Current presidential administration and today's economics.

Great Debates
1

It seems as though there is a trend of blaming current office holders for today’s poor economy. Is this really fair? I would think that policy’s that are set in stone today will not effect the economy until years later. These things just take time grasp the nation, in my opinion. My theory is that it is President Clinton’s fault for today’s economy. It was him and his administration that set up policy’s that would effect today. It’s been known that the economy was at a downfall end the of his second term and now it’s “Bush’s fault” for what’s going on. The only reason Clinton had two good terms was because of the technology sector. Without that, the economy would probably be the same or worse.

I could not imagine taking office and less than a year later, have to tackle one of the biggest terror attacks this world has ever seen. Not only that, it was the center our World’s Trade. The economy took a big hit because of it. Tack on a slumping technology sector, things add up. All too often I see threads saying, “It’s Bush’s fault for today’s economy”. You may not like him, and that’s fine, but considering what he’s gone through the last 3 years, you gotta give in to him. Policy’s his administration is set fourth today will effect the next presidency. So when [insert future president here] takes office, democrat or republican, they will be taking the credit for past policy’s.

I will give you this. Policy’s that seem bad in which they are actually good can get bad press in the media, in which, yes stocks may go down. But I believe this is the strongest administration we’ve had in a long time. IMO of course.

Thoughts?

2

How many years do you suppose?

Two seems reasonable to me.

Who was it that ran on the campaign slogan, “Are you better off today than you were four years ago?”

3

Well, somebody doesn’t like Clinton much today. What’s the matter, you have a nightmare about him or something?

I dunno, do you have any original ones?

4

Republicans are famous for their slavish devotion to principles of personal responsibility. When it is convenient. When it isn’t, they blame Clinton.

5

yme, you’re correct in supposing that economic plans don’t take effect for years after their implementation. How many years? It’s hard to say, especially when you consider Washington’s dirty little secret: The president doesn’t have much effect on the economy either way, generally speaking.

That’s not to say it can’t happen. Reagan cut taxes a lot when he was in office, and the result was the freeing of capital, and a pretty big economic boom. But not all of that was his doing. Partly, it was just time for the tech industry to explode. It would’ve happened one way or the other. At best, presidential economic strategies are like magnifying glasses. A good policy can make a boom even better, a bad policy can make a slump even worse. Reagan doesn’t get credit for the fact that the 80’s and 90’s boom happened, but he should get crefit for it being as big as it was.

As for Clinton, he didn’t really do much to the economy either way. He raised taxes a little, yeah, and that may have slowed the economy a tad, but it by no means hamstringed it. As much as Clinton may like to believe, he had absolutely nothing to do with the 90’s. And as much as Clinton haters may like to believe (and I’m one of the biggest Clinton haters out there), he’s not responsible for the current down trend. The economy sucks right now because it got too big for its britches. The recession was a quick reality check. Now we’re gradually digging our way back out.

Bush’s economic plan is pretty much long-term. In the short-term, there’s really not much anyone can do. The market (read: the investors) are jumpy, so they’re not investing as much as they should. All we need to do to get back on track is make the investors less jumpy. The war right now is likely a big problem - investors don’t like uncertainty. I predict that once the war begins, the stock market will jump, and once the war is over (maybe two, three weeks later, tops - the Iraqis are already ready to surrender), it’ll see big gains. No more war, no more uncertainty.

Certainly, the cut in dividend taxes will help a little, but again, that’s mostly a long-term thing. In the short term, we’ll see little in direct results - and of course, that’ll be used against the current administration. But once the market picks up, I expect to see a lighter version of the 90’s all over again. Hopefully with a little common sense this time.
Jeff

6

As you note the market hates (and punishes) uncertainty.The first downtick in the dotcoms happened about 6 mos.before the elections,historicaly a time for the markets to regress untill they seethe results.If it’s a "regime chamge"as happened in the 2000 elections another bump was noticed.Given that the Nasdaq had more venture capital companies this hurt more initially,further drying up either venture cap’s monies or resolve,and another slide is inevitable.By the next year this is starting to manifest itself in the Dow and then 9/11 happens further tanking that one with their airline and suppliers worries.

We come to '02.Bush makes an axis of evil speech with no like strong statement addressing market makers concerns.

Another year goes by and the SOTU reflects again more of these hawk positions with a few softballs about aids and hydrogen cars.

By this time we’re all saying “where’s the beef,George”

Tho an uptick is possible * immediately * after the actual last combat shots are fired,I see no sustained "campaign promise financial program"euphoria without some actual implemention of some new incentives for the businesses to plow money into.

And,as I’ve stated,this is all about perception,not a factual financial ledger.But I’ve seen no hint in Bush’s or Greenspan’s remarks that lead me to believe they’ve got any fixes up their sleeves.Tax cuts do little for the socalled buyers that drive the economic engine,when most of them use it to hold home and hearth together.

Maybe invest in Supermarkets and Fanne Mae’s ? :frowning:

7

Fannie Mae got clocked today, FYI. Could be a good time to buy that one?
Anyway, I’m one of maybe two people in the whole world who believes that Clinton’s tax hike was perfectly timed, and so was the initial stage of Bush’s tax cut. As Clinton came into office, it was becoming obvious that the economy was actually doing pretty decently, and the prescribed thing to do at a time like that if you’ve got big deficits is raise taxes to throttle the economy back and reverse the deficits. To me, that’s the principle reason why the 90s were so good.
The reverse was true for Bush, and mirabile dictu, he did the reverse. As a result, we’ve only had a relatively mild recession so far, even though it was preceded by the biggest boom ever.
The fact that he was of the opposite party might’ve helped a little, of course.

8

Well then, if you blame Clinton for the fall after his presidency, you have to do the same with Reagan, methinks. When the economy tanked after his presidency, technically, it’s his fault.

BTW, did Clinton steal your bike, yme?

What next-Clinton kicks puppies?

9

I’ve said this on other threads, but will repeat. I don’t see the gov’t (esp the pres) being able to influence the economy in any significant way. Most tax cuts/raises are mice nuts compared to the GDP. The exception is interest rates, which can really screw up the economy-- remember stagflation?

Both parties are guilty of taking credit when none is due and placing blame where none is apropriate. I usually just ignore all the chatter such as “Clinton create 20 million jobs”.

10

So, if you get you correctly:

The attacks on WTC and collapse of tech shows that the economy is not controlled by the President. So Bush didn’t do it.

But, on the other hand, Clinton did it.

You can’t have it both ways.

11

It’s not like Clinton went to sleep for 8 years. Remember the Asian crisis? The Mexican crisis? That big investment place that went under? The Clinton administration skillfully handled many crises.

And Bush? When the market tanked because of Enron, did anyone believe Bush was really serious about reforms? He had a useless Secretary of the Treasury for 2 years. Yeah, friend of Bono’s, but no friend of ours. And some short term tax cuts that get money into the economy would help too.

Clinton got spending and the deficit under control. What a world, when Democrats stand for fiscal responsibility!

12

Different policies have a range of effects over the short and long term.

For example, monetary policy (set by the Federal Reserve) has a longer lead time to take effect than fiscal policy (changes in taxing and spending).

OTOH, the Fed can respond much quicker than Congress can, so that shortens monetary policy’s effective lead time.

I would recommend that the poster consider taking a college-level course in introductory macroeconomics. Alternatively, he could pick up an intro textbook.

Clinton, btw, had a pretty good mastery of intro economics. His strategy was to advocate short-term spending during a recession (a plan that Congress rejected: they argued that the recovery was already underway) and budget surpluses during the economic expansion. The latter “tight” fiscal policy allowed monetary policy to be looser than it would have been, thus adding modestly to national investment.

Bush’s strategy is to advocate tax cuts slanted towards higher income groups when the economy is doing well (it’s called, “giving money back to the people, since we can afford it”) and when the economy is doing poorly (“it gets the economy moving again”).

13

Voyager makes an interesting point: we might assess the extent to which a given President responds to economic events or tries to use economics events to advance a pre-existing agenda.

14

When added interest expenses are factored in, Bush’s proposed tax cuts will amount to $1.85 trillion over the next 10 years. http://www.cbpp.org/2-14-03tax.htm

Let’s call that $185 billion dollars per year. That’s about 1.8% of the economy’s output, or about 2/3 of a decent year’s growth rate.

Investment during the 1995 boom totaled about 15% of GDP. Assuming that 80% of the tax cut goes into consumption (a WAG), that crowds out about 10% of US investment.

Of course, I’m not considering W’s 2001 tax plan, just his 2003 plan.

15

Lots of opinions, speculation, and subjective analysis in this thread so far. Anyone wish to discuss any objectives measures?

Does anyone else see a flaw in this logic?

I’ve seen this espoused numerous times as well. But it doesn’t make much sense to me.

Federal government spending represents 20% of the GDP - the single largest category of spending. Government spending policy is perhaps the biggest single factor effecting the economy overall (albeit, perhaps still relatively small). Tax cuts/raises significantly impact the behavior of spending and investment in the private sector, which also likely impacts the GDP significantly. And while Congress controls appropriations, it is fair to say that the POTUS has the single most influence on the federal budget and tax policy.

So what am I missing?

What tax hike are you referring to?

Most taxpayers (those earning less than $100K), ended up with a lower tax rate, for the same income, than when Clinton entered office. Yes, the rich paid more. Is that what you describe as a tax hike?

16

The fact that in this era of increasing globalization and synchronization of the business cycles of many countries, such fiscal stimuli have a vastly diminishing effect. You get less bang for each buck of government spending.

However, the idea that the president has no influence on the economy is ludicrous. An offhand statement by the president can have an immediate and measurable effect on securities markets. Even Bush Sr.'s offhand comment about broccoli affected the market for the leafy green vegetable.

Setting macroeconomic policy is rather like setting the temperature for a shower. After years of living in the same house, most people can wander into the shower in the wee hours of the morning and by feel alone, set a comfortable temperature within seconds.

Problem with macroeconomics is that the faucets are always changing. You don’t know how long a hot or cold water adjustment will take to stabilize, and just when you begin to figure it out, the lag changes. The desired temperature changes all the time. And when you make the changes, some scream that it’s too hot while others lament the cold.

While the president may have little influence on your economic life, he certainly wields awesome influence over the livelihood of the poor. Clinton and the EITC.

17

The idea that the president has little or no influence over the economy strikes me as naive. For instance, if a President is elected during a period of economic prosperity, then pushes through a budget that quadruples government spending while slashing taxes by 70%, it’s going to have a pretty big impact on things.

Seems to me the only folks who trot out the “it takes a long time for a President’s plans to have an effect” are folks who don’t want to admit that the current economic problems are due to the person currently in the White House. Bush apologistas like to blame Clinton for the current economic disaster, yet never blame Richard Nixon for the problems of the late '70s.

18

OK, so if we agree that the POTUS can take blame/credit for the economic performance of the country, let’s go easy on the OP and give each President a lag of two years before their policies affect the economy.

How do we measure economic performance? How about GDP growth?

Let’s look at Clinton’s numbers. Between 1995 and 1998 (first term + 2 years), the GDP increased 15.8%. From 1999 to 2002, the GDP increased 11.3%.

Bush’s first term (+2) just started, so we have to rely on OMB projections, but from 2003 to 2006, the GDP is projected to increase 13.9%. The numbers are only available through 2008, so I can’t project his second term.

Now, that’s with letting Clinton absorb all of the hit from 9-11, and everything up through the beginning of the year.

Let’s all hope George hits his numbers. It’s looking pretty slow at the start.

19

How could any president be responsible for GDP growth during his administration?

It’s equally silly to blame Bush for the economy as it is to blame Clinton for it.

Massive tax cuts (or increases) is about the only thing that would have any hope of affecting the economy of the US in any measurable way. And even then, IMHO, it has about the effect of a 10 year old building a larger sandcastle against the rising tide.

The economy did well because of the technological growth of the 90’s, fueled by the investing of the baby boomers, who were nearing retirement age.

Now that those same baby boomers are pulling money out of the market, or moving it to bonds or other non-stock securities, the market is bearish.

Enron, 911, the election, and the war uncertainty aren’t helping matters much. However, if all of these events happened during the middle of the roaring 90’s the market would have quickly recovered.

20

AZCowboy: I have no idea what you meant by that post.
I have to assume it referred to the increase in the EITC that Maeglin posted, but I may be wrong. Please clarify.

PS: If you meant the adjustment for inflation that normally takes place each year in the tax code, that was passed under Reagan, and of course has been there for every President since then.
PPS: I’m a Democrat, and have nothing at all against that increase in the EITC. But unless I’m missing something, rates did increase under Clinton.