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My view on what's going on in the financial markets and the global economy, and a few other things that might interest me from time to time.

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The Virginia Gubernatorial Election

The Virginia gubernatorial election, which was won by (former Carlyle) Republican Glenn Youngkin, is one of what might ultimately be two surprise victories by Republican candidates in races for state leaders that took place on Tuesday. The other state race for governor, still too close to call, is in New Jersey. What makes both state elections interesting at the national level is that President Biden carried both Virginia and New Jersey by comfortable margins in the Presidential election just last year at this time (Biden won 54.4% in Virginia and 57.3% in New Jersey).

For readers wishing to focus on more important global macro topics like the COP26, I can understand why you might ask why I would write about the Virginia governor election. I realise it might seem relatively insignificant to some of my readers but hear me out. The messages resonating from the Virginia state election are important. Democrats currently control both the House and the Senate by narrow majorities, but their control post the 2022 midterm elections appears fleeting assuming that the Virginia (and possibly New Jersey) elections are a harbinger of what might lay ahead. Keep in mind that all 435 seats in the House will be up for grabs in 2022, as will 34 of the 100 Senate seats. With this context, let me set forth the three reasons I decided to write this brief article about the Virginia gubernatorial race.

Firstly, Virginia is my home state. Even though I have not lived there since the 1980s, I still go back from time to time and follow what is going on in the state in which I was born and raised. I happened to be in Virginia for a couple of weeks in early October in the run-up to the election, so I got to see first-hand one of the gubernatorial debates and to study up on the candidates’ positions on a variety of social and fiscal issues.

Secondly, the victory by the GOP says a lot about what is going on in national politics in the US at the moment. President Biden’s approval rating has fallen to around 42-43%, so his honeymoon is clearly over. This might be related to the US mis-steps in its withdrawal from Afghanistan, his handling on the ongoing pandemic, or – perhaps most influential – the inability of a Democratic-controlled House and Senate to pass the Biden social spending programme, to which the progressive Democrat wing has linked the bipartisan-supported infrastructure plan. I find it remarkable that the Democrats cannot sort out their own party in this respect, and the longer this impasse continues, the inepter the Democrats look. In soccer parlance, the Democrats have scored an own goal. As many of my readers might know, the issue within the party is that the progressive caucus endorsed the initial Biden-sponsored $3.5 trillion social spending plan, but two moderate Democrats have pushed back because they are fiscally more conservative than the party at large. Will something get done? I suspect so but it is hard to say when or what the plan might look like, although something in the $1.5 trillion area seems a reasonable guess. To hold up the bi-partisan infrastructure-approved plan is nasty politics within the Democratic party. This shows division not unity, certainly not inspiring confidence amongst voters as far as Democratic leadership of the US in the future.

Lastly, the campaign by Mr Youngkin provides important insights into how Republicans should campaign going into the 2022 mid-terms. Democratic challenger (and former governor) Terry McAuliffe made at least two tactical blunders. Firstly, Mr McAuliffe talked too much about what was wrong with Mr Youngkin rather than why voters should vote for him. Naturally, there are fairly significant differences between the platforms of each candidate, largely mimicking the national platform differences of each party. These include an array of fiscal and social matters, many quite divisive and some of which are very relevant at the moment. Even so, I found myself so annoyed by Mr McAuliffe’s ongoing negative campaigning that it overwhelmed the debate around some of these important issues, which should of course be the focal point in any election. (As an aside, secondary education was a very divisive issue in Virginia, one in which Mr McAuliffe slipped on a banana skin which also did not help his campaign.) The second tactical mistake was that Mr McAuliffe tried to constantly “link” Mr Youngkin to former President Trump. I hardly heard a sentence come out of his mouth that did not suggest that Mr Youngkin was simply Mr Trump reconstituted. However, this strategy was not effective, mainly because – in my opinion – Mr Trump is increasingly regarded as a “one off”. Let’s be real for a moment – Mr Trump had a bombastic personality, unusual mannerisms for the “leader of the free world” and all sorts of character flaws that are truly unique to Mr Trump. As time has passed, many voters – including most independents and perhaps even some Democrats – quite rightly recognise that Mr Trump was a unique individual, not really representative of the majority of Republicans. Fortunately, Mr Trump stayed out of Virginia during the campaign, which might have otherwise helped Mr McAuliffe stage a stronger argument in this respect. Still, the message is that the passage of time has lessened considerably Mr Trump’s influence, whether negative or positive, on other US races.

According to a Gallup Poll (here), 29% of US voters consider themselves Republicans and 29% consider themselves Democrats. This leaves a huge 41% as independents, and it is these voters that will determine the outcome of the 2022 mid-term elections (noting that the Dem-GOP-Independent mix varies by state of course). With the shocking win by Glenn Youngkin in Virginia and the close race in New Jersey, Democrats need to set up and take notice because if things continue as they are, they will almost certainly lose control of both the House and the Senate in 2022.


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04 thg 11, 2021

Fascinating analysis! Interesting to see Virginia as a microcosm of national politics. I was surprised by the poll you cited (~40% independent) given how polarised politics has become in the US. Maybe people are disillusioned by both parties? Wouldn't blame them if they are!

Realise it's early days and things change fast but eager to hear your thoughts on the next presidential election as candidates emerge...

- Margot


04 thg 11, 2021

I totally agree with reasons one and two. You touched on it in the article, but a lot of the reading I’ve done suggests that the third reason McAuliffe lost was because of his stance on a few sensitive issues (namely, critical race theory in the classroom, and secondarily, harsh vaccine mandates which don’t appeal to the entire population). Both issues are sensitive and you might assume that a good number of people with a view contrary to the ”accepted” view choose to stay silent until they’re in an election booth.

Also, if you find yourself with free time, Google “Lincoln Project Virginia election” which was an enormous blunder attributed to McAuliffe (whether or not he was responsible for…

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