By Victor Reklaitis
As Virginia goes, so goes the nation?
That’s an overstatement, but the governor’s race in the Democratic-leaning state is drawing considerable attention this fall, with analysts connecting the contest to President Joe Biden’s spending plans and next year’s U.S. midterm elections.
The race features Democrat Terry McAuliffe, who served as Virginia’s governor from 2014 to 2018, and Republican Glenn Youngkin, who until a year ago worked as co-CEO of private-equity giant Carlyle Group /zigman2/quotes/200142014/composite CG -4.28% .
Polls have been mostly tight lately, with Youngkin ahead of McAuliffe by 1.7 percentage points in a RealClearPolitics average of surveys as of Tuesday. Election Day is Tuesday, though early voting by mail or in person was available for weeks.
Pundits likely will end up making too much out of the result in Virginia’s gubernatorial race, said Ed Mills, a Washington policy analyst at Raymond James. But following that caveat, Mills said: “There is a fairly decent probability there will be market /zigman2/quotes/210599714/realtime SPX -2.27% sentiment that shifts due to this election.”
A McAuliffe loss would boost expectations that Democrats are going to perform poorly in the 2022 midterm elections, Mills told MarketWatch. So top Democratic lawmakers would feel renewed pressure to deliver on some part of Biden’s plans for infrastructure /zigman2/quotes/200238288/composite PAVE -2.90% and social spending “because they have this flashing red warning sign” from the loss in Virginia, he said.
The price tag for those plans likely would end up on the lower end of the expected range, with tax hikes also on the lower end, and “that’s a market positive,” the analyst added. For now, the plans consist of a $1 trillion bipartisan infrastructure bill that already has passed the Senate, as well as a Democratic social-spending package with an anticipated price tag of around $1.75 trillion .
But it’s also possible that following a McAuliffe defeat, that “Democratic unity further dissolves, because individual members really are concerned about their ability to maintain the majority and want to establish an independent streak,” Mills said. The “Democrats in disarray” narrative would be in play, and market expectations could shift to anticipating that Congress just will deliver an infrastructure bill, possibly with a reduced price tag, according to the Raymond James expert.
What about a win for McAuliffe?
“There will be some more aggressiveness by some of the progressives to push harder for their agenda,” Mills said. “The top-line number probably goes up a little bit, but it probably takes a little bit longer to get a final deal as the different factions debate each other.”
It’s also possible Democrats might try to show some progress on Biden’s agenda before Election Day in Virginia to boost their chances in that state, according to the analyst.
Virginia’s race for governor matters because it’s the only competitive big election this year, but it’s not “an unerring predictor” of what will happen in next year’s midterm elections, said Larry Sabato, director of the University of Virginia’s Center for Politics, in an email.
While incumbent Democratic Gov. Ralph Northam’s victory in Virginia’s 2017 gubernatorial election was followed by his party taking over the U.S. House in the 2018 midterms, McAuliffe’s win in 2013 was followed in 2014 by Republicans taking back the Senate and keeping control of the House, Sabato noted.
In the nationwide midterm elections that take place in a year, Republicans are aiming to become the majority again in the U.S. House and Senate. Betting market PredictIt in recent weeks has been giving the edge to the GOP to do exactly that in both chambers of Congress.
A key challenge for McAuliffe this year has been declining Democratic enthusiasm, according to Sabato. That has come as “Biden’s standing fell in the summer, and as Democrats showed they couldn’t manage to pass (at least so far) the two big bills on infrastructure and social programs,” the University of Virginia expert said.