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Ask Not What the President Can Do for the Economy
Ask Not What the President Can Do for the Economy
By BRYCE COVERTJUNE 20, 2016
THIS year’s presidential candidates, like all candidates before them, have talked endlessly about what they’ll do to boost the economy if they make it to the White House.
The presumptive Republican nominee, Donald J. Trump, has pledged to create economic growth of as much as 6 percent each year, “growth that will be tremendous.” He says he will deliver “a dynamic economy again.”
Hillary Clinton, the presumptive Democratic nominee, is far more cautious about what she promises, but has still made her own list of expansive economic pledges. In a speech last July, she vowed to drive incomes upward, strengthen the middle class and ensure long-term economic growth. “We have to build a growth and fairness economy,” she said.
The mantra resurfaces each election cycle: It’s the economy, stupid. The issue is consistently at the top of voters’ minds. Steady growth usually buoys the party of the sitting president in an election, while bad performance will drive it out. When they go to the polls, Americans are supposed to be picking the person they think is best poised to bring them the economy they desire. And candidates are all too happy to keep talking about what they say they can deliver.
But politicians may be selling voters a bill of goods about how much their presidential pick really matters. Candidates spend a lot of time talking about tax plans and income growth — instead of the issues they could actually directly control in the White House. The economy is the issue the public cares the most about, but perhaps the one that presidents have the least power over.
There is a longstanding trend that has baffled researchers and Republicans alike: Since World War II, the economy has consistently performed better under Democratic administrations than under Republican ones, no matter how one measures its performance. Why? It’s mostly about luck.
In two different papers, the economists Alan S. Blinder and Mark Watson found that the strength or weakness of the economy was mostly related to factors out of a president’s hands, such as oil-price spikes that crimp consumer spending and often precede a recession, productivity growth and a rosy international economic picture. Higher consumer confidence also helps, which may be affected by the president, but that’s a much less direct outcome than, say, tax changes.
Presidents do influence those factors, of course. Starting a war in the Middle East will affect oil prices. Government can help foster new industries and technologies — say, the internet — that can alter productivity. But there are other big items under presidential purview that the studies found that don’t have any impact, such as the size of the federal deficit or spending on the military.
A closer look at history reveals these patterns. President Dwight D. Eisenhower is known for his investment in the nation’s highway system, but the economy he oversaw benefited more from lessons in productivity that companies learned during the war, and the adoption of new technologies. President Ronald Reagan is lionized for his tax cuts and deregulation, but it was the Federal Reserve’s fight against inflation that had the biggest impact. President Bill Clinton oversaw robust economic growth, but we have the rise of the internet and other factors outside of his control to thank.
There are also clearly presidential policy pushes that have more marginal, but important, consequences. Tax policy can either exacerbate or reduce income inequality, for example, which has been found to slow economic growth. Presidential appointments to agencies like the Federal Reserve and Department of Labor are crucial. Without the stimulus package pushed and signed by President Obama, the economy would almost certainly have fallen further into recession and taken far longer to crawl back out.
This also means that the person who is sworn into office in January will have at least some consequence for the economy. If it’s Mr. Trump, he’s made it clear that his top priorities will be trade and immigration policy. The details of his plans often shift, and depending on what course of action he takes on trade he could either help the economy by going after China’s currency manipulation or end up costing the country millions of jobs by starting a trade war. Reducing the flow of immigrants would certainly be terrible for the economy.
If Mrs. Clinton becomes president, it seems likely that first on her agenda will be pushing for national paid family leave, a minimum-wage increase and more government spending on things like infrastructure projects to create jobs. Paid family leave can keep people in the work force and even expand it. A bump in the minimum wage can put more money in people’s pockets and stimulate the economy — without, most likely, costing jobs. Infrastructure spending has been found to generate significant economic growth.
But both candidates need Congress to get these things done. The number of new laws enacted by recent Congresses has been steadily on the decline for some time. To get at least something accomplished, President Obama has been turning to his executive power. But the change that can be wrought through those orders is much smaller; rather than being able to raise the minimum wage on his own, for instance, he can do so only for government contractors. And those orders can always be reversed.
Continued:
Last edited by Goose (6/20/2016 6:45 am)
We live in a time in which decent and otherwise sensible people are surrendering too easily to the hectoring of morons or extremists.