Is It Still The Economy, Stupid?

For decades, approval of the economy would decide how the nation votes. But what happens when just a fifth of the people see all the benefits?
Occupy Wall Street protesters join a labor union rally in Foley Square before marching on Zuccotti Park in New York's Financial District. Wednesday, Oct. 5, 2011, file photo, (AP Photo/Jason DeCrow, File)

Occupy Wall Street protesters join a labor union rally in Foley Square before marching on Zuccotti Park in New York’s Financial District. Wednesday, Oct. 5, 2011, file photo, (AP Photo/Jason DeCrow, File)

Perhaps the most sacred tenet of political analysis is that Americans vote with their wallets and the state of the economy is the deciding factor in any election. Now, this doesn’t negate the numerous studies which found that racial animus, xenophobia, and fear of change were huge drivers in the 2016 election, but the general idea was that concerns about the economy sealed the deal. From a broad perspective, that doesn’t seem to make a lot of sense. After all, the economy was doing great, and the current boom — which President Trump once called fake as a candidate, but for which he’s is now busy taking credit while advancing his trade wars — was well underway.

And yet, while the tail end of Obama’s job approval was bolstered by the nation’s economic outlook, Trump’s isn’t and has changed little since May of 2017 in the grand scheme of things. Likewise, despite the roaring economy predicting that a candidate promising to continue the same economic policies Obama promoted would win, that didn’t happen. So what’s going on? Well, voter suppression, the fact the Electoral College makes where citizens vote more important than how many of them actually vote, Russian propaganda, and good, old-fashioned nativism and bigotry definitely played big roles. But they shouldn’t have triumphed over all the economic good news according to the pundits. So, what happened?

Well, decades of trickle-down happened. A good economy doesn’t really mean good news for the majority of voters anymore. They may approve of how a president handles it, but many of these policies no longer make much of a difference. We’ve been over the dire statistics before. Nearly 8 in 10 Americans are living paycheck to paycheck, 4 in 10 will retire broke, and 6 in 10 couldn’t afford to spend $500 to respond to an emergency. When you look at the overall income distribution in the U.S., there’s little difference in wealth for more than 7 in 10 Americans since they don’t benefit enough from tax cuts, and their wages are stagnant when adjusted for inflation as costs of housing, healthcare, and education are skyrocketing.

wage growth stagnation chart

Source: Quartz/BLS

Statistics on wealth are equally disconcerting. Collectively, 80% of Americans own just 7% of the nation’s wealth while 19% lay claim to more than half. The remaining one percent? Forty cents out of every dollar in the country belong to them. Worse yet, a survey conducted by Harvard professor of business Michael Norton and behavioral economist Dan Ariely, found that we’re basically in denial about the severity of the problem. While Americans generally believe that wealth distribution is too distorted for their taste, they fail to appreciate the full extent of the divide and how far behind they are in wealth creation.

actual wealth distribution in the united states

Source: YouTube/politizane

These numbers and surveys are not new, and even current statistics don’t vary much from what we’ve seen for the last decade. The Norton and Ariely survey was published in 2011, and constant coverage of income inequality began the same year. So why is inequality accelerating thanks to unnecessary tax giveaways to the wealthy by politicians consistently reelected to do just that? Perhaps, as Ronald Wright said, economically stymied Americans “see themselves not as an exploited proletariat but as temporarily embarrassed millionaires” and with their seemingly unlimited optimism about the future, assume and plan for the best.

estimated vs. idea vs. actual wealth distribution in the united states

Source: YouTube/politizane

Perhaps the living avatar of this attitude is Sam Wurzelbacher, better known as Joe The Plumber, who became famous worrying about having to pay taxes on the $200,000 per year handyman business he was planning to purchase. As he was brought up over and over again during the presidential debates in 2008, he sounded like a businessman worried about policies that might cut into running his company. But he wasn’t. He didn’t have a proper license, was making $40,000 per year, and had a lien against his assets for not paying the taxes he was so worried about cutting into his imaginary profits. His complaints were based not on his economic reality but his financial dreams.

The same wishful thinking dominates the national discourse about wealth and income. We’re told that taxes “punish success” and that America is not a nation of have and have-nots, but “those who made it and those who will make it” even though basic mathematics says that you can’t run a civilization without taxes and that there will always be people who are worse off in any system that isn’t a moneyless, post-scarcity utopia of absolute equality. And so, voters just keep electing politicians who stuff the pockets of the wealthy and refuse to do the hard work of creating a proper vision for a post-industrial economy, blaming their failures on convenient and powerless scapegoats, claiming all they need is more unchecked power and fewer questions to fix fiendishly complex problems with simple solutions.

When these politicians assume office and the economy grows on paper, 8 out of 10 voters don’t feel the benefits because they end up being swallowed by the top quintile. This may be why half of voters approve of how both Obama and Trump have been handling the economy over the past three years, but are still concerned about their own futures and willing to cross party lines. In 2016, 77% voters who said their financial situation worsened over the previous four years voted for Trump according to exit polling, and among them was a sizeable contingent of former Obama voters who believe he let them down on the economic front. In the meantime, 72% of voters who said their financial situation improved cast their votes for Clinton.

Americans have developed an immensely complex relationship with the economy, and they’re conflicted about their place in it and what should be done to improve it. An economic boom that was approved of by the public but sent few of the benefits their way didn’t help Democrats, and there’s little reason to think that an even more lopsided distribution of economic gains will help Republicans. The bottom line is that voters are casting their ballots not on overall economic performance and their satisfaction of the macro statistics, but their perception of how much of this great economy benefits them. Since there’s no longer a direct link between a growing GDP and increased financial security for the overwhelming majority of voters, pollsters and pundits have to stop treating a few baseline numbers as the deciding factors in elections.

For as long as trickle-down, supply-side economics is the law of the land and the top quintile of citizens own more than 9 in 10 dollars worth of assets, liquid or not, this will remain a problem for any president of any party trying to bet the farm on good macroeconomic news and forecasts. Our pundits and political analysts need to make similar adjustments in their thinking. Often, in politics, things are always one way until they suddenly aren’t. And when it comes to using an overall approval of the economy as the ultimate barometer of the voters’ mood, they really need to try and get ahead of the curve and start talking about the effects of inequality on the electorate because voters sure are talking about it at their kitchen tables.

Check out our video series on income inequality.

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Opinion // Economy / Polling / Voters