Lessons Learned

The Great Recession, and resulting private and public sector bankruptcies, served to hasten long-overdue cost-cutting and product rationalization in Michigan. The result is one of the state’s longest economic expansions on record.


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More than ever, political activity in America has become interwoven with the fabric of economic outlooks. Indeed, another national election year is on the horizon.

True to form, 2016 promises to be a record-shattering year for media advertising outlays and political lobbying expenditures. Economically speaking, there will be positive short-term spinoffs, as well. As far as the outlook in Michigan and the Detroit area, these external factors must be considered.

For example, over the past 100 years, the following pattern has prevailed: There have been 18 economic downturns, and six of the recessions have coincided with a presidential election year — influencing public opinion as to economic security and the overall financial outlook. Notably, in five of these six cases where real GDP stumbled during a national election year, control of the White House in the following year shifted to the other political party.

Correspondingly, such shifts most often resulted in wholesale changes of economic and financial policies, significantly altering GDP growth, inflation, interest rates, and consumer buying power.  Especially with reference to consumer buying power, if a Republican wins the White House next November, major policy alterations would affect Detroiters and Michigan’s auto industry.

Already, Republican candidate Donald Trump has suggested General Motors, Ford, and Fiat USA (Chrysler), along with their related suppliers, cease their operations in Mexico and move production back to the United States, most notably in low-cost labor markets in the South. While economic changes cause households to reassess whether the time is right for purchasing or financing automobiles, moving factories thousands of miles is another matter altogether.   

An interesting corollary to these potential political outcomes is the power of a failing economy to demolish the incumbency or legacy of a sitting president. In two well-known episodes, prospects for another four years in the White House were denied to Jimmy Carter (lost to Ronald Reagan in 1980) and Herbert Hoover (lost to Franklin Delano Roosevelt in 1932). Carter’s loss was largely attributed to the horrific effects of raging inflation, shrinking payroll employment, and the impact of joblessness on wealth creation and confidence. Hoover’s loss was also inevitable — the Great Depression embodied all of Carter’s economic nemeses, compounded.

When President Obama exits the White House, he will leave behind billions of dollars of unfunded social and infrastructure programs ranging from the Affordable Care Act to crippling restrictions on coal-powered energy plants and a resulting shift to “green” energy, to Social Security (although past presidents have also failed to deal with the latter).

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