The American public is anything but happy.  Congressional approval is at all-time lows, the president’s approval ratings are mired in the low to mid-40s and the only public institution that seems to attract any significant support is the military.  So what explains this?  Why does the public feel so disenfranchised and powerful?  Furthermore how did it happen?

To answer these two questions we have to look at what government has been up to in the last sixty years.  More specifically, the programs that have been created and the economic growth their action (or inaction) has fostered.  Consider the following.  From 1953 when President Eisenhower first took office to the end of 2007 (and the start of the recession) the US has added “An interstate highway system, two massive expansions of Social Security, the beginnings of federal aid to education, Medicare, Medicaid, food stamps, Head Start, volunteer programs, SCHIP (the State Children’s Health Insurance Program), No Child Left Behind, and the Medicare Prescription Drug Benefit. We fought hot wars in Vietnam, twice in the Persian Gulf, in Afghanistan, as well as a cold war that lasted for 40 of those years.”

Also consider this.  Even as the US was adding all these goodies and fighting all these hot and cold conflicts federal spending never topped 23% of GDP (in fact it sat between 17%-23%).  The top marginal tax rates were reduced to 35% before being bumped back up by then-President Clinton in the 90s.  It is absolutely remarkable this occurred. 

How this occurred was pointed out by political analyst Sean Trende at Realclearpolitics “From 1953 through 2007, there were only 10 quarters (out of 220) where per capita GDP was less than it had been three years earlier — clustered in the late 1950s and 1980s. And when GDP fell beneath the overall trend line, there was usually a spurt in growth that brought us back to the trend line.”  What this means is that as federal spending grew the economy grew in equal proportions.  Tax revenue went up which meant being able to add and pay for new programs to woo voters.

But now fast-forward to today and that is rapidly becoming a historical reality.  Politicians always seem to be the last to notice things and this is one of the things they seem to have missed.  As Trende points out the new reality is the “Elimination of what we might call Congress’ “GDP Dividend.”

It is worth nothing that every president up to Barack Obama has run on a platform promising some sort of spending cuts, tax increases or revenue increases.  Politicians of both political parties have been all but to willing to exploit the GDP Dividend and divvy up pieces the ever-expanding pie.  That is until 2007.  Now that pie is not just growing but seems to be shrinking.  Of our two political parties Democrats are almost completely united behind not just divvying up the pie even more but expanding it through future borrowing to expand the pie.  In lamens terms that translates to the federal government spending more and more of GDP.  Republicans on the other hand seem divided.  One the one hand some of their membership seem to favor the status quo and try to target the small part of the pie known as discretionary spending.  On the other you have many freshman and senior Republicans fighting to actually cut spending and start shrinking the pie, making everybody feel some of the pain (including the 47% who do not pay federal income taxes). 

The scramble for who gets what out of the pie, whether to expand it or not, how, etc. has helped make Americans feel disenfranchised from the system.  And the resulting political turmoil and erratic voting habits it has created has only further exacerbated the problem.  Many moderate incumbents being knocked out of both parties due to corruption or a bad economy, fights over spending bills and looming government shutdowns, and a general distrust of DC in general has all been fed by the end of the GDP Dividend.  A solid majority of Americans (http://www.gallup.com/poll/151490/Fear-Big-Government-Near-Record-Level.aspx) currently fear big-government intrusion.  For a public that has always been relatively independent and distrustful of the political class the end of the GDP Dividend has only made this worse.

The American public has watched as DC has devolved into nothing more than shouting matches to determine who gets what out of a shrinking pie.  One party stands almost in total lockstep about rejecting the truth and the other party is torn between preserving the status quo and cutting spending heavily across the board.  Economic growth is sluggish, signs of a permanent underemployment class are being seen everyday and the US is facing more issues than ever.  Americans who feel disenfranchised from the political system and wonder how it happened perhaps can look here and gain a better understanding and perhaps change this dynamic.  One can hope anyways.

Special thanks goes out to Realclearpolitics writer Sean Trende for giving me the idea and info for this piece.

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