How the president CAN'T affect the economy
Posted August 16
Democrat Hillary Clinton and Republican Donald Trump, and their supporters, say they have what it takes to put the United States economy into high-growth mode.
And while both candidates claim their opponent would spell certain doom for the nation's economy, the data have long shown presidents have far less economic impact than they want voters to think.
While Forbes did note a study of previous presidents and their economic impact found the economy is better under a Democrat, the result is only “weakly significant,” with an average boost of GDP growth of 1.08 percent. The deeper truth, writer Jeffrey Dorfman wrote, is “presidents barely matter in explaining economic growth.”
The president’s party accounts for about 5 percent of difference in economic growth rates in the U.S. postwar history, Dorfman wrote, which leaves 95 percent of economic fluctuations to other factors.
Podcast Freakonomics produced an episode on the presidential impact on economy in 2010, noting there's “an extremely wide gap” between what people perceive the president’s power to be and what the nation's CEO can actually do in office.
Bernadette Meyler, a professor of law at Stanford, said in the podcast “the president really can’t just turn around and fix the economy within two years,” and, if anything, the economy depends more on Congress because it has the power to decide how to raise and distribute funds.
“I think that probably candidates do think they can just get in there and change everything all at once and then pretty soon realize about all of the other things that are constraining their ability,” Meyler said. “I actually don’t think it’s a bad thing (…) because that at least provides some motivation for trying to change things.”
What economic power the president has shows up only “years or even decades after they leave office,” according to fivethirtyeight.com. For better or worse, the impact is far from immediate.
It’s not an entirely hard-and-fast rule, though. When the country’s in crisis, “presidential action can have an immediate and measurable effect,” such as the way many economists think the stimulus package Obama signed early in his administration lessened the recession’s effects, Ben Casselman wrote for fivethirtyeight.com.
Aside from crises, there’s little presidents can do to help an economy in the short term, although they can harm it, according to Casselman, citing President Richard Nixon’s 1971 wage and price controls that failed to halt inflation in the long run.
“In other words, neither Clinton nor Trump can realistically promise to avoid recessions or boost economic growth," Casselman wrote. “Instead, voters should be asking themselves a series of questions: Which candidate do I trust to manage a crisis, or to avoid creating one? Which candidate will set up the economy for success after he or she leaves office? And which candidate’s policies will help the most people succeed in the economy that we have now?”
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