A moment in a recent debate between Cathy McMorris Rodgers and Mark Mays illustrated a problem facing voters this election season.
When the candidates got to ask each other a question, the challenger turned to the incumbent and announced a two-part query about the economy, the banking crisis and federal spending. Part one:
“Cathy, how many millions in a trillion?”
McMorris Rodgers paused, and around the room full of Spokane business leaders, audience members calculated the zeros in their heads and on their fingers.
A million millions, McMorris Rodgers said, and many heads nodded, some more confidently than others. Everyone who had heard about the financial crisis in recent weeks had heard the figure. The economic stability package could cost more than $800 billion, which is regularly described as nearly a trillion; the total amount of bad debt from risky loans is in multiples of trillions, and the national debt, as Mays noted, was going to $10 trillion, or 10 million million.
Mays may have been trying to score a point in the debate, but the exchange highlighted an important point: Economic issues are weighing heavily on voters’ minds, maybe more heavily since the Great Depression. But all the big numbers carry little real meaning until they’re translated to people’s everyday lives.
Daily headlines catalog the stock market’s decline, crises in the international banking system and the federal government’s willingness to spend nearly a trillion dollars to shore it up.
Voters read those headlines, listen to the candidates’ stances, and scratch their heads. What does a 1,000-point drop in the Dow or a credit crisis brought on by derivatives mean to them?
The problems fall under the realm of macroeconomics, and voters live microeconomics, said Patrick Jones, executive director of the Institute for Public Policy and Economic Analysis at Eastern Washington University.
Translate the drop in the Dow to a loss of 25 percent out of a voter’s 401(k) plan, Jones said. Bring the credit crisis closer to home – say an employer can’t borrow money to buy inventory or meet payroll, which could mean layoffs.
“The people on the street, what they care is how it affects their pocketbook,” said Steve Scranton, of Washington Trust Bank and a member of the Spokane Mayor’s Economic Policy Advisory Board.
Voters might see gas prices fall and think, “Great!” But they don’t consider that the prices are coming down because the economy is slowing and demand for fuel dropping, Scranton said.
“People have a hell of a time determining how macroeconomic policy affects them,” said Phil Kuharski, who has tracked the Spokane economy for decades.
Most voters, and some politicians, could use a class in basic economics, he said. Right now, it’s common to hear politicians talk about an economic crisis. But the country doesn’t have an economic crisis, it has a financial credit crisis, he added.
Kuharski explained the difference this way: Think of the economy as a big, complicated machine with a motor. Credit is the gasoline that runs the motor, and right now it’s in short supply, in part because institutions that normally lend money don’t trust their normal customers.
“We’re having a fuel crisis,” he said. But credit isn’t the economy. The economy is people producing goods and services, and other people buying those things, or buying and improving property. And it’s all still here.
It can be difficult to grasp, which is why Kuharski and other economists think voters could spend a little more time studying economics. But maybe a little less time using economics to determine their votes.
Randy Barcus, chief economist for Avista Corp., says he sometimes makes people angry with his take on the relationship between the election and the economy. Forget what the pundits tell you about economics tipping this election, he said: “It does not matter who gets elected.”
In the presidential race, Barack Obama and John McCain have essentially the same stance on the economic stabilization package. They both voted yes.
They have different tax plans and would try to make different changes to the health care system.
Who the next president picks for U.S. treasury secretary might matter, because the economic stabilization package gives new authority to that official to help ease the credit crisis. But the economy is like an aircraft carrier – it turns very slowly. What politicians do “doesn’t matter, except on the fringes and not for two to four years.”
Economics matters even less in an election for governor or mayor, Barcus insisted. Most economic growth happens in the private sector. That includes job growth, which candidates like to promise but really can’t deliver quickly.
Government can change its policies to encourage or discourage investment, which can eventually create jobs, he said. “But that takes a long time.”
That’s not to say that voters shouldn’t pay attention to macroeconomics, Kuharski said. It’s important to pay attention to big issues, including energy and trade policy and economics.
“But they can’t expect politicians to be able to close the gap in understanding,” he said.