Market Overview

Does the 2012 Election Really Matter for the Economy?


In light of recent subtle infighting for both the left and the right with respect to policy goals, personalities, and ideology going into November, some commentators and candidates have said that the 2012 election is going to be most important election of our time -- as has been said in previous elections. Despite the ongoing salvoes of criticism from both sides of the political aisle, does the 2012 election really matter for the economy? If it is true that "politics is the concentrated expression of economics", then the answer to that question may only raise further questions.

I. A Question of the Federal Deficit

A recent article from Zero Hedge's Tyler Durden portends that at this point for the next presidential election, the US will be $24.1 trillion in debt. From the article: "The bottom line is that whoever wins the presidency, it will matter precisely [diddly-squat]. As the US debt clock shows, fast forwarding 4 years, or to February 2016, when the next presidential race will be in its final stretch, America will have $24.1 trillion in debt, about $9 trillion more than it does, now on $17.4 trillion in GDP, for a gross debt to GDP ratio of 138.9%." Thus, from this perspective, it appears that the 2012 election does not matter in terms of the American economy. Durden also noted that whereas "interest rates may be negative in 2016", at that point "the liquidity trap endgame has not only begun, but is well on its way to ending, and mercifully putting an end to this whole Keynesian 'sustainability' charade." Durden concluded that as this current path runs its course, eventually "the only 'buyers' will be the central banks" thereby leading us to a state of being a "Weimar World" -- alluding to the Weimar Republic in Germany from 1918 to 1933 that led up to the rise of fascism and World War II that brought about unprecedented levels of human pain, suffering, and death all over the world.

Durden is not alone in his sentiments regarding the 2012 presidential election. According to a Feb. 11 article from Business Insider written by John Mauldin, "The truth is [that] it doesn't matter who's president -- we'd be screwed regardless." Whereas every election is framed as being "the most important election of our time and a defining moment for the American Experiment", Mauldin contends that "the most important issue facing the US is dealing with its deficit." Thus, though we may spend time discussing the political future of the US, if "the bond market decides to provide its own solution by demanding much higher interest rates", at that point the game will be over "and a prolonged recession if not a depression will ensue."

Mauldin argued that if Hillary Clinton had been elected in 2008 instead of Barack Obama, owing to hypothetical policy decisions, "the economic results would have been pretty much the same for the first three years." Mauldin: "The economy would still have been down 8 million jobs. Tax revenues would have fallen in any event. [...] So, one way or the other, we would arrive at 2011 and the crisis over raising the debt ceiling." From Mauldin's perspective, the 2012 election "is ultimately about dealing (or not dealing) with the deficit, and putting the country on a path to a sustainable budget deficit...that is the paramount issue."

In order to fix this issue, Mauldin argued that a consensus in Washington will be necessary; "creating a path to a sound, controllable budget is the important thing, the primary objective." According to Mauldin, though trying to form a consensus in the US owing to political ideological diversity may be difficult, we must form a consensus "if we want to give our children any hope of a better world than the one we have now."

II. The Emerging Zeitgeist of Electoral Irrelevance and Ideological Disconnect

This emerging Zeitgeist that the 2012 election is pretty much irrelevant comes at a time when there appears to be a serious disconnect between Washington and everyday Americans. With Congress' approval rating at around 12 percent and the possibility of GOP enthusiasm waning in conjunction with the prospect of low voter turnout, one has to wonder how our current situation will develop going into the general election in November. Whereas the interests of Washington, Wall Street, and Main Street appear to differ, this disconnect or gap portends an evolving political consciousness in America. I believe phenomena like the Tea Party and Occupy Wall Street are symptoms of this evolving political consciousness.

I recently discussed how "the lack of a diversified number of viable political parties in the US may be a substantial part of the problem" that is the disconnect between government and the people. I argued that "given economic issues and changing demographics, perhaps a departure from the two-party system should be considered, encouraged, and permitted." Were a multi-party system in place with a diverse range of political viewpoints, perhaps phenomena like the Tea Party and Occupy Wall Street would not exist.

However, in light of the ideological battles between Republicans and Democrats and even current infighting within both parties, I would argue that in some ways the US already does have a multi-party system -- with various factions and tendencies in each respective party able to stand on their own -- but the current nebulousness of political ideology only adds confusion to the political process and makes economic issues that much more divisive. For example, from this multi-party perspective, within the Republicans we see religious conservatives, libertarians, the Tea Party, and other various tendencies. Within the Democrats we can see Yellow Dog Democrats, liberals, neoliberals, socialists, some members of the Occupy movement, and other various tendencies. This appears to be similar to the idea of coalition parties in multi-party systems whereas parties begin to form "left" and "right" coalitions -- usually with the left coalition represented by the color red and the right coalition represented by the color blue. In the US, for whatever strange reason, these ideological colors are reversed (compared to the rest of the Western world) appearing to subtly confirm the idea that the US is a politically and ideologically backwards country. Given the diverse range of opinions in both parties, it becomes difficult trying to determine what exactly the "D" or "R" next to a politician's name really means in this time period.

In light of this political and ideological backwardness, perhaps this is why many Americans prefer to view themselves as independent. The problem with a mass amount of independent voters is that every election becomes somewhat herky-jerky, unpredictable, and a popularity contest. Of course, I can understand for some this may not be a problem at all, but an advantage of our system. However, in light of economics, finance, and business, commerce works and flows easier when political policies are predictable and free of constant change.

Going back to the two-party system versus multi-party system debate, commenting back in 1893 on why there is no major socialist party in the US, Friedrich Engels noted that the US Constitution "causes every vote for any candidate not put up by one of the two governing parties to appear to be lost. And the American...wants to influence his state; he does not throw his vote away." That being the case, when the two major governing parties become hostile to each other to the point where neither party wants to deal with the other, the situation (political and economic) can become precarious and unpredictable; precariousness and unpredictability can be bad for business.

III. The Specter of Electoral Irrelevance and the Future of American Democracy

According to a recent article from Zero Hedge, "Recent times have been particularly hard on young adults." In this way, the "new youth normal" translates into "your parents' basement." The article discussed a recent Pew Research study that found that "fully 55% of those aged 18-24 (and 4% of 25-34 year olds) say young adults are having the toughest time in today's economy." Due to declining economic conditions, "a shocking 34%" of individuals in the 25 to 29 age range have had to move back home with their parents. From the article: "Finding a job, saving for the future, paying for college, and buying a home are seen as dramatically harder for today's young adults compared to their parents' generation." Durden commented that "[a]s these increasingly disenfrachised young adults make some of life's biggest transitions (or not as the case seems to be), we wonder just how long it will be before Al-Jazeera is reporting on the Yankee-Spring... or maybe the [Bureau of Labor Statistics] will decide to redefine basement-dwelling (or rioting) as a full-time job."

The specters of youth unemployment, expensive student loans, and arguably all-out exploitation of young Americans (via Social Security and higher education) add a somewhat ominous dimension to the current socio-economic debate in the US. A recent nationwide poll of young voters done by Hiram College found that "50 percent of 18 to 29 year olds view President Obama" favorably, but "they do not think highly of either the Tea Party or the Occupy Wall Street movements." Even further, young voters "would like to see an independent candidate run for president." Whereas according to the study younger voters are more likely to be Democrats, "more than two-thirds of them think the government is broken." The fact that more than two-thirds of young voters think that the government is broken portends a possible evolution of the American political process going forward.

Along that same line of thought, a recent op-ed from John Iacovelli discussed how "an American Spring is in the air." In interviewing Kevin Zeese and Margaret Flowers of the Occupy movement, Iacovelli discussed how "Occupy Phase 2" will be a non-violent protest to take place this spring -- involving "setting up alternative economic structures designed to weaken the 'pillars of power'." For Kevin Zeese, "the conversation between President Obama and the Republican nominee is a false conversation, for what will be said is only what those nominees' contributors allow them to say." In pertinent part, Iacovelli wrote that the Occupy movement "has no time to look to elected leaders to solve problems because time is short, and the system does not work. The true conversation is the one we must continue in the movement. But after 2012, it may be time to organize another party." The Occupy movement appears to be preparing for massive demonstrations in Washington, DC on March 30, 2012 to signal the start of the American Spring and in Chicago on May 1, 2012 to protest the concurrent NATO and G8 summits.

The eventuality of an American Spring of some sort with Occupy protesters looking for a Tahrir Square moment in the US adds an interesting dimension to the 2012 elections. The dichotomy of the 1 percent and the 99 percent subtly suggests a perspective where the political process has been compromised; even former Clinton labor secretary Robert Reich has recently written how Pres. Obama has handed the electoral process "over to the super rich." Whereas we will have to wait and see what becomes of these Occupy demonstrations, it's beginning to appear that many young people are starting to feel estranged from not only the political process but also functional life in terms of employment, moving out, and making life's rites of passage. Taking all the above into account, the more Americans view the 2012 election as being irrevelant to the US economy, the more likely it is that citizens will feel alienated from the democratic and political processes -- perhaps leading into a situation with low voter turnout for the alleged most important election in our lifetime. As Democratic strategist James Carville recently commented, "Was I the only person who noticed [that the GOP voter] turnout collapsed in Florida, Nevada, Colorado, Minnesota, Missouri and everywhere else?"

Thus, if the 2012 election begins to be perceived by most everyday Americans as being irrelevant to the economy at a time when the economy is the no. 1 issue in the country, what does that say about the political process? Or even further, what does this sentiment portend regarding the evolution of the political consciousness in the US going forward? The answers to such questions only seem to raise further questions.

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