Trump's collapsing on the economy. It's a warning sign for new Democratic governors.

Donald Trump won re-election on affordability. What happened next is a warning for Abigail Spanberger and Mikie Sherrill.

The past few weeks have amounted to a body blow to the Trump administration on the economy, with polls showing the public increasingly souring on the president’s handling of the issue. A widely shared Fox News poll released last week found Trump’s approval rating on the economy at an all-time low, with Americans saying, by a margin of 2:1, that he bears more blame for its current state than Joe Biden. 

That result, which is in line with other polls released in recent weeks, came on the heels of Spanberger’s and Sherrill’s landslide victories in Virginia and New Jersey, which seemed to cement the economy as a new winning issue for Democrats. But those victories are about to collide headfirst with a question Trump has been grappling with since January: When it comes to affordability, how much can really be done?

The issue is particularly resonant in New Jersey, which is among the costliest states in the country, ranking second out of all 50 states on the Bureau of Economic Analysis’ Regional Price Parities. 

Virginia has its own, distinct challenge. Its basic costs are lower than New Jersey’s, but it faces an economic threat from job losses in the federal government, which was long a reliable driver of growth in the state. With the third-highest federal workers per capita, the commonwealth has been hit hard by the Trump administration’s decimation of the federal workforce; its unemployment rate rose for seven straight months beginning in February.

Spanberger seems to recognize the need to adjust for the loss of federal dollars. A spokesperson for her campaign told me there’s “a clear recognition that Virginia needs greater diversification” in the state economy.

So, what can Spanberger and Sherrill do? Here's a rundown of the promises and pitfalls on a few major issues.  

Utilities
Skyrocketing utility costs around the country have emerged as a potent campaign issue. Nowhere was that more evident than in New Jersey, which led the nation in electricity rate increases over the past year, per data from the Energy Information Administration. By the end of her campaign, Sherrill’s promise to “declare a state of emergency on utility costs” had become her signature policy plank. The proposal, which she argues would empower her to freeze rate hikes and flatten residents’ utility costs for a year, was a politically smart move. But there are real questions, both legally and practically, over whether she can actually achieve it.

Virginia's situation is only slightly less dire: The Old Dominion came in sixth in the nation in rate increases over the past year. Both incoming governors are about to face a problem of international proportions.

New Jersey and Virginia are both under the same electrical grid manager, PJM Interconnection. Their grid region, shared with 11 other states, just so happens to be home to more data centers than anywhere in the world, at a time when AI electricity needs continue to boom. PJM announced just last week that it is moving forward with its plan to manage new data centers, which are driving rapid increases in electricity costs across the country. Spanberger especially could face a big test soon: Virginia specifically now has the highest concentration of data centers on the planet. How she navigates this issue while in office could have reverberations for other states.

But rising energy costs are a worldwide phenomenon. “There are macro-level factors that are driving up electricity costs everywhere,” said Sam Trachtman, a senior researcher at the Berkeley Economy and Society Initiative. Any effort to mitigate data center expansion could also run into resistance from the Trump administration, which is ramping up pressure to streamline data center construction and insulate companies from liability. 

Taxes
Sherrill theoretically has room to provide tax relief in New Jersey, which has the highest property taxes and the highest corporate income tax in the country. She zeroed in on property tax reform as a priority during her campaign, proposing the consolidation of some school districts. The move could open up room to reduce property taxes, over half of which go to funding schools, though it would not affect the nearly 40% of residents who do not own a home. She also proposed increases to the state’s child tax credit and earned income tax credit, which provide refundable relief to families and lower-income workers. Sherill’s ability to provide tax reductions, though, may be limited by the state’s fiscal situation: Outgoing Gov. Phil Murphy is leaving her with a $1.5 billion structural deficit in the state budget.

Virginia has a more moderate tax system, the product of Republicans and business-friendly Democrats trading the governorship back and forth for the past few decades. It does not, however, have a state child tax credit, something Democrats in the state assembly sought unsuccessfully to add during budget negotiations earlier this year. A new CTC could be low-hanging fruit for the Spanberger administration. 

Wages
New Jersey is one of 10 states in which the minimum wage is already at least $15 an hour. While it’s certainly possible to increase the statutory minimum further — it’s worth remembering that the national campaign for a $15 minimum wage began in 2012; in 2025 dollars, that would be $21 — it’s unlikely.

Spanberger, on the other hand, has an opportunity. Virginia’s minimum wage, which is pegged to inflation, is set to rise slightly to $12.77 beginning in 2026. The governor-elect has said she supports raising it to $15 an hour, a policy she also voted for on a national level when she was in the U.S. House. That proposal ought to have a relatively easy time getting through Virginia’s General Assembly, where Democrats picked up seats in November. 

Housing
Virginia generally falls in the middle of states on housing production, neither a top producer nor a notable laggard, but it faces the same shortage as the rest of the country. Spanberger has proposed a carrot-heavy suite of ideas, with incentives for localities to build and approve more housing. But she notably resisted the kind of heavier hand that governors like Gavin Newsom have taken in recent years, saying in September that she doesn’t want to “mandate to a community, ‘You have to say yes to this or you have to say no to this.’” Barring stronger intervention from the state government, it’s unlikely Virginians will see a noticeable change to the commonwealth’s housing situation.

New Jersey is in a far worse position than Virginia; the Garden State faces a severe housing shortage, ranking toward the bottom of states in terms of new production. In theory, that provides Sherrill a clear inroad on affordability, which she acknowledged during her campaign, embracing YIMBY language and saying the “root of the problem is … a lack of supply.” This bland diagnosis was enough to prompt her opponent to run a surreal ad, featuring multiple shots of dead deer, sounding the alarm about “overdevelopment.” 

But she’ll face some steep barriers: New Jersey already has the densest population in the country, much of which is concentrated in politically powerful suburbs that have historically been extremely resistant to new building. And even if she succeeds in jumpstarting housing production, the time lag between new building and lower prices is politically perilous. “Theoretically, it can happen quite quickly, within five to 10 years,” Trachtman told me. That timeline may be quick from an economic perspective — talk to anyone who works in local housing production — but it’s deadly for a politician.

That dynamic speaks to a broader theme in the affordability discussion: When it comes to basic costs, many of the most powerful levers of change are held by the federal government, whether it’s interest rates, tariffs, or healthcare policy. The Kaiser Family Foundation, for example, estimates that 326,000 Virginians and 457,000 New Jerseyans will see their ACA subsidies expire in December, a policy outcome neither governor-elect holds any sway over.

Even in the areas in which states do have power, progress is often marked in decades, not years. “It’s a huge, huge challenge with what we're trying to do on housing supply,” said Chad Maisel, a Senior Fellow at the Center for American Progress, who co-authored the group’s recent housing plan. “If you're an individual and you're seeing your rents go up 50% over the last five years, you're not interested in a five or 10-year plan to build more housing. You want help now.”