It’s the Partisan Economy, Stupid
Wednesday, January 23, 2008
Americans’ views of macroeconomic trends are increasingly a product of their political leanings, writes MICHAEL BARONE.
“It’s the economy, stupid.” That’s the sign that James Carville famously put up in the 1992 Bill Clinton campaign war room. As we know now, the economy was not in such bad shape at the time: the shallow recession of July 1990-March 1991 was already over, according to the National Bureau of Economic Research, when Clinton announced his candidacy in October 1991. But Clinton and the off-and-on independent candidate Ross Perot insisted that the economy was experiencing its worst recession since the Great Depression, and the standing of President George H.W. Bush never recovered.
Carville’s slogan was based on the conventional wisdom about how the economy affects American politics. That conventional wisdom is based on the political science developed in the years after the Depression. It was based on how voters with vivid memories of the Depression responded to macroeconomic trends. These voters knew how a temporary downturn in the economy could lead to a downward deflationary spiral—and to personal economic disaster. The impact of the Depression on Americans’ personal lives is illustrated in the fact that U.S. birth rates declined 15 percent between 1929 and 1933, and divorce rates dropped 25 percent. As Ben Wattenberg once put it, “If you already were in a household, you couldn’t afford to set up a second one.”
As a result, for decades after the 1930s Americans tended to vote for the “in” party (the party of the incumbent president) when the macroeconomy was growing, and vote for the “out” party when the macroeconomy was faltering or in recession. Political scientists developed a simple rule of thumb for predicting elections: when the economy was in good shape, the incumbent party would win.
But in recent years, this rule has proved increasingly unhelpful. One formula predicted that Al Gore would win the 2000 election with 56 percent of the popular vote. In fact, he won 48 percent of the popular vote, far short of the prediction.
What has changed? Two things. First, most voters today do not remember the Great Depression. Second, voters’ assessment of the economy is increasingly a product of their partisan leanings, rather than the other way around.
The median-aged voter of 2008 has lived all of his or her adult life in an economy that has had low-inflation growth about 95 percent of the time.
The first point should be obvious. Voters from different generations, with different experiences and different perspectives, do not necessarily behave the same. Political scientists, to the extent that they try to come up with universal generalizations about voting behavior, run up against this inconvenient fact. The median-age voter in 1960 was born around 1915 and had vivid memories of the 1930s. He or she remembered how hard it was to get a job and begin a family in a time of widespread unemployment. The median-age voter in 1992 was born around 1947 and had vivid memories of the stagflation and gas lines of the 1970s. He or she remembered how hard it was to pay rising monthly bills with paychecks that were being eroded by bracket creep. As a result, such voters were skeptical of high government spending and stringent government regulation. Bill Clinton, even as he was decrying “the economy, stupid,” kept these attitudes very much in mind.
The median-age voter in 2008 was born around 1963. This voter never waited behind the steering wheel in gas lines and never struggled to pay bills during the stagflation of the 1970s. This voter has lived all of his or her adult life in an economy that has had low-inflation growth about 95 percent of the time. For these voters, such prosperity may largely be taken for granted. And their assessments of the economy are likely to be very different from those of voters who had a personal memory of the 1930s.
This leads to my second point—that Americans’ views of the economy are increasingly a function of voting behavior or party loyalty, rather than the other way around. The most succinct evidence of this comes from a January 2006 report by the Pew Research Center for the People and the Press entitled “Economy Now Seen Through Partisan Prism.” As the Pew report notes, during the1992 campaign year and up through 1994 there was a partisan divide on the economy, with about 20 percent of Republicans and less than 10 percent of Democrats rating it as excellent or good. From 1995 to 1998, with a Democratic president and a visibly aggressive Republican Congress, Democrats and Republicans gave similar ratings to the economy. From 1998 to 2000, Democrats were somewhat more positive about the economy than Republicans, at a time when economic growth was vibrant and inflation low.
Then, after the election of George W. Bush, the divergence between the two parties expanded into a chasm. It began to widen during the recession of March-November 2001, and it widened much more as the economy recovered and resumed low-inflation growth. By early 2006, a time of vibrant economic growth, 56 percent of Republicans said the economy was excellent or good, while only 28 percent of independents and 23 percent of Democrats agreed. We have seen similar responses in the years since, although the percentage of Republicans rating the economy positively has dropped somewhat since the subprime mortgage crisis and the decline in housing prices during the second half of 2007. As the Pew Research Center points out, Democrats and Republicans of similar income levels gave sharply different ratings of the economy.
There is a divergence here between Democrats’ and independents’ assessments of their personal economic condition, which have generally been positive, and their assessments of the economy as a whole. It’s hard to resist the conclusion that when Democrats—and, in 2004-2006, independents—were responding to questions about the condition of the economy, they were actually responding, “I am a Democrat,” or, more emphatically, “I hate George W. Bush.”
Today, as financial markets face instability and the possibility of recession looms, the economy is emerging as an issue in the 2008 presidential campaign. But what should be done about it? In the post-Depression years, the alternatives were fairly clear-cut: Democrats tended to favor increased public spending or, in the case of the Kennedy-Johnson administration, stimulative tax cuts. Republicans tended to favor tighter discipline on public spending and balanced budgets, and they resisted the Kennedy-Johnson tax cuts. More recently, since Ronald Reagan successfully pressed for tax cuts and supported tight monetary policy in a time of slow growth and high inflation, Republicans have tended to favor those measures. Democrats have generally favored tax increases, as they did in 1993, or allowing tax cuts (at least those on high earners) to expire, as they do today. In the short term, Republicans seem to be following Democrats in seeking tax rebates and other short-term fiscal stimulants.
But it’s not clear that either set of solutions addresses the true policy needs of the nation—or the political needs of the presidential candidates. At a time when the political science models of the 1950s and the Keynesian economic models of the 1960s seem to be out of sync with reality, new models and new policies are needed.
Michael Barone is a resident fellow at the American Enterprise Institute.
Image by Getty.