Republican presidential nominee Mitt Romney has made the economy the center of his campaign, hoping for a repeat of the election of 1980, where Ronald Reagan unseated Jimmy Carter in a weak economy, or 1992, where Bill Clinton did the same to George H.W. Bush. But there was a marked difference between the two recessions that could prove instructive for Romney and running mate Paul Ryan heading into November.
What was unique about the recession of 1980 was the high levels of inflation, reaching double digits. Though inflation affects different people in different ways (helping debtors at the expense of creditors, for example), it nonetheless imposes costs on society as a whole–costs that every person, as a consumer, eventually faces. The high interest rates necessary to bring inflation down also impose costs that are widely felt and shared.
High unemployment does not affect society in general in quite the same way. It affects a small proportion of society directly, and the rest indirectly. With low inflation, low interest rates, and a rising stock market, many people may not be aware of the problem at all. Even with an expanded definition of unemployment, including those who have given up looking for work, most Americans may be able to consider it someone else’s problem.
Clinton ran against Bush during the recession of the early 1990s, which was less severe than the recession of the Carter or Obama eras. Inflation did not reach Carter-era levels (nor did unemployment reach Obama-era levels). Yet Clinton ran on economic policy–and won. What is interesting is that Clinton did not win a majority of the vote, and that the economic issue that dominated the 1992 campaign was the rising cost of U.S. debt.
In many ways, Clinton owed his election to the emergence of H. Ross Perot, who made the national debt his signature issue. Though economists–particularly of the Keynesian variety–sometimes dismiss federal deficits and debts as a driver of economic malaise, to taxpayers who must eventually foot the bill, and worry about rising inflation or interest rates down the road, the issue is a poignant symbol of economic mismanagement.
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