Economic issues receive a great deal of attention during presidential election campaigns in the United States of America as well as in other comparable places around the world. Though a multitude of issues exist, this essay aims to provide a concise framework for drawing contrasts and comparisons between economic issues and events and election campaign statements. One should expect seekers of the presidential office to issue statements about recent job growth, worker productivity, energy supplies, congressional actions, income taxes, and the like. Readers and informed voters can take a step back from those statements or claims and examine them using an aggregate demand-aggregate supply model. It simplifies reality by informing us about the economic state and a primary set of dynamic factors that influence the economy. In addition, one can use the model to contemplate the interdependencies among economic events, fiscal policy, and monetary policy. Armed with an understanding of that framework, readers will gain a better understanding of the cyclical natures of political campaigns and economic events and the critical challenges of synchronizing cycles and policies.
Keywords Aggregate Demand; Aggregate Supply; Economic State; Fiscal Policy; Election Campaigns; Model; Monetary Policy
Economic issues gain prominence during presidential election campaigns in the United States of America and in other places around the globe. Those issues and elections capture the attention of politicians, journalists and scholars from many angles. At the conceptual level, many scholars during the past three decades have focused on the complex relationships between the state of the national economy and the attributes of a presidential office holder or seeker. At the empirical level, it appears that researchers have a lot more work ahead of them in their search to uncover the nature of those relationships. As specific examples of the wide diversity in those efforts, one of the economists referenced in this essay views election results as a function of economic events and another holds the converse view. Acknowledging the uncertainty in the nature of a relationship between a set of presidential election results and a set of economic events, this essay merely serves to inform students and prospective voters by highlighting some key factors and issues that often make their way into presidential and other election campaigns.Campaign Issues
A range of issues may arise during any given campaign for national office including: Energy prices; environment; health care; antitrust; poverty; crime; education; social security; minimum wage; unions; labor discrimination; international trade; federal spending; income taxes; fiscal policy; national debt; stock markets; monetary policy; interest rates; inflation; and unemployment. Invariably, voters will find the contenders focusing on the last two items in that list. On the one hand, this reduction can simplify matters for voters as they prioritize their own ranking of issues and seek to hear the opposing candidates' views on the issues. On the other hand, some candidates for political office and some students of economics may be familiar with the tradeoff between inflation rates and unemployment rates.Comparing Campaigns & Economic Conditions
A purpose of this essay is to provide a concise framework for drawing contrasts and comparisons between campaign statements and economic conditions. The median voter model is a tool with which to simplify those economic and political realities. By extension, as already alluded in the paragraph above, candidates for a political office tend to move toward the preferences of the median, or swing, voter. Campaigns seem to increase in complexity and intensity when the results from popular polls indicate that voters are emphasizing one issue over the others. In the pages ahead, readers will find presentations of some economic goals, policies, and variables that tend to surface during political campaigns.
While on the campaign trail, presidential office seekers may make statements about recent job growth, worker productivity, energy supplies, congressional actions, income taxes, and the like. Sometimes the following issues receive little attention or factual data: The status of a federal budget, fiscal policy, and monetary policy; the recent trends in personal income, in income distribution, and in consumer confidence; the rates of unemployment, interest, inflation, and economic growth; and, so on and so forth. Therefore, it is important for politicians, voters, and students to realize some advantages by enhancing their awareness of a critical set of economic measures.Five Goals of the National Economy
This essay condenses into a few pages a significant portion of information and it points readers toward other sources of information. As a primer available for and conducive to knowledge expansion, for instance, most introductory textbooks in economics list five goals for a national economy. In addition, those books highlight many of the inherent conflicts that exist among and between those goals. As a terse introduction to the conflict between two specific goals, this section begins with a general description of the five goals.
- First in the list is efficiency, which occurs as existing resources generate larger amounts of output in combinations that are valued most by society and consumers.
- Second, full employment occurs when everyone who is eligible for work and desires it actually has a job.
- Third, an equitable distribution of income occurs with the relative movement toward a situation of greater equality in which, for example, ten percent of the population earns ten percent of the income in comparison to a prior situation.
- Fourth, price stability occurs when an inflation rate is as low as possible, stable across time, and consistent with expectations.
- Last, economic growth occurs when there are annual increases in Real Gross Domestic Product (RGDP), which by definition is the constant dollar value of final goods and services produced in the United States during any given year.
To obtain finer detail on these goals, readers again are encouraged to consult textbooks commonly used in introductory undergraduate-level courses in economics including those by Arnold (2005), Guell (2008), and/or McConnell & Brue (2008). Though any contender for the nation's highest political office can refer to any of these goals to launch a debate with their opponent, the rates of economic growth, unemployment, and inflation seem to be the favorite goals in the list. The latter two usually receive the greatest amount of attention and make for a lively and perhaps endless debate. One reason for its presence in a political debate is the inverse relationship between inflation rates and unemployment rates as seen in the Phillips Curve, which is a key concept to keep in mind now and for future reference.
If recent elections are any indication, the trade off will certainly stimulate bantering between opposing candidates and political parties. At this juncture, the reader may begin to imagine how a focus on one side of the equation would add complexity to a public debate between two contenders for a political office. In order to understand that relationship, we need to turn our attention to the basic elements of the national economy.The Aggregate Demand-Aggregate Supply Model
The aggregate demand-aggregate supply (AD-AS) model informs us about the locus of national output and price level and the set of factors that influence those levels. This section presents the model in a simplified form placing an emphasis on the trade off between inflation and employment. Working in a stepwise manner toward that purpose, readers and students alike become aware of the need to understand graphs and to know that a demand line or curve is downward sloping to the right. This is true whether one is studying microeconomics or macroeconomics. As a specific case in service to this purpose, the supply line or curve in macroeconomics is J-shaped; alternatively, it takes the form of a backward-L shape with a smoothed elbow instead of one with a right angle.
Two key reference points provide essential information. One key reference point is the output level that corresponds with the vertical segment of the AS curve. That segment suggests national output is at its maximum. Another key reference point...
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