This article is adapted from a speech delivered at the Mises Circle in Fort Myers, Florida on November 9, 2024.
The answer to the question posed in the title is: Yes and No. Yes, some elections have made a significant difference but in general, no, they have not. There are many reasons why elections generally no longer make much of a difference in terms of the economy. One is that for the past half century the average reelection rate of incumbents in the House of Representatives is about 95 percent. It’s lower – about 82 percent – in the U.S. Senate. However, if one subtracts the unusually large turnover in the 1980 election the average is closer to 90 percent.
For all practical purposes, once elected to the House it is almost impossible to lose an election. The senate is not too far behind. This is because the same government that supposedly polices monopoly with its “antitrust laws” has erected enormous barriers to entry into politics.
Both parties play the gerrymandering game for one thing. The executive branches of the states rewrite congressional districts after every census, the result being that many districts are in spectacularly odd shapes, kind of like a salamander. (“Gerrymander” is a combination of “Gerry” as in Elbridge Gerry, James Madison’s vice president, and “salamander”). They pick out the areas where there are say, 80 percent or more of registered voters in the party that is drawing the new congressional district map, thereby guaranteeing that that party’s nominee or incumbent will always win.
Every member of congress has a large, taxpayer-funded staff which is essentially a subsidized reelection campaign organization. It’s hard for challengers to compete with that. The “constituent service” that congressional staff perform includes making sure enough government loot is spread around the district to make at least a majority of voters grateful at election time.
The congressional committee system is organized in a way to maximize the purchasing of votes by the handing out of welfare/warfare state subsidies. If one is from an agricultural district, one gets on the agriculture committee. If one is from a district with a military base or a defense contracting corporation or two, one gets on a military procurement committee. Again, challengers find it extremely difficult to compete with that.
Upon being elected to congress, corporate political action committees swarm the newbie’s office to arrange for a lifetime of institutionalized bribery, euphemistically called “campaign contributions.” See the movie “The Distinguished Gentleman” starring Eddie Murphy to learn how this works. (“Let’s cut the bullshit!” said a powerful committee chairman to Murphy who had just told him that he ran for congress “to serve my country”).
In case there is not quite enough bribery, members of congress play the “money for nothing” game, the title of a book by legal scholar Fred McChesney. The game is played as follows: Congress proposes to impose onerous taxes, regulations, antitrust investigations, and more on various industries or even individual companies. The companies then shower both political parties with more millions of dollars in “campaign contributions,” after which the congressional sponsors of the interventions say, “What were we thinking?! This has all been a big mistake. Let’s drop the whole thing.”
Such proposed laws are known as “milker bills” by congressional staffers since they “milk” campaign contributions from targeted businesses and industries. It is an extortion racket many orders of magnitude larger than anything the Mafia ever attempted.
Congressional hearings bring in “experts” not to advise congress on anything but to support pre-conceived policies. If the policies prove to be unpopular, then the “experts” can be blamed. The same is true of congressional “commissions.” They are convened to support certain policies and also serve as blame catchers when things go wrong.
It is almost impossible for Third Party candidates to challenge the “uniparty” candidates, with many states requiring tens of thousands of signatures to run for congress compared to no signatures at all required for a Republican or Democrat candidate. Imagine if the business world was run like this. Want to open a new restaurant in town? Or a new car dealership? Get 100,000 signatures first then we can talk about it.
The Bureaucracy
Prior to the 1883 Pendleton Act the federal bureaucracy was characterized as “the spoils system” whereby incoming administrations routinely fired one-third to a half of all federal bureaucrats and replaced them with their own political appointees. Abraham Lincoln was considered to be a master of the use of political patronage in this regard. As a young man entering politics in the 1830s he said that his career aspiration was to be “the DeWitt Clinton of Illinois.” DeWitt Clinton was a New York governor credited with perfecting the spoils system of buying political support with patronage jobs. Lincoln did succeed in becoming the king of pork barrel politics in Illinois long before he became president.
“Civil Service reform” changed all that and established a system whereby federal bureaucrats are given de facto lifetime tenure (See Murray Rothbard, “The United States Civil Service: From the “Spoils System” to the Pendleton Act”). So-called Civil Service reform was mostly a project of New England and New York political elites, wrote Murray Rothbard, who claimed to want to replace patronage with merit in hiring bureaucrats. Their real intent, said Rothbard, was to provide greater employment opportunities for themselves!
Under this system every bureaucrat is a budget maximizer and an incessant lobbyist for more tax dollars, more power, more staff, and more perquisites. Since there are no profits per se in government, only budgets, bigger budgets means greater prospects for pay raises, larger staffs, and more perks.
The primary means of moving up in the bureaucracy and “managing” a larger number of bureaucrats is to already have a “large” staff under one’s supervision. This means that government bureaucrats tend to be staff maximizers as well as budget maximizers. Thus, unlike private competitive businesses, government agencies strive to maximize costs, not minimize them (which is a way to maximize profits).
Because of Civil Service rules it is virtually impossible to fire or get rid of a bureaucrat. Public employee unions will use the Civil Service laws to file lawsuits and no government administrator wants to spend years of his time involved in such lawsuits. It is much easier to bribe the bureaucrat with higher pay at a different location within the government, which is the usual way of doing business. Thus, the well known inefficiencies of bureaucrats and bureaucracies are amplified by a system in which the most incompetent or embarrassing bureaucrats are often the most handsomely rewarded financially.
Bureaucrats are experts at creating crises or the perception of crises because that’s what ratchets up their power, perks, and budgets. In some cases that is all that they do. When there is no genuine crisis facing the public the bureaucracy faces a crisis crisis. No crisis means no ratcheting up of budgets, pay and perks.
In the mind of the bureaucrat there is no bigger crisis for him than a politician elected to a position of power such as the president who is a proclaimed enemy of bureaucracy and bureaucrats – at least rhetorically. Every bureaucrat in Washington will spend all of his work days plotting and scheming how to sabotage such a political figure and any plans that he may have for slowing down the growth of government. This was true decades before anyone began calling the permanent Washington bureaucracy “the deep state.” Indeed, bureaucrats who have been in Washington for many decades are fond of bragging about how they have “survived” president after president who promised to restrain the federal Leviathan. They gloat that all of these presidents are now history but he, the old bureaucratic saboteur, is still there. This is yet another reason why elections so often do not make much of a difference in the economy: The state’s tax/regulatory/war-making/central planning bureaucracy is little changed no matter who is elected president.
Some Elections Can Make a Difference
Elections can make a difference regarding the economy, but in order to do so there is usually a decades long philosophical/ideological/intellectual campaign, for good or bad, that is a prerequisite. I will cite a few examples.
At the very beginning of the American republic there were two opposing political factions, the Jeffersonian and the Hamiltonian. Hamilton and the Federalists wanted to impose British mercantilism without the British on Americans. This involved protectionist tariffs, corporate welfare for road- and canal-building corporations (for starters), a large public debt, and a national bank run by politicians modeled after the Bank of England.
The Orwellian and Machiavellian Hamilton called this British mercantilist system “The American System” but it was anything but that. He boasted of how such a bank could imitate the Bank of England and finance imperialistic wars and much else, creating an imperialistic empire just like the British empire.
The Jeffersonians opposed all of this and considered it to be nothing less than a betrayal of the American Revolution which was fought to escape the corruption of the British empire, not to emulate it. The Hamiltonians wanted centralized government combined with a heavy dose of corruption, which would help to cement in place their permanent political power.
The Jeffersonian view prevailed, for the most part, for some seventy years with president after president vetoing corporate welfare subsidies and protectionist tariffs, with few exceptions such as the 1828 Tariff of Abominations. There were three central banks between 1789 (the year the Constitution was ratified) and the early 1840s – the Bank of North America, the First Bank of the United States, and the Second Bank of the United States. The first lasted only a year and was privatized; the second was abolished after twenty years for generating boom-and-bust cycles, price inflation, and political corruption. The Second Bank was created to monetize the debt accumulated for the War of 1912. Its recharter after twenty years was successfully vetoed by President Andrew Jackson for – guess what? – creating boom and bust cycles, price inflation, and corrupting politics.
On the eve of the Civil War the average tariff rate of 15 percent was the lowest of the nineteenth century; there were no significant federal corporate subsidy programs, and there was no central bank. The federal and state governments did suspend specie payment from time to time and regulated branch banking.
That all changed dramatically after the election of 1860 when Lincoln, a lifelong mercantilist and political son of Alexander Hamilton, won 35 percent of the popular vote in a four-man race and became president. He signed ten tariff-raising bills and the average tariff rate went from 15 percent to about 60 percent and remained in that range until the income tax was adopted in 1913. The old railroad industry lawyer/lobbyist instigated the colossal corruption caused by massive subsidies to railroad corporations during the Grant administration, opening the door to institutionalized crony capitalism for the rest of the nineteenth century and beyond. Never again would there be a James Madison vetoing subsidies to corporations as unconstitutional, as he did on his very last day as president on March 4, 1817.
The National Currency Acts and Legal Tender Acts nationalized the money supply, created the greenback dollar, and imposed taxes on the remaining competing currencies to drive them from the market. The first income tax was instituted during the war as well, but ended after the war. The American system of federalism was essentially destroyed with the effective abolition of the rights of secession and nullification and the U.S. government became an imperialistic empire, first waging a war of genocide against the Plains Indians, then waging an imperialistic and aggressive war with Spain, invading the Philippines, and myriad other military adventures. In short, Lincoln used the war and the absence of the Southern Democrats to finally impose British-style Hamiltonian mercantilism on Americans and the system has been festering ever since.
After President Andrew Jackson vetoed the rechartering of the Second Bank of the United States Whig party politicians like Lincoln began a crusade to resurrect a central bank. In his History of the American Whig Party Michael Holt wrote that during the 1840-1860 period no politician in America was a more forceful advocate of bringing back a central bank than was Abraham Lincoln. He had a lot of help – the banking industry would lobby for the next seventy-three years before it finally got its fourth central bank, the Federal Reserve.
The temporary Civil War income tax excited the statists and socialists in American society because it ignored the constitutional prohibition of a direct tax on incomes and offered unlimited opportunities for them to create their Heaven on Earth through government planning and interventionism. They succeeded for a very short time during the first Grover Cleveland administration in the 1880s, but the income tax was rather quickly ruled to be unconstitutional by the Supreme Court. They would finally succeed when the income tax amendment was adopted in 1913, the same year that the Fed was created.
American statists and socialists always understood that “democracy” would eventually evolve into socialism, as Hans-Hermann Hoppe explained in Democracy: The God That Failed. Hence, for the last several decades of the nineteenth century and into the twentieth century there was also an ideological crusade to adopt the direct election of U.S. senators to replace the original constitutional system of senators being appointed by state legislators.
The purpose of the original system was so that a senator who pledged to do one thing and then did the opposite in the senate in a way that was harmful to his own constituents (but pleasing to special-interest groups) could be immediately recalled and replaced. That ended with the Seventeenth Amendment, also adopted in 1913, that mandated the direct election of U.S. senators. From that point on a senator could collect campaign cash from anywhere in the country, from any and all special interest groups, and be more beholding to them than to the folks back home.
What all of this means is that the 1912 election was the ultimate triumph of “progressivism” with the Fed, the income tax, and the Seventeenth Amendment all put in place in that one year, with the progressive Woodrow Wilson ensconced in the White House, after a decades-long political struggle. It was a revolutionary election year. It all started when the Civil War created the attitude in the Northern states that Big Government, especially if armed with income taxation and a central bank, could solve any and all problems.
There was a brief respite from progressivism run amok in the early 1920s (although the progressives’ plague of alcohol prohibition existed from 1920 to 1933), but the creation of the Fed in 1913 was like the implantation of cancer into the American economy. Monetary expansion by the Fed in the late 1920s created a classic boom and bust, with the bust appearing in the form of the stock market crash of 1929.
Most historians claim that the 1932 election was historic as far as affecting the economy is concerned, but the 1928 election of Herbert Hoover may have been just as historic in that regard. Up to that time the way in which Americans responded to panics or “recessions” was governmental retrenchment – cut government spending and taxes, limit government borrowing, reduce tariff rates, and let free enterprise flourish. Herbert Hoover was a progressive and a social engineer (and a real mining engineer as well) who said that his goal was “the transformation of American society,” reminiscent today of Obama’s declaration that “we” want to “fundamentally change American society.”
Hoover responded to the stock market crash with massive government intervention. He used threats and promises to get corporations to raise wages during a Depression which caused even higher unemployment. He greatly expanded public works spending and imposed what Murray Rothbard called “enormous” tax increases. He started the business of bribing or forcing farmers to grow fewer crops and raise less livestock to try to increase farm incomes (while impoverishing consumers). This led to massive unemployment in farming, especially among Southern sharecroppers, many of whom were the grandchildren or great grandchildren of slaves. He socialized capital with his Federal Financing Bank and signed off on the Smoot-Hawley tariff that ignited an international trade war that shrunk world trade by two thirds in three years.
FDR’s chief domestic policy advisor, Rexford Tugwell of Harvard, stated that the New Deal was just an extension of what Hoover had started. And extend it did, with the entire economy being cartelized under government supervision, price cutting outlawed, employment taxes making it ever more unprofitable to give people jobs, massive government make-work jobs programs and the job-killing taxes imposed to finance them, the job-destroying minimum wage law, laws granting special privileges to unions so that even more jobs can be eliminated by higher wages during a depression, and a level of government-created business uncertainty that caused private capital investment to be negative. By 1939 the unemployment rate was still over 17 percent, nearly six times what it was in 1929.
So yes, the election of 1928 had an important impact on the economy because, for the first time in American history, a “panic” was met with massive government intervention, made even more massive by FDR. Progressive ideology, which had evolved over the previous seven decades, made this possible.
The end result was a sixteen-year long Great Depression that only ended after World War II was over, the army demobilized, and the federal budget cut by two thirds from 1945 to 1948. (Unemployment disappeared during the war as ten million men were inducted into the military, but the standard of living became worse for many Americans because so many resources were diverted from civilian to military use and war socialism crippled the private sector economy even more than the New Deal alone did).
Finally, elections have sometimes mattered after a state has created an economic calamity, such as the decade of stagflation that Americans experienced after Nixon closed the gold window. The election of Reagan did speed up the deregulation of oil and gas, airlines, and trucking that was started by the Carter administration and there were significant tax rate cuts and relative monetary restraint in the early 1980s.
So yes, elections can have important impacts on the economy, but the most important ones are preceded by some kind of revolution in the world of ideas, for good or bad.
The mission of the Mises Institute has always been to provide as clear and concise an argument as possible, based on the Misesian/Rothbardian tradition, that economic freedom always trumps the economic slavery of interventionism and socialism. The Institute has essentially been an ammunition factory in the war of ides for the past forty two years. It is crucial that these ideas continue to be spread far and wide if we are ever to make a u-turn on the road to serfdom.
This article is adapted from a speech delivered at the Mises Circle in Fort Myers, Florida on November 9, 2024.
