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It Ain't the Economy, Stupid
To his worshipers, Ronald Reagan's great economic achievements were tax cuts and spending restraint. Not so. Reagan's singular feat was supporting Paul Volcker's Federal Reserve in suppressing double-digit inflation, which had destabilized the economy (four recessions between 1969 and 1982). From 1980 to 1983, inflation dropped from 13 percent to 4 percent. This set the stage for the long expansions of both the 1980s and 1990s.
Reagan's cut in tax rates probably helped slightly, but the overall tax burden wasn't much reduced. In 1988, taxes were 18.2 percent of gross domestic product (GDP), slightly above the post-1950 average until then (17.8 percent of GDP). With a military buildup, spending restraint was negligible. In 1988, federal outlays were 21.3 percent of GDP, only slightly lower than in President Carter's last year (21.7 percent).
Bill Clinton had little to do with the causes of the 1990s' economic expansion: low inflation, low oil prices, a computer and Internet boom, a stock market boom. The claim made for Clintonomics is that paring the federal budget deficit in 1993 provided the essential catalyst by reducing interest rates. But long-term rates in 1994 were actually higher than in 1993. Many forces affect rates aside from the budget deficit: inflation and inflationary expectations, saving behavior, Federal Reserve policy, overall credit demand.
Clinton's contribution was self-restraint. Unlike Nixon and Carter, he didn't meddle with the Fed. He was a "conservative" in a pragmatic way. He knew when to leave well enough alone.
Of course, presidents do affect the economy. But their greatest influence often occurs after they've left office. FDR's enduring legacy was Social Security; Reagan's was low inflation. Some policies that are initially popular turn out to be calamitous. Under John Kennedy and Lyndon Johnson, the government followed highly expansionary policies to reduce unemployment. Initially popular, they ultimately spawned high inflation. The converse is also true. The anti-inflationary policies of the early 1980s sent unemployment to 10.8 percent. Reagan's popularity plummeted.
Sensible voters should look beyond the cheery or dreary economy of the moment. They should recognize that if presidents could control the business cycle, recessions would never occur, there would always be "full employment" and inflation would remain forever tame. Instead of judging prospective presidents on what they can't do, voters ought to concentrate on what they can do. There are plenty of real differences among the remaining candidates. But Carville is probably right. For many, it will be the economy, and it will be stupid.
© 2008
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Member Comments
Posted By: dawei @ 05/12/2008 12:01:18 AM
Comment: I think all three candidates are worthless. Abama and Clinton will not handle terrorists correctly, all three will not handle China corrcetly, and McCain is an idiot in understanding Economics. Two of the top five qualifications should be Economics and military action. Not reserves or just service in the Army, Navy or Marines. I mean action in a war and probably nothing less than Captain. I saw a new blog site that is good. www.stopthenonsensenow.blogspot.com. I don't know hoe long until he gets to todays issues but he is writing about the liars in the white house during the 80's and the elite killers and terrorists, the CIA. His mission statement says he wants the people of the US to revolt and take back the government. He is right.
Carter did not renew the lease on the Panama Canal, which is great that China controls it now, and the people vote the pocketbook is correct. They are stupid. The above blog site tells about how stupid the US people are. I am only 29 and working on my PhD but the person writing the blog site is going to talk about Economics and the amnesia everyone has developed about Reagan and giving chemicals to Hussein, Bush going after oil the Chinese were in negotiations with before 9/11, the CIA funding terrorists by selling drugs to American children, and a whole load of "crap" as he puts it that the government has "bamboozled" the public over the last 35 years or more.
And he has nothing good to say about the Kennedys either.
Posted By: kcarizona @ 02/09/2008 6:59:35 AM
Comment: I once heard blamming the President for a bad economy is like blaming Ronald McDonald for a bad hamburger. i am waking up and trying to stop the NO GAIN BLAME GAME and looking to what i can do today to make this economy better. If each one of us across the country did our part the president could go about doing his job and we... too much to ask?? everyone minding their own business???? i don't mind President Bush's business i mind my own. My business as a citizen is to mind the election and vote and so i am voting for the best i vote Hillary. I vote Apple over Microsoft i vote Costco over Sams club i vote Coke and Pepsi over RC i vote the best, i wish i could vote Ford over my Honda but for now i vote Honda - for now.
Posted By: HerbB @ 02/08/2008 11:46:21 PM
Comment: So basically you say we should just throw in the towel. There is nothing a president could do with all his power and influence to improve the economy. So we should forget the economy as deciding factor for our presidential candidate and judge him by his credentials on national security. Is this what you are suggesting? Hmm...Can it be that your favorite candidate is John McCain? Should we just forget about his lack of credentials on economics and internal affairs and build our decision in large on his heroism during the Vietnam war? Isn't a President also in charge of the federal budget? Isn't he also in a large part responsible what energy policy this country is governed by? Isn't he also responsible for raising or lowering the debt? Isn't he in charge of federal spending? It seems to me that you are limiting your judgment criteria a bit too much. Give George W more merit for the mess he made!