How Elections can Affect the Economy

How Elections Can Affect the Economy

Madison Rebholz

Even with the election just around the corner, it may not seem like much is changing. However, the economy may change more than you think. In election years where the current president is running for re-election, the economy tends to fare better, as the president panders to economically beneficial plans and promises that benefit large portions of the population, making people wish to elect them once more. However, this year is full of uncertainties, especially since most of the claims made by our current candidates are more focused on scandals and hard-hitting issues than our economy, making citizens uncertain of the possible opportunity costs of electing one over the other -- and without knowledge of what economic plan each candidate is running with, it’s like a shot in the dark. According to Merrill Lynch, “. . . frontrunners have often appeared vulnerable to upstarts, leaving markets to sift through any number of potential economic policies from a remarkably diverse array of candidates from both parties.”

Another huge downside to this uncertainty is the tenseness of companies to take risks at this time of year -- often the marginal cost of hiring new employees or purchasing new inventory or merchandise is far outweighs any marginal benefit of keeping up with their normal yearly activities, and thus activity in the economy decreases quite volatilely, no matter the demand for products. In each election cycle, no matter which party was leading or whether it was a re-election year or not, the economy and its productions slowed considerably.

Looking at this election specifically, a large portion of the uncertainty simply comes from the candidates themselves. A lot of highly regarded economists are nervous about the upcoming election, fearing it to be worse. According to Nicholas Bloom of Stanford University, “When we’ve looked back over the last 30 years, we’ve seen two presidential elections that have spiked uncertainty. It was first Clinton/Bush Sr., then Bush Jr./Gore. They were margain elections, and in both cases it was the new candidates coming to the election. I think in the case of Trump it would be a magnitude larger, because he’s never held political office before.” He then goes on in the interview to explain that Clinton is at least predictable, as she has held a position in a place of government before, giving people some ease of mind. Because of this uncertainty, it is inevitable that the economy with fluctuate rapidly, especially because of the circumstances of this year’s election.

In total, the economy is affected heavily by the presidential elections. The uncertainty wafting around these uneasy times creates a large dip in economic processes, business production and hiring, and leads to the country picking up lost pieces afterwards after gaining a foothold. With the election coming so soon, it’s important to realize these changes are coming, and recognize that we may be dealing with even worse slowdowns this year than any time before, just based on the candidates and the mood surrounding their race for presidency.

Works Cited

"How Presidential Elections Affect the Markets - Merrill Lynch." Merrill Lynch. N.p., n.d. Web. 24 Oct. 2016.

Ryssdal, Kai, and Nicholas Bloom. "Presidential Elections Are Bad News for the Economy."Marketplace. N.p., n.d. Web. 24 Oct. 2016.