Let's Play a Word Association Game

The continued bad news from the financial markets has clearly shoved the economy into the limelight as one of, if not the key issue in this election. Many pundits believe that this has the potential to shift the race in Obama’s favor. I happen to agree with this sentiment, but it is important to understand why; the reasoning is not as simple as it may seem.   

The traditional logic of the economy and presidents is that since the president is the only nationally elected official, he is held (rightly or wrongly) accountable for the overall wellbeing of the national economy. In many ways, the president is kind of like a quarterback in football: when things go right he gets too much credit, and when things go wrong he gets too much blame. The key fact to remember is that while a president is a critical player in the health of the economy, he is still only a single person among many other players in the game. Thus, he can make all the right choices and still get stuck with the blame for other players’ poor performance.   

Rather then trying to actually assess how much blame we should attribute to the Bush administration for the current economic crisis versus mistakes made by key finical institutions, it is more important to examine how the current set of events is likely to be interpreted by likely voters in November. Intuition may suggest that if people are personally feeling the pinch of a bad economy (i.e. they suddenly have less in their purses or wallets than they did previously), they should hold the party in power of the presidency responsible and vote for the opposing party’s candidate.    

However, most reputable research disputes this theory. Rather than voting based on ones own economic situation, the vast majority of voters tend to vote based on what they perceive as the general condition of the economy as a whole. This raises several important questions regarding the current election.   

The first is that for the first time in the history of the United States, most adults have some stake in the stock market. Either as a result of personal stocks or retirement funds, peoples’ well-being is much more closely tied to the welfare of the stock market than ever before. The result is that even if the overall fundamentals of the economy are strong, if people perceive that the overall stock market is in crisis, then the nation is in a national economic crisis. Thus, using the same logic as before, if people perceive a national crisis in the stock market, which I think most currently do, they will likely vote democrat in November.   

The second aspect that is unique to this financial market crisis situation is that in some ways the republicans are guilty of their own image success. In terms of associations, if you asked most people which party they associate with big business or Wall Street, they will say republicans. Thus, even though the Republican Party is not probably directly responsible for the current finical situation, republicans are guilty via association.   

If this association theory is correct, then all Obama should have to do to win on this key issue is to hammer on this association and pose the question “who you would rather have clean up this mess: the people who are in bed with big business or an outsider who knows what is right?”  

The third aspect to take note of is that in terms of the abilities of the candidates, McCain will be hard pressed to win an election that is based on the economy. McCain’s best chance of winning this election is to keep the agenda on national security, experience, and social conservative issues. He has almost no experience with economic issues and his age, race, income (via his wife), and own statements on the economy all make him ill suited to play the understanding white knight to the rescue.   

This is not to imply that Obama would actually do a better job at attempting to resolve the situation. That question will largely be the result of what kind of economic teams are put in place by the respective candidates. But actual chance of success is much less important in the economic arena of politics than association with ability. On this count, Obama is clearly far out ahead of McCain.