I really, really wanted to start this in GQ, since it’s a question with a factual answer, but I will bow to reality and concede that it’ll turn into a debate. Please, though, let’s try not to make it about the 2008 Presidential race…
Everywhere you turn in U.S. politics, you hear people lauding (or criticizing) the economic acumen of Presidential candidates. Presidents get the blame when the economy goes bad, and they get the credit when it goes well. But that doesn’t reflect what I was taught about how the U.S. government works.
As I understand it, the President influences the economy by:
[ol]
[li]Selecting the Fed chairman (who must then be vetted and approved by Congress and has no obligation to do what the President asks him to do)[/li][li]Signing budgets and financial bills (all of which come from Congress)[/li][li]Vetoing budgets and financial bills (which can be overridden by Congress)[/li][li]Starting very expensive wars (you got me on that one, but let’s PLEASE not make this thread about wars)[/li][/ol]
Basically, it’s all about Congress. The POTUS can make suggestions or recommendations, but it’s Congress and the Fed that really control the economy. Presidents can promise tax cuts/rebates, interest rate changes, bailouts, foreign aid money, and so forth, but they can’t actually deliver any of it.
So why are we all so concerned about economic experience, and why do we assign economic blame and credit to the President?
Again, I’m not asking about specific people, and this isn’t about the 2008 election. I really want to understand how the President influences the economy.
No president, regardless of expertise runs the day to day economy. However he sets the direction by who he selects to run it. Bush came in saying he was cutting taxes, especially for the wealthy. The idea of deficits do not matter , was their mantra. He broomed his first economic adviser when he was uncomfortable with the direction we were headed. So ultimately it lies at his feet.
Who he appoints in his admin is extremely important.
Well, you got all the way to one post in before your OP got ignored in favor of some good ol’ fashioned Bush-bashin’!
How much influence does the President have? Less than Congress does, and even then doesn’t it take years for changes to occur?
Did the “surplus” checks help out or harm - that was directly from the office of the President, wasn’t it? That might be the extent of direct influence outside of appointments.
The budget does not come from congress, it goes to congress.
“The law specifies that, by the first Monday in February, the President submit
to Congress his proposed Federal budget for the next fiscal year, which
begins October 1.” From here.
You overstate the power of the executive branch somewhat here.
Congress is the primary check on executive power, yes. Congress must approve spending and so on, yes.
I don’t know, because it isn’t like the President himself creates the budget single-handedly. That’s what the cabinet and other advisors are for. Still, the President must (should) be able to weigh recommendations and choose a course of action. The more informed a President is, the better this should go, but I agree with what I think you’re saying, which is that having a deep understanding of economics is not particularly critical.
I did misstate that. Still, the president can’t do anything with the budget unless Congress approves of it.
That’s not really my point (although we do agree on it). I’m trying to figure out why, when people look back on a presidency, one of the first things they rate it on is how the economy did during that president’s term (e.g., huge deficits for Reagan, prosperity for Clinton, etc.), when the president really doesn’t seem to have the authority to do much. Congress makes all the money decisions, including whether to approve the president’s appointments.
I think the thing you’re forgetting is the influence of the president on the debate, and his stance as leader of his party, especially if his part has a majority. Do you think anyone but Reagan and Bush were really responsible for the tax cuts on their watch? If the Democrats hadn’t taken control in 2006, don’t you think they’d be extended already?
The Budget is a massive document. The president certainly doesn’t read it (does anyone) but he is the one responsible for the allocation of money across departments. While Congress certainly modifies it, I suspect most of the line items never get touched, being too trivial or uncontroversial for anyone to care about.
So control no, influence yes. And we get the importance of the president in good times, and the unimportance in bad times, like today.
I am no fiscal expert, but I would like to throw in the idea that executive-branch-led tax policies that support or penalize various industries have a big effect on jobs in those industries. And employment and income obviously have a huge effect on the economy. I believe this is why the Clinton administration always cited its number of “jobs created” as a major economic positive, and it is also why Obama claims his energy policy (which is in part–even in large part–a set of tax incentives and disincentives) will create jobs in the environmental/energy sector.
(Sorry for the mentions of specific presidents/policies if that’s not the kind of comment you had in mind.)
A little clarity in order – the President submits a budget which Congress generaly ignores in favor of its own budget resolution. That budget resolution is not signed by the President. The budget resolution, though, only sets an outline for spending. The real spending is done in the twelve appropriations bills passed by Congress and signed by the President. So talking about “budgets” when you really mean to say “appropriations” only serves to confuse the conversation.
That being said, if the budget resolutions change policy, like make tax changes or entitlement spending changes, then these changes must be implemented by legislation, which generally goes through the regular process but cannot be filibustered.
I don’t think you really meant that. No one controls the economy. At least not an economy like the one in the US. Government policy certainly has some effect on the economy, but mostly it is “controlled” by millions of people going about their business every day. And those people aren’t all in the US, either.
I think the president’s job is to assemble the right people but more importantly, he should set the tone and sell the priorities to the people. I realize that all the partisan carrying on can and probably does keep a president’s vision from coming to fruition, but I believe the president’s job is to assess our needs, put a plan together to fix what’s broken or bolster what’s not, and then sell it to the people who can make it happen.
That’s my point. I’m not forgetting it. The President is highly influential, but so is the Speaker of the House, the party chair, the Fed chair, and all of the members of Congress that vote for or against appropriations and laws.
If the President doesn’t have the support of his party, he can’t get anything done. I think his party’s influence on the economy far outweighs his own.
Absolutely true. I retract my statement.
But given that, is it really fair to credit a President for a good economy or blame him for a bad one?
That rests on the assumption that “the people” (and I assume you are talking about some people in government) can make those changes happen. They can enact a policy but that does not mean it will have the desired results. As mentioned above, the economy is “controlled” only in the sense that the individual decisions of millions of people come together and produce an emergent order. The actions of the government have some effect, yes, but we do not live in a planned economy. Even in planned economies, as we saw in the Soviet Union, the government’s ability to control the econmy is very, very limited.
Government policies are a combination of a huge amount of ignorance, a large dose of giveaways to special interest groups, and a few nuggets of good sense. They are unlikely to do much to achieve the lofty goals envisioned by the politicians promoting them. Really the only good government can do is to reduce government interference in the market and let the emergent order work more efficiently. If a President proposes that and it gets done, then he can take credit for helping the economy.
Not Bush bashing at all. He is prez and therefore handiest to use as an example.
Clinton paid down the national debt. But he countered that with NAFTA. and love of WTO. He opened the door to moving our industries abroad . That is a big cog in the economic meat grinder that is chewing up American workers now. But unemployment was low and gains were more fairly distributed.
Except you’ll have a hard time finding any credible economist that thinks lowering barriers to trade is bad for our economy. Yes, some jobs may go offshore, but other jobs are created in industries that export more goods to others. Consumers reap the benefits of lower prices and more products.
And Clinton did not really pay down the national debt. We did not have a budget deficit during a few years during Clinton’s reign, and so were not adding to the national debt, but any dent he made in actually paying down the debt was miniscule at best. The national debt and a budget deficit aren’t the same thing.
So paying down the national debt is wrong because it isn’t a lot? Bush and his people have skyrocket the debt. The basic economic system is weaker.
A credible economist is defined by the slant of the follower.
Almost nobody would argue international trade is bad. Having a level market is another argument. The economists that set up the trade agreements put us in a weak position. They allowed trade barriers that made some of our goods cost prohibitive abroad. They could gulp huge amounts of American buyers but we could not sell there .
As I said before. China did not develop a better anything. They did not out compete us. They just gave our industries cheap labor with no regulation. So we moved lock, stock and intellectual property onto their shores. It was done by the leaders of industry to maximize profits. You can argue that that is what they do. But the repercussion to American workers and stability should be part of the equation. Our negotiators do not work for the American people. They work for industry. Our regulators do not work for the American people. They work for industry.
I remember LBJ, a master of this, and the influence he had. Neither the fed chair, nor the Speaker, nor any random Congresscritter can demand prime time for a speech on the economy, nor guaranteed headlines even in smaller papers.
Not to mention that the president is the one who chooses the Secretary of the Treasury. There were several times during the Clinton years where we could have had a meltdown without good leadership. The current occupant of this office is the first really topnotch guy in the Bush years.
But how does a president lose support? Bad poll numbers, continued foul ups, etc. When someone comes into office, they have that support, during the honeymoon period, and it is the president’s to lose. Even then, the Congress is more likely to run around like chickens with their heads cut off, because they do not have a massive staff to study and analyze the issues, and can’t take rapid corrective steps like we saw last weekend. Plus, the administration economics people come from the financial community. I doubt anyone in Congress has Paulson’s background.
Depends. I think it’s easier for the government to hurt the economy than to help it, but I don’t think you can generalize about whether the good times are due to government action or if the bad times are. If you look at monetary policy pre- and post-Volker, that might be an instance of government action hurting the economy and then helping it (once inflation was brought under control). But how much the economy boomed and when and how long the recessions have been have a lot to do with market forces that are beyond the government’s control.
And when you consider how globalized markets are these days, it’s important to not think of the US economy as existing in some sort of bubble, unaffected by everything going on all over the world.
The government can distort incentives. To the extent that the incentives in question bear directly on the economic issue and are the primary incentives, the government can have an enormous impact. I think it is fair to say that the Soviet government exercised a great deal of control over the economy. Ultimately they cannot remove the profit motive, true. The government can also give things away to certain select people. This can have a large impact, depending on the people, and what’s given, but it may have little impact other than to hurt those that were taken from for the benefit of those to who it was given.
My point was that government may want to produce X with its policies. It sets in place incentives, programs, and punishments to achieve X. It is unlikely, however, to achieve X. Even in an economy where the government had much, much more control over the economy, it failed to achieve X by its policies. So the idea that we just need a good plan and get the people to implement that plan and everything will be fixed is a ridiculous one.