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The election results offer a window into the American psyche, a sense of how voters are thinking about the economic conditions affecting their lives. For all the sense of economic discontent, at the broadest level, their vote was for the status quo: Barack Obama will remain president; the Senate will continue to be led by a comfortable Democratic majority; and the House will stay in the hands of a large Republican majority. By sifting through exit polls, specifics emerge about what lay beneath those big calls.
1 This recession was different. There was a debate over whether the economic recovery under Obama should be judged against the standard of other recoveries from deep recessions in the United States (as a number of economists supporting Mitt Romney argued), or against the standard of economies trying to claw back from financial crises (as those more sympathetic to Obama argued).
The benchmark one chooses makes a difference in whether one views the slow recovery under Obama as a crushing disappointment caused by a failed president or whether it's on the right course, given the difficult circumstances that Obama inherited. It appears that voters were sympathetic to the president on this crucial question. Almost four years after President George W. Bush left office, 53 percent of voters blamed him, versus 38 percent for Obama. Even 12 percent of Romney voters blamed Bush.
2 Inflation is a big problem. To economists, inflation is the dog that didn't bite. Despite fears among commentators that the Federal Reserve's easy money policies would spark rising prices, the consumer price index rose only 2 percent over the last year, exactly what the Fed aims for. And investors are pricing in only 2.07 percent annual inflation on bond markets over the coming five years. Don't tell that to voters.
About 37 percent named rising prices as the biggest economic problem, basically tied with the 38 percent who named unemployment. Prices for gasoline and some other commodities are up since Obama took office. But he began his term when those prices were artificially depressed by the global economic crisis. Since early 2011, gasoline prices have moved up and down within a range of about $3.20 to $4 a gallon, showing no discernible trend upward. Voters may be frustrated that, while the prices of goods been rising (at a relatively low rate by historical standards), wages haven't. In that case, their real complaint is that weak economic growth and high unemployment are keeping wages down.
3 Deficits aren't at the top of voters' minds. In Washington, the question of how to reduce the budget deficit has been front and center for two years. It dominated the debt-ceiling debate in 2011, and is returning to center stage as Congress and the president get set to negotiate a resolution to the "fiscal cliff." Guess what: Voters are focused on other things.
Only 15 percent named the budget deficit as their top issue. That was far below the number who named the economy (59 percent) and even below those who listed health care (18 percent) as the top issue. Getting the nation's finances on a more sustainable track may be necessary, but the impetus to move quickly isn't coming from voters. This is an area where voters' opinions match fairly well with what financial markets are saying. The usual reason why deficits are harmful is because government borrowing pushes up interest rates, crowding out investment by the private sector. Those high debt levels can cause investors to lose faith in a government's ability to repay, sparking a fiscal crisis, as Greece and Spain can attest. But neither high debt nor investor panic has been a serious problem in the United States.