Presidential Economics: What Leaders Can and Cannot Do about the State of the Economy

The Presidential campaign season is about to go into full swing. The conventions are coming, to be followed by a barrage of advertising and then almost certainly, we will have debates. Much of the focus will be on Iraq and American foreign policy, but inevitably, the economy and its performance over the last four years will play a crucial role in the campaign.

John Kerry will focus on the mediocre performance of the economy, particularly the job market, in the first part of the Bush Administration. Bush will tout the performance of the economy over the last year or so as long as the job numbers continue to be rosy through the fall. Implicit in this discussion are two strange assumptions. The first is that the President “runs” the economy. The President hardly even runs the government. He certainly cannot direct the fortunes and failures of millions of workers, managers, investors and entrepreneurs. The second implicit assumption is that the success or failure of the President depends on his ability to “stimulate” the economy, as if the economy were an engine that simply needed a different setting for its carburetor or as if it were a lazy steer that needs prodding to speed its way on a cattle drive.

This presumption that the President is somehow in charge gives both the incumbent and his challenger something to talk about. All failings become the focus of the challenger. Why didn’t the incumbent do a better job of stimulating the economy? The incumbent points to anything good that happened during his watch as being part of his policy design. I don’t think we’re all Keynesians now, but it’s alarming to hear George Bush explain that his tax cuts stimulated the economy by putting money into the hands of consumers so that they can spend it and create jobs.

Read the full article at The Library of Economics and Liberty