Recently by John Tamny: What Keith Richards' ‘Life’ As a Rolling Stone Tells Us About Economics
With the Obama economy limping along thanks in part to the Administration’s policies in favor of extreme dollar weakness, there’s growing speculation as to his re-election chances in 2012. Will a difficult economic situation that includes high levels of unemployment make Obama a one-term president? History says no given the power of incumbency.
Added to that, another popular narrative of late points to an Obama victory owing to the supposed economic illiteracy of the electorate, along with a media that will provide our weakened president with positive media coverage no matter the state of the economy. Of course the problem with this bit of theorizing is that Americans aren’t stupid, and after that, past elections suggest that those same Americans tend to tune out the media.
Ronald Reagan’s two terms in office tell the tale here. As USA Today media reporter Peter Johnson has put it, “Over the course of his campaigns and eight years in office, Ronald Reagan’s press peaked and fell but was always negative. … In his re-election bid in 1984, 91 percent of his coverage was negative.”
The above is important. Despite a rising economy and millions of new jobs, the media invariably stuck to a number of gloomy themes during the Reagan years, including the rising homeless population, twin deficits, and a generalized assumption that the supposed economic gains of the 1980s were only being enjoyed by the wealthy few. Amidst this constant negativity, Reagan was returned to office in 1984 with one of largest landslide victories in electoral history.
Back then, stocks confirmed what voters already knew – that the economy was doing very well. Despite a major recession brought on by Paul Volcker and the Federal Reserve’s needless flirtation with quantity money targets in the early 1980s, the Dow Jones Industrial Average still returned 134 percent during Reagan’s presidency. Markets and the Electoral College told the truth about an economy and presidency that the media regularly tried to cast in a negative light.
To put it simply, voters aren’t dim and they know when the economy is performing well. Conversely, when the economy is acting badly, voters are well aware once again.
For evidence supporting the above, we must first journey back to Jimmy Carter’s presidency. As William Greider put it in Secrets of the Temple, “Despite the aggravations of inflation, President Carter had presided over one of the longest and most expansive periods of economic growth in postwar history, four years of recovery starting in 1976.”
So while GDP, the frequently faulty measure of economic health, was rising during Carter’s presidency, neither the stock markets nor the electorate were fooled. The recession during the Carter years was the falling dollar, as evidenced by spikes in gold and oil. A falling dollar is always recessionary for limited capital flowing into hard, commoditized assets, and away from innovative ideas that fund our economic advancement.