Idrees Kahloon and Jordan McGillis discuss polling and strategy on economic issues, the limits of election modeling, and the state of the presidential election.
Audio Transcript
Jordan McGillis: Hello and welcome to 10 Blocks. I'm Jordan McGillis, economics editor of City Journal. My guest today is Idrees Kahloon, Washington Bureau Chief of The Economist. Idrees, thanks for coming on with me.
Idrees Kahloon: Thank you for inviting me. Glad to be on.
Jordan McGillis: Yeah. First I just want to say Bureau Chief is a super cool title, does that come with a badge?
Idrees Kahloon: It's a very, very serious job. I get to decide the lunch that we get on Wednesdays, which is today, and I have some oversight over the desks and their arrangement as well. So really just a lot of power.
Jordan McGillis: I imagine an old Katharine Graham Washington Post sort of set up, a lot of smoky rooms for you there at the Washington Bureau.
Idrees Kahloon: Yeah, yeah, yeah. We've left all that behind, now it's just people in a cubicle trying to figure out what the next big thing is going to be.
Jordan McGillis: But if I understand correctly, you've been out on the road a lot this summer, almost like a tornado chaser.
Idrees Kahloon: Yeah, well, at the start of summer, I found myself just being bored with the election, not really finding anything much to do. I remember I spent a good week or two reading about the Chevron decision because that was really the most interesting thing that was going on. And then since then we've had quite a lot happen. We have a new candidate at the top of the Democratic ticket, and yeah, it's been exciting to go out and see them on the road, see the Democrats at the DNC, Republicans at the RNC. Very oddly, both conventions filled with people who are just totally enthusiastic and totally jubilant, which is not what you would've expected.
Jordan McGillis: Definitely. We're recording this the final week of August, so just a week past the Democratic Convention, about eight weeks from the fateful debate between Donald Trump and Joe Biden. And as you say, the changing of the terrain in these past eight weeks, and especially since Kamala Harris emerged as the Democratic candidate has been spectacular. For those of us in the commentariat. What I'm super interested in today and why I am curious on your opinions is how the economy is factoring into this election and how you might think things have changed with respect to that question since Kamala has become the Democratic nominee.
Idrees Kahloon: Yeah, I mean it's a fascinating question. So I mean, Joe Biden had re-embraced the concept of Bidenomics, I mean initially it was used as a pejorative, and at the start of the year he said, "Actually, no, Bidenomics is good and I'm all about it. And that had a few pillars. One of them is large spending on climate subsidies through the Inflation Reduction Act, a big emphasis on industrial policy, continuing the protectionist policies of Donald Trump.
And what we've seen with Kamala Harris is one, largely a strategic ambiguity about what she believes about most questions, but where she's been most clear I guess, is on economic issues. And there she's really pitched Bidenomics with a few tweaks generally in a more populist direction. So, for example, she has embraced Donald Trump's pledge to not tax tips. That's actually a kind of expensive idea. It doesn't sound like it would be, but it is. She's embraced this kind of anti-price gouging provision, which they've subsequently backed away from and probably wouldn't do all that much to deal with grocery inflation. But by and large, the pillars of Bidenomics, this big industrial spending, really aggressive antitrust out of the FTC and Department of Justice and aggressive rule makings from the EPA and other agencies, I think all of those have basically been unchanged. It's just more tweaks
Jordan McGillis: Prior to the age issues really coming to the fore in June for President Biden, I think as economic editor of our publication, I was trying to shoehorn in economic arguments into why Biden was unpopular. Nothing has changed fundamentally economically. We've seen this huge surge of support for Kamala Harris. Do you think people are over the inflation worries they had in the years leading up to this election? Are those still an issue? What are people talking about politically when they talk about the economy?
Idrees Kahloon: So if you ask voters directly through polls, they still are upset about inflation, and economists emphasize annual changes, so changes in the price level, which have declined and voters remember what the prices of things were four or five years ago. So they talk about the cumulative level and economists tend to emphasize the annual change, which has been positive. The economy is cooling perhaps a little bit too much, the Fed is going to cut soon, but the Federal Reserve's job is to lick inflation, and it's done that pretty well.
And then overall, American voters are probably more pessimistic about the economy than the fundamentals might suggest. So I've looked at polling that shows that 40% of American voters say that they think that the economy's in a recession right now and actually have been saying that for a long time. A lot of them think that unemployment is high when it's not. So there's a generalized malaise about the economy that is certainly out of step with the fundamentals, particularly if you compared America's performance with those in European countries where inflation has been worse and the recovery has been a lot slower.
Jordan McGillis: The Financial Times was out with a poll in the last week or so in which they're reporting for the first time that they've run this monthly check, people prefer the Democratic candidate on the economy, very narrowly. Do you think that's purely the switch to Kamala and that it was just that they no longer trusted Joe Biden because of his age? Or is she somehow not being held to account for the years of runaway price increases that seemingly disturbed people?
Idrees Kahloon: I think it's a bit of both. I mean, when she campaigns and talks about inflation, it's in this sort of passive voice, "I know the prices have gone up too much." And people sort of, because the vice president is this almost misbegotten office that's kind of powerless despite all the trappings of power that it has, I think people generally don't really credit her for the Biden administration's successes and they don't dock her for its failures. You see that on Gaza as well. But the way she talks about it is this cost of living issue has crept up on us and we need to deal with it. So I think that that's part of her pitch.
And I guess the other thing I'd say is that the president doesn't really have one lever at his desk that's gas prices, another one that's unemployment, another one that's inflation, and he's just falling asleep at the dials. I mean, presidents are surfing macroeconomic waves, but what they are is they are communicators. They need to be able to sell their economic policy. They need to be able to convince people that they can do a good job in stewarding the economy and also that their opponent would do a bad job.
And I think Biden has basically become rhetorically inert in his ability to kind of command the bully pulpit, but Kamala Harris is good at that and is good... She's dodging interviews, but she is good at going up on a stage and delivering an address. And so she's emphasizing things that are popular among voters. And she's also doing, I think, a better job of attacking Donald Trump on, for example, I think the characterization of his pitch for tariffs and higher tariffs as a tax on Americans is a clever way of framing it. So I think that she's benefiting both from the position of the vice president that's kind of a bit aloof and removed from decision-making, but also I think she's better at, for lack of a better word, prosecuting the case against Trump.
Jordan McGillis: As you note, she has sought to distinguish her positions from Trump's on, for example, the tariffs. But as you alluded to earlier, there are a lot of cases where they're tacking in the same direction, which suggests that there is a sort of popularist appeal to some of these nods to lowering prices that may not actually have much economic backing. I'm thinking particularly about this idea of giving $25,000 to first-time home buyers. That's the sort of thing that I could very well see Trump embracing as well.
Idrees Kahloon: Yeah, yeah, totally. And it reminds me, I mean, I covered her campaign for president in I guess for the 2020 cycle, but it ended in 2019, but I covered it fairly closely. And I remember one of the policies that she pitched at the time was a rental tax credit, basically refunding the cost of high rent apartments to Americans, which would've been probably quite popular. But also given what we know about housing supply and how inelastic it is, probably would've been a straight pass-through to landowners. And this policy basically immediately reminded me of that.
Now it's a bit better conceived because she is at least nodding to supply issues. She's saying she's recognizing that there is a housing shortage, that more needs to be done to deal with the local barriers to building more housing. My worry with the plan as constructed though, is that housing policy is set at the local level, there's little that the Feds can do to deal with it. They can try to set up incentives and she has ideas for that. But if the supply signal can't be sent, but you are giving a very strong demand boost, I mean, you could just see that resulting in house price inflation without doing that much to deal with the stated goals of the policy, which are to reduce the housing shortage and to benefit first time home buyers. I think that that's something you see.
And I think also with other aspects of her economic policy, I think all of that is in campaign mode now. So the tax on tips thing, I think is not a very deeply held position of hers. If I had to guess the price gouging point, if you ask her people about it, they'll say, "Well, what it really means is that if there's a hurricane, you can't charge $10 for a bottle of water." Fine, that seems fine, but it's probably not going to do very much for grocery prices. The deeper core of what Harris administration would mean for the economy, you'd have to dive into how they would approach the renegotiation of the Tax Cuts and Jobs Act, whether or not they would continue to embrace the kind of Brandeisian view of antitrust enforcement, whether they would continue to run the agencies in the way that they have. I mean, that's the stuff that really would matter.
Jordan McGillis: On the Brandeisian point, J.D. Vance has emerged as a spokesman of sorts for the new right on economics, on matter of matters of law and of antitrust. How do you think the Republicans would manage those issues if Donald Trump were to win in 2024?
Idrees Kahloon: So this is something I'm really curious about. I mean, on economic matters, you've seen some convergence, actually quite a bit of convergence between Democrats and Republicans. And Vance I think epitomizes that to a really high degree. I mean, he said complimentary things about Lina Khan, who's the FTC chair under Joe Biden. He and Josh Hawley have said nice things about her. He also wants to hire, at least he says hire Child Tax Credit level. I think in an interview he pitched that being $5,000 or something, Republicans are making gestures towards being more pro-Union. I think Hawley even endorsed a kind of co-determination bill, which is this Warren-esque idea that's practiced in Germany where workers have positions on corporate boards. So Vance is the kind of poster child for this new brand of economics. And so if he is in the position, if he's vice president, of actually being decisive on these issues, I think that could matter a lot and we haven't touched on trade, but obviously they continue to be interested in protectionism and this kind of American system idea of protecting manufacturing.
But I don't know if that would manifest. So when Trump gave his speech at the RNC, he still had this Laffer-esque, Reaganite sort of discussion about the need to cut corporate taxes. The Tax Cuts and Jobs Act was basically a Paul Ryan project, and Trump ultimately is the decision maker. So I think Vance's selection is very interesting in this regard, but you'd also want to think about who would be the chair of his economic advisors, who would be his US trade representative, who would be his Treasury secretary? And if those are the three or four people in the room who are going to be talking to Trump, then where do they come down at the end of the day? I think that's probably going to be the better indicator than just the selection of J. D. Vance
Jordan McGillis: And the selection of J. D. Vance as Donald Trump's Running Mate is interesting not only for his explicit views on these matters, but also the culture that he represents and the geography. J. D. Vance is from a Rust Belt town in his description in Ohio, and that's an issue, the Rust Belt and left behind areas that The Economist has covered really well of late. Can you tell us a little bit about the coverage that your paper has put out?
Idrees Kahloon: Yeah, of course. So there was some work done by my colleagues looking at areas that could be considered left behind or people that could be considered left behind. And actually what we find is that the last few years have been reasonably good. A lot of that is pretty hot, a labor market that's benefited workers at the bottom of the income distribution, that's probably compressed income inequality, somewhat. Labor force participation rates for men, which had been declining, seemed to have stabilized and slightly increased after the pandemic. And so there's a lot going on here. Market wages are up, as well. And the college wage premium, which had been growing a lot over the previous decades has actually declined a bit in the last decade. All of which is to say is that if you are participating in the labor market, your returns are actually pretty good. And obviously during the pandemic a lot of the stimulus was fairly generous to those who were working as well.
So that's an interesting kind of juxtaposition with the overall economic mood, which as we said before is pretty down on the overall state of the economy, it says that inflation has made things very hard and for some items that's true. I think interest rates have made housing harder for people who want to acquire mortgages than before, certainly. But if you look at a lot of the people that policymakers have been worried about, you see actually there's quite a lot of convergence and even the Black/white gaps in income and unemployment have also been declining as well. So there's a lot of positive data to look at over the last decade that perhaps people don't spend as much time on.
Jordan McGillis: In Ohio, while it is often considered one of these left behind areas, it's not a swing state at this point in time, but some nearby states that have similar characteristics, Michigan, Pennsylvania, of course, and Wisconsin, they're going to be key in this election. What are the economic issues in those states specifically across the former industrial heartland? What's driving people's voting preferences right now?
Idrees Kahloon: So a colleague of mine looked at swing state economies as well and basically found that they are relatively similar to the economy as a whole. I mean, there's one exception, which is Nevada, which has a higher unemployment rate, that might be a result of Vegas and it's particular swings that are associated with it. But the issues that are affecting the swing states, even though a lot of them had high manufacturing employment are pretty similar to what you see around the rest of the country. And in fact, a lot of them have had slower inflation than the national average.
So I think that, it reminds me, but I grew up in Kentucky where you would see signs, "Friends of coal," on the back of quite a lot of cars and coal mining had this kind of a disproportionate influence in politics. I remember looking up at one point there were 6,000 or so active coal miners left in the state. I mean, it's a kind of vanishingly small share of the overall labor market, but they have this kind of nostalgic premium that is placed on that kind of work, which I think you also see with, for example, steelwork and other kinds of work, work that people associate with what it is to be American. And that is why I think you saw Joe Biden implement new steel tariffs earlier this year. I think that was pretty clearly not a kind of economic calculation, but a political one. And I think that that drives a lot of policy at the moment.
Jordan McGillis: And of course, J. D. Vance has been one of the strongest proponents for that sort of policy, particularly around those heavy industrial issues like steel. And the state of Pennsylvania is one that we think of with the steel industry centered around Pittsburgh. But the state of Pennsylvania also holds Philadelphia, and you could just as easily argue that this election could come down to suburban Philly voters. What are those sorts of people thinking about?
Idrees Kahloon: Yeah, I mean, I think a lot about the idea that American politics have become post-materialist and that people are as important as the economy is, as determinative, as presidents are for where economic policy can go, the voters are not so easily swayed by the promise of lower taxes or the promise of new benefits and new programs. So to your point about Philadelphia suburbs, what are people there thinking about? I mean, they're thinking about inflation, but they're also thinking about abortion. That's a particularly important issue. And so-
Jordan McGillis: Another issue on which we've seen a rapid race to the center.
Idrees Kahloon: Absolutely, absolutely. When the Democrats talk about abortion, they're emphasizing cases like ectopic pregnancies, cases where really it's inarguable in my view that the woman needs medical care. They're not emphasizing elective second trimester, third trimester abortions or anything like that, they're emphasizing what is being lost by these policies in Republican states. And you see on the Trump side, I mean a complete pivot to the center. I think he said the other week that his term was going to be good for women and the reproductive freedom. I mean, just totally trying to appropriate the Democratic language on there. But to your point, I mean there are certainly voters who are going to be casting their vote based on the idea of who would be better for manufacturing and who would be better for these industries on which we maintain a nostalgic premium. But even Pittsburgh, it's a city I've spent some time in, their economy, it's not steel based now, it's powered by Carnegie Mellon and UPITT and the Pirates and the-
Jordan McGillis: Excellent robotics hub in that city.
Idrees Kahloon: Excellent robotics hub, excellent medical hub. I mean, just there's a lot happening at Pittsburgh. It's a really cool city.
Jordan McGillis: And I think that is an outgrowth though of it's industrial greatness, it had that infrastructure in place.
Idrees Kahloon: Yeah, yeah, yeah, absolutely. And there's old money, you can still see it. There's still, Carnegie created a bunch of very nice buildings and you walk around, but it's managed to pivot to an economy for the 21st century in a way that's not steel based. And steel is important. And the justification you could have, I should say, to the credit of people who want to subsidize or protect the steel industry, is that there could be national security benefits to producing steel at home, particularly the kind of high strength steel you need for defense applications. There are justifications I think you could make, but broad-based tariffs for the purpose of protecting domestic industry, I think those are rooted in more political calculations than they are pretty strict economic calculations.
Jordan McGillis: I'm lingering here on Pennsylvania because I was looking at the latest model from The Economist, and as of today, August 28th, you've got a slight probability that Kamala Harris will win the election, and it's based on a 0.1% advantage that she appears to have in that state. If that were to go to Trump, based on The Economist model, this whole election would go the other way.
Idrees Kahloon: Yeah, Pennsylvania is going to be the tipping point state of the election, very, very likely given how it's a state with the most electoral college votes of any of those that we talk about as being contested. And I think we have, you might be looking at it right in front of you, but I think we have Kamala Harris as basically a slightly weighted coin tossed win maybe 54 or 55. And Democrats I think have a euphoria that is justified on a relative basis because relative to what Joe Biden would've been doing now, it is a lot better, but on an absolute basis, being 50/50 against Donald Trump is not a particularly comfortable place for them to be. I'll point out that at this point in 2020 and 2016, Democrats had larger polling leads over Donald Trump than they do now. In both cases, they suffered a polling correction that favored Republicans and that led in Hillary's case to a loss and in Joe Biden's case to a very narrow victory narrower than the popular vote would have you believe.
Jordan McGillis: I know you're not the one behind the lever on the model, but are you able to explain a little bit of what that's taking into account and if those past inaccuracies are factored in?
Idrees Kahloon: Yeah, so I've worked a bit on election models, so I can tell you a bit about how they work. I mean, basically what you're doing is you are a looking at, so let's say we are, I think we might be 68 days from the election, or the exact number doesn't matter, but you look at previous elections and you say, okay, 68 days from the election, how off were the polls on average from the true result? And as you get closer, the polls do a better job of predicting the final outcome, although you don't ever get terribly close to it, you're still two or three points off. But what it does is that it uses that estimate as basically your variance. And so what it will incorporate is the fact that polls today are generally off the final result in the popular vote by four or so points.
But what it won't do is say, we think that the direction is going to be favored to one party over the other. So it assumes the kind of symmetric distribution, which is correct across the past couple of elections, the past two, which are the ones I point out, obviously it's gone one way. That's not to say that it has to go that way this time around, but that's basically what's going on. And then we can talk a bit more about the details if you want, but there's a lot under the surface about how states are correlated with one another and how a good or bad result in one state affects how much you should update your anticipated level in another state, if you like.
Jordan McGillis: Yeah, I would love to hear more about the state correlation.
Idrees Kahloon: Yeah, sure. Basically, the idea is that you have a correlation matrix between all the states. And I know for example, that if Kamala Harris is winning Florida, she's winning all the states, basically, all the really major contested states. But what I can also tell from demographic similarities from the way that state-level polls move is that, for example, if Kamala Harris is one point better in Michigan, she's probably doing, let's say 0.8 points better in Wisconsin because those states tend to move pretty similarly in public opinion. She's probably also doing, let's say 0.4 points better in Texas, where doing better in Michigan is probably indicative that she's doing better elsewhere, but maybe not as indicative because there's a very different demographic, a very different political history. So a lot of the work that my colleagues have done has been into estimating a correlation matrix between all 50 times 50, I guess 51 if you include District of Columbia, but estimating all the entrants of that matrix. And then when information comes in from one state, let's say in Virginia, this happened when-
Jordan McGillis: What do you mean by when information comes in, polling information or past results?
Idrees Kahloon: Polling, polling information. So-
Jordan McGillis: Pure polling?
Idrees Kahloon: Pure... So let's say we get a poll in Virginia that showed, and this happened with the case of Biden, that showed Biden up by maybe that four when he won in 2020 by 10. That's telling you information about his chances in Pennsylvania, they're not good if he's only winning Virginia by four. How much you update, how much you change your prediction in Pennsylvania based on that poll in Virginia, depends on how correlated you think the two states are, and then specifically how much you trust that particular poll. And so the trick that my colleagues, or all of the work is in that weighting in deciding how much that new information is actually telling us about what's going on in all the other parts of the country.
Jordan McGillis: Pennsylvania makes sense to me at this point. I'm curious about Wisconsin, what's your perspective on Wisconsin and why it is not more similar to Minnesota with which it shares that long border?
Idrees Kahloon: Okay, Wisconsin, Minnesota. That's a good question. Off the top of my head the first thing I thought of that Minnesota had a pretty robust history of progressive politics, but then I realized that Wisconsin does as well, Robert La Follette and all those folks are based out of there. I would have to think a little bit more about it. I mean, it could be demographic differences. Minnesota has descendants of Scandinavian immigrants who I think are Leftier than the descendants of Italian and Irish immigrants that could be playing part of it. The African-American populations of the two might differ as well in terms of size and also ethnic background, a lot of Somali Americans in Minnesota who tend to be, I think, a bit more progressive on average. I don't know.
Jordan McGillis: Yeah, I tend to agree with those broad strokes. And then why have Michigan and Ohio diverged so much in the last couple of cycles?
Idrees Kahloon: Another good question. Michigan has more ethnic minorities, I think, than Ohio, that'll do some of the work, I would guess.
Jordan McGillis: Tying back to the great migration or recent post-1965 immigration, what do you attribute that to?
Idrees Kahloon: I think the African-American population would be kind of a great migration move. Detroit was a pretty big hub for Black migration, and then subsequently you've had a reasonably large Arab-American settlement in Michigan, which on the scale of the election might be two or so percent, but I think would still kind of change a bit.
And then the other thing I would look at, because the big dynamic in American politics over the last 10 or so years has been educational polarization. So I would look at whether or not there are more college-educated people in Michigan than there are in Ohio, because that tends to be the new fault line in American politics. I guess as a last thought on that polarization point, something that's interesting to me is the observation that this is not just an American phenomenon, but one that you see across Europe as well, where left-leaning parties have increasingly become identified with the party of the college-educated, whereas a lot of them have names like Labour, they're rooted in working-class movements, and yet conservative parties, in this case, the Republican Party, have made a lot of inroads with people without college degrees, blue-collar workers, etc. You see that in England with Labour and the Tories-
Jordan McGillis: Much to the chagrin of the Lib Dems, I'll note.
Idrees Kahloon: Yes. Yeah, yeah, the nice neoliberal, sort of neoliberal centrists have kind of been squeezed out, and you see that in France as well.
Jordan McGillis: Do you think it's fair to compare the Reform UK party to the MAGA wing that's now dominant in the Republican Party?
Idrees Kahloon: I think superficially, yeah. I think on immigration, that's kind of the issue that Reform is most identified with. Yes, certainly the resonances are really strong. The anti-globalist outlook of Nigel Farage, his hostility to the EU, similar in a lot of ways to how Trump sees the world. I don't know that much about their specific thoughts about economic policy though, so that would be the thing that I'd want to learn more about. But I definitely think that there are resonances there.
Jordan McGillis: All right. Last question for you here, Idrees, what is the economic argument that Donald Trump needs to make to swing some voters, and what's the economic argument Kamala Harris needs to make to swing voters to her side?
Idrees Kahloon: So the economic argument Donald Trump needs to make is a pretty simple one that he is already making, which is that Democrats managed the economy badly and triggered inflation and can't be trusted to do it again. That's the argument he needs to make, and he's been trying to make it, I think, relatively well. Kamala Harris needs to play defense against that argument. But I think the one that she could make in order to win is that when it comes to renegotiating taxes, which the next president will have to do, her plan is fiscally sustainable, whereas Donald Trump's pledge of keeping the individual provisions of the Tax Cuts and Jobs Act in place would be fiscally ruinous. I think that she needs to, if the theme of this campaign is going for the fallow and forgotten middle, then she needs to reclaim, I would argue, that center and say that she's actually the fiscally responsible candidate, Donald Trump's plans for taxes and tariffs would worsen inflation and worsen the deficit and actually, she's the more responsible candidate on both those counts.
Jordan McGillis: Our guest today has been Idrees Kahloon from The Economist. Idrees, thank you very much.
Idrees Kahloon: Thank you so much. I really appreciate it.
Jordan McGillis: And where can our listeners keep up with your work?
Idrees Kahloon: You can follow the work of me and my colleagues at The Economist, and my colleagues and I also do a podcast on American politics called Checks and Balance, which I would be very happy if you listened to as well.
Jordan McGillis: Can't recommend that podcast enough. It's one of my favorites. Thanks again, Idrees.
Idrees Kahloon: Thank you.
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