It’s the Economy Stupid – Unless It Isn’t

Impeachment is a hoax, says the President, and with some reason, given the paucity of evidence of a high crime or misdemeanor, and a procedure that makes Stalin’s show trials, minus the coerced confessions, a model of procedural probity. No matter: no one seems to care. “The evidence demonstrates”, write scholars Christopher Achen and Larry Bartels, “that the great majority of citizens pay little attention to politics.” Trump’s supporters still love Trump, his enemies still despise him. In Washington jargon, impeachment has not moved the needle.

Trump’s team looks back to the days of George H.W. Bush and Bill Clinton. Bush lost to Clinton because the economy failed to recover from a recession soon enough to provide voters with a “feel-good feeling.” As the Clintonistas predicted, it was “The economy, stupid.”

As for impeachment, Clinton’s approval rating reached a peak of 73% on the day he was impeached, and he left office with it at 66% even though the senate split 50:50 on whether he should be found guilty of obstruction of justice — 67 votes are needed for conviction.

What matters, say all the President’s men, is the economy. Unemployment is at a fifty year-low; wages are rising, especially for lower earners; the American job creation machine continues to hum, turning our 266,000 new jobs last month; inflation is nil. The good economy, says Trump, leaves voters with “no choice” but to vote for him “even if you don’t like me”.

Other studies say the economy matters, not so much as defined by its growth rate, but because the threat to jobs from imports or technological change unsettles many voters. Oxford economist Carl Benedikt Frey and colleagues estimate that “… Michigan, Pennsylvania, and Wisconsin would have swung in favour of Hillary Clinton if the exposure to robots had not increased in the immediate years leading up to the election…”. That would have given the Democrats a majority in the Electoral College. Trump is seen by voters with this sort of insecurity as their champion against foreigners who would steal their jobs while investment bankers profit.

However, reliance on “It’s the economy, stupid” might be misplaced today. Many scholars argue that identity politics and partisanship determine voting patterns, that voters seem to sort themselves out by ethnicity, gender, income, education and political party. Trump’s reliance on the economy to earn him a renewal of his lease on 1600 Pennsylvania Avenue, and models supporting that view, have him whistling past a graveyard soon to contain the remains of Trumpism.

As early as 2004 journalist/historian Thomas Frank published his “What’s the Matter with Kansas?”, pointing out that Kansans elected conservatives, which was contrary to their economic interests. He concluded that social issues such as gay marriage were more important than pocketbook issues. Five years later Norman Podhoretz, a public intellectual, noted that most members of the Roosevelt coalition “followed the rule that increasing prosperity generally leads to increasing identification with the Republican Party. But not the Jews,” who consistently vote for high-taxing, big spending liberals, against their own economic interests.

Adding to the evidence of a disconnect between economic self-interest and voting preferences are a Wall Street Journal survey and a study by The Economist. The former found that the President’s popularity has risen in counties disproportionately dependent on the hard-hit manufacturing sector. And The Economist’s study concluded that the relationship between consumer confidence and approval of the president “had broken down.”

In deciding whether it is stupid to hold to “It’s the economy, stupid” we start with the fact that partisan voters, looking at the same economic data, reach opposite conclusions, making the actual performance of the economy almost irrelevant. A survey conducted by the online pollster SurveyMonkey found that 71% of Republicans say they expect business conditions to be “very” or “somewhat” good over the next year. A mere 15% of Democrats are similarly optimistic. One data set, two interpretations. Marquette University political scientist Amber Wichowsky puts it this way, “Partisans have a strong desire to interpret the economy in a way that benefits their ‘team'”. Ominously for Trump, independent voters, some 15% of the total, have views closer to those held by Democrats than by Republicans. In several states they can determine which candidate will get their electoral college votes.

Equally important, a good overall economy might not be so good for a large swathe of voters. Some 61% of likely voters tell pollsters for the FT-Peterson US Economic Monitor that the run-up in share prices has had little or no effect on their personal finances, which makes them impervious to the President’s warning that if he loses the election “your 401(k)s [will go] down the tubes, everything’s going to be down the tubes … so whether you love me or hate me, you got to vote for me.”

Finally, there is a dispute over who deserves credit for the economy’s performance. Trump overcomes his natural modesty to claim full credit, quite reasonably citing his deregulatory measures and tax cuts. Democrats attribute all the current good news to the foundation laid by President Obama. This partisan view allows both Democrats and Republicans to support a pre-selected candidate irrespective of how the economy is performing on election day.

One way to decide whether Trump’s gamble that because of the healthy economy voters will give him a second term is to ask yourself a counterfactual question. Would Trump be re-elected if the unemployment rate were, say, 8%, real wages were declining, and share prices were plunging? Not likely, unless his opponent goes beyond lackluster to implausible. The economy might be less important than before partisanship and identity politics came to matter so much, but full employment, rising wages, and fatter pension funds sure are better than the alternatives for the President.