Results tagged “economy”

 Posted by  Larry Bartels

John McCain is a maverick and Barack Obama is a postpartisan problem-solver. But you wouldn't know it by looking at their economic plans. Both candidates' proposals faithfully reflect the traditional economic priorities of their respective parties. That makes the track records of past Democratic and Republican administrations a very useful benchmark for assessing how the economy might perform under a President McCain or a President Obama. The bottom line: During the past 60 years, Democrats have presided over much less unemployment and much more robust income growth.

The $52.5 billion plan Senator McCain announced last week includes $36 billion in tax breaks for senior citizens withdrawing funds from retirement accounts and $10 billion for a reduction in the capital gains tax. Those are perks for investors, most of whom are relatively affluent. (McCain is also proposing a two-year suspension of taxes on unemployment benefits, but that's a fraction of the plan's cost.) He also favors broader tax cuts for businesses and wants to extend President Bush's massive tax cuts indefinitely, even for people earning more than $250,000 per year.
 
McCain's proposals reflect the traditional Republican emphasis on cutting taxes for businesses and wealthy people in hopes of stimulating investment – "trickle down" economics, as it came to be called during Ronald Reagan's administration. But will proposals of this sort really "stop and reverse the rise of unemployment" and "create millions of new jobs" as McCain has claimed? The historical record suggests not.
 
President Bush's multitrillion-dollar tax cuts, which were strongly tilted toward the rich, could not prevent (and may even have contributed to) significant job losses. On the other hand, when Bill Clinton raised taxes on affluent people to balance the federal budget (while significantly expanding the Earned Income Tax Credit for working poor people), unemployment declined substantially. Under Clinton's watch, 22 million jobs were created.
 
Prefer a broader historical comparison? In the past three decades, since the Organization of the Petroleum Exporting Countries oil price shocks of the mid-1970s and the Republican turn toward "supply side" economics, the average unemployment rate under Republican presidents has been 6.7 percent – substantially higher than the 5.5 percent average under Democratic presidents. (The official unemployment rate takes no account of people who have given up looking for work or taken substantial pay cuts to stay in the labor force.) Over an even broader time period, since the late 1940s, unemployment has averaged 4.8 percent under Democratic presidents but 6.3 percent – almost one-third higher – under Republican presidents.
 
Lower unemployment under Democratic presidents has contributed substantially to the real incomes of middle-class and working poor families. Job losses hurt everyone – not just those without work. In fact, every percentage point of unemployment has the effect of reducing middle-class income growth by about $300 per family per year. And the effects are long term, unlike the temporary boost in income from a stimulus check. Compounded over an eight-year period, a persistent one-point difference in unemployment is worth about $10,000 to a middle-class family. The dollar values are smaller for working poor families, but in relative terms their incomes are even more sensitive to unemployment. In contrast, income growth for affluent people is much more sensitive to inflation, which has been a perennial target of Republican economic policies.
 
Although McCain portrays Senator Obama as a "job killing" tax-and-spend liberal, the new $60 billion plan Obama unveiled last week also has a tax break as its centerpiece – a tax break specifically tailored to create jobs by offering employers a $3,000 tax credit for each new hire over the next two years. Obama's proposal would also extend unemployment benefits by 13 weeks for those who remain jobless, as well as match McCain's in suspending taxes on unemployment benefits.
 
Obama's new proposal complements $115 billion in economic stimulus measures he had already announced, including $65 billion in direct rebates to taxpayers and $50 billion to help states jump-start spending on infrastructure projects. All of this is squarely in the tradition of Democratic presidents since John F. Kennedy, who have relied on public spending and tax breaks for working people to stimulate consumption and employment during economic downturns.
 
These and other policies have produced not only lower unemployment under Democratic presidents but also more economic output and income growth. In fact, over the past 60 years, the real incomes of middle-income families have grown about twice as fast under Democratic presidents as they have under Republican presidents. The partisan difference is even greater for working poor families, whose real incomes have grown six times as fast under Democratic presidents as they have under Republican presidents.
 
Of course, past performance is no guarantee of what will happen when the next president takes office. However, given the striking fidelity of both presidential candidates to their parties' traditional economic priorities, the profound impact of partisan politics on the economic fortunes of American families over more than half a century ought to weigh heavily in the minds of voters.
 
This entry is also posted on the Christian Science Monitor website, csmonitor.com, October 21, 2008.

 Posted by  Larry Bartels

My essay on "The Irrational Electorate" from the new issue of the Wilson Quarterly is now online. It provides an opinionated review of scholarly research on voting behavior ranging from Alex Todorov on reactions to competent faces to Hill, Lo, Vavreck, and Zaller and Gerber, Gimpel, Green, and Shaw on the duration of advertising effects to Gabriel Lenz on rationalization.  Most of the reaction so far -- from Henry Farrell , Matthew Yglesias, Brad Long, and Ross Douthat  among others -- focuses on my description of voters' responses to the Great Depression, which draws on a paper Chris Achen and I presented at the Midwest Political Science Association meeting a few years ago.  Apparently the Great Depression is a topic of particular interest these days.

 Posted by  Nolan McCarty

A close look at the roll call on which the House of Representatives voted down the Administration’s financial bailout plan reveals a lot about the state of contemporary American politics and provides some clues as to how the financial crisis and the economy will play in the presidential and congressional elections. Here are some of the factors that led to the bill's defeat on the House floor.

 
Ideology
As my colleagues, Keith Poole and Howard Rosenthal, and I have argued elsewhere, ideological differences have increasingly structured voting coalitions in Congress over the past 35 years. On the face of it, this vote appears to be an exception. The Treasury plan had support and opposition across the ideological spectrum. But on closer examination, ideology was an important determinant of opposition among Republicans but not of Democrats. Using my preferred measure of the ideological orientation of legislators, DW-NOMINATE , I can divide the Democratic party into liberal and moderate halves and the Republicans into conservative and moderate halves.   Almost 80% of the conservative Republicans voted against the bill while only 55% of the moderates did so, a statistically significant difference. On the other hand, 55% of Democratic liberals and 61% of Democratic moderates supported the bill. This difference is not statistically significant. These results hold up in a multivariate analysis that includes a host of other variables described below. 
 
The Financial Services Committee
Because of the urgency with which the bailout plan was presented, its major provisions were negotiated by the administration and congressional leaders, circumventing the standard practice of committee hearings and markup. While Chairman Barney Frank was involved in the negotiations, most rank-and-file members of the Financial Services committee were cut out of the formulation of the most important piece of legislation to appear in its jurisdiction in many years. Perhaps this explains why the bill faired so poorly among the members of Financial Services. Of the Democrats on the committee, 66% supported the bill, not a much higher percentage than the caucus as a whole. On the Republican side, the committee members were 12% more likely than their fellow Republicans to oppose it.   The difference is even larger (22%) in a multivariate analysis that accounts for member ideology and campaign contributions from the financial sector. Consequently, the committee as a whole voted against the bill. It is disappointing that the committee with direct oversight responsibility for the financial sector was not able to provide the leadership necessary to get the bill passed. Had all the Democrats on the committee voted in favor it would have passed.
 
Campaign Cash
Few industries have been more active than financial services in supporting Congress’s need for campaign funds. According to data from the Center for Responsive Politics, the finance, insurance, and real estate sectors gave an average of $157,000 to each House member in 2007 (the median was about $100k).  Those who received more than the median amount supported the bill by 52-48% margin while those who received less than that voted about 60-40% against. In the multivariate analysis, an extra $100k is associated with a 7% increase in the probability of support among Democrats and a 9% increase among Republicans. Although association is not causation, it is certainly troubling to see such a strong association between the cash and the vote. It is worth noting, however, that a large number of Republicans on the gravy train voted against the bill. Sixteen Republicans who received more that $300k voted against the bill (only three such Democrats did). It appears that the industry had spent a lot of money supporting deregulating Republicans who turned around and bit them when government intervention was what they wanted.
 
Constituency
Even in a global financial crisis, politics is local. An important predictor of whether a member supported the bailout is whether his/her district is located in New York, the home of much of the financial industry. Twenty-five of 29 New York House members supported the Treasury bill.  The only member from NYC, Long Island or Westchester to vote against was Jose Serrano from the Bronx. The multivariate analysis suggests that Democrats representing high income districts were somewhat more supportive of the bill, but there is no such relationship among Republican members.
 
The Election
Perhaps the biggest factor in the failure of the bill in the House was that its hard to do something unpopular a month before the election. Based on a list available on RealClearPolitics, 25 of the 31 incumbents most at risk of losing in November voted against the bill. Even more strikingly, of those members who retired and are not on the ballot, 83% voted in favor. The failure of party leaders and presidential candidates to keep electoral calculation out of the mix may well have led to the bill’s failure on Monday.   

 Posted by  Lynn Vavreck

Everyone’s talking about the economy. Everyone including John McCain – and if there’s one person in America right now who shouldn’t be talking about our economic woes, it’s John McCain. McCain said today, “the economy is about to crater” while simultaneously an ABC News/Washington Post poll reported that Barack Obama had surged ahead with a 9-point lead and that most Americans think Obama will better resolve the nation’s economic woes.

 
Using terminology from The Message Matters (forthcoming from Princeton University Press), McCain is an insurgent candidate who needs to focus the election off of the economy and on to some other issue on which he is closer than Obama to most voters – and on which Obama is committed to an unpopular position. Hmm. Not an easy task. Obama, on the other hand, is what I call a clarifying candidate – merely clarifying the fact that the other party is responsible for the current economic mess. 
 
Why does McCain face this tough insurgent job? He is a member of the party that brought about this period of economic decline. Everyone knows the state of the nation’s economy predicts election outcomes quite well. The table below uses a variety of models to generate predictions and compares them to actual outcomes. You’ll see that the models often correctly predict the winning party (although they do a lousy job at predicting the point estimates). The models miss in three years (or four if you count 2000): 1960, 1968, and 1976. All very close elections. Let’s take a look.
 
 
 
Range of Economic Forecasting Predictions and Actual Two-Party Vote Share from Four Popular Forecasting Models
 
 

Year
 
Actual
Incumbent
Vote Share
 
 
Range of Predictions
 
1952
44.6
42.5-47.5
1956
57.8
54.7-57.3
1960
49.9
50.4-52.6
1964
61.3
57.8-63.6
1968
49.6
50-51.7
1972
61.8
54.2-62.2
1976
48.9
47.7-53.7
1980
44.7
39.8-49
1984
59.2
57.2-60
1988
53.9
51.4-54.6
1992
46.5
46.2-47.1
1996
54.6
53.9-58.1
2000
50.3
52.8-60.3
2004
51.2
52.1-55.3
Note: Range of forecasts includes predictions from models of
Wlezien and Erikson Campbell, Abramowitz, and Holbrook.
 
 
 
The structure, the state of the nation’s economy, is a powerful predictor of election outcomes. But, the relationship is not perfect. And in a year with so many “firsts” maybe history isn’t such a good guide. 
 
Still though, if you were McCain, you’d have to be willing to take a big risk if you thought Obama wouldn’t benefit from the nation’s economic situation. Assuming McCain’s campaign is smart enough to realize this historical trend, what can McCain learn from the candidates in the past who have overcome the structural conditions? How have previous candidates beaten economically advantaged candidates?  To answer this question, I read every campaign stump speech, newspaper article in the New York Times and Washington Post, and watched every campaign ad made in the last 50 or so years. 
 
In 1960, John Kennedy made the entire election into an all-out battle with the Russians. They had more missiles than us, their kids were smarter, and they were going to beat us to the moon. Because Americans feared the communists and because Nixon was a part of the administration that brought about the “gaps” – Kennedy was able to leverage this dimension and win by a very narrow margin.  In 1968 Richard Nixon talked mainly about making the streets safe again and reducing crime. People were frightened in the late sixties – there was violence everywhere (in Vietnam, on college campuses, in city centers) and people did not feel safe walking in their own neighborhoods after dark. Nixon leveraged this fear and the correlation between crime and race to refocus the election off of the economy and on to safety, crime, and although implicitly, race. He also wins by a very narrow margin. And, finally, in 1976 Jimmy Carter ran as a Washington outsider reminding voters that Gerald Ford had been appointed to the Vice Presidency and the Presidency – and, that he pardoned Richard Nixon. Watergate loomed large over the 1976 election, and Ford didn’t help his chances by reminding voters that “our long national nightmare is over.” Kennedy, Nixon (1960), and Carter (1976) leveraged dimensions on which their opponents were weak. These candidates were not predicted to win based on the nation’s economy, but they refocused the election off of the economy and on to something else on which they had an advantage. They had great insurgent issues.
 
What is McCain’s insurgent issue? He is spending an awful lot of time talking about the economy, which can only help Obama. Let’s look at the candidates since 1952 in McCain’s position who campaigned on the economy even though it advantaged the other party: George McGovern, George H.W. Bush (1992), and Bob Dole. Bush and Dole talked mainly about tax cuts and McGovern talked mostly about tax reform. Of these candidates, only Bush was a member of the incumbent party – and in fact, he was the actual incumbent candidate. Talking about the economy when it helps the other guy is not a great insurgent issue. No insurgent candidate in the last half-century has beaten the predicted economic winner by talking about the economy more than anything else. 
 
So, when McCain says he wants to postpone Friday’s debate until a compromise and a deal is reached to bailout the nation’s struggling, “cratering” economy – I say, “I’ll bet he does.” Any time McCain is talking about the economy he is not talking about his insurgent issue, which means he is not making progress toward refocusing the election off of the economy and on to his issue. Unfortunately, the dramatic manner in which he suspended his campaign and shuffled off to Washington only underscores the importance of the economy as an issue in this election. 
 
And yes, Barack Obama is black. And yes, John McCain is a bi-partisan legislator and a maverick – but – John McCain is a Republican and his party will be blamed for the crater into which he has just crawled. History tells us there is only one way out:  stop talking about the economy and make this election about something else --  something on which McCain holds an advantage vis-à-vis Obama and something on which Obama is committed to his unpopular position. With fewer than 50 days left, McCain has his work cut out for him.
1

About this site

The mission of Princeton’s Center for the Study of Democratic Politics at the Woodrow Wilson School is to promote empirical research on democratic processes and institutions.  That broad mandate has attracted a diverse collection of faculty, students, and visitors pursuing a wide variety of research topics. However, the American electoral process has been a recurrent focus of interest for many of the scholars associated with CSDP and a frequent topic of conferences, colloquia, and other events sponsored by the Center.  As the 2008 campaign unfolds, we thought it might be helpful and fun to collect the election-related research, analyses, and offbeat insights of our extended scholarly community, both for our own edification and as a resource for others interested in how political scientists are thinking about the election.  We welcome contributions, comments, and suggestions. For more about the people and activities of CSDP, please visit our website, http://www.princeton.edu/~csdp/. To post a comment, click the "speech bubble."

  — Larry M. Bartels, Director
Close