This recession was different. There was an interesting debate during the campaign over whether the nation’s economic recovery under Obama should be judged against the standard of other recoveries from deep recessions in the United States (as a number of economists supporting Republican rival Mitt Romney argued), or against the standard of economies trying to claw back from financial crises (as those more sympathetic to Obama argued).
The benchmark one chooses makes a big difference in whether one views the slow recovery under Obama as a crushing disappointment caused by a failed president or whether it’s on the right course, given the difficult circumstances that Obama inherited last Inauguration Day.
Presumably, very few voters spent the run-up to the election re-reading Carmen Reinhart and Kenneth Rogoff’s findings on international financial crises, and most probably missed the debate that played out in economics blogs and newspaper opinion pages. But it appears that voters were sympathetic to the president on this crucial question.
One of the exit poll questions asked whether voters blame the nation’s economic problems on Obama or George W. Bush. Almost four years after Bush left the White House, 53 percent of voters blamed him, vs. 38 percent for Obama. Even 12 percent of Romney voters blamed Bush for the nation’s economic problems. It’s possible that those views reflect more on the two mens’ personal qualities than on an implicit judgment about whether the slow recovery was a direct result of the policies that preceded it. But the data suggest that voters were willing to hold this recovery to a different standard, given its origins.
Inflation is a big problem. To economists, inflation is the dog that didn’t bite. Despite fears among commentators that the Federal Reserve’s easy-money policies would spark rising prices, the consumer price index rose 2 percent over the past year, exactly what the Fed aims for. And investors are pricing in only 2.07 percent annual inflation on bond markets over the next five years.
Don’t tell voters that. About 37 percent named rising prices as the biggest economic problem, basically tied with the 38 percent who cited unemployment. (The other options were taxes, with 14 percent, and housing, with 8 percent.)
Prices for gasoline and some other key commodities have risen since Obama took office. But he began his term when those costs were artificially depressed by the global economic crisis. Since early 2011, gasoline prices have moved up and down within a range of about $3.20 to $4 a gallon, showing no discernible trend upward. The average national price of a gallon of gas was $3.46 on Wednesday, well below its peak of $4.13 on July 15, 2008.
Voters may be frustrated that, although the cost of goods has been rising (at a relatively low rate by historical standards), wages haven’t. In that case, their real complaint is that weak economic growth and a high unemployment rate are keeping wages down.
At the same time, the exit polls may partly explain the common disconnect in congressional hearings between economists, such as Federal Reserve Chairman Ben S. Bernanke, who focus on the effects of high unemployment and consider inflation as well-contained, and politicians who are thinking about the price of gas and groceries.
Deficits aren’t at the top of voters’ minds. In Washington, the question of how to reduce the budget deficit has been front and center for two years now. It dominated the debt-ceiling debate in 2011, and is returning to center stage as Congress and the president get set to negotiate a resolution to the “fiscal cliff” — the tax increases and spending cuts scheduled to take effect Jan. 1.
Guess what: Voters are focused on other things.
Only 15 percent named the budget deficit as their top issue in exit polls. That was far below the number who said the economy (59 percent) and even below those who listed health care (18 percent). Getting the nation’s finances on a more sustainable track may be necessary, but the impetus to move quickly isn’t coming from voters themselves.
This is an area where voters’ opinions match fairly well with what financial markets are saying. The usual reason deficits are harmful is because government borrowing pushes up interest rates, crowding out investment by the private sector. Those high debt levels can cause investors to lose faith in a government’s ability to repay, sparking a fiscal crisis, as Greece and Spain can attest.
But neither high debt nor investor panic has been a serious problem in the United States. Interest rates are at all-time lows, and companies are reporting no trouble borrowing money at low rates by issuing bonds. The U.S. government can borrow money for a decade for 1.68 percent, suggesting that any fears of a U.S. fiscal crisis are distant, at best.