ELECTIVE ECONOMIES.(The Talk of the Town)

In the days leading up to the midterm elections, Republicans spread a simple message. "If the Democrats take control," Dick Cheney warned, "the economy would sustain a major hit." Wall Street pundits forecast a future of tax hikes and new regulations, and suggested that if Democrats took both the House and the Senate there would be a "major stock sell-off." But the day after the elections stock prices went up. If disaster is looming, investors can't see it.

Perhaps the market is just blithely ignorant. But it's more likely that investors understand what the pundits don't: while we hold politicians responsible for things like the rate of economic growth and unemployment, in the short run they generally have little influence on the economy as a whole. There are some interesting patterns in U.S. history--economic growth, for instance, tends to be stronger in the first years of Democratic administrations than in Republican ones--but the effects of such trends are small. And changing congressional majorities seem to have even less impact than changing administrations. Voters might expect that a dramatic power shift like the one we saw on Tuesday would have profound consequences for the economy. But it almost certainly won't.

In part, this is because Congress is limited in the tools it can use (especially if a President is likely to veto its initiatives). Monetary policy is controlled by the Federal Reserve Board, which is essentially independent of political pressure. It hasn't always been this way. In 1971, for instance, Fed chair Arthur Burns began to cut interest rates, which kept the economy growing briskly into the next year's election. Republicans in Congress could certainly have used a couple of interest-rate cuts this year, but there was never a possibility that the Fed would oblige. And while Congress does have the power to tax and spend, changes in spending and taxation typically have only a marginal impact on short-term economic performance, because they're too small to have much effect on what's now a thirteen-trillion-dollar economy. Nor is there any obvious connection between changes in policy and economic outcomes: Congress raised taxes in 1993, and the economy boomed. It cut taxes in 2001, and the economy grew briskly then, too.

Elections are also unlikely to bring major economic changes, because when it comes to macroeconomic questions Democrats and Republicans are simply not that far apart. The Democrats will block any attempt to extend tax cuts for the wealthy, but they've shown no interest in returning tax rates to where they were when, say, Ronald Reagan took office. Both parties seem to accept that the Fed's most important job is keeping inflation under control. Both pay lip service to balanced budgets (although the Democrats appear more committed to them in practice). There's no movement to restore the kind of elaborate regulations that ...