“IT’S THE ECONOMY, SMARTY PANTS.”

SEPTEMBER 12, 2024 – To date, Democratic strategist James Carville’s most famous line is “It’s the economy, stupid.” It was directed at workers on the 1992 Clinton campaign, not because Carville believed they were stupid, but because he wanted everyone in the campaign to focus. At campaign headquarters in Little Rock, the insightful and effective strategist hung a sign on which “It’s the economy, stupid” was the second of three focal points. (The first was “Change vs. more of the same,” and the third was “Don’t forget healthcare.”)

Today, according to numerous polls 40% of voters think the economy (“and inflation”) is the most important issue in deciding who should be president. Politically, Carville’s most famous line remains a primary focal point of the presidential campaigns. What we don’t know with certainty about the 40%, however, is how many will actually vote—and for whom.

I wouldn’t want to be the strategist for either team with regard to the “economy.” The “economy,” as perceived by most Americans, is rarely viewed in its comprehensive complexity. This explains why very positive statistics carry very little currency among voters. For some the ”economy” means grocery prices. For others it means apartment rent, home prices and mortgage rates. For yet another segment of voters the “economy” means the S&P 500, Nasdaq, and the DJIA. For certain business owners the “economy” means a worker shortage. For union bosses it’s all about stubborn wage increases amidst record corporate profits and CEO incentive pay pegged to stock performance. For the single mother of three kids who’s working two jobs and not making ends meet, the “economy” is woefully underperforming.

Ask any economist on the spectrum from Marxist to Miltonian (Friedman) and you’ll hear deep analysis followed by definitive “solutions.” Ask voters what they think are “solutions” and you’ll qualify for the “Human with Spinning Head” exhibit at next year’s state fair. Between the economist’s theory (pick one, any one) and the politician’s necessity of garnering votes lies an unbridgeable gap.

As I see things, the basic problem in “fixing” or “improving” the economy is that voter concerns are nearly always triggered by symptoms—the price of groceries; unaffordable housing; the cost of education, day care and health care; the lack of higher paying job opportunities; fixed retirement income not keeping pace with the cost of living. The political responses are likewise tailored to symptoms without regard to the complex of economic causes, including structural conditions. The result is a mismatch that is ineffective; or worse, the policy responses intensify the very symptoms that need to be addressed.

None of the economic symptoms that cause people pain and anxiety are simple. High grocery prices, for example, are caused by a multitude of factors. “Price gouging” (whatever that is) as asserted by Harris is a perceived cause without evidence of its effect on the price of meat, milk or M&Ms. Nor is any evidence submitted to show the proportionality among . . . the ill-defined (and undefinable) theoretical factor of “price gouging” and the many other causal elements of price increases—everything from supply-chain disruptions to the effect of supply and demand (including sub-elements such as war, weather, and labor shortages) to the price of money (i.e. global credit markets) to the price of insurance and other overhead expenses incurred by the retail grocery industry—a notoriously thin-margin enterprise.

Most voters, however, who cite the “economy” as their top issue—meaning inflation at the local grocery store and their favorite restaurant—don’t have the bandwidth (i.e. attention span) to hear an economist explain what goes into the price of milk. Instead, many eligible voters are drawn to the promise of a ban on “price gouging” or, alternatively, swayed by the hyperbolic blather that “inflation has never been worse in the history of our country”—when in fact, the current rate of 2.5% is well below the historic high of 14% in 1980, when a Republican (the beleaguered Gerald Ford) was president. There’s no simpler device of persuasion, however, than uber-over-gruppen-fuhrer statements uttered with great fervor, however false.

All of which directs attention to a larger reality: “gov’mnt,” let alone the president gets way too much credit when our economy—a regulated market economy[1]—is humming along and way too much blame when it isn’t. Despite the standard Republican script that “Democrats are Marxists,” the party of Biden and Harris is a long shot from espousing a planned economy. In fact, of the top economic powers of the world, America is the furthest to the right end of the political-economy spectrum, and most mainstream Democrats—Harris and Walz included—would be considered center-right in other Western industrial nations. Since by world standards we are still very much a market economy, government generally and the president specifically have limited control of the economy. Sure, the Federal Reserve sets the “fed funds” rate—a key interest rate affecting global credit markets—and manages the money supply, which is no small thing given that the dollar is the world’s reserve currency and likely to remain so for the foreseeable future . . . unless we blow ourselves up. And yes, government regulates a host of industries, many rather extensively, but comparatively speaking, good ol’ supply and demand and the profit motive are as vibrant as ever, as are individual choices all across our population and countless commercial enterprises. Some of those choices are predictable, many are not, but all of them are channeled directly or indirectly into the “economy.”

Ample room exists for debate about how our economy should be restructured and how individual and enterprise choices can be incentivized or disincentivized, albeit without guaranteed effect. Compelling and legitimate arguments can be advanced for both more regulation or less—and for both more and less depending on context; or better yet, for “better” regulation, whether more or less. The fundamental problem we face, however, goes beyond economic structure or choice of guiding economic theory. The challenge of “fixing” our economy can be boiled down to three factors:

1. The size of our population (over 330 million) and annual Gross Domestic Product (GDP) (the sum total of all goods and services); that is, our “economy” (pushing $29 trillion). Think in terms of a giant cruise ship changing its course or docking at port.
2. Our diversity—50 individual states, each with its own set of rules; urban vs. rural vs. suburban; coastal vs. not; old vs. young vs. middle age; rich vs. poor and everyone in between; historically marginalized vs. historically advantaged; religious beliefs of all stripes; language; world views influenced by family and cultural background, education, opportunities taken, opportunities denied . . . et cetera ad infinitum. United our needs and wants, issues and interests are definitely not.
3. Though we’re still the world’s largest economic power and wield all sorts of related power—military, diplomatic, cultural—we do not exist in a vacuum. Our financial system (a subpart of the “economy”) and international trade (another subpart) are linked to the rest of the world, and accordingly, we can’t ignore or evade powerful influences afoot beyond our borders—things such as global climate change, political crises, religious fanaticism, and economic failures, all of which conspire to drive mass migration.

Given these three realities, it is pure hallucination to think any candidate for president can “fix” the “economy” to the needs and desires of a majority or even plurality of voters. To expect fantasy to become reality, then howl in disappointment because the reality doesn’t materialize . . . is the same as a child’s pout when the gift of a magic carpet fails to fly (as falsely advertised it could). There’s plenty wrong with America’s “economy,” both symptomatically  and structurally. But there’s also lots to celebrate about America’s “economy” and its potential.

All of which brings us to the two candidates running for president. One is capable of reading, listening, thinking, speaking and interacting with people constructively and empathetically. One has exhibited no such capabilities—or abilities or inclinations. Whether the capable one can “fix” the “economy” isn’t even on my “ballot.” She can’t and won’t “fix” it, but a reasonable expectation is that she won’t tank the economy by converting the Oval Office into a clown show and spooking investors domestically and worldwide. I know enough about the one who is bereft of the requisite capabilities to know that I know all I need to know about the one who is capable of reading, listening, thinking, et cetera. I’ll vote accordingly—and whole heartedly—and wish her (and all of us Americans, Democrat, Republican, and Unaffiliated) the very best of luck and success.

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© 2024 by Eric Nilsson

[1]Name a market economy in the world that isn’t regulated and I’ll show you a “market economy” that is either rife with corruption and extreme disparities or a “coconut economy” on an unnamed atoll in the South Pacific completely isolated from all international trade and contact, with per capita income of 2.3 coconuts per day (But hey! Their happiness quotient could be off the charts.)