.

But that is how people are treating things right now, because people are looking around and things are more expensive. All of the inflationary money blown in during the last days of the Trump administration and the entirety of the Biden administration is still in people’s pockets. They don’t know what to do with it. 

Now, the Federal Reserve is lowering those interest rates again in an attempt to create more liquidity, which, again, I’ve always found is strange. We do not have a dearth of liquidity in the United States right now. We don’t have a dearth of opportunities for where to put the liquidity; nobody knows what to do next. It feels as if the market is doing fine, but it’s also paralyzed. 

And that’s the problem.

The real issue with the market right now is that the middle bulk of the market is not being invested in. One of the reasons that it’s not being invested in is that there are hungry speculators with too much cash in their pockets, thanks to the free rein of money for a very long time.

But also, there’s tremendous uncertainty if you’re in a service industry or manufacturing industry about the tariffs, and that does make a gigantic difference. There’s no question that people are confused and discombobulated by the day-to-day action of the administration. As I’ve been saying for literally the entirety of the Trump administration, if the administration pursued lower taxes, lower regulation, and free trade agreements with everybody around China, the economy would be in better shape.

The line for Democrats going forward is going to be if the economy collapses. If the economy goes down, it’s an existential danger to the Republican Party, which writ large, means an existential danger to the country, because the next step by a lot of people is going to be swiveling over and saying, we need more government. We need more centralized power. 

Ironically, one of the things that could help the Trump presidency is if the Supreme Court strikes down the tariffs, because then the economy will soar because a lot of investors who’ve been sitting on the sidelines will suddenly feel secure that their inputs are not going to be increased, jacked up randomly by 30, 40, 50%, depending on where they’re getting their products from. They’re not going to fear as much that export markets are going to disappear.

I understand that his tariff policy is very near and dear to the president’s heart. I get it. I understand his feeling that we have been screwed in past trade negotiations. I don’t even disagree with that. But the answer to that is to negotiate better deals with countries, not to put blanket tariffs on allies we need.

And President Trump understands better than anyone how central the success of the economy is.