The headlines this week are, of course, about the results of the midterm elections in the USA, and with that — economic, financial, and military aid to Ukraine. There is widespread concern about a possible revision of the US policy of support for our country.
The fact that the Republicans "ousted" the Democrats is not surprising, as evidenced by historical experience. For 22 electoral periods — from 1934 till 2018 — the presidential party normally lost its representatives in the first midterm elections: on average, 28 seats in the House of Representatives and 4 seats in the Senate. The reasons for this change in electoral preferences are different, but the main one is the dissatisfaction of American voters, caused by the gap between the pre-election promises and the real results of the winning party in the most recent presidential race. Moreover, dissatisfaction is often fuelled by manipulations, which are especially effective in a highly politicised environment.
In one of our previous analytical reports, we pointed out the risks of a gradual slide of the US economy into recession, which is not good for the current president and his party. Meanwhile, Biden's team approached the elections with somewhat contradictory but still positive results (only in the first half of the year the economy showed some pre-crisis signs), but after three quarters, positive shifts are greater.
For instance, in the 3rd quarter of 2022 real growth resumed: 2.6%, in the conditions of global turbulence and uncertainty, sanctions and (largely provoked) high inflation. Since the year beginning, the private sector has recorded an increase in the number of full-time employees by 3.8 million, unemployment fell to the record-low pre-coronavirus rate of 3.5-3.6%, with steadily growing wages (table "Quarterly indicators of the US economy").
Quarterly indicators of the US economy
|
IV’21 |
I’22 |
II’22 |
III’22 |
|
|
GDP growth, year to year, % |
||||
|
real |
7.0 |
-1.6 |
-0.6 |
2.6 |
|
nominal |
14.3 |
6.6 |
8.5 |
6.7 |
|
Average hourly wages, $ (end of period, adjusted by seasons) |
31.40 |
31.75 |
32.11 |
32.46 |
|
Deficit of trade in goods and services (end of period), $ billion |
82.0 |
106.9 |
80.9 |
73.3 |
Source: Credit Suisse
Let's pay attention to one important thing. The nominal US GDP continued to grow at a faster rate (largely under the influence of the inflationary component), which, in the conditions of strengthening dollar, also means strengthening of the purchasing power of US economic agents. At the same time, international settlements, stock exchange quotations, debts, lending and assistance are paid in nominal dollars. A nominal GDP increase means a decrease in relative macroeconomic indicators (fiscal and trade deficits, fixed amounts of aid, debt in terms of GDP), and with it, easier access to resources controlled by US financial institutions. That is, the resources that have already been allocated or will be allocated in the near future as external aid (including for Ukraine) will "weigh" less for the economy of the world's leading country than the same amount a year earlier.
Moreover, such strengthening of the dollar (apparently with the increase in the demand for imported goods and services in the US) did not lead to the restoration of foreign trade imbalances (which is often in the focus of attention of opponents of the current government) — thanks to export growth, the trade deficit experienced a noticeable decrease (table "Quarterly indicators of the US economy").
In such conditions, the Republicans may well reproach the current US executive branch for insufficiently focused and delayed military aid to Ukraine.
One remark: They say that by-elections give a mark to the current President. Of course, the higher the popularity of the president is, the better the socio-economic conditions in the country, the fewer legislative seats the presidential party will lose at midterm elections. In turn, the conclusiveness of the opponents’ victory also serves as an indicator of the popularity of and trust in political rivals who claim to lead the new government. Today, there are reasons to say that the Republican tsunami did not happen.
It may be said that the current midterm elections have become a referendum on trust in Trump: he did not take part in the elections directly but remains the leader of the Republicans, and will probably stand for the presidency again. Here lies a significant potential contradiction. Trump's popularity among the Republicans (and even not all of them) does not at all mean popularity among the voters, including even those who traditionally support the Republicans.
This primarily concerns Americans coming from the former socialist countries, whose number in the US is significant. The vast majority of such Americans, including of Ukrainian origin, traditionally support the Republicans. However, they will not support a candidate who will "play along" (or declare such an intention) to Russia. If this happens (under the pretext of a diplomatic dialogue), the Republicans may lose a lot before the next presidential election. This does not mean that these voters will vote for the Democrats. Rather, the support base of the Republicans will decrease, which may give additional chances of victory to the Democrats, who remain fairly united and consistent. This is already too much for the Republicans, politically.
As for the immediate consequences for Ukraine, it probably makes no sense to talk about a decrease in US involvement and US aid today. They may even grow, under the slogan "we should do more". Meanwhile, we can expect stricter control over the use of both financial and military aid. In this connection, Ukraine should restore and strengthen transparency and meaningfulness in decision-making and their implementation. With progress in these areas, we may expect furtherance of the strong policy of all-round support for Ukraine.
https://razumkov.org.ua/komentari/ryzyky-vtraty-pidtrymky-ssha-minimalni
