ECONOMIC ANALYSIS: Does the economy care who wins in November?

If you ever visit Indiana’s past through the eyes of our state’s excellent historians, you uncover many amazing facts. To me, one of the most remarkable is this: In the 19th century, before the age of the automobile, mass communication and high school basketball, the voter turnout among Hoosiers in national elections approached, and sometimes surpassed, 90 percent.

When you think about the sacrifice it took to get to a polling place in those days, that’s an incredible achievement. Of course, the polls were often open for a week or more in that time, and the exclusion of women, blacks and those who did not own property from the voting booth made participation rates look a little better as well. But there’s little doubt that before there were teams of five that were bouncing round balls on hardwood courts, the official sport of Indiana was politics.

It’s an apt analogy, because many of us today still follow the rise and fall of party political fortunes as a sort of sporting event. The ever-present quantification of pre-election voter sentiment in polling statistics and fund-raising results bears a remarkable resemblance to the standings we see on the sports pages of the newspaper. And when it’s over, we feel better when our side wins, just as we like the home team in any sport to prevail, even if the election outcome otherwise has no direct impact on our well-being.

But aside from those vying for patronage jobs, or special interests concerned with their private perks, what exactly is our skin in this game of politics? It’s not a ballgame, after all. Those we elect will govern all of us, supporters or not, until the next election.

From the point of view of the economy, it’s a surprisingly difficult question to answer. The economy has been notoriously immune to political rhetoric. We’ve had inflation under Republican and Democratic administrations alike. There have been good and bad outcomes for almost every economic variable of interest, including job growth, budget deficits, and productivity, irrespective of which party held sway.

That’s true for the Indiana economy as well. The long, slow decline in the relative prosperity of the state economy, perhaps best measured by our per-capita income ranking among other states, did not pause or change direction when a new resident moved into the governor’s mansion.

I’m not sure if that says something about the way the economy works, or the way our political system works. It’s probably a little of both.

It certainly reminds us that the power our political leadership exerts over the economy is a good deal less than many of us seem to think. It’s comforting to think that actions of our leaders are decisive, but questions about how well the current president or governor has performed in managing the economy are based on a false premise. The most important shortterm management decisions on the economy are left to the unelected governors of the Federal Reserve.

In the longer run, of course, policy decisions made in Congress and in state legislatures can have a significant impact on the climate for economic growth. And perhaps there is something about our political system, but recent years have seen those decisions cut against party stereotypes. The Clinton administration championed free trade and welfare reform. And the current Bush administration pushed though a huge expansion in Medicare.

The reverberations of those decisions, and many others, show up in economic statistics usually long after the principals have left office. But predicting which party in power will make which type of decision hasn’t been easy the last few years. So if you’re riding a donkey or an elephant this electoral season, more power to you. You’re following a long tradition. As for myself, I’m just hoping whoever gets into office has what it takes to do right for the economy.