Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
When US political strategist James Carville, then a senior aide to presidential candidate Bill Clinton, declared that one of the keys to winning the 1992 election was “the economy, stupid”, he was stating one of politics’ most fundamental truths.
Dozens of elections over several decades had reliably shown that voters don’t react well to economic woes and will punish the incumbent party, while a government that leaves the electorate feeling richer stands a good chance of fending off a challenge.
But if Carville had given the same advice to any of Clinton’s successors as Democratic presidential candidate, both its veracity and effectiveness would have been much less clear.
Much has been written about the disconnect between the increasingly healthy state of the US economy and Americans’ gloomy perceptions of it, but the striking development over the past 18 months has been that even as public sentiment has finally begun to climb, it has done nothing for President Joe Biden’s approval ratings. In other words, it’s not that Americans don’t accept the economy is improving: even when they do, they don’t give him any credit for it.
It would be easy to dismiss this as an anomaly triggered by the Covid-19 pandemic and a once-in-a-generation inflation crisis, But in America, it’s not been “the economy, stupid” for more than a decade. Research by political scientists John Sides, Michael Tesler and Lynn Vavreck first drew attention to the phenomenon in their 2019 book Identity Crisis, highlighting how Barack Obama’s approval rating trended steadily downwards despite economic sentiment rising during his presidency.
Sides and his colleague Robert Griffin found that this decoupling continued during Donald Trump’s presidency. While there was a brief return to the old pattern in 2021 as Biden’s approval numbers declined in lockstep with rapidly souring views of the US economy, this turned out to be only a brief echo of the past. The new rule — that “It’s no longer the economy, stupid” — has since reasserted itself.
What makes this apparent shift all the more notable is that it appears to be an exclusively American phenomenon. The age-old relationship between economic sentiment and a government’s popularity has evaporated in the US, but it remains almost as strong as ever in western Europe, with the favourability of French and German governments still closely linked to economic fortunes. The same is true in the UK, albeit to a lesser extent.
This contrast between continents supports the theory that the hyper-partisan nature of US politics is behind the decoupling. The US electorate is now cleanly divided into Democrat and Republican factions, more hostile to one another than ever before, making it harder for economic trends to move people between political camps. If anything, voters’ politics are now shaping their economic perceptions, not the other way around.
In one particularly ingenious piece of analysis last year, US political scientist Brian Schaffner demonstrated that even when there did appear to be a relationship, in 2022, between US voters’ assessment of their economic circumstances and their approval of the president, this was a mirage. Rather than the real severity of people’s struggles determining their level of criticism of Biden, those who disapproved of him the most were also the most likely to say they were struggling even when they weren’t.
In this context, the incentives to adopt good economic policy are completely broken. Gross domestic product growth that Europe would kill for, robust job creation and disinflation without rising joblessness appear likely to be neither here nor there when Americans consider their vote this November.
Contrast all this with, say, Germany, where economic sentiment tends to be very similar among supporters of the governing coalition and opposition parties alike. Even supporters of the hard-right AfD generally evaluate the economy in line with backers of the mainstream parties.
In America, the polls currently point to a second term for Trump, whose pivot to tax cuts and protectionist trade policies could well send inflation jumping again — it shouldn’t be taken for granted that the US will continue to streak away from a sluggish Europe.
And while Europe’s economies have been struggling, at least the voters share a common assessment, making for a rational political system that rewards good economic stewardship.