By Barkley Rosser, Professor of Economics at James Madison University in Harrisonburg, Virginia. Originally published at EconoSpeak
On many Mondays I indulge in taking Robert J. Samuelson to task after his regular Washington Post column of the day. Today he was almost right, or if you prefer, even mostly right. This one was titled “It’s Not the Economy, Stupid” about the outcome of the midterm election, as well as a delayed comment on the 2016 presidential election (although, of course, HRC did win the popular vote by three million popular votes, if not the electoral college). His main argument is that in both of these elections, but especially last week’s midterms, the state of the economy was relatively unimportant. The argument is that here is Trump with GDP growth exceeding 3%, the unemployment rate under 4%, inflation largely under control, but this supposedly good performance did not help him out much with his party taking a pretty serious hit (the size of which still being counted). He also sees something similar in 2016, although arguably the economy was not as strongly favorable, but still quite respectable while not obviously helping the incumbent party. Indeed, in 2016 many saw the economy as hurting the Dems, especially in the Rust Belt.
There is a lot of truth to this, with a lot more attention on ethnic and cultural issues, although it should be kept in mind that the top issue for Dems, health care, is at least partly an economic issue. Certainly one sign of the weakness of the economic issue is the matter of the big GOP tax cut. They were quite convinced when they passed it last December that this was their ticket to a strong showing in the midterm election. And indeed it is almost certain that at least some of the acceleration of GDp growth can be attributed to it even if it may be setting up the economy for slower growth down the road. So according the usual views, it should have helped the GOP. But in the end it seems to have been an electoral flop. It has consistently done poorly in the polls, and most GOPs running for reelection in the end barely mentioned it.
But then the major source of reported public unhappiness with the tax cut is revealing. It is the massive inequality obviously inherent in it: the vast majority of the gains went to the top ends of the income and wealth distributions, and everybody knows it. As it is, supposedly the vast majority of taxpayers did get a cut, but for vast majority of that vast majority, it was such a small cut that they barely noticed it. In fact, Obama gave a bigger tax cut back in 2009, but the same thing happened then. When the GOP claimed he had raised taxes, a majority of voters believed them. They barely noticed the actual cut they got. No, it does not seem voters are all that upset about the increased deficit, but they resent that so much of it went to the rich.
So in both 2016 and in 2018, a major problem was that while there were all these good looking aggregate statistics, a majority of people really did not notice much improvement. Yes, job security has steadily improved, but this still has not shown up in wage increases, although reportedly there has begun to be some increase of those recently. But as with the tax cut, not too much, or maybe too little too late. The bottom line here is that most people simply are not seeing all that much economic improvement, so while it is not a negative, the economy is not remotely the positive many think it might have been or should have been. Most of those gains have gone to the top, and that was going on while Obama was president as well.
There is another matter in the midterm election where economics may have shown its old important tole, curiously reported on in WaPo two days earlier. This is that it looks like Trump’s trade war may have impacted several congressional races, mostly not to the GOP’s favor. There seems not to have been much impact, if any, on Senate races, with Dem candidates in Indiana, North Dakota, and Missouri losing even while trying to score against Trump’s trade war. But supposedly the issue played for the Dems in in several races where growing soybeans is a big deal, notably two races in Iowa, one in western Illinois, one in southwestern Wisconsin, and one in southeastern Minnesota, with Dems flipping all these seats while pushing hard on the trade issue. OTOH, one of the two seats that flipped from GOP to Dem was the northeastern seat in Minnesota. This is where the Mesabi range is and still probably the largest source of iron ore of any House district in the nation. Anyway, its economy is booming thanks to the tariff on steel and aluminum imports. So, we know that so far basically the one industry that has really done well from the Trump trade war has been steel, and so it is not surprising that a district heavily dependent on producing iron ore would boom and favor the GOP, while districts with industries, like soybeans, hurt by the war would go the other way.
So, Samuelson’s claim that “It’s not the economy, stupid,” seems to be a bit overdone, if not completely false.
40 comments
Comments are closed.
basically on main st. everyone knows those numbers are massaged so much as to be more like lies. Tell some whose rent has increased 10% a year since the gfc that there’s no inflation…
Every dollar that we get goes to cost of living increases.. and the frogs are still sitting in the hot water waiting to be boiled.
Bingo. Look at the trend in student loan debt, which continues to accelerate while the overall student population declines and you know costs are going up. A major boon to most American’s bottom line would be public health care and higher education. Everything else is playing around at the margins for all but the very wealthy.
Nitpick. Hrc did not “win” the popular vote in that HRC had a plurality. And trump + johnson > HRC + stein.
And let’s not forget Bill Clinton, like trump, never won more than 50.1% of the popular vote.
(Abstainers + Stein + Johnson) > Trump
(Abstainers + Stein + Johnson) > Clinton
“None of the Above” keeps winning by a landslide.
Thank you Robert.
Good point. I’ve heard it before, but it always bears repeating. We so easily forget!
I think this graph of developed country median and average per adult wealth explains a lot about why Trump got elected and then the House flipped in mid-terms: https://i.redd.it/xn49devaljm11.png
The median person knows that the system is not working for them and is flailing around looking for solutions. Meanwhile the top tier (basically top 10% but especially the top 0.1%) thinks everything is going fine, because it is going fine for them. As a professional, we are doing ok and I am making sure my kids don’t build up significant debt and have started retirement savings accounts so they can build up wealth to avoid this trap.
I think if all boats can get lifted and the median to average wealth and income can tighten up some and the median income and wealth for the US advance against other developed countries, many of the current nasty political rhetoric will die down. However, if the disparities grow and median US income falls further behind on the world stage, then all hell may break loose.
When it’s not the economy, elections will be about whatever the media wants it to be about.
My anecdotal experience was that this election was about whatever the media want[ed] it to be about.
The “economy” of GDP growth and low unemployment is not the economy of most voters. Rosser seems to get that the tax cut didn’t help the average voter, and so is closer to this than Samuelson, but at the same time doesn’t really seem to get it.
The stats are so crooked and so detached from what most Americans experience, that basing claims on them as if they represented The Economy, rather than a performative propaganda narrative seems naive and self serving.
FWIW, I only follow shadowstats.com and ignore even most of the numbers posted by our sainted Lambert.
I think lambert posts numbers that other people come up with, and he presents them for you to make your own observations about, and most of what is presented to us is/has various degrees of lying with statistics but that’s not st. lamberts fault
It may be true that most people don’t believe what the government says about unemployment, gdp, inflation and any other stat that can be massaged. But the real issue is that neither party, the Republicans predictably, and the Dems, tragically, don’t offer any real programatic solutions. Trump, being a lot more politically savvy (or should I say market savvy) than the pathetic dems offered a boat load of economic solutions in 2016, and that’s how you get to be president. (He didn’t/couldn’t deliver, but that’s another topic). Bernie also offered a bunch of economic nostrums and in a real democracy he might even have gotten a chance to deliver on them (a slim chance but one could at least hope that he’d have shown more guts than the likes of Obama who also articulated lofty promises, failed in every way to deliver on them, but still could convince his base, and probably himself, that he was a success).
Unless the democrats can find and support candidates who promise real alternatives, and can convince folks that he or she is willing to fight for them once elected, it is meaningless to characterize an election as being about economics.
@Norm, it may be premature to judge that Trump “didn’t/couldn’t deliver”. You may well turn out to be right which many suspect and you may only wrong in the sense that he only accomplishes some (a small piece) of his promises. But the 2020 question is whether he’ll be able to show SOME promises kept and build, in Trumpian fashion, on that.
Just my 2¢ ;-)
As an important election issue, the economy seems to be asymmetric. When it’s bad, many voters turn out to “throw the bums out.” When the economy is good, voters tend not to turn out to say thank you. For example, the GOP learned that gratitude for tax cuts did not motivate voters in 2018.
They might have showed up if they had actually noticed the tax cut. For most people it was so minuscule as to be irrelevant.
Was that even the point? It though it was to motivate donors.
To my mind a political issue presupposes a difference between candidates, a point of distinction. Differences in style, appearance, and verbiage don’t amount to an issue. How could it be the “economy-stupid” if both candidates have essentially the same views and impacts on the economy-stupid? How are the Democrats and Republicans really all that different from each other? Issues? What issues?
> It is the massive inequality obviously inherent in it: the vast majority of the gains went to the top ends of the income and wealth distributions, and everybody knows it.
Lets not forget the one time rip roaring rocket ride for the stawk market. All the peasants can do is watch the rocket’s red glare on the way up and run for cover on the way down.
It’s quite like a rocket. All smoke and a loud crash on the way down.
“…the top issue for Dems, health care…”?
I’m gonna have to start paying more attention!
No kidding, I thought the gender war was the Dems’ top issue.
And dude, health care isn’t “at least partly an economic issue” – health care is ONE OF THE MOST IMPORTANT bread-and-butter economic issues for every non-zillionaire family in America.
In the US some people look, not at the official unemployment rate, but at the Civilian Employment-population ratio.
https://fred.stlouisfed.org/series/EMRATIO
I’m no where near as knowledgeable about economics as most people on this site but having at best 60% of your population “employed” is not good because, as they say, it creates a large reserve army of the unemployed, eager for jobs which keeps real wages down. Trump’s tax breaks for the rich haven’t solved this problem. They were self serving give-aways by Trump to the people who donate to Paul Ryan and Chuck Schumer – and the Deplorables know that.
The mid term election results to me were somewhat of a muddle. Anyway, the big show down is in two years.
The best way for the Dems to win is to discredit Trump in the eyes of the Deplorables as a liar about both the economy and war and not to try to further discredit him in the eyes of CNN and NPR viewers because the way they enjoy doing that alienates the Deplorables. Trump won the South Carolina primary over neo cons Rubio and Cruz for a reason and it wasn’t Trump’s pro war stance. It was because Trump said the wars were a mistake. So why can’t the Dems call out Trump over his belligerency toward Iran and Russia and his failure to end the wars? And I’m sure we already know the answer to that. Because establishment Dem foreign policy and establishment Repub foreign policy as well as their Pentagon funding policy are the same.
The Dems must offer a plan which credibly accelerates the percentage of people employed, significantly raises real wages, lowers, and I mean actually lowers, the costs of housing, food, health care, and education. The party, Dem or Repub, which gets elected on such a plan and actually does it will win power for a generation. But as we know, the Dem establishment can’t do that because Schumer, Pelosi, Clinton, Harris, Booker, Biden, Wall Street, the MIC, Big Tech, Big Pharma, and the rest – along with almost all of the Republicans.
The Dems love to condemn Trump as some kind of aberrant political beast which practices non normal politics, which offends them. Yet they studiously ignore the fact that in a country where half the population is either in or near poverty, you have no right to expect non normal politics nor the right to be safe from various species of political beasts.
Bingo! About a third of our labor force has been unemployed for years. Also, most of the new jobs are lower paid.
My family doctor, who is employed by Pennsylvania’s largest health care company, told me that if he complains or bucks the system, he will be fired. And he will be replaced by any foreigner with a medical degree because there is a special U.S. visa (ditto for nurses). This visa allows companies to bring in any warm body from any country–without vetting–as long as they have the proper degree and a job is waiting for them.
This is on the heels of the outsourcing of x-ray diagnoses (been going on for at least a decade). And the manufacture of many of our drugs in China (despite their terrible record on quality control). Meanwhile, Congress tells Americans that importing drugs from Canada is too dangerous….
I believe your doctor is referring to the H-1B visa program. While it is true his employer can bring in a foreign doctor or nurse that foreign doctor or nurse will still have to be licensed to practice by your state. The medical doctors in most states have made this a long and difficult process for medical doctors. Medical doctors have an ancient and still very powerful union. Nurses also have a strong union though no where near so strong or protective as the doctors’ union.
Other callings that require at least a bachelor’s degree are also exposed to H-1B visas and have already suffered considerably. ‘Engineers’ — except for the relatively peculiar and less common “professional engineers” in private practice — have no unions to speak of and in my opinion forming a union of engineers would be like trying to get ten bags of alley cats to march in step in rank and file in a parade.
“So why can’t the Dems call out Trump over his belligerency toward Iran and Russia” You answer your rhetorical question quite well but I would like to thank you for pointing out that the Trump administration HAS been more belligerent towards Russia than its predecessors. The Dems have the additional problem calling him out over that as they’re committed to the idea that Trump is Putin’s puppet and only got in the White House due to the sinister, Machiavellian machinations of the Russian intelligence services. To quote a famous historical figure “I feel like I’m taking crazy pills!”
Victoria Nuland? Who’s the corrolary?
Putin is Machiavellian?
It’s way beyond that: most liberals I know think he has occult powers.
I came up with a saying which seems “neat” and “cute” to me. But I don’t know if it can have any real-world targets and applications or not. But here’s hoping, just in case.
“It’s not the economy, stupid. It’s the stupid economy.”
It sounds good, but only if afterwords you clarify what a non-stupid economy looks like, IMO. I. E. explain that the problem is neoliberalism afterwords.
Herman Daly has described a non-stupid economy. Frederick Soddy attempted describing a non-stupid economy or at least non-stupid economics in his day. People like Charles Walters Jr. and the economists at National Organization for Raw Materials have tried describing a non-stupid economy.
http://www.normeconomics.org/
There was a time when non-stupid economics and non-stupid economists were actually consulted to help craft a non-stupid economy for this country. The non-stupid economist Carl Wilken was actually called to testify before a Joint Session of Congress at least twice. Who now even knows of this well-suppressed history? Only those fringe cranks who go digging, I suppose.
http://normeconomics.org/fame.html#1
Carl Wilken used to have a wikipedia page. Now I don’t find it any more.
There’s a disconnect between the economy a large part of the populace actually experiences and the (entirely macro and aggregated) economy that gets touted everyday by the media.
They’ve been touting the allegedly booming economy and low unemployment since late 2014 at the latest, and the failure of the rising tide to lift a large fraction of the boats gets buried in the fine print. When mentioned at all.
A rising tide lifts all yachts.
And drowns the boatless….
depending on how it’s calculated all the people doing gig work like uber won’t be counted in unemployment stats, not even if they lose their gig and have no paid work of any sort, as they aren’t eligible to collect unemployment. Labor Force Participation Rate is the only rate that doesn’t seem entirely gamed.
I’m with most of the other commenters here: I no longer believe the official stats on the economy, just as I no longer believe the official narrative on anything else either. Every time they media talk about our economy these days, it always somehow reminds me of the boot surplus from Orwell’s 1984.
What does it mean when everybody has a job, but one job is not enough to get a living wage? We’d need an employment rate significantly larger than 100% before most people would be taking home a living wage. In the days of one living wage per household, small unemployment rates meant something. They don’t mean much now.
Yeah, the economy wasn’t all that since 2008. Though the right wing propaganda did an about face after the election of 2016, the facts still remain that it’s a weak economy for non-monopolies. This is simply stating a fact. That were still looking at general unemployment instead of labor participation is yet another flaw.
Sure profits are doing great, but it’s not being seen in terms of better public spending (infrastructure etc). The Amazon deal with NYC is telling. More jobs, sure, but Amazon basically wanted to be given money to move where there’s infrastructure of the first world kind. Something they don’t want to pay into. Why is that? How long can that last?
There will come a time to pay the piper and again we’ll be left wondering how?