Both sides weigh in on what's to come and who will benefit or get hurt.
This report first aired in December 2021.
It's been three decades since a presidential race was won based largely on the slogan, "It's the economy, stupid." And once again, a troubled economy has become a major driver in U.S. politics. Americans are struggling with a pandemic shutdown hangover, mind-boggling inflation, shocking gas and grocery prices, and shortages of both workers and products. Today in our cover story, straight talk from two experts with opposing views on a lot of topics, but agreement that we’re not close to out of the woods, yet.
Back in 1992, there was a recession, and Bill Clinton was running to unseat President George H. W. Bush. Clinton adviser James Carville made the economy the linchpin of the campaign, coining the phrase: “The economy, stupid,” which he later explained in an interview.
James Carville: (C-SPAN interview, July 13, 2012) In '92, we thought the economy should be the focus of everything we did went. What I was trying to get the campaign more focused, get the people in the campaign more focused. And it was like: ‘It’s the economy, stupid.’
Today, nearly thirty years later, the economy is again shaping up to be a political game-changer. Polls show the economy was the top issue on voter's minds in the recent upset in the Virginia governor’s race. In a state that has far more registered Democrats, the Republican, Glenn Youngkin, somehow beat the Democrat, former governor Terry McAuliffe.
But to whose advantage will the economy prove to be in the 2022 Congressional elections? And, most importantly, what’s the outlook for your personal finances?
Wendy Edelberg: It's a mixed bag, there's a lot to be very excited about. The economy is growing quickly, but it's coming out of a very deep hole and the recovery from the pandemic-induced recession has been nothing short of chaotic.
Tyler Goodspeed: We seem to be plateauing at levels that are still well below where we were pre-pandemic. At the same time, the inflation is at some of the highest levels that we've observed in recent decades.
We get dueling assessments from Tyler Goodspeed, who headed up the White House Council of Economic Advisers under President Trump, and Wendy Edelberg, once the top economist at the Congressional Budget Office.
Sharyl: Tyler, when I say “supply chain,” which is something I think most Americans haven't spent much time at all thinking about until fairly recently, what thoughts come to your mind?
Goodspeed: I think the pressures are going to persist for the next few quarters and perhaps a bit beyond. Some of the policy choices that have been made that I think have exacerbated some of the labor shortages and increased demand at the same time that supply remained somewhat constrained.
Sharyl: Specifically to supply chain, what do you see in the next four to six months?
Edelberg: If we're just talking about the container ships, we need resolution all the way across that system. This is a near-term problem. This is a three-month problem, a six-month problem.
Sharyl: Tyler, do you think the supply chain issues overall were largely just entirely unavoidable or do you see that different policies would have or could have mitigated some of this?
Goodspeed: I think that the continuation of enhanced federal unemployment insurance benefits had probably modest effect, but nonetheless, a net negative effect on the return to work of a lot of American workers. In July, we had the rollout of the new child tax credit, the design of which, at the margin, discourages the return to work. Policy has certainly exacerbated some of these supply-side problems that were there already present.
Edelberg: I think we actually now have a whole lot of evidence in hand that the expiration of the unemployment insurance benefits did very little in aggregate to spur more people to come back into the labor market. But one reason why we know that it's not U.S. fiscal policy that has driven these supply constraints is that they're happening globally. We’re seeing supply constraints in Asia, we're seeing supply constraints in the U.K., we're seeing supply constraints in Australia, we're seeing inflationary pressure across the globe.
Sharyl: We had become what most people consider energy independent, I think starting around 2017 or 2018 or so, no longer are we, and we are now asking or talking with Russia, Saudi Arabia, and OPEC nations about their output to try to help ease pressure on our gas prices. What's going on with energy? And what can we expect in the near future?
Edelberg: So I would still characterize us as largely energy-independent. We have actually an enormous capacity to ramp up our own oil and natural gas production in this country. And I think that if we see oil prices and natural gas prices remain elevated, for any longer than what we've already seen, I would fully expect our production to start to respond and start to respond pretty quickly.
Goodspeed: I agree with Wendy that historically, the U.S. domestic energy production has been pretty nimble. I think that has been throttled to a certain extent in recent months, because unfriendly policy is staring them in the face.
Sharyl: What's that?
Goodspeed: Well that's, first of all, competition down the road from heavily subsidized non-fossil-fuel-based sources of energy. So in the near term, I think this could be an adverse energy supply shock, not like the 1970s, but probably more than we've seen in a few decades.
Sharyl: Tyler, looking ahead, going into Christmas, there may be a significant number of vaccine mandate-related retirements and firings. What do you see as the impact of that on our nation and the cost of that?
Goodspeed: We're actually still 5 million jobs shorter where we were in February 2020. We’re also 8 million jobs short of where we ought to be or would have been if we have continued at the pre-pandemic pace of jobs growth. So, if I were in policy now, I would be focusing on measures to incentivize return to employment as quickly as possible so that we can keep that labor market recovery on track.
Edelberg: People are scared of the pandemic, and the more we can get people vaccinated, the less scared people will be. So I think worrying about how mandates, vaccine mandates, will constrain labor supply, misses something that I think is quite significant on the other side of the ledger.
Sharyl: The economy as a political issue in the midterm elections — what do you say about that?
Edelberg: The economy is always a political issue. So there's nothing particularly surprising there.
Sharyl: Does that help or hurt one side or the other, do you think? Where we are now if it stays about the same?
Edelberg: Oh, geez, I'm going to ask Tyler to answer that first.
Goodspeed: I think it's a negative for the party that occupies the White House and has majorities or effective majorities in both houses of Congress.
Edelberg: Alright, let me take a shot at this. Acknowledging that there's a huge amount of uncertainty, it is quite possible that a year from now, we will have largely recovered from the pandemic, knock on something. And we will have logged a bunch of quarters of very strong growth, we may well be looking forward to a slowing, as the economy has to have a glide path back toward what is a reasonable state of growth.
Sharyl: What is something significant economically that you think was done right under the Trump administration, something very important that comes to mind?
Goodspeed: I think the 2017 tax law was absolutely pivotal in transitioning us from what had been a historically slow economic recovery with historically slow real income growth to a state of affairs, that, on the eve of the pandemic, in 2019 alone, we observed real income gains for the typical American household that were more in one year than in the entire 16 years through 2016.
Edelberg: I do think one of the most extraordinary and positive things that happened in that four-year span is that policymakers generally allowed the economy and pushed the economy to grow quite fast, in a way that actually worried me somewhat at the time. But turned out that we were able to grow that quickly, without spurring really unwanted inflation. All of those great benefits of strong growth, I would pin far more on monetary policy, and what Congress was doing with defense and non-defense spending than anything having to do with the tax act.
Sharyl: Is there something very important and critical you can point to that has been done under President Biden that's been positive for the economy?
Edelberg: Whoa, wow. So I think much of what was in the American Rescue Plan was very, very positive for the economy. I think it provided a significant amount of fiscal support to ensure that we would have a strong recovery.
Goodspeed: One of the good things about the relief package was the funding and support it provided for rolling out vaccine distribution and for helping schools to safely reopen.
Sharyl (on-camera): When looking at the Covid time period, a Gallup poll says we recently reached a new high in terms of people mentioning an economic issue as the top problem facing the U.S.: 26%.
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