The University of Texas at Austin
  • The economy is the crux of November's elections

    By Michael Brandl
    Michael Brandl
    Published: Oct. 8, 2010
    The

    Michael Brandl is a senior lecturer in economics and finance at the university’s McCombs School of Business. A recipient of the 2010 Regents’ Outstanding Teaching Award, Brandl is also an expert commentator who has written for publications such as CNN and has appeared on countless TV news programs discussing national and global economic issues. He is the author of the popular Macroeconomic Updates blog.

    In the 1992 presidential election race the Clinton camp mocked President George H.W. Bush’s inability to understand his falling popularity with the memorable phrase “it’s the economy, stupid.” It is funny how history has a nasty way of repeating itself. In this fall’s election season that phrase could be repeated again and again. It helps to explain why voters on both the left and the right are mad.

    Pundits on the right complain that a government “takeover” of the economy is under way while the economy falls apart. Meanwhile pundits on the left complain that “not enough” is being done to help the unemployed and the poor in our society. At the same time incumbents argue that the “Great Recession” would have been even worse if not for the policies they enacted during the financial crisis and thus they should be re-elected.

    The political scientists tell us that voters often “vote their pocketbook” –- if the economy is doing well, it’s good for incumbents, but if the economy is not doing well, incumbents may be in very big trouble. Just ask George H.W. Bush how things turned out for him.

    So, who has the “economic facts” on their side? The sad answer is no one. The pundits on the right have a grain of truth to their argument about an increased size of the U.S. federal budget, but this can hardly be correlated to a “takeover” of the economy. While our budget deficits grow, the British and Europeans are having serious, grown-up discussions on how to reduce the size of their deficits in a way that will not choke off economic growth.

    The pundits on the left also have an once of truth in their argument when they point to the worsening economic plight of those Americans outside the richest 10 percent. But to simply throw more money at the problem is hardly a well thought out economic solution. Instead, the badly misaligned incentives within our economic policies should be addressed to ensure those in the middle and lower rungs of the economic ladder have the opportunity to work their way closer to the top.

    And the incumbents do have a modicum of truth to their argument when they point out the TARP [Troubled Asset Relief Program] and stimulus packages were needed given the crisis we faced. But, that grossly overlooks the bigger problem of how we got into this mess in the first place and the fact that the current policies in the U.S. do nothing to prevent another major economic and financial blow-up in the future. If anything, the policies passed make a bigger economic crisis in the future even more likely.

    So, in the end, regardless of partisan politics, the voters have a right to be mad. It is the economy.

    Visit the mid-term elections blog series home page for a complete lineup of faculty experts’ analyses.

    • Quote 2
      Josh Law said on July 19, 2011 at 7:40 p.m.
      I agree with the comment above. Even little things that you see working with the military start to pile up. I was once spending time with some newly minted member of the air force who were doing a training off base and they had a ridiculous per diem. Even the little things add up!
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      Eric Connelly said on July 9, 2011 at 8:14 a.m.
      I work as a civilian at a military base here in the US. The government waste that I see daily is appalling. The multi-million dollar building renovations continue, and within a couple years, the buildings are torn down, all paid for in our defense budget. During Wartime, our defense budget gets a blank check by our government,while these wasteful projects continue without any oversite. This has to stop, and it starts at the top. If we could curtail just some of this wasteful government spending, we wouldn't need to raise our debt limit.
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      Robert Weekes said on Feb. 12, 2011 at 8:25 p.m.
      Short-term economic solutions are up to political debate, but the long-term solution to fixing our economy lies in overhauling our nation's public school system. We need to go back to the private school system because public schools cost more and have less skilled and motivated teachers than private schools. Before the unionization of the school system our country was growing economically every year. It's leveled off for about the last 40 years and we need to turn that around to stay on top. We need to scale up private school vouchers and scale down public school funding over time to restore our education system to its former glory. Doing this will surely strengthen the dollar in the forex market and maintain our #1 global status.
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      Ginger Palumbo said on Oct. 15, 2010 at 7:35 a.m.
      I too was thinking of the same phrase just the other nite when I watched Obama on TV. If the Republicans do get a landslide victory, their attempts to do anything other than what Obama wants to see will be thwarted by his massive VETO stamp & hence will be seen as "ineffective Republican efforts" to move us forward.I may not be up on every single issue, but after the TARP stuff, I dont see the Democrats doing anything to move the American economy forward by doing things that create a positive business climate, just ways for the "haves" to give to the "havenots" w/Uncle Sam as the middle man. I guess thats supposed to be the way for people to get money in their pockets instead of working for it since there's no business-stimuating activity (other than the bank bailout)to hire the "havenots" so they can work for their spending money...
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      Joe Herbst said on Oct. 14, 2010 at 2:05 p.m.
      As a follow on to Jeff G.'s astute comments (also an '89 MBA), only when and after the proverbial stuff hits the fan is there even a glimmer of grown-up discussion on the core problems facing us. Unfortunately that tiny glimmer is almost always way too late and then gets fully extinguished by the political exploitation by those in Washington with the assistance from their elitist media friends. Maybe this madness will begin to change for the better come November 2nd. Thank God our Founders understood the evils of big government, and gave "We The People" a say every 2 years. Hook 'em!!
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      Don Wright said on Oct. 14, 2010 at 2:00 p.m.
      The fact that both sides are in part right, but more importantly, wrong at the same time, perhaps indicates that the electorate is looking for a completely new solution. Throwing the bums out and replacing them with more bums won't necessarily fix anything. This is simply rearranging the deck chairs on the Titanic. I believe Jeff Gutknecht's comment on Oct 10 above is exactly what we need. That is, to fundamentally change the "incentive structure" in our political system by establishing term limits. At that point, perhaps we will attract true citizen politicians who seek to serve for the betterment of our country, instead of their own interests. Not until then, will Congress have the political fortitude to make the tough decisions regarding our economic, fiscal and tax policies.
    • Quote 2
      It’s the Economy, Again, Brandl Says said on Oct. 11, 2010 at 9:48 a.m.
      [...] Read the whole article [...]
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      Jeff Gutknecht said on Oct. 10, 2010 at 6:50 a.m.
      Economic policies are in my view typically self-serving attempts to a segment of the electorate in order to favorably position for an upcoming election. This is at the root of "the bridge to nowhere" and countless other policies. Why even the attempt to transition in many illegals, which will add to the already overburdened entitlement programs, is a thinly veiled attempt to gain favor with the rapidly growing and important Hispanic block. An important change in our way of government must be firmly established term limits such that those who serve will be forced to see their positions as temporary, and not a gravy train to be protected at all costs. Only then when self-serving motives are eliminated may the voters in Congress simply look at what is best for the country, and not simply the voters they want to appeal to.
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      Mike Greczyn said on Oct. 9, 2010 at 9:04 p.m.
      It would be great if any of the political groups discussed above demonstrated any understanding of this situation. Unfortunately, whomever wins politically will probably take victory as a sign of their "rightness" on the economy, so the larger issues may continue to be unaddressed.
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