The Economy and the Voters

There’s a cliché in economic psychology that goes something like this:

“If your neighbor loses their job, it’s a recession. If you lose your job, it’s a depression.”

That simple statement neatly sums up the danger of predicting how people interpret and react to economic news. Regardless of what the national, “big picture” economic numbers may be, the economy -- from a vote-influencing standpoint -- is really only what the individual thinks it is, as filtered through the prism that passes the light into their individual world. The GDP may say one thing, the Labor Participation Rate may say something else, but if that person was recently laid off because their facility just shut down and moved its operations somewhere else, then the economy is bad. Pure and simple.

The first thing that affects an individual’s perception of the economy is the solidity and staying power of his employer. A coal miner, an automotive assembly-line worker, a customer service representative, these kinds of positions are very subject to outsourcing. U.S.-based workers in these fields are ripe targets to being replaced with lower-cost foreign labor. For a 59-year-old lifelong auto plant worker, the idea of “re-inventing” oneself after decades of doing the same thing is highly unrealistic and quite daunting. For him, there is no easy alternative path. Frankly, he either goes into his brother-in-law’s business, works in retail or food service, or collects unemployment for as long as possible and then staggers his way to early retirement. An ignominious, unjust end to what had been a perfectly respectable, dignified working career.

GDP numbers are less than meaningless, as are things like historic national unemployment among this or that demographic group. One interesting aspect of these situations is that many displaced workers invariably feel that it’s the government’s responsibility to take care of them if their job disappears for whatever reason. When a facility moves or a job category fades into irrelevance due to changing market conditions or evolving technology, the individual worker often thinks the government should make up for his loss. The degree to which the disadvantaged worker (and by extension, their family) feels his needs have been met by state or federal agencies often determines the extent of support or disapproval the affected individuals will show at voting time. Unrealistic or not, that’s simply the way many people feel. The abstract national economic numbers don’t matter to them; whether the government will prevent them from experiencing a personal financial catastrophe is what matters to them.

Another area where the economy affects voting decisions are the “daily scorecard” factors. There are several day-in/day-out visual indicators of the economic status of people’s daily lives that can and do influence their voting tendencies. Gasoline pricing -- plastered in big numerals that they pass by each and every day on their way to work -- the price of grocery staples like milk, eggs, and hamburger in the supermarket, rent or real-estate tax, these are the real-life expenses that determine whether or not any given person feels “Things are getting tight” or “Hey, I have a bit more breathing room.”

Note that the price of these economic factors may very well not have anything to do with any local, state or federal government policy whatsoever. But many voters will ascribe either blame or credit, as applicable, to a governmental entity, even if that economic component was totally unrelated to any government activity.

Given its highly-visible nature, gasoline pricing is an excellent example of an economic factor that will reflect credit or blame on the government in the eyes of the voter, even though the government may not be entirely -- or even partially -- responsible for drastic changes to its price. Informed individuals know that retail gasoline pricing is subject to four main factors:

  1. Worldwide supply and demand for crude oil, based on economic activity and the supply stocks on hand.
  2. Oil exploration/extraction activity and technology. Fracking, for an example, is an oil extraction technology that entered widespread use only a few years ago. With fracking, the U.S. has been able to completely rewrite the rules of crude oil production and supply, and by most measures, is now the world’s largest producer of crude oil.
  3. Oil refining capacity and gasoline distribution considerations. The U.S. is constantly “on the edge” of refining capacity, given how expensive refineries are to build and the undesirability that most locales feel about having a refinery in their neighborhood (the “NIMBY” effect). The briefest of refining interruptions due to seasonal switchovers, maintenance delays or accidents will temporarily cripple the production of gasoline and cause a price spike. There is also the effect of “boutique grades” of region-specific gasoline that prevents the transfer of gasoline from one market to another in order to relieve spot shortages, because gasoline intended for Kansas City may be unlawful in, say, San Francisco.
  4. Geopolitical Influences, aka, the “Terrorism Premium.” Political unrest that causes a supply interruption from an unstable country will result in an immediate worldwide price jump because of the way it spooks the commodity market, with a commensurate rise in retail gasoline prices.

(These are the main dynamic, changeable factors. For this discussion, we’re going to assume that state and federal gasoline taxes are a constant.)

These four factors influence the retail price of gasoline that the average voter sees on a daily basis, but the “government” can’t do too much about any of them on an immediate basis. If China’s economy is expanding and putting pressure on worldwide oil supplies -- forcing prices higher -- there’s not much that a U.S. administration can do about it. But that administration will get the credit or blame as gasoline gets more or less expensive.

Gasoline pricing is a “daily scorecard” factor that either makes the average voter feel better or worse about their own economic situation. The government will usually get the blame or the credit at election time, yet this, like so many of the economic factors that influence people’s votes, has very little to do with direct government action.

The “big numbers” that the government likes to tout -- so many consecutive months of job gains, the weekly unemployment claims continually diminishing, the unemployment rate being at historic lows, the GDP growing at a faster rate than it did under a political rival’s administration, stock market levels and so on -- often have very little to do with how the everyday person views the economy and thus the “big numbers” don’t necessarily influence their vote. Politicians would do well to recognize this and adjust their communications accordingly.

There’s a cliché in economic psychology that goes something like this:

“If your neighbor loses their job, it’s a recession. If you lose your job, it’s a depression.”

That simple statement neatly sums up the danger of predicting how people interpret and react to economic news. Regardless of what the national, “big picture” economic numbers may be, the economy -- from a vote-influencing standpoint -- is really only what the individual thinks it is, as filtered through the prism that passes the light into their individual world. The GDP may say one thing, the Labor Participation Rate may say something else, but if that person was recently laid off because their facility just shut down and moved its operations somewhere else, then the economy is bad. Pure and simple.

The first thing that affects an individual’s perception of the economy is the solidity and staying power of his employer. A coal miner, an automotive assembly-line worker, a customer service representative, these kinds of positions are very subject to outsourcing. U.S.-based workers in these fields are ripe targets to being replaced with lower-cost foreign labor. For a 59-year-old lifelong auto plant worker, the idea of “re-inventing” oneself after decades of doing the same thing is highly unrealistic and quite daunting. For him, there is no easy alternative path. Frankly, he either goes into his brother-in-law’s business, works in retail or food service, or collects unemployment for as long as possible and then staggers his way to early retirement. An ignominious, unjust end to what had been a perfectly respectable, dignified working career.

GDP numbers are less than meaningless, as are things like historic national unemployment among this or that demographic group. One interesting aspect of these situations is that many displaced workers invariably feel that it’s the government’s responsibility to take care of them if their job disappears for whatever reason. When a facility moves or a job category fades into irrelevance due to changing market conditions or evolving technology, the individual worker often thinks the government should make up for his loss. The degree to which the disadvantaged worker (and by extension, their family) feels his needs have been met by state or federal agencies often determines the extent of support or disapproval the affected individuals will show at voting time. Unrealistic or not, that’s simply the way many people feel. The abstract national economic numbers don’t matter to them; whether the government will prevent them from experiencing a personal financial catastrophe is what matters to them.

Another area where the economy affects voting decisions are the “daily scorecard” factors. There are several day-in/day-out visual indicators of the economic status of people’s daily lives that can and do influence their voting tendencies. Gasoline pricing -- plastered in big numerals that they pass by each and every day on their way to work -- the price of grocery staples like milk, eggs, and hamburger in the supermarket, rent or real-estate tax, these are the real-life expenses that determine whether or not any given person feels “Things are getting tight” or “Hey, I have a bit more breathing room.”

Note that the price of these economic factors may very well not have anything to do with any local, state or federal government policy whatsoever. But many voters will ascribe either blame or credit, as applicable, to a governmental entity, even if that economic component was totally unrelated to any government activity.

Given its highly-visible nature, gasoline pricing is an excellent example of an economic factor that will reflect credit or blame on the government in the eyes of the voter, even though the government may not be entirely -- or even partially -- responsible for drastic changes to its price. Informed individuals know that retail gasoline pricing is subject to four main factors:

  1. Worldwide supply and demand for crude oil, based on economic activity and the supply stocks on hand.
  2. Oil exploration/extraction activity and technology. Fracking, for an example, is an oil extraction technology that entered widespread use only a few years ago. With fracking, the U.S. has been able to completely rewrite the rules of crude oil production and supply, and by most measures, is now the world’s largest producer of crude oil.
  3. Oil refining capacity and gasoline distribution considerations. The U.S. is constantly “on the edge” of refining capacity, given how expensive refineries are to build and the undesirability that most locales feel about having a refinery in their neighborhood (the “NIMBY” effect). The briefest of refining interruptions due to seasonal switchovers, maintenance delays or accidents will temporarily cripple the production of gasoline and cause a price spike. There is also the effect of “boutique grades” of region-specific gasoline that prevents the transfer of gasoline from one market to another in order to relieve spot shortages, because gasoline intended for Kansas City may be unlawful in, say, San Francisco.
  4. Geopolitical Influences, aka, the “Terrorism Premium.” Political unrest that causes a supply interruption from an unstable country will result in an immediate worldwide price jump because of the way it spooks the commodity market, with a commensurate rise in retail gasoline prices.

(These are the main dynamic, changeable factors. For this discussion, we’re going to assume that state and federal gasoline taxes are a constant.)

These four factors influence the retail price of gasoline that the average voter sees on a daily basis, but the “government” can’t do too much about any of them on an immediate basis. If China’s economy is expanding and putting pressure on worldwide oil supplies -- forcing prices higher -- there’s not much that a U.S. administration can do about it. But that administration will get the credit or blame as gasoline gets more or less expensive.

Gasoline pricing is a “daily scorecard” factor that either makes the average voter feel better or worse about their own economic situation. The government will usually get the blame or the credit at election time, yet this, like so many of the economic factors that influence people’s votes, has very little to do with direct government action.

The “big numbers” that the government likes to tout -- so many consecutive months of job gains, the weekly unemployment claims continually diminishing, the unemployment rate being at historic lows, the GDP growing at a faster rate than it did under a political rival’s administration, stock market levels and so on -- often have very little to do with how the everyday person views the economy and thus the “big numbers” don’t necessarily influence their vote. Politicians would do well to recognize this and adjust their communications accordingly.