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Economic Policy (Macroeconomics)

Economic Policy (Macroeconomics)

Politics & Economics

"It's the economy, stupid!" That catchphrase was coined by a strategist on Bill Clinton's 1992 presidential campaign, but the point holds true for almost all American elections.  

If the economy is humming right along and things are going well, the party in power will almost always win another term.  But if the economy stinks, voters will almost always opt for "change," putting the other team in power.

In other words, problems like unemployment terrify sitting politicians during election years because they threaten to cost the politicians their jobs.

Thus few things scare politicians more than a bad economy.  Unless those politicians happen to be out of power, of course, in which case  a bad economy (in a sick sort of way) is great news. For that reason, politicians pay close attention to economic statistics and lie awake nights worrying about the economic forecasts.

Unemployment and Presidential Elections
Average Unemployment Rates
November Rates


Two types of problems worry politicians the most—recession and inflation. During periods of recession, economic growth stalls. During periods of inflation, prices rise. A recession means that people are out of work, new businesses are not being started, new houses are not being built, and new cars are not being purchased. 

Inflation means that people can’t afford all of the things they could in the past. It means that our standard of living declines as we have to make harder choices about how we spend our money. Inflation also makes people invest their money differently—the safe, slow-growing investment becomes useless when inflation gobbles up all of the profits.

Why It Matters Today

One of the two biggie macroeconomic problems—recession—has seriously dogged the American economy over the past few years.  In fact, the current recession is the worst in the United States since the Great Depression of the 1930s.  (A "depression" is just a recession that really, really sucks.)  During the current recession, the nation's economy has shed more than 8.4 million jobs; even if a robust recovery develops (which appears rather unlikely at the moment) it will take years of growth just to get back to where we were in the mid-2000s.

And to make matters worse, that other great macroeconomic menace—inflation—may be lurking around the corner, as well.  Many economists worry that the huge government deficits caused by the economic slowdown (which reduces tax receipts) and government efforts to stimulate the economy (which increase spending) could soon lead to an inflation crisis.  Yikes.

So recession and inflation are no mere abstract academic issues to be studied in some textbook.  They're the forces shaping the world we live in.  The more you know, the better you'll be able to cope.

US Unemployment 2000-2010


Sometimes, a Song Says it Better: Brother Can you Spare a Dime? by EY Harburg and Jay Gorney

This classic “Brother, Can You Spare a  Dime?”  can speak to almost any generation about downward mobility.

A more current twist on the same subject comes from Ryan Star’s “Breathe” whose video includes the unemployed.

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