10:09 am
Tue April 27, 2004

Electoral College

Unintended economic effects of the Electoral College.

Wilmington NC – [Click the Listen button to hear Dennis' commentary.]

One peculiarity of American presidential elections is, the electoral college. Because it rewards candidates on the basis of winner-take-all in each state, it may encourage sitting presidents to slant a policy decision toward the interests of specific states ? those that can make a difference when electoral votes are counted ? even if the decision may not be in the best national interest. This can result in unintended economic consequences. I use international trade policy to illustrate.

In the United States, Congress has conveyed to the president authority to negotiate free trade agreements. This has been widely credited as a significant factor in liberalizing US trade policy. The theory being that, because the president represents the interests of all Americans and not just a region or specific interest group, trade policy crafted by the executive branch is less likely to be protectionist.

By contrast, members of Congress represent specific districts, and by extension special trade interests. For example, special treatment for the steel industry in Pennsylvania and Ohio; for the textile industry in the Carolinas.

Regarding trade policy, it is well received in political-economic thought that free trade is in the best overall interest of the nation. Protectionist policies are counter-productive. Congress generally accepts this view. Nonetheless, individual legislators often respond to local constituencies ? laid-off steel or textile workers, for example ? by advocating parochial protectionist measures. Log-rolling follows, where legislators trade support for policies that protect individual interests. Over time, this creates policies that tend toward protectionism.

Thus, the logic of presidential authority for trade policy seems clear. It is based on an assumption that, to the president, all votes are equal. That is, in the executive?s policy calculation, one vote is equally weighed against another. The result, therefore, should be in the majority?s interest.

But, the electoral college can change the result. A sitting president who wants to be reelected has an incentive to favor policies that will win votes in those states with a majority of electoral votes ? even if a national majority believes those policies are not in the country?s best interest. In short, presidential candidates know that the electoral vote can be won without winning the popular vote.

Therefore, if a protectionist policy helps gain votes in a state important to reelection in the electoral college, even if it may hurt those in states that are not likely to be won anyway or are safely in the president?s column, it is to the president?s advantage to pursue protectionism. A recent example was the president?s decision to hike steel import tariffs in March 2002. This was a sign of support for ailing steel makers and steel workers in states like Ohio and Pennsylvania.

As a result of the tariffs, steel imports declined and domestic steel prices increased. States that rely heavily on steel as an input and those that handle steel imports were hurt. For example, steel-intensive industries in California saw profits drop as much as 20 percent. Many of New York?s steel-handling longshoremen joined the unemployment rolls. Noteworthy, both these states may be out of the president?s reach in this year?s election. And with fewer ships arriving here with steel, there were fewer to load with grain for export. This hurt bread-basket states such as Kansas and Nebraska ? states where the president?s challengers are unlikely to do well regardless.

Thus, trade policy well illustrates a case where electoral college politics results in policy with economic consequences that were not intended by those who devolved policy-making authority to the president. Perhaps it is time to rejuvenate the concept of popular presidential elections.