The government is, of course, claiming responsibility for it all, but that’s natural and expected for any politicians. My question is, what relevance will all this good news now have for the next election? This question has a number of subquestions I think are relevant, like: is this the start of a real, substantive recovery? If the numbers are more sluggish next year, how much recovery will Bush actually be able to point to, and will it affect his polling? Are these numbers enough to push up overall economic numbers on their own, even if there’s a minor hit to them in the next year? Is it enough to make his reelection better than even? Is any of this predictable when we have an entire year of economics and politics to go?
I’m sure I’ve forgotten important matters; feel free to speculate/comment beyond this, 'cause I am not an economist, or anywhere close to it…
From what I’ve read in the reports, the data looks more like the beginning of a trend than an anomoly that will fizzle. Note that the Sept job numbers were rvised upwards, making 2 good months in a row. In that case it’s great for Bush and his re-election. I tend to discount any administration’s ability to control the economy, but that’s not the way the electorate, as a whole, reacts.
Since business cycles tend to be longer term than 1 year, it’s likely that, if this is indeed a trend, things will continue to improve thru the election period. That shifts the discussion more onto Iraq.
GW’s political career rests on this. Forget Iraq…his re-election hinges on a good economy. If the economy is strong, if people are back to work, he’ll be re-elected next year. If not…not. No way Iraq will become that much of a hot button issue by next year (assuming things remain basically the same as now) if the economy is strong and folks are back to work…IMO anyway.
To answer the OP, it depends. If this trend continues, and more importantly, if peoples PERCEPTIONS are that things are better (i.e. they are back to work), it will DEFINITELY have a huge impact next year. If the numbers are simply a momentary spike and they fall again, then THAT will definitely also have a huge impact…in the other way.
From John Mace
I agree completely…but the perception in the US is that the administration has a direct impact on this. Personally I think that the economy rises and falls, and the administration has no more impact than they do on the tides…its something that simply happens while they are there.
My bolding. I think that’s a much bigger assumption than you realize. Actually, I think if things just stay pretty much the same, that’s very bad for Bush. By this time next year, my expectiation will certainly be that things should be much, much better in Iraq than they are now. Much better. US troops exiting, Iraqi’s taking significant control over civil and military defense. Elections well under way. I could go on…
Lets agree to disagree then. I really think that, if the conflict gets no worse than now, but that the economy surges back, that Bush will be re-elected inspite of that. I don’t think the American people are TOO concerned with the present level of casualties in Iraq, that its still too early for a broad based opposition due to that. Right now, I see the majority of Americans as being a bit disquieted by events, a bit mistrustful of the administration, but I don’t see much out and out opposition yet from the majority perspective.
I think that with a strong economy and with people getting back to work, that THIS will be the key factor if GW is to get re-elected by next year. Iraq won’t heat up for the American people (again on a broad based level), IMO, for at least another year, if the situation remains basically stagnant. Now…if things get worse…well, all bets might be off, though again a strong economy will certainly help to mitigate that.
I guess we’ll see whos right next year. I, for one, think the situation in Iraq will be largely the same next year, though I conceed it might be a bit better. I think that the resistance fighters have a good year or two of munitions and hate in them at least, though, so I don’t expect it to be vastly better by next year.
The economy is naturally cyclical. The government can’t do anything to change this, but it can react to it, and mitigate some of the extremes, …extend the good times, shorten the bad times.
The government did a good job in engineering a “soft landing” while Clinton was at the helm (how much responsibility we can attribute to a President for the economy’s short term performance is arguable.) Then, I think the government did a very bad job during the technology blowout of the late 90s. There was a lot the Government can and should have done, but didn’t. The Fed for its part raised interest rates, as it should to try to put the brakes on, but the rest of government joined in the suicidal free for all. Some of this I attribute to heady optimism, some I attribute to not wanting to put the brakes on the economy before an election.
Bush inherited an overheated economy in the midst of a pretty extreme cyclical downturn that got excacerbated by international events and the accounting scandals.
It could have been worse, but the government did what it had to do, lowered taxes and increased spending. Again, I don’t attribute any genius to this manuever, I think it was pretty clear that it had to be done, and it was.
We are now in the midst of a recovery phase. Employment is typically a lagging indicator. We have the rest of the ingredients and employment was confirmed for the second time today. So yeah, it was pretty important.
Barring any disasters I am predicting that we can expect a pretty good economy through 2011 or so.
This recovery should be pretty important electionwise. If the news from Iraq improves I think Bush can make a pretty good argument that he took us through the storm.
This month’s economic #s will not have any effect on the election next year. It is the #s collectively as the election gets nearer and nearer. If the economy continues to get better then the Democrats will be left with criticizing Iraq. President Clinton was right before and it will apply for this election also: It’s the economy STUPID!"
I have to agree with ** Scylla ** - the government can not control the economy, only influence the extremes; Bush got a economy on the downturn of an economic bubble, compounded by 9/11 and other factors. Still, Bush did an adequate job handling the economy, things seem to be on the upswing again, and we will probably have quite a few years of economic gain, before the whole cycle starts over again.
Really? What sort of cycles? Kondratief Cycles? Schumpetrian creative destruction cycles? Animal Spirits Cycles? Harrod-Domar warranted growth cycles? New Classical Real Business Cycles? Do tell.
Why not? And why the latter? And if so, how is that a good thing? What outcomes would tell us that the current government failed in its challenge?
Politically, sure. But specifically, what would tell us that the storm was not his fault and that any recovery was due to his actions?
Yeah, I’m an economist, Scylla. And I found your story a bit objectionable. Mostly because you don’t say “we don’t know” enough, but partly because your story is badly inconsistent. If you believe in real business cycle theory, the government can’t do much about stabilising the economy for the simple reason that the cycles are really optimal intertemporal responses to environmental and technological shocks. Economies don’t “overheat”. The Clinton regime didn’t engineer a soft landing and the Bush regime hasn’t stimulated the economy. The Fed had no effect because money is neutral even in the short run. All those Dopers complaining about losing their jobs are kidding us - they are really chosing to withdraw from the labour market for a time until technological circumstances make work preferable to leisure again.
The story you told sounds more like a Keynesian story - there was a boom, it became a bubble and some stimulus was required once it burst. I’m not saying this is a bad story, I’m just saying it’s a story. You could tell a different one - for example: the downturn was just the natural end to a period of immense productivity growth. New ways of doing things had been tried during that time and some of them failed (that being the nature of entrepreneurship). By stimulating the economy at that time the government has undermined the “gales of creative destruction” which would have cemented the best business practices. Had they not done so the economy would have rebounded more quickly and stronger.
So my answer to
is: we don’t know. However, if you believe that the government budget matters (for example that it has stimulated the economy recently) then the contractionary adjustment that must come in the next few years - higher taxes and/or lower spending - is an enormous cloud hanging over the recovery.
It’s significant politically only if it translates into better conditions for the average voter around election time.
But it sure is great news. Nice to see estimates being revised upwards for a change.
I also note that every article I’ve read so far on the recovery has economists crediting Bush’s tax cut as being partially responsible. That’s going to be a BIG election issue next year. If the economy grows at its forecast rate of about 4.5-5%, and unemployment drops to its forecast of 5.8%, the economy is going to be a big selling point for the President, and he can point directly to his tax cuts as part of the reason.
The Democrats are going to have to hit him hard on the deficit (and they should), because I think that’s the only economic argument that’s going to have any traction with voters. I don’t see 5.8% unemployment as being a big election winner for Democrats, and the rest of the numbers look to be spectacular.
I think voters pretty much only care about their own personal lives as far as the economy goes. No one really cares about the deficit. If this is the beginning of a recovery, and this time next year there’s less unemployment and the stock market is higher, Bush will be re-elected.
Just IMO, but rising economic numbers won’t mean diddly-squat if the average voter doesn’t feel like things are genuinely improving on a personal level. Saying “productivity increased XX% last month” doesn’t mean much for the folks who are still unemployed, or who continue to struggle to make ends meet because their salary dropped 40% since Bush went into office. And I have the suspicion that things aren’t going to improve very soon for the typical non-wealthy Americans out there.
It’s not productivity, its GDP growth. The former is good, but can actually lead to more unemployement if the economy isn’t growing. The latter is better because it almost certainly leads to more jobs and a better stock market. Both of which are things that voters do pay attention to.
It’s amazing that some people hate Bush so much that they think GDP growth of 8% won’t affect the election. I suppose if the GDP had contracted 8%, that wouldn’t have mattered either, right?:rolleyes:
I really think that, if the conflict gets no worse than now, but that the economy surges back, that Bush will be re-elected inspite of that. I don’t think the American people are TOO concerned with the present level of casualties in Iraq, that its still too early for a broad based opposition due to that. Right now, I see the majority of Americans as being a bit disquieted by events, a bit mistrustful of the administration, but I don’t see much out and out opposition yet from the majority perspective.