Do presidents really affect the economy?

[Tennessee Gal]

Recently on the Tennessean Forum several Republican posters stated the belief that economics are cyclical and have nothing to do with presidential actions. What is your opinion?

I found the following to be quite interesting:

Depression: January 1920 - July 1921 (President: Democrat Woodrow Wilson)

Depression: Aug. 1929 - March 1933 (President: Republican Calvin Coolidge and Republican Herbert Hoover)

Depression: May 1937 - June 1938 (President: Democrat Franklin Roosevelt)

Sharp Recession: May 1923 - July 1924 (President: Republican Calvin Coolidge)

Sharp Recession: Nov. 1948 - Oct. 1949 (President: Democrat Harry Truman

Sharp Recession: July 1953 - May 1954 (President: Republican Dwight Eisenhower)

Sharp Recession: August 1957 - April 1958 (President: Republican Dwight Eisenhower)

Sharp Recession: Nov. 1973 - March 1975 (President: Republican Richard Nixon and Republican Gerald Ford)

Sharp Recession: July 1981 - Nov. 1982 (President: Republican Ronald Reagan)

Mild Recession: Oct. 1926 - Nov. 1927 (President: Republican Calvin Coolidge)

Mild Recession: April 1960 - Feb. 1961 (President: Democrat John Kennedy)

Mild Recession: Dec. 1969 - Nov. 1970 (President: Republican Richard Nixon)

Mild Recession: Jan. 1980 - July 1980 (President: Ronald Reagan)

Mild Recession: July 1990 - March 1991 (President: Republican George H. W. Bush)

Latest Recession: President: Republican George W. Bush

Of the eighteen economic depressions/recessions listed, thirteen occurred during Republican administrations and only five occurred during Democratic administrations. In addition of the 177 months spent in economic depressions/recessions, 145 of those months occurred during Republican administrations and only 32 occurred during Democratic administrations.

http://www.econlib.org/library/Enc/Recessions.html

I am interested in finding more info on this topic. If you have links to share, please post them.

[bfusco]

1. yes

It is true that economies are cyclical in nature with periods of growth and retraction and many factors beyond the goverment play into it. However, goverment policy has a profound impact from direct investment into the economy in the public and private sectors, impact of the national debt on interest rates, degree of taxation and trade policies set are just a few things the goverment does that impacts the economy. It sounds like the Reupublican posters are using it as a cop out to absolve this current administration. I here the same logic from Republicans all the time; When the economy is good under a Republican President, it's because of their policies. When it's bad under a Republican President or good under a Democratic President, the arguement is the economy is cyclical and has nothing to do with the goverment.

[AngryYoungMan]

2. Frustrating argument

I'm not an economist or a student of economics so I don't have the wherewithal to address this, but I've encountered the argument many times.

My opinion is as follows: the republican "cyclical" position is sophistry. More exactly, it's a set of arguments designed to support an opinion that's already been decided upon (like the decision to invade Iraq). Sophistic arguments don't have to be that good, since they generally play to a sympathetic audience.

Of course Presidents affect the economy. The main reason is that they bring a cabinet into office with them, and those people perform actions that directly affect growth, interest rates, consumer confidence, etc. I beleive that Robert Rubin, had he still been in office in 2001, would have made some statments and taken some actions that would have arrested the plunge we all felt then. Bush's gang (particularly Paul O'Neill) were not interested in salvaging anything; they were interested in promoting a severe tax cut. So, they didn't really try very hard when it came to stopping the plunges of leading economic indicators that year.

The cyclical argument is suspicious just because it's so damned pat. According to this logic, prosperity during Republican regimes is the result of Republican policies (Reagan: "are you better off" etc.); economic decline during Republican regimes, however, is always the result of PREVIOUS Democratic regimes. On the other hand, during Democratic regimes the rule is reversed; prosperity is the delayed result of the previous REPUBLICAN President's actions.

The Brookings Institute and the Heritage Foundation and all the other think tanks and conservative journalists and commentators do what they can to bolster this idea. They don't have to work very hard, since their target audience is rich people whom they are telling to expect a big windfall. It's like persuading people that ice cream will make them lose weight, and will improve the health of their neighbors as well. Notice how the "benefits" of Bush's tax cuts "won't show up until later"...presumably under a Democratic President (God willing) in the years to come.

It's essentially a rhetorical scam, but when you're arguing with a "true believer" you cannot overcome the essentially impenetrable false logic.

[VoteClark]

3. Yes, but not the way people think they do.

I usually think that Presidents do not directly affect the economy. They do indirectly.

For example, when a Republican candidate is ahead in the polls then some stocks in military corperations go down. If a Democrat goes up in the polls stocks in Health Care go up.

Tax plans also affect the economy.

But it really depends on the mood that the President as a person sets, and their agenda.

They can also affect the economy by appointments in the Federal Reserve Board.

But it is really limited. They can't do much directly. I personally, if I were in Bush's shoes, would recall the tax cut and pay of the state debts. $70 Billion would handle the states problems. Which in turn would lower property tax. This would put people at ease. I would then release the US oil Reserves to lower oil prices. I would raise the salaries of all Federal employees. Increase the amount of loans for college to get people out of the work force. Lower the age of retirement to encourage people to get out of the job market. Mandate that all corperations being compenstated supply a health care plan or lose benifiets, and then raise minimum wage by about $1.

This would change the attitude of most people and turn the economy around. Most the time the economy is stalled is because people stop spending and they stop spending because they are not secure with their future income.

:kick:
J4Clark

[DemExpat]

5. I also think that Presidents have enormous influence indirectly

by affecting the mood, the tone, the attitude of the people.

:kick: Dems :kick:

DemEx

[OHdem10]

4. Possible info on Depressions, recessionsetc

Try Ourfuture.org <Website> EMail Info@Ourfuture. StanGreenberg
pollster usually has this kind of info or someone there might better direct you.

[Tennessee Gal]

9. Thanks!

That link is full of great information.

[kcwayne]

6. Presidents policies absolutely affect economic prospects

Here are a few examples:

FDR's WPA program was a major stabilizing force in preventing unemployment from cascading from 20-25% to something so high it in all likelihood have led to a change in government to socialism or communism.

FDR's leadership to move us into WWII (Roosevelt's war the Republicans disdainfully called it then) finally lifted us out of the depression.

JFK's space program led to incredible gains in technology that directly lead to the formation of the entire tech industry, many of the fruits of which we are benefitting from today (at least until the fruits are all exported to China and India)

LBJ's War on Poverty and escalation of the Viet Nam war spent the surpluses generated by good economy of the mid 60's leading to a recession in the early Nixon presidency.

Nixon's wage freezes in the early 70's was one of the Republican's most stupid economic moves ever. For those of you that do not remember, companies were not allowed to increase wages for any employees except for a few exclusions in categories established by the government. (I don't remember, but I bet that CEO options and bonuses were not restricted). In conjunction with a non-existent energy policy, the 70's were an economic disaster at a time when better leadership should have resulted in booming times. Why? Because you had the entire baby boom generation hitting the market with needs such as cars, steroes, housing, education, food, clothing, etc. Anytime you have a massive population moving into a mode where they need services, the economy should boom.

Reagan's massive spending on defense stimulated the economy in the mid 80s, and led to the deficit inspired recession in the early 90s.

Clintons deficit reducing in combination with the spending habits of the boomers accelerating (because their maturing careers generated more income) led to the boom in the 90s.

The economy tipped over and started heading south during the last presidential campaign. Bush's policies have created an atmosphere of uncertainty and fear about the future, and have caused a crises in confidence. We should be experiencing good economic times as boomers again shift their spending profile (retirement homes, health needs, vacation expenditures).

As the boomers shift into their 70s however, look out below. I cannot concieve of a presidential policy that can overcome the massive retraction in spending that occurs in old age in an economy that is a net importer of goods and services. We would need leadership that can turn us into net exporters to offset the dislocation of consumers that we are about to experience.

[TreasonousBastard]

7. Of course they do, but...

just looking at lists of recessions doesn't really tell the full story.

Recessions are cyclical, no matter who does what. Often, the cycle depends on factors from months or years ago. The increases under Reagan is principally tied to changes in business practices that started under Carter, but Carter had little to do with them. Except for deregulation, of course. (It's often forgotten that Carter was one of the biggest deregulators of them all.) Changes in supplies and inventory, accounting changes, newer machinery increasing production, increases in employee productivity, increased use of computers and data collection, new products like personal computers and entertainment goodies... Lots of things led to an upsurge in business activity during the 80's.

I'm not sure what caused the latest recession, but it probably had a lot to do with real incomes sliding downwards and not enough new products out there to keep demand growing. Moving manufacturing overseas didn't help a bit. I am convinced Shrub is completely clueless, and probably doesn't give a shit about it anyway, but I can't blame it entirely on him. I can blame him for inept attempts to deal with the symptoms, though. And possibly setting us up for a major fall in the future.

Administrations can do things that ameliorate the problems in downturns. Unemployment insurance, job training, programs for displaced workers, corporate bailouts, government spending, investing in R&D... All of this will eventually have an effect, but maybe not for years. They can also do things that have unknown effects, such as tariff and import regulations, environmental and safety regulation (causing increased spending), monetary policy, farm and other subsidies...

It is all very complicated and many people have pieces of the puzzle, but no one knows for sure what's going on. If anyone claims to, I just think back to the words the economics chairman gave us in the first lecture of Eco 101-- "You will study and learn many formulae, rules and principles. Even more if this is your major. Just remember that absolutely none of it works in the real world."

[Tennessee Gal]

8. I agree about lists

However, cyclical ups and downs were the points being made by the Republicans. I just thought it interesting that the downs were predominatly during Republican administrations.

[lanlady]

10. the cyclical argument--

--is one I've been hearing a lot of lately from my Repug acquaintances. Not being an economist, my rebuttal is usually something like, "trying to get Dubya off the hook? If Clinton were still prez, bottom dollar you'd be blaming HIM alright." But there are a lot of great responses here to your post, and thanks to them I'll be able to respond more effectively, with facts.

[ArkDem]

11. Jimmy Carter was president in 1980.

.

[Tennessee Gal]

15. OOOPS!

You are correct! Thank you!

[VermontDem2004]

12. If a President

can raise taxes, lower taxes or cut spending, increase spending. Presidents are able to make many decisions that affect the economy in some way. So Presidents have a large role when it comes to the economy. I guess Democrats know how to manage money better then Republicans, plus you need to study what FDR did to revive this economy, he did alot in bringing us out of the Depression.

[snippy]

13. There are economic cycles but presidents do have an impact.

Over the past one hundred years or so economists have proposed several theories to account for economic cyclicality but none of the theories explain all of the cyclical events. Government policies can and do affect economic cycles though, most notably through monetary policy set by the Federal Reseve, but also fiscal policy set by the president and Congress. Monetary policy may be most effective at slowing an economy on the verge of inflationary growth while fiscal policy is most effective at stimulating a contracting or sluggish economy. Neither monetary policy nor fiscal policy controls the economy.

However, there are three totally objective measures which distinguish the economic effects of republican presidents from democratic presidents. These are the annual rate of job growth, the size of the federal deficit and the performance of the stock market. All three of these measurements perform much better under democratic presidents than under republicans. I think all three are related with the rate of job growth being the most important.

Since Harding was president, the annual rate of job creation under republican presidents has always been lower than under democratic presidents. Since the depression, the best rate of job growth under a republican was 2.2% per year during Nixon's time in office. The worst rate of job growth under a democrat was 2.3% per year during Kennedy's time in office. Bush has a -0.7% annual rate which is the first negative number since the depression.



Since Kennedy was president, republican presidents have always run higher federal deficits in current dollars, in constant dollars and as a percentage of GDP, than democratic presidents.
http://w3.access.gpo.gov/usbudget/fy2001/sheets/hist01z3.xls
(The estimates for 2000 and subsequent years are no longer applicable. Also, the numbers for the first year of a presidential term are from the budget of the preceeding term.)


The stock market also performs better under democratic presidents.

The excess return in the stock market is higher under Democratic than
Republican presidencies:nine percent for the value-weighted and 16 percent
for the equal-weighted portfolio.The difference comes from higher real stock
returns and lower real interest rates,is statistically significant,and is robust
in subsamples.The difference in returns is not explained by business-cycle
variables related to expected returns,and is not concentrated around election
dates.There is no difference in the riskiness of the stock market across
presidencies that could justify a risk premium.The difference in returns
through the political cycle is therefore a puzzle.

http://www.personal.anderson.ucla.edu/rossen.valkanov/Politics.pdf
This analysis covers the years 1927-1998 and separately examines the years from 1927-1962 and 1963-1998. The results now would show an even greater difference.

I think that both the higher rate of job growth and the lower federal deficit may explain the better stock market performance under democratic presidents

[Tennessee Gal]

16. Great info!

Thanks

[DemocratSinceBirth]

14. Here's An Interesting Fact Or Artifact

If rich people were smart they would vote Democratic. There have been numerous studies of stock market performance and presidential tenures. All the studies suggest that the economy and the equities market perform better under Democratic presidents. I'm sure someone can find a link.

Investors made more money during the Clinton-Gore years then they will ever make in the Chimpy-Fatboy years even with all the tax cuts.

Some rich folks like Warren Buffet have figured this out but most will let their ideology get in the way of making alot of extra bucks.

[Tennessee Gal]

17. THANKS!

To one an all who posted here. You provided excellent information!

[sandnsea]

18. Yes but there's more to it

It seems Republicans always measure everything in GDP, recessions, depressions and growth. They always point to Reagan and his GDP. And of course we're now out of a recession because GDP is up. But both of them have one thing, at least, in common; the GDP being made up of deficit military spending. That's not an economy.

And then there's the interest rates, unemployment, inflation, and a bunch more stuff I likely don't even know about. Like there's different measurements for production by US companies (here & abroad) as opposed to production from just in the US.

There certainly are business cycles, but the President's policies also have an affect. It seems anybody with eyes ought to be able to see that.

[snippy]

19. I think it all depends on job creation.

I have no evidence to support that claim, but more jobs means more people buying goods and services which leads to more businesses coming up with new or better or cheaper goods and services. More jobs also means fewer people looking for work which makes employers offer better pay and benefits than they otherwise would. More people recieving more compensation is good for the economy in my book.

Republican presidents have a hostility towards labor that democratic presidents do not have. Both republican and democratic presidents support business, but many, if not most, republican politicians seem to relish the exploitation of labor. That may boost profits over the short term but I think it harms economic growth.

Republicans love to whack off while chanting about the benfits of competition but they hate an environment where businesses have to compete for workers.

[Classical_Liberal]

20. Well I think this sort of legislation hurts the already beleaguered

Internet sector. It certainly won't help California come out of recession.

http://www.isp-planet.com/news/2003/tauzin_dingell_030723.html

http://www.internetnews.com/xSP/article.php/1379401

Yet nobody raises cain over it.