Saturday, September 18, 2010

Why Voters are Angry: Part II

"It's the economy, stupid."  That famous James Carville line from  the Clinton campaign of 1992 encapsulates the importance of pocketbook issues in elections.  It was probably voters' belief that Clinton would focus on improving the economy--in contrast to his rival George Bush the elder, who seemed out of touch with the problems of middle class Americans--that proved decisive in electing Clinton that year.  The ironic part was that by the time of the election in 1992, the economy was already well on the road back to recovery, even though most people weren't feeling much improvement.  In another irony, Clinton's economic program, a key element of which consisted of significantly raising taxes during a weak economy, may not have contributed all that much in the short term toward getting the country out of recession (perhaps because the country was already out of recession by the time Clinton got into office).  Anyway, during the 1992 campaign, voters had the sense that the Bush administration had neglected the economy, and were therefore receptive to Clinton's promises to focus on bread and butter issues.  The moment that I remember most strongly was during a town hall format debate when a woman in the audience asked the candidates how the deficit had affected them personally.  Bush flubbed the question because he didn't understand it--the woman probably meant to ask how the recession was affecting the candidates, not the deficit--and Clinton was able to score with one of his "I feel your pain" responses.

We are only beginning to emerge from a much worse recession during this midterm election cycle, and voters are obviously angry that the economy does not seem to be improving very fast or at all.  For many, such as the long term unemployed, things probably seem like they are getting worse.   Meanwhile, the deficit is skyrocketing due to greatly reduced revenues and increased stimulus spending.  Many people must conclude that the government is only making our problems worse.

When adversity hits a family or a business, we take austerity measures.  If somebody loses their job, or the company's sales fall, the family or the business tighten their belts to survive.  Unfortunately, when everybody cuts back, that only contributes to the downward spiral in the economy in general.  And when the government does precisely the opposite of what any rational family or business would do in a downturn--namely go on a spending spree with money it does not have--that probably creates some cognitive dissonance.  How can it make sense for my family to cut spending to deal with a recession, but for the government to increase spending to deal with the same problem?  So my theory is that once again, and with a vengeance, voters are upset about the deficit when the thing that is actually causing them hardship is the recession.  In other words, we know the economy is bad, but there doesn't seem much we can do about that.  We can always blame the government for the deficit, however, because the government is not doing what any sensible business or family would do in bad times.  We didn't worry so much about the deficit when times were good (even though that would probably have been a good time to reduce it), but now we are greatly alarmed.

Of course the party in power is going to get blamed in this situation, whether or not they caused the recession.    And it may be that they can only assuage the voters' concerns if they demonstrate that they feel the voters' pain.

4 comments:

  1. Joe, you are a calming influence. I do appreciate that. Well written. I am just guessing you get as frustrated as anyone at times.

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  2. << So my theory is that once again, and with a vengeance, voters are upset about the deficit when the thing that is actually causing them hardship is the recession. In other words, we know the economy is bad, but there doesn't seem much we can do about that. >>

    Joe and others, I am wondering, do you agree with me that:

    1) Wall Street accounts for well over half of our GDP and their profits benefit few others than themselves? That swaps create nothing of value? That Wall Street is no longer re-investing in our country the old fashioned way (which would create jobs)? That Big Banks are essentially ignoring ‘conventional’ investment in America in favor of swaps?

    2) China is gaming the world markets with the under valued yuan? That is destroying American manufacturing and causing a loss of jobs let alone stifling creation?

    3) Do you agree that the failure to address these issues plays a major role in our current financial collapse?

    Why aren’t others mentioning these critical issues? If you agree with me -- then there is a girnormous amount of potential in what we _can_ do and a long trail of what both parties have refused to do.

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  3. I do agree with you that financial services constitutes much too large a proportion of our economy. But I'm not sure I would agree that financial services are of no value. Considering that you and I are both in service professions ourselves, I think it would be hard to argue that providing any kind of service that people seem to want and are willing to pay for has no value.

    I also agree with you that China's currency is undervalued. But remember there is a benefit as well as a cost to that. The benefit is that consumers save a lot of money by buying cheap goods from China. The cost of course is that it makes it harder for our manufacturers to compete.

    And I also agree that we should spend more time addressing the issue of making American goods AND services more competitive in the world market.

    I would spend more time talking about these kinds of policy choices, but I don't really want to make this a policy wonk blog. It's a hope and change blog. I'm more interested in process issues than specific policy choices anyway.

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  4. Thanks Joe - I do understand the thrust of your sharing your time and input here and I appreciate that.

    << Considering that you and I are both in service professions ourselves, I think it would be hard to argue that providing any kind of service that people seem to want and are willing to pay for has no value. >>

    If I sold life insurance to a neighbor and then gambled that he would die with another policy that would not be looked on favorably. If I sold fire insurance on homes and then bet that they would burn down that would be frowned upon. I am confident that the services you and I provide have some greater value to society that pure profit. There is an element of emotional and moral correctness. Our services are based in fairness.

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