Post by: Benjamin Landy , on November 6, 2012
Contrary to the summary analysis of certain pundits in the closing hours of the 2012 presidential campaign, the contrast between the social and economic policies proposed by President Obama and his Republican challenger are stark. But, counterintuitively, the implications of today's election are all the more historic because the economy will almost certainly improve no matter which candidate takes office in 2013.
The United States added 171,000 new jobs in October, the 32nd consecutive month of private sector growth. The public sector also began to recover in the last few months: in 2010 and 2011, nearly half a million government workers lost their jobs, many of them teachers and educators. In the last three months, public sector employment has rebounded by 83,000.
At this rate, Moody's Analytics and Macroeconomic Advisors both predict the economy will expand by about 12 million jobs by 2016. Even if we go over the "fiscal cliff" at the end of the year (a worst case scenario), and higher taxes and spending cuts push the United States into a recession in 2013, the Congressional Budget Office still expects the U.S. to create over 9 million new jobs by 2017.
Economic growth is also picking up, despite significant headwinds from the debt crisis in Europe and slower growth in China. The latest report from the Bureau of Economic Analysis shows GDP grew at an annualized rate of 2 percent last quarter, faster than the previous quarter and slightly better than analysts' expectations. Although private domestic investment shrank in the last two quarters as businesses grappled with a lackluster global economy and the uncertainty surrounding the fiscal cliff, GDP was buoyed by an improving housing market and healthy retail sales.
What that means, essentially, is that barring some catastrophe, the economy is going to recover no matter who becomes president. (The power of the executive will be limited in either case by a divided Congress.) Romney admitted as much when he told supporters that "if we win on November 6th . . . [w]e'll see capital come back, and we'll see—without actually doing anything—we'll actually get a boost in the economy." It also explains why his forecast for the number of jobs that would be created during a Romney presidency—12 million—is identical to the baseline predicted by Moody's and other analysts.
If Obama gets a second term, the narrative of his presidency, and by extension the entire governing philosophy of the modern Democratic party, will be one of turnaround and success. The stimulus, Dodd-Frank and the Affordable Care Act will be validated by growing employment, financial stability and universal health coverage. If Romney is elected, many Americans will attribute the same (or similar) period of economic recovery to the benefits of conservative governance, including the likely repeal of all of the above. We've seen this happen before: consider the legacies of Jimmy Carter, who took the blame for the exogenous 1973 oil embargo; and Ronald Reagan, who oversaw an economic recovery when the Federal Reserve dropped interest rates from record highs.
Of course, nothing in life is 100 percent predictable. Either candidate could make some world-historical mistake over the next four years that drives the economy over a cliff. But it's not likely. If the economy continues to grow as we expect, the future of both parties—and of two distinctly different visions for the role of government—may well hinge on who gets credit for the simple act of having their hands on the wheel when the economy gets back on track.