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It’s Still the Economy, Stupid


At the Republican Iowa caucus in January, vendors sold buttons featuring a variety of slogans.  “Give Me Liberty, Not Debt,” read some.  “Legalize the Constitution,” demanded others.  The clashing slogans were more than just a memorabilia mash-up; they spoke, as well, of the perpetual vacillation during presidential election campaigns between the inescapable place of economic realities and the importance of ideological solidarity to the voters.

The 2012 contest is a vivid illustration of how a campaign can swing between economic questions of employment rates, deficits, and trade, and ideologically charged “culture war” questions of abortion, marriage equality, and the place of religion in public life.  There is no gainsaying the visceral importance of social questions –– in the 1980s, religious leaders like Pat Robertson and Jerry Falwell certainly helped propel the Republican base to the polls for Ronald Reagan.  Ultimately, however, historical evidence and political theory predict that this year’s election will depend, above all else, on the state of the economy and the way it is perceived by the American electorate.

Right now, while Mitt Romney strains to reassure the base that, as governor of Massachusetts, he was “severely conservative,” and while Rick Santorum extols the supremacy of God’s law over the law of man and legislature, it is hard to remember that come this fall both parties will move toward the ideological center. But they will, and they must, if they hope to have any chance of winning, as the ideologically median voter’s preferred candidate is statistically bound to be elected in a two-party system.  So while the clatter of slogans and sound bites might make it seem like there is a gulf between the two parties, by the time there are two candidates on the ballot, the ideological gap between them will have shrunk. And in the muddiness of that middle, empirical economic evidence sways the ideologically agnostic.

Historically, the voting public tends to place complete responsibility for the state of the economy – good or bad – on the incumbent party.  Voters do not sort through the nuances of thwarted policy initiatives, extant deficit burdens, or coincidentally favorable market conditions.  They look at bottom-line numbers: the scale of unemployment, the rate of inflation, the number of housing foreclosures.  So when the “dot com boom” propelled the country to dizzying prosperity in the mid 1990’s, President Clinton fully reaped the reward.  Similarly, President Obama inherited a massive financial calamity that has come to define his term in office and that now threatens his electoral prospects this November.

In modern presidential history, the two times that economic barometers plummeted during an election year, 1980 and 2008, the incumbent party faltered at the polls.  Conversely, the two times that the economy flourished, growing by more than 6 percent in 1944 and 1972, the incumbent party scored a compelling victory.  Reagan, Nixon, Eisenhower, and Truman were able to win despite recessions earlier in their terms due to favorable economic trajectories, which voters tend to embrace during elections.  So when a moderate downturn emerges, as it did in 1992, even a popular president, like George H.W. Bush, becomes vulnerable.  As a result, any upturn in the economy bodes well for Obama in 2012, not only because people often vote with their wallets, but also because voters are profoundly risk averse.  If they don’t feel a looming threat to their economic security, they prefer a known leader and familiar policies.  Since 1792, the incumbent or his party has re-captured the White House two out of every three elections.

Obama already has benefited from recent upticks in certain economic domains.  After the Bureau of Labor Statistics released a favorable jobs report in February, polls showed a bounce of four percent in his approval rating.  Obama was buoyed again in the polls in mid-February, just as the Gross Domestic Product was inching up, and General Motors – a company that a year ago Obama pulled from the brink of extinction with a government bailout plan – posted its largest profits ever.  Economic indicators have improved enough that some forecasting models that gave Obama a 40 percent chance of winning last fall now put the President’s chances of re-election at 60 percent.

Speaking about the economy and efforts to improve it, however, does not generate the same positive outcome in the polls.  Obama delivered a major speech on the economy in Kansas on December 6, 2011 in which he struck a populist chord and condemned the supply-side economics of his Republican opposition.  Following that widely covered speech, there was no corresponding improvement in his approval rating.  Obama saw a similar stagnancy in his approval rating after his State of the Union address.  People apparently don’t want to hear about economic recovery; they require actual evidence of it.

Although some decry the voting public as intellectually lazy for ignoring economic ideology and focusing on numbers alone, voter responsiveness to quantifiable economic trends has the positive effect of forcing the president to work towards actually improving the economy through effective policy, rather then just employing political rhetoric to sway voters.  If the economy continues to improve in the months leading up to the election, the Republicans are likely to shift tactics and start emphasizing ideological differences with the president – a strategy designed both to rally the base and to divert the attention of uncommitted voters away from positive news.  After all, elections aren’t about achieving consensus or governing.  They are about winning. Republicans are going to hew to whichever strategy seems most beneficial at the moment, whether it’s focusing on ideology or economic realities.  The Democrats will do the same. Senate Minority Leader Mitch McConnell summed up this sentiment best when he told the National Journal in October 2010 that his main priority was beating Obama – not improving the economy or protecting the country from national security threats, but beating Obama.

Ideology plays a larger role in the primary process.  In early February 2012 the Republican contenders appeared before the Conservative Political Action Conference convention in Washington, D.C. to win the organization’s stamp of approval.  Conscious that his moderate positions in his past leave him vulnerable to conservative critics, Mitt Romney, the former Governor of Massachusetts, met privately before the event with conservative leaders to reconnect with the loyal base.  During the primary campaign, Rick Santorum, the former Pennsylvania Senator, and Newt Gingrich, the former Speaker of the House, have pounded Romney as a Massachusetts moderate, citing his one-time support for legalized abortion and the statewide universal healthcare law he added to the statue books.

To shield himself from such attacks, Romney has shifted to the right to curry the median Republican voter, promoting himself as adamantly pro-life and a successful, fiscally conservative businessman. Romney clearly understands the importance of political centrism, both within the party and in a general election.  Apparently, so do the members of CPAC.  They backed Romney, even though other candidates had more faithfully conservative bona fides.  This endorsement, now a blessing, will become his bane. Post-primaries, Romney will have to appeal to very different middle-of-the-pack voters, and the Democratic Party will paint him as someone who panders to the voters by flip-flopping on the issues.  Santorum would fare no better in this regard since he staked out a staunchly conservative position throughout the campaign that Democrats are sure to exploit among uncommitted, centrist voters.

The 2012 election is whipsawing already between economic issues and the emotional rhetoric of abortion, contraception, marriage, and religion.  Now that the economy is in tentative stages of recovery, the opposition candidates have shifted the discourse to ideological issues. Should the economy once again stumble as a result of a Greek default or rising gas prices, the Republican focus will likely return to the economy.  For regardless of buttons, slogans, Republican rhetoric, or the political football of choice, the numbers indicate that economic realities will dominate the voters’ choices, as they always have.

 

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  • that stocks bonuecd back from a nearly 700 pt drop and there are serious slides this week but it isn’t the worse one we have had.128 point loss is steep but it is much better than the 700 that it was.The liberals running around yelling the sky is falling the sky is falling is part of the reason for this they are in a panic and DEMANDED a bailout which is only a bandaid. It might get worse but we are ok. The WHOLE WORLD is experiencing the same thing right now .so the world won’t crash!Not to say it isn’t serious .it is I do believe the government will handle this .and solve it eventually!BAD NEWS If OBAMA Is in though .and we will never hear the end of it that it was the republicans but it is the democrats CLINTON did this .don’t be fooled into thinking different. You can’t make money like we did back then and not pay for it now. IT was AMAZING the money we made during Clinton years but it was a false bottom a bubble under false economy and we were in a recession when Bush took office ..but no one says anything about THAT!There was a crash in 1970 too ..Look at history a recession is on average at this time .we go in cycles and we have ALWAYS corrected the situation within two years.Remember too this is a good thing that this weekend is a holiday weekend and all markets are closed hopefully people will step back and take a second look. We are living the housing bubble 45 percent drop right now that is a WHOLE LOT OF LIBERAL caused problems from Clinton !Stock is a sliver of a market based on earnings .companies are going to earn 40 percent less but not all companies are going to go out of business right now ..we are not going to go down.Companies are trading at muliti million dollar lows right now so that means we are going to go up! It will take time..!Just DON’T PANIC!!!!!!! We are senior citizens and we are worried about our 401 K’s and stocks and we have taken a huge hit but we have done this before and it went up before and it will go up again.You cannot solve 30 years of unwinding credit being defaulted in just a few days.Not ONE BANK has lost ONE person’s FDIC money .so it is really not THAT bad yet! Oh and please stop listening to the news ..they can give you facts but they are also VERY NEGATIVE! That is their business to report everything they have 24/7 to cover news and they are fighting for time! So the most outrageous they get the more viewers they get.