By Michael A. MacDowell
“It is the economy, stupid” became the key phrase that Bill Clinton’s campaign adopted in 1992 to thwart George H. W. Bush’s unsuccessful bid for second term as president. Political strategist James Carville invented this term to emphasize the economic morass that many felt during sluggish economic growth of the first few years of the 1990s.
In 1992 the American economy was just emerging from a two-year recession. Many Americans worried about their economic prospects. One of Bill Clinton’s first actions was to push for a $241 billion tax hike, which was approved by the 103rd Congress. By the time Clinton began to run for his second term in 1995, 50% of US companies had trimmed payrolls. Between March 1995 and March 1996, 25,000 high-paying manufacturing jobs disappeared, according to the Bureau of Labor Statistics. One million people needed two or more jobs to make ends meet. The economy, “stupid,” had not improved.
Looking backwards, two researchers from the Washington, DC-based Tax Foundation used a reliable model of the US economy and found that if the tax increase had not occurred, there would have been 1.2 million more Americans working in 1996 than actually were. They also discovered that the average American wage would have been $2,600 higher in after-tax income and the US economy would have grown an additional $208 billion between 1993 and 1996.
By the mid-to late 1990s, the American economy finally began to grow. Economic leaders met in Washington in April of 2000 to review the then-recent economic growth. According to the Wall Street Journal, there was general agreement that the period had been marked by positive trends in trade, technology and the actions of a wise Federal Reserve Bank. But since 2000 the economy experienced two recessions, a technology bubble collapse followed by a housing boom, and the largest financial crisis in 75 years.
Today in the final stages of what seems to be an interminable presidential contest, can the phrase “it is the economy, stupid,” be used by either side? The answer is yes and no. Clearly there are many who feel left out of the meager economic growth that has occurred after the Great Recession. Since 2000, workers earned 66% of the national income in wages, salaries and benefits. Today it is 61%. Since 2000 profits have risen 12%, but income has grown by 8%. However, these aggregate statistics belie a much more systematic problem.
In the past, difficult economic times have been at least partially offset by a belief that we are “all in this together.” Citizens believed that the American economic spirit of hard work and perseverance would provide them with a middle class lifestyle, but for many this is no longer the case. Charles Murray’s book ‘Coming Apart’ traces the deterioration of the American white middle class. Murray maintains that institutional factors holding families together — church, good schools, civic organizations and the traditional family itself — have failed to provide working class whites with the social glue that reinforces their will to succeed. What is true for whites is more so for minorities because many begin their climb on the economic ladder on a lower rung than do most whites.
In 1990, 44% of the national income went to the top 20% of American families. In 2012 almost 50% did. In this environment it is easy for politicians to run on the powerful vs. powerless platform. The Pew Research Center found that 61% of Trump supporters and 91% of Sanders’ supporters, many of whom are now lining up behind Clinton, see the economic system as favoring the powerful.
Aside from the finger pointing, the lack of specificity on both sides of the aisle on how to address real and perceived inequities remains. On a positive note, economists are busily rethinking outdated policies in areas like technology, trade, employment and productivity, as well as fiscal and monetary policy. This work is extremely important because the results will help offset inevitable unintended consequences of well-meaning, but often counterproductive, policy implementations.
Whomever our next president is should hit the ground running with a cadre of economic experts attuned to the issues that divide Americans today. Hopefully these experts will have an eclectic view of the US economy and social systems. They should not be locked into thinking that reflects outdated policy and predetermined long-held views of any particular party.