I had earlier written that President Biden was Corbynizing the Democratic Party. Jeremy Corbyn, the leader of the UK Labour Party from 2015 to 2020, moved the party so far left that it was considered unelectable. Indeed, in the 2019 general election, Labour's vote share fell to 32%, leaving it with 202 seats in parliament, its fewest since 1935. Yesterday's election shows President Biden is doing exactly this to the Democratic Party. What should have been an easy win in Virginia turned into a pounding for the Democrats, and New Jersey Governor Phil Murphy is holding on by his fingernails in an election he won easily in 2017. Both Virginia and New Jersey signal a shift in the electorate by 13 percentage points, which is huge. Put another way, if the Democratic Party saw results similar to the UK, the Democrats would hold 135 seats in the House to the Republicans' 300, that is, the Republicans would have a two-thirds majority. That's Corbynization.
Much of my work relates to the changes I saw in Hungary following the collapse of communism. In Hungary, the fiscal conservatives abandoned the anti-communist coaltion and moved to the left in the early 1990s. This occurred also in the US and UK, with Bill Clinton and Tony Blair acting more like moderate Republicans than today's progressive Democrats do. Both Clinton and Blair were successful. Donald Trump did his utmost to expel the moderates from the Republican Party, and indeed, suburban independents defected to the Democratic Party in 2020 to elect a Joe Biden promising to be a boring centrist. Joe Biden had an opportunity -- and indeed, a crushing need -- to consolidate independents and moderate Republicans to the Democratic cause. With the fall of communism, blue collar whites abandoned the Democratic Party and became the backbone of the socially conservative Republican Party. This had the effect of pushing the median voter boundary to the right, that is, pushing the fiscal conservatives to the left, back to their historical position prior to the communist era. Biden won with support of the moderate voters; McAuliffe lost without their backing.
To put it into numbers, here are our estimates of voters' ideologies on a stylized basis in the post-communist era: egalitarians (progressives), 33%; fiscal conservatives (libertarians and some independents), 17%; social conservatives, 50%. The median voter boundary therefore falls between the fiscal conservatives (suburban independents) on the left and the social conservatives on the right.
As a result, Republicans can win without the fiscal conservatives, as Trump did in 2016. Indeed, but for a full court press by independents, Trump would have gained those 44,000 votes in four key states which would have brought him the presidency in 2020.
By implication, if the Democrats are to hold power, fiscal conservatives must dictate the tone of the left, just as fiscal conservatives did on the right during the communist era. Failing that, the Democrats will suffer the fate of Labour in the UK. Nevertheless, President Biden has allowed 'the squad' -- three radical leftist women -- to brand the Democratic Party. It is Manchin and Sinema who are out of step and obstructing 'consensus'. Under Biden, the Democrats have become a hard left party, with the moderates -- the Amy Klobuchars and Pete Buttigiegs -- passively surrendering to the progessive agenda while a solitary Joe Manchin attempts to hold back the flood like the Dutch boy with his finger in the dike. Suburban independents have no interest in socialism, but without their help, Democrats will lose, just as they did in Virginia yesterday. And lose big they will. As I wrote in my Sept. 24 note, "the Democrats are likely to be obliterated at the polls next November." We have now seen the preview.
Even worse, the trend seems to be deteriorating for the left. In Hungary, for example, the boundary between conservatives and the left runs near the 70th percentile. That is, egalitarians and fiscal conservatives together barely crack one-third of the electorate. As a result, the opposition's candidate to face off in Hungary's elections against the conservative prime minister Viktor Orban is...a conservative. Both the incumbent and the challenger are conservatives. That is the mood of the times.
The US will not be immune to these trends. A rapidly aging society with low economic growth is likely to become more conservative, and that's exactly what we see. The defections of blacks, and in particular Hispancics, to the Republican Party are likely to continue and very possibly intensify. The Hispanics I know are mostly hard-working, religious and conservative people. In terms of economics, they look a great deal like non-college educated whites, the core Trump constituency. But for the wedge issue of illegal immigration and amnesty, a large portion of Hispanics would move to the conservative side of the ledger.
I would like to think that, like Bill Clinton, Joe Biden will experience an epiphany and move hard to the center. But does Biden have Bill Clinton's acumen, energy, leadership and political skills? I fear not. I fear he will continue to dig deeper into the hole already rising around the Democrats.
And keep in mind all this likely gets worse. House prices have started to implode, with real estate website Zillow announcing layoffs of one-quarter of its staff. Home price implosions absent a recession are rare; indeed, a collapse in house prices usually signals a depression. Meanwhile, US oil company Diamondback has announced it will not increase production next year. If other US producers follow suit, expect the price of oil to surge well beyond $100 / barrel. In terms of the economy, the coming year could be really ugly. If the Democrats thought this election was bad, just wait a year.
I have offered to help the Biden administration develop a market-based approach to illegal immigration, one which would close the southwest border to illegal immigration while providing legal status for long-term undocumented Hispanic immigrants in the US. This is a policy tailor-made to suit the tastes of independent voters. Of course, by allowing in more than one million unauthorized migrants over the last year, the Biden administration has not made the work any less challenging, but we have to start somewhere.
The offer still stands.