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U.S. Economy

Political Polarization: It's Worse Than You Think

Political polarization has increased since the 1980s, and its spikes have depressed employment, investment, and output, says a study (PDF) released on Friday by the Federal Reserve Bank of Philadelphia. That won’t come as any surprise to people who have lived through this month’s partial government shutdown and brush with national default. But Philly Fed economist Marina Azzimonti wrote the study well before the October “fudget” debacle. Her data extended only a bit past the fiscal cliff negotiations at the start of 2013.

Azzimonti’s Political Polarization Index resembles the Economic Policy Uncertainty Index, which has its own website. The Peter G. Peterson Foundation used that policy index for a report this week estimating that the nation’s lurches from crisis to crisis have cost the U.S. about 900,000 jobs. The Political Polarization Index is based on the frequency of newspaper articles about political disagreements over policy. The index’s increase from 2007 to 2012 was a “shock” that might have cost the U.S. 1.75 million jobs, Azzimonti writes.

You can’t add the 900,000 to the 1.75 million because the economic policy and political indexes are mostly describing the same phenomenon. There are some differences, though, as Azzimonti’s index includes polarization over such social issues as abortion and gun rights that have nothing to do with economic policy.

A textual analysis based on counting phrases is imperfect because an article about a reduction in polarization would show up in the index as more polarization just because it would use that word a lot; the Roosevelt Institute’s Mike Konczal pointed this out in a critique of the Economic Policy Uncertainty Index.

Still, it’s probably in the ballpark. Just for fun, here is the set of words that Azzimonti tracked:

At least one term from this list:

Polarization, polarized, disagreement, standstill, stalemate, gridlock, deadlock, fail to compromise.

And one term from this list:

White House, Capitol Hill, Senate, Congress, partisan, Republican, Democrat, GOP, political, public policy, federal budget, tax, national debt, federal debt, deficit, debt ceiling, balanced budget, defense spending, constitutional reform, war on terror, entitlement, public welfare, social security, health care, minimum wage, unemployment insurance, unemployment benefits.

Or any articles using these specific terms:

Political division, political divide, partisan division, partisan divide, division in Congress, gridlock in Washington, divided American politics, division of ideology, ideological divisions, ideological differences among/between parties [and variations of these].

Coy is Bloomberg Businessweek's economics editor. His Twitter handle is @petercoy.

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