Economy key factor in US elections

Dennis Morrison, Contributor

IF OPINION polls are to be believed, the Democratic Party is almost certain to lose control of the House of Representatives in Tuesday's mid-term Congressional elections in the United States of America and will have to fight to the bitter end to maintain the slightest majority in the Senate. This is in spite of the findings showing that Americans dislike congressional Republicans more than Democrats. It is hard to explain by what reasoning rational voters would come to this choice.

The picture gets no clearer when we look at the positions that voters are adopting on the specific issues. The state of the American economy is the key issue in the minds of voters, and every poll shows that a big majority blames the past George W. Bush administration for current problems. Further, most voters say they see no difference between the Bush policies and those that the Republicans are currently advocating, yet a majority of likely voters say they will vote for the Republicans.

Some commentators attribute this to poor political marketing by the Obama administration that allowed their emergency economic measures to be used by Republicans (Tea Party) to invoke the caricature of Democrats as wasteful, big-spending Washington liberals isolated from the heartland. Others think behind it is a backlash by whites to a black president and their fears of losing their dominance. Shankar Vedantan, author of The Hidden Brain: How Our Unconscious Minds Elect Presidents, Control Markets, Wage Wars and Save Our Lives, views it as a paradox which he has attempted to explain as a case of what psychologists call 'action bias'.

Message has not resonated

That is to say, people, when faced with tough situations, tend to make changes, even if in reality the better course would have been to hold steady. It may well be the reason why Obama's campaign message beseeching American voters to stick with the Democrats and their policies that have pulled America from the brink of depression has not resonated. Economic conditions are brutal; people are scared and therefore likely to act irrationally.

Americans are, in any case, impatient and notoriously short-term in outlook, and expectations ran high that Obama would have turned around the economy in short order. Truth be told, their economy is suffering deep structural problems, low savings rates, falling educational standards, a de-linking of wage growth from productivity gains that has undermined the economic standing of its middle class, and it is losing competitive advantage in several industries. The severe damage suffered by its financial system means that recovery is going to be slower and more uncertain than in normal recessions.

With the economic pressures bearing down, and especially the frightening prospect of unemployment remaining at crisis levels for the foreseeable future, voters will suffer amnesia. Which is why the traditional advantage held by the Democrats as the party seen as better able to create jobs is now trumped by the caricature of wasteful, big government liberal. Only amnesia induced by economic distress could have clouded this long-held belief and historical experience.

All the empirical data over the 60-year period, 1945-2005, point to the Democrats having a superior track record in the key measures of economic performance. In his book, Unequal Democracy, Professor Larry M. Bartels of Princeton University sets out America's unemployment, per capita income growth, and inflation rates over this 60-year period, according to the tenure of different presidents. Democratic presidents outperformed Republicans significantly on the two counts that now dominate the daily experience of Americans: unemployment and per capita income growth.

Incomes grew

More jobs were created and Americans enjoyed lower unemployment rates when Democrats were in control of the White House. Incomes grew almost twice as fast and importantly, the share of national income of the bottom 40 per cent of the population increased faster than that of the top 20 per cent up to the end of the 1970s. In other words, families at the bottom of the economic ladder fared better in periods of Democratic control with income inequality declining by an estimated 25 percent but increasing under Republican control. Republicans achieved marginally lower inflation rates.

Yet, Bartels's research suggests that electoral results reflect unenlightened self-interest by the American electorate in their voting patterns. Despite the Democrats having performed better in the areas affecting the economic livelihood of the majority classes, Republicans were more successful electorally in terms of control of the presidency and more recently, in the Congress. Part of the answer lies in how Republicans have succeeded in weaving social-cultural issues into their political ideology and underpinning this with economic dogma (tax cuts) that is appealing.

In an environment of economic despair, their message inveighing against big government has obscured the fact that the unprecedented tax cuts alongside two wars and new entitlement programmes are what triggered the large budget deficit and skyrocketing national debt. Lost in the mumbo-jumbo of the moment is that these Republican policies and the free-wheeling, financial dons of Wall Street combined to generate the current crisis of joblessness, rising poverty, and fear.

Should the Republicans win on Tuesday, will they follow through on their election rhetoric of downsizing government to bring down budget deficit?

America needs solutions to its budget and debt problems, but it cannot cut its way back to prosperity. It must find a new growth model.

Dennis Morrison is an economist. Feedback may be sent to columns@gleanerjm.com.