Elections, Unemployment & Inflation Research Paper Starter

Elections, Unemployment & Inflation

(Research Starters)

This paper analyzes the issues of employment and inflation as they relate to both the economy and the electoral political environment. In doing so, the reader gleans the risks and potential benefits of extensive economic analysis for a candidate's election or reelection.

Keywords Equilibrium; Inflation; Macro-economy; Recession; Revenues



John Snow was not a very good politician. Certainly, his qualifications were impeccable: a former Chairman and CEO of transportation giant CSX Corporation, co-Chairman of several business association boards (including the prominent Business Roundtable), and high-level official with the Department of Transportation, Mr. Snow was certainly well-experienced enough to serve as the point-man on the issues of economic growth and job creation. Few could argue against this point when President George W. Bush tapped Snow to become the next Secretary of the Treasury in 2003.

However, during his three-year tenure, John Snow was charged with balancing an extremely complex, volatile and unpredictable US economy, which left him and his agency continuously welcoming positive news but acting as if the other shoe was about to drop. Where a career politician might publicly embrace favorable trends in the economy and at the same time downplay problems that may exist, Snow's task was to see the whole picture. By doing so, he had the unfortunate duty to inform the public that the best news may not be the complete news.

In one instance, then-Secretary Snow was asked for his assessment of the post-recession economy. The nation's gross domestic product (GDP) was experiencing high output, employment figures were strong, and all signs pointed to continued economic expansion after a painful first few years of the 21st century. Any observers who might have breathed a sigh of relief at the news, however, were quickly brought back to reality by Mr. Snow's blunt assessment: "that's an environment in which the Fed needs to continually be alert to early signs of inflation," he cautioned ("John W. Snow quotes," 2007).

In an American election season, few voters would have the time to hear a comprehensive economic analysis from the candidates. An era of sound bites and short, energized campaign speeches forces candidates to offer the sort of candor that Mr. Snow presented regarding the economy. In fact, his assessment of strong economic growth would have likely come across to voters as apparent pessimism, as if he managed to envelop a silver lining with the dark cloud of inflation. In this regard, Mr. Snow had the good fortune to not be an elected official seeking another term or a candidate seeking a first term.

Of course, no legislative, presidential, gubernatorial or mayoral candidate can expect to last the entire campaign without being asked about how to address the economy. If inflation is too high, he or she may be asked how to address it. The same can be said about job creation and business development. Unfortunately, the two issues remain at opposite, countervailing sides of an economy, as is the case with supply and demand. For the candidate, to acknowledge and explain this fact to uninitiated voters, while necessary, is extremely difficult to articulate and even harder to factor into a proposal that will generate support.

This paper analyzes the two issues of employment and inflation as they relate to the both the economy and the electoral political environment. In doing so, the reader gleans the risks and potential benefits of extensive economic analysis to a candidate's election or reelection.

Employment & the Economy

On September 11, 2001, the terrorist attacks on New York City and Washington, DC caused massive damage not only to the American psyche but to the economy as well. Most analysts, however, believe that the American economy was beginning to slide significantly prior to September of that year, and the attacks accelerated a near collapse. For four years, the United States struggled with economic introversion and job layoffs. Across the country, state budgets initiated painful cuts in order to offset a lack of tax revenues caused by increased unemployment and corporate shutdowns. Clearly, the boom times of the mid- to late-1990s had come to an end.

The recession of 2001-2004 is now recent history, but the American economy did not simply bounce back to form. The best assessment experts can offer is one of cautious optimism. Even the slightest evidence of turnaround is taken with a grain of salt by the casual observer. In early 2007, revelations of sloughing housing sales, exacerbated by a sudden spike in foreclosures, led citizens and leaders alike to believe that the forecast may not be promising. Consumer confidence became tentative at best and the rising cost of oil only added to latent anxieties.

Making matters worse is a trend that suggests that job growth is slowing. Although 2007 unemployment rates generally held fast compared to 2006 (Bureau of Labor Statistics, 2007), reports of periodic job losses have sent politicians into active mode. Occasional reports of job losses have ignited fears of a return to the stagnation of 2001-2004, and legislators scrambled to put into place safeguards to protect incomes and jobs. One US Senator has proposed increasing the eligibility rates, benefits and duration of Unemployment Insurance (UI), a system paid into by the employers themselves (Schiller, 2007). An increase in the benefits and the number of beneficiaries means that more money must be paid into the fund by employers, who are likely to curtail expansion if they are forced to pay more for UI. Put simply, the call to action based not on a definable trend but on latent fears of a return to a recession has set off reactionary policy responses that may do more harm to the economy than good.

Still, there does appear to be a trend leaning toward an economic slowdown, and in light of an ongoing mortgage crisis and a significant number of families with high credit debt, should a recession return, it appears the American citizens would be harshly impacted. Thus, the 2008 presidential election, which seemed to focus primarily on the continuing military campaign in Iraq, seems to have returned to economic issues that will likely be a litmus test for the candidates' ability to respond to a potential fiscal crisis. Many observers believe the response of any candidate, Republican or Democrat, must be to introduce some sort of economic stimulus in order to revitalize the private sector and thereby pump up jobs and wages. By getting people back to work, experts believe, the current housing and credit crisis can be offset and the economy can avoid its second recession in less than a decade ("Crisis as opportunity," 2007).

There are not many issues to which both parties in the American political system can agree on a solution. In order to ensure that families have food on their tables, businesses thrive and governments can afford to pay for their budget programs, it is clear that a strong...

(The entire section is 3088 words.)