Election Year Politics Has Impact on US Economy

Politicians could be making the economic slowdown in the U.S. worse than it really is by constantly reminding voters that the economy needs fixing. This is the view of some analysts who say that because consumer spending is the primary engine that drives U.S. economic growth, negative messages during this election year cycle can have a dampening effect on the world's largest economy. VOA's Mil Arcega reports.

Rising unemployment, the housing downturn and stock market plunges have made the state of the economy the number one issue for voters -- replacing the Iraq war.

This has led presidential hopefuls from both the Democratic and Republican parties to work hard at convincing Americans that they have the knowledge, experience and wisdom to heal the ailing economy

Republican candidate John McCain said recently, "It's obviously important to stop the spending. As president I know how to do it."

Democratic candidate Barack Obama said, "We will once again lead the world, not just militarily but diplomatically, economically."

 Hilary Clinton, the leading Democratic candidate, said, "We've got to do something about this. And there's a big difference between talking and acting."

But some economists say all the talk about the economy -- especially the emphasis on the negative -- only serves to make matters worse.

Dan North is the chief economist at Euler Hermes, one of the largest credit insuring firms in the world. Hermes says, "When you get this relentless drum beat, which I've seen before in election years, it tends to make people pull their horns in a little bit because they do start worrying more about the economy."

And when people are worried, North says they tend to spend less. "Most of our economy is based on people spending - that is buying milk, buying cars, and suits and TVs, and that sort of thing. That's what drives our economy. Two thirds of our economy is driven by consumers. So if consumers stop spending because the economy is slowing, it's gonna be yet another drag on the economy itself."

Even financial markets are not immune. Tom Hertz, an economics professor at American University, says investors react in similar fashion to stock market psychology. He says what happens in U.S. markets often has a chilling effect on markets around the world. "Well, suppose you're a Japanese investor and you discover that there's something going wrong in the American market and you think it may or may not affect the Japanese market, well, just to be sure, you sell, right? So -- self-fulfilling prophecy - it does affect the Japanese market."

Any recovery of the slumping U.S. housing market may be similarly affected. Economists say fears that the U.S. economy may already be in a recession is causing some buyers to think twice before making any big purchases.

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