Political Dimensions of the American Macroeconomy

209 Pages·2019·6.167 MB·English

by  Gerald T. Fox

Economics and Public Policy Collection FO
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Philip Romero and Jeffrey Edwards, Editors
Political Dimensions of the American Macroeconomy
Gerald T. Fox
Political macroeconomy refers to the interconnection between macroe conomic politics
and macroeconomic performance. The expectational Phillips curve may be used to
examine the economic aspects of this in terrelation. Macroeconomic politics relates to
voter behavior, presidential reelection ambition, partisan economic priorities, and
special interests. These factors impact the fi scal and monetary policy actions of the
presid ent, Congress, and central bank.
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According to the electoral effect, presidents attempt to boost the econo my before
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an election to increase reelection votes. According to the part isan effect, conservative T
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presidencies are relatively infl ation averse, while liberal administrations are relatively A
L Political Dimensions

unemployment averse. The evidence, however, suggests that the electoral and partisan D
I
M
effects occurred idiosync ratically in the U.S. economy during 1961–2016.
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The economy also affects presidential approval, Congressional elec tions, consumer of the American
S
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sentiment, voter participation, and macropartisanship. An international dimension of O
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the political macroeconomy is the issue of free trade versus protectionism and the S
O Macroeconomy
perspectives of economic liberalism, neomercantilism, and structuralism. F

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Gerald T. Fox received his PhD in economics from the University E

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of Utah. He completed his undergraduate degree in economics
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at Brigham Young University. Professor Fox teaches economics E
R Gerald T. Fox
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at High Point University. His research interests include political C
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macroeconomics, regional economic an alysis, and globalism. N

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He has published research in the Journal of Confl ict Resolution,
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Applied Research in Economic Development, and the Journal R
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of Macroeconomics. He has also coauthored a major economic impact study on the E
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furniture industry in North Carolina. He has presented research at numerous academic O
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conferences. Dr. Fox speaks Japanese and travels to Japan in the summers. He has O
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worked in the Philippines, Japan, Poland, France, and England. He was a visiting Y
professor at the University of War saw in Poland. He has also served as Faculty-in-
Residence at the University of Winchester in Winchester, UK.
Political Dimensions
of the American
Macroeconomy

Political Dimensions
of the American
Macroeconomy
Second Edition
Gerald T. Fox
Political Dimensions of the American Macroeconomy, Second Edition
Copyright © Business Expert Press, LLC, 2020.
All rights reserved. No part of this publication may be reproduced, stored
in a retrieval system, or transmitted in any form or by any means—
electronic, mechanical, photocopy, recording, or any other except for
brief quotations, not to exceed 250 words, without the prior permission
of the publisher.
First published in 2020 by
Business Expert Press, LLC
222 East 46th Street, New York, NY 10017
www.businessexpertpress.com
ISBN-13: 978-1-94897-635-0 (paperback)
ISBN-13: 978-1-94897-636-7 (e-book)
Business Expert Press Economics and Public Policy Collection
Collection ISSN: 2163-761x (print)
Collection ISSN: 2163-7628 (electronic)
Cover image licensed by Ingram Image, StockPhotoSecrets.com
Cover and interior design by S4Carlisle Publishing Services Private Ltd.,
Chennai, India
First edition: 2015
Second edition: 2020
10 9 8 7 6 5 4 3 2 1
Printed in the United States of America.
Abstract
Political macroeconomy refers to the interconnection between macro-
economic politics and macroeconomic performance. The expectational
Phillips curve may be used to examine the economic aspects of this in-
terrelation. Macroeconomic politics relates to voter behavior, presidential
reelection ambition, partisan economic priorities, and special interests.
These factors impact the fiscal and monetary policy actions of the presi-
dent, Congress, and central bank.
According to the electoral effect, presidents attempt to boost the econ-
omy before an election to increase reelection votes. According to the par-
tisan effect, conservative presidencies are relatively inflation averse, while
liberal administrations are relatively unemployment averse. The evidence,
however, suggests that the electoral and partisan effects occurred idiosyn-
cratically in the U.S. economy during 1961–2016.
The economy also affects presidential approval, Congressional elec-
tions, consumer sentiment, voter participation, and macropartisanship.
An international dimension of the political macroeconomy is the issue of
free trade versus protectionism and the perspectives of economic liberalism,
neomercantilism, and structuralism.
Keywords
classical macroeconomic perspective; congressional vote; electoral cycle;
expectations-augmented Phillips curve; fiscal policy; inflation; Keynes-
ianism; median voter model; monetary policy; partisan cycle; political
business cycle; presidential approval; presidential vote; unemployment

Contents
Acknowledgments ...................................................................................ix
Chapter 1 The Political Macroeconomy .............................................1
Chapter 2 Refresher on Macroeconomic Measurements and the
Business Cycle .................................................................15
Chapter 3 Mainstream Macroeconomic Theory and the
Expectational Phillips Curve ...........................................35
Chapter 4 Fiscal and Monetary Policies ...........................................63
Chapter 5 Voter Rationality and Macroeconomic Preferences ..........85
Chapter 6 Electoral Political Business Cycle .....................................95
Chapter 7 Partisan Political Business Cycle ....................................107
Chapter 8 Evidence of Electoral and Partisan Cycles ......................115
Chapter 9 Other Political Business Cycle Considerations ...............129
Chapter 10 Economic Influence on Public Sentiment and Voter
Behavior ........................................................................145
Chapter 11 Trade Policies and International
Political Perspectives ......................................................159
Chapter 12 Conclusion....................................................................175
References ...........................................................................................185
About the Author ................................................................................189
Index .................................................................................................191

Acknowledgments
This book is based on research and study over the last two decades. I wish
to thank the many anonymous referees who reviewed my research and
provided valuable suggestions. I would like to thank High Point Uni-
versity for allowing me the time to complete this book. I wish to ex-
press appreciation to individuals affiliated with Business Expert Press who
provided encouragement, suggestions, and motivation; they include Jeff
Edwards, Phillip Romero, Scott Isenberg, and Chithra Amaravel. I am
grateful to the team at S4 Carlisle in overseeing the production of this
book. Moreover, I wish to thank my dear wife Mayumi for her patience
and support while I undertook this project.