Partisan Conflict in the U.S. and Potential Impacts on the Economy

Partisan conflict is not new, either in American politics or elsewhere. For economists, politics per se is not of central interest, but its implications for economic activity are. The more specific step we take in this article is to relay how partisan legislative disagreement has evolved and how that may affect the economy. Of particular interest are the effects on how businesses delay hiring and investment when facing high policy uncertainty. We will focus on fiscal policy since it, unlike monetary policy, must be negotiated in legislative settings. We will also concentrate attention here on the U.S. given its economic importance and because data and analyses are available to draw upon, even though our aim remains more general: to connect legislative disagreement to economic outcomes and policies in any major economy.