Michael Brandl is a senior lecturer in economics and finance at the university’s McCombs School of Business. A recipient of the 2010 Regents’ Outstanding Teaching Award, Brandl is also an expert commentator who has written for publications such as CNN and has appeared on countless TV news programs discussing national and global economic issues. He is the author of the popular Macroeconomic Updates blog.
In the 1992 presidential election race the Clinton camp mocked President George H.W. Bush’s inability to understand his falling popularity with the memorable phrase “it’s the economy, stupid.” It is funny how history has a nasty way of repeating itself. In this fall’s election season that phrase could be repeated again and again. It helps to explain why voters on both the left and the right are mad.
Pundits on the right complain that a government “takeover” of the economy is under way while the economy falls apart. Meanwhile pundits on the left complain that “not enough” is being done to help the unemployed and the poor in our society. At the same time incumbents argue that the “Great Recession” would have been even worse if not for the policies they enacted during the financial crisis and thus they should be re-elected.
The political scientists tell us that voters often “vote their pocketbook” – if the economy is doing well, it’s good for incumbents, but if the economy is not doing well, incumbents may be in very big trouble. Just ask George H.W. Bush how things turned out for him.
So, who has the “economic facts” on their side? The sad answer is no one. The pundits on the right have a grain of truth to their argument about an increased size of the U.S. federal budget, but this can hardly be correlated to a “takeover” of the economy. While our budget deficits grow, the British and Europeans are having serious, grown-up discussions on how to reduce the size of their deficits in a way that will not choke off economic growth.
The pundits on the left also have an once of truth in their argument when they point to the worsening economic plight of those Americans outside the richest 10 percent. But to simply throw more money at the problem is hardly a well thought out economic solution. Instead, the badly misaligned incentives within our economic policies should be addressed to ensure those in the middle and lower rungs of the economic ladder have the opportunity to work their way closer to the top.
And the incumbents do have a modicum of truth to their argument when they point out the TARP [Troubled Asset Relief Program] and stimulus packages were needed given the crisis we faced. But, that grossly overlooks the bigger problem of how we got into this mess in the first place and the fact that the current policies in the U.S. do nothing to prevent another major economic and financial blow-up in the future. If anything, the policies passed make a bigger economic crisis in the future even more likely.
So, in the end, regardless of partisan politics, the voters have a right to be mad. It is the economy.
Visit the mid-term elections blog series home page for a complete lineup of faculty experts’ analyses.