Election: The Economy

Economists who have correlated economic statistics and past elections say the president should be waltzing to victory Tuesday, with as much as 57 percent of the national vote. In the hard-hit battleground of the upper Midwest, pollsters say Democratic challenger John F. Kerry should have locked up states like Michigan by now. Instead, the outcome is anybody's guess. Razor-thin margins in many states seem to defy those states' economic fates. The failure of the economy to play decisively in either candidate's favor may be due to the mixed signals of the economy itself or the result of both campaigns' success in shifting the focus to foreign policy.

Washington Post staff writer Jonathan Weisman, who wrote about the diminished role of the economy in this year's election outcome in Friday's Washington Post, was online Friday, Oct. 29, at 2 p.m. ET to discuss his article, Is It The Economy?.

Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.

_____________

Alexandria, Va.: Are there economic/political parallels to the close elections in 1948 and 1960?

Jonathan Weisman: The economists who model economic performance against election outcomes have been remarkably successful in their projections. So those close elections would indicate that the economies of '48 and '60 were creating more headwind for Truman and Nixon than Bush is facing. Truman and Nixon were also facing an additional factor, what modelers call party fatigue, since their parties had controlled the White House for some time before those campaigns.

_______________________

Laurel, Md.: Since 1980, income disparity in this county has been rising, as measured by the percent of income going to the top 20 percent of earners. Almost without question the main reason has been the pro-business political and economic climate that increased the return on capital (investment income) relative to the return on labor (wage income). In the last 24 years, we've seen terrific returns on investments (stocks and home prices) but little real wage gain.

If taken to extremes (possibly we're there already, possibly not) we could have economic growth in which most people don't participate. GDP doesn't differentiate between a $85,000 luxury car bought by a rich family, from $85 worth of clothing bought by each of 1,000 poor ones.

The persons in your article sound like exactly the ones that are more expensive than they're worth; and who need to be removed from the economy to increase the return on capital.

Jonathan Weisman: Some of the economists agree wholeheartedly that looking at cumulative income gains in the past four years may not be measuring how most individuals feel, since those gains were concentrated in the elite. The problem is that good data on median income has a year lag, as the Census Bureau crunches the numbers. So economists working in real time can only go by the large aggregate data.

_______________________

Washington, D.C.: All the economic models predicted a comfortable Gore win in 2000. Sure, he won the popular vote, but he still lost the election.

Jonathan Weisman: Actually, some of the models, I'm thinking of Ray Fair's, predicted a very slender victory for Gore in the popular vote. The economy was helping him, but he was hindered by party fatigue.

_______________________

Silver Spring, Md.: Is there a chance that Americans are coming around to the political experts' general view that presidents can't really do much to affect the economy?

Jonathan Weisman: Probably not. It's just that voters have so much more on their minds, with war and terrorism, that their tendency to blame the president has been watered down. Next time we have peace with no prosperity, I'm sure the guy in the Oval Office will take the blame.

_______________________

Southern California: Yes, the economy is a big issue in this election, but I feel many voters are savvy enough to know that the blame, and praise, for the economy doesn't rest on the president's shoulders. Kerry makes these ridiculous assertions that it's Bush's "fault" so many millions of jobs have been lost, most people are intelligent enough not to do that. On the same token, Bush recognizes economic weakness and makes a point of saying "We [administration] do all we can but all in all the economy is doing okay but look at what we're up against...]

Let's face it, outside of what government spending he does or doesn't approve, the President has little impact on a $10 trillion economy.

Jonathan Weisman: I would tend to agree, but President Bush has made significant claims about the impact of his very bold economic policies. Maybe he didn't believe it. Maybe he doesn't think the president can impact the economy. But he did tell us that his tax cuts would create millions of new jobs, and that John Kerry's plans would cost millions of jobs. If the politicians tell voters their policies matter, it is little wonder the voters take them at their word.

_______________________

Columbia, S.C.: I understand that Sen. Kerry has centered a large portion of his campaign on jobs and the economy. Can you explain how raising the federal minimun wage to $7 by 2007 might affect our economy. Is it more likely to have a negative or positive impact? Thanks!

Jonathan Weisman: The last time the minimum wage was raised, in 1997, lots of opponents said it would kill jobs. The job market instead boomed, along with the rest of the economy. This time, however, the job market is very weak, so the outcome could be very different. What we learn from these economic models is, they're just models. We don't really know what would happen if the minimum wage is raised.

_______________________

Bethesda, Md.: Why haven't the high gas prices had much of an affect on this race?

Jonathan Weisman: Very good question. Higher gas prices could be the great nexus between the foreign policy debate and the economy, since part of the gas price hikes is from international unrest. But Kerry has not exploited the connection, and adjusted for inflation, oil is not nearly where it was in the early 1980s.

_______________________

Herndon, Va.: Is the gambling industry a good economic measure of the election? And if so, what do the Vegas odds on this election tell us about the ultimate winner?

Jonathan Weisman: I have no idea. Ask a bookie.

_______________________

washingtonpost.com: In the "$17/hour" series that The Post has been running recently, did the reporters find workers similar to Mr. Tyner, the struggling worker from Michigan who you interviewed for today's story?

washingtonpost.com: Permanent Job Proves An Elusive Dream, (Post, Oct. 11)

Jonathan Weisman: Good question. I did the last story, on temporary workers struggling in Kentucky. And every one of them is voting for President Bush. One, because he strenuously opposes gay marriage, another because he believes Kerry is a "flip-flopper" who wuld not protect the country. They actually are angry at what they see as policies that help the rich at their expense, but they are willing to set that anger aside to vote on other issues.

_______________________

Washington, D.C.: Although, Conservatives are known to be against creating deficit and for strong economy and smaller government, the past few Republican administrations have left their successors with a record deficit, weaker economy and larger government (Bush Sr., Bush W., Reagan). Shouldn't such results hurt their base?

Jonathan Weisman: There was concern among some Republicans that the surge in government spending, the Medicare prescription drug bill and the record budget deficit would dampen enthusiasm among conservative voters. President Bush has addressed the spending issue at least rhetorically. But fiscal issues just have had no real impact on this race. People tend to believe the deficits are a necessary biproduct of the war on terrorism. The numbers don't really back that up.

_______________________

Arlington, Va.: Is health care inflation singled out in any of the models you wrote about?

Jonathan Weisman: No, and it should be. In this environment, looking at total compensation gains without factoring in the rising cost of health insurance benefits does skew people's perceptions of their personal wealth.

_______________________

Honolulu, Hawaii: Hi Jonathan,

Does the economy seem to play a larger roll in poll results in those parts of the country that would seem to be less of a terrorist target?

Jonathan Weisman: Not really. Some of the states where terrorism concerns are greatest -- I'm thinking in the mountain west and the south -- are places not exactly in the obvious line of fire. The actual targets of 9-11, Washington, D.C. and New York, will go for Kerry handily. The economy is playing as an issue in the obvious places, Michigan, Ohio, Wisconsin, but it is not playing as large as one would expect.

_______________________

Annapolis, Md.: Getting back to the gasoline prices. Now that it has come out that the increase in gas prices has helped Exxon and Shell make a lot of money. Do you think that there will be an outcry because they may have exploited the news in order to increase the prices as much as they did when it was not necessary?

Jonathan Weisman: With every gasoline price spike, eventually anger turns to the oil companies, which always seem to profit handily. This time, that anger has been muted, in large part because Republicans controlling Congress have not held any hearings or demanded any investigations, and Republicans controlling the White House have stayed out of the issue as well. In 2000, the Clinton White House tapped the Strategic Petroleum Reserve, tapped the Federal Trrade Commission to look into price fixing (a charge which proved baseless) and generally played the oil issue up for Al Gore. Not this year.

_______________________

Silver Spring, Md.: Would you consider the lack of focus by voters on the economy to be a grave mistake?

Jonathan Weisman: I actually think Kerry is making a grave mistake by not hammering the economic issues in the upper Midwest. He may rue the day he decided to make the final message of the campaign about tons of missing explosives in Iraq, not thousands of missing jobs in Michigan.

_______________________

Clifton, Va.: Why aren't more Americans upset and making an issue of the record deficit Bush has given us?

Jonathan Weisman: I think most Americans believe the president when he says the deficit was caused by war, recession and terrorism. The White House does concede that about 30 percent of the swing from surplus to deficit is due to tax cuts, but they say those were necessary to bring the economy out of recession. And people tend to accept that. The fact is, the deficit was only a major issue in 1992 because Ross Perot made it one, with his charts and paid infomercials. The deficit became a proxy for economic malaise, but the economy is just not that bad this go-round.

_______________________

Washington, D.C.: The Commerce Department reported today that GDP grew at a 3.7 percent rate in the third quarter. That's a great number, but it's being played up as a weak result in much of the media today. Why is that, and will it play into these economic election models?

Jonathan Weisman: The GDP data will give Bush even greater margins in the economic-political models, but I'm not sure it will have much impact on Tuesday. People's perceptions of the economy are probably fixed at this point. The number is strong, but the consensus forecast was for 4.3 percent growth. That set people up for some disappointment. Growth was also buoyed by surging consumer expenditures that far outstripped their earnings and sent the savings rate to nearly zero. With rising energy prices already squeezing consumers, most economists say the current growth is likely to slow.

_______________________

Annapolis, Md.: I wasn't really claiming that they price fixed as much as they kept raising the prices until the public complained. Lowered them a bit, waited a few weeks and started increasing them again. I have heard no public out cry against the prices. Which are the highest they have ever been.

Jonathan Weisman: I agree that the voters have been rather quiescent this time around.

_______________________

Hudson, Ohio: The dollar remains extremely weak against most foreign currencies. Is that a good thing?

Jonathan Weisman: If the dollar keeps weakening slowly, it will probably help get the United States' economy back into balance. Imports will become more expensive, exports will become cheaper, and consumers will have to live within their means. In the long run, that would be good. In the short run, it involves pain, as we all lower our standards of living. But if the dollar starts a rapid, possibly catastrophic slide, it could be a disaster. Interest rates would shoot up. Inflation may come roaring back. And if U.S. consumers cut back drastically, our counterparts in Europe and Japan will not have the money to take up the slack. The result: world-wide recession. I'm not saying that will happen, but we should be mindful.

_______________________

Worcester, Mass.: Why is it that some economic experts are saying that giving tax breaks to businesses will help the economy? It is well know that that doesn't work. The money needs to go to the people, who spend it, causing the companies to hire to keep up with the need. The people who are hired, get checks, pay taxes, and buy. That makes more companies hire to keep up with the demand, and so on, till the peak is reached. By giving money to companies when the public is not buying is useless, because the companies do not hire because the demand is not there. Yet the Bush administration pushes this falsehood.

Jonathan Weisman: It's a 20-year-old debate between supply-side economists, who believe you give the tax cuts to those who supply the goods and services, and Keynsian economists, who say you tweak demand for goods and services with tax cuts or spending. The debate has become virtually religious, with adherents sticking to their arguments regardless of history and data. The fact is, President Bush's tax cuts have mainly been Keynsian, lowering taxes on individuals who could then use the money to buy, buy, buy. Only a small amount went to businesses to spur investment.

_______________________

New York: I just saw on TV that the 2004 election futures market today has Kerry and Bush at a tie -- i.e. their "shares" are now priced equally. Do these election "markets" actually apply market forces to election prognostication, or are they just wild gambles.

Jonathan Weisman: The idea is that an individual futures buyer may be just a gambler, but taken together, market forces are rational and reflect the candidates' real chances. I personally don't believe the market for candidate futures is big enough to be truly that efficient, but a lot of others swear by these markets as better predicters than the polls.

_______________________

Annapolis, Md.: I would argue that as "labor consciousness" and the labor movement continue to decline, the economy as an election indicator will continue to fall off in favor of social issues and foreign policy.

Jonathan Weisman: I agree that the labor movement was a major factor in driving middle-class economic issues to the political fore. The unions educated their members on issues and had outsized influence on the parties, especially the Democrats. But they have not delivered elections of late, so their political influence may be waning.

_______________________

Tampa, Fla.: With escalating costs and boomers about to retire, why hasn't health care resonated? The system is a mess.

Jonathan Weisman: Wait til 2008. The health care system will have to get to crisis stage before Americans are willing to entertain what President Bush castigates as "a government takeover" of medicine. But that may be coming.

_______________________

Washington, D.C.: To determine any policy's job impact, why do the talking heads look at net job losses or gains? Shouldn't you ask what the number of jobs would have been with or without that policy? For example, even though the net number of jobs grew in the 90s, perhaps that was due to other explanatory variables and the tax increase actually had a negative jobs impact.

Jonathan Weisman: Certainly the job gains of the 1990s had more to do with the productivity revolution, the computer and telecommunications boom, the stock market and investment surge, etc., then Washington policymaking. But people still blame or credit the guy in the White House, so jobs will always be part of the political lexicon.

_______________________

Washington, D.C.: Are there any real predictors of who will win the presidential race? How often has the ecomomic data been accurate?

Jonathan Weisman: Ray Fair of Yale swears his model has been right for nearly a century, but he also says he does not believe Bush will waltz to a second term the way his model predicts.

_______________________

Twinsburg, Ohio: Mr. Weisman, with the stock market pretending to be a yo-yo, where would you put a large sum of windfall cash?

Jonathan Weisman: Well, a lot of people are putting it into the homes, or other real estate. Which may be the next bubble to burst. The housing market has sustained this economy for four years, giving people investment vehicles, raising their wealth, providing jobs, and injecting money into consumer spending, through refinances and cash-outs. If it weren't for housing, we'd be looking at a very different economy -- and election. It's remarkable.

_______________________

Arlington, Va.: I'm surprised to hear you describe Bush's cuts as Keynesian -- I disagree. Keynesian stimulus through tax cuts would mean funneling tax cuts into people's hands who would spend the money. Some of that has happened (particularly with the bits of the 2001 tax cut that Baucus and other Democrats in the Senate demanded in return for their votes). Most of his cuts to the higher brackets, on the estate tax, on capital gains and dividends are not going into spending. They are going into savings and investment. That's classic supply-side mumbo-jumbo.

Jonathan Weisman: Actually, a recent federal report on the 2001 tax rebates found that 2/3 of the total was spent. That percentage is far higher for the less affluent, of course, giving credence to the charge that the tax cuts were an inefficient stimulus. But in Keynsian terms, lowering income tax rates is aimed at increasing demand, not supply. It's just that demand can be stimulated more or less efficiently.

_______________________

Sun City, Calif.: Since American working class have to live, and today at minimum wage they are making a "real dollar" amount of approximately what is being earned in third world nations, when you factor in the cost of living in this country. What is it that employers want to do to American workers, to give them meaningful jobs? It appears they want slaves, not proud American citizens manufacturing their goods, providing services. Switzerland's minimum wage in excess of $15/hour makes me wonder why U.S. is not ashamed paying workers so little?

Jonathan Weisman: If U.S. companies can find consumers for their products, at home or anywhere in the world, they can get away with paying whatever they want. Wages will rise when companies feel like they actually need their employees to buy their goods.

_______________________

Dayton, Ohio: Do you or do you not believe that the issue of outsourcing has traction nationally in this election? Do you believe that the issue only has relevance to blue collar workers or will white collar workers also make election decisions on this issue? (It has significance in Ohio.)

Jonathan Weisman: I think it has real traction in important states -- Ohio, Wisconsin and Michigan. Kerry has tried to exploit it by saying he would close tax loopholes that encourage overseas expansion, but even he has had to admit he can't stop the outsourcing of jobs overseas. That has muted Kerry's appeal, and it may dampen turnout among disheartened blue-collar workers fearing their jobs are next.

_______________________

Washington, DC: Kerry and the Democrats are trying to make a huge deal out of offshore outsourcing, and even if it may not be "good for us" as Bush's economic adviser stated, recent studies, including by the GAO, indicate it may not be as big a phenomenon as all of the rhetoric might suggest. How big an issue do you think this really is?

Jonathan Weisman: Politically, I think it is a big deal. Economically, not yet but it may be. It's not that so many jobs will leave the country but that the growth of jobs overseas may dampen growth at home while depressing wages for those who have jobs.

_______________________

Dayton, Ohio: I've overheard that the nonprofit sector is a bellweather of sorts for broad economic trends, as they tend to lose and gain jobs in quick response. Is this true? How/why

Jonathan Weisman: Sorry, I don't know.

_______________________