By Jeff Ostrowski Eds: For immediate release. c.2012 Cox Newspapers
WEST PALM BEACH (Cox Newspapers) — For two decades, presidential candidates have followed a pithy edict: “It’s the economy, stupid.”
But economists have a different take on the outsized role the economy plays in presidential elections. It goes something like this: You’d have to be stupid to think the president controls the economy.
Jobs are perhaps the biggest issue in this election. But, economists note, the president doesn’t hire or fire workers.
“Political leaders have no business taking credit for job creation,” said Gregory Miller, chief economist at SunTrust in Atlanta.
Nor does the commander-in-chief buy or sell houses, or stocks. Aside from a brief Depression-era experiment when Franklin D. Roosevelt set the price of gold every morning over breakfast, the president’s power is limited.
“The president has much less influence on the economy than we think,” said Stephen Dubner, co-author of the bestsellers “Freakonomics” and “SuperFreakonomics.” “It is the ultimate in figurehead politics.”
While Dubner’s books are known for their contrarian bent, traditional economists agree with his assertion. Don Boudreaux, an economist at George Mason University in Fairfax, Va., said it’s hard to imagine anyone — even someone as powerful as the president — controlling the nation’s $15 trillion economy.
“What happens day to day in the economy is largely out of the control of the president and the Congress,” Boudreaux said. “The economy is so darn complex. The economy is not run by the president, it’s not run by Congress — it runs itself.”
Economists say the most economically influential man in Washington isn’t the president but the chairman of the Federal Reserve. The Fed controls the money supply in an effort to set interest rates.
“Monetary policy is a major, major issue, and of course the president has no control over that,” said Antonio Villamil, dean of the business school at St. Thomas University in Miami Gardens, Fla., and an undersecretary of commerce during the George H.W. Bush administration.
The president isn’t completely powerless, of course. If Congress is on his side, he’s a powerful player in tax policy, federal spending and sweeping initiatives such as President Obama’s health care overhaul.
“The president can set the tone,” Villamil said. “A president can create a lot of uncertainty in the marketplace, and that uncertainty can be translated to lower job growth.”
Even so, many economists use phrases like “at the margin” to describe the effect of presidential initiatives on the world’s largest economy.
Despite economic reality, presidential candidates from both parties talk endlessly about their plans to goose hiring and spur spending. They leave voters with the clear impression that job creation and economic growth are simple, predictable things that the guy in the Oval Office can control.
During the Republican National Convention in Tampa, Mitt Romney touted his five-point jobs program that he said would create 12 million new jobs.
“What America needs is jobs,” Romney said. “Lots of jobs.”
Obama countered with his own platform, one that he said would place the nation on “a path to grow this economy, create good jobs and strengthen the middle class.”
Economists consider this sort of talk little more than pandering to a public that doesn’t understand the limits to the president’s role in the economy. Hiring and GDP growth are dictated by the business cycle, those ebbs and flows in demand for products and the supply of those products.
“The prototypical business cycle will happen independent of who’s in the White House,” said Robert Dye, chief economist at Comerica Bank in Dallas.
The economy long has played an important role in presidential elections, but it’s a role that seems to have grown since 1992.
That was the year Democratic strategist James Carville coined the phrase, “It’s the economy, stupid.” Bill Clinton unseated George H.W. Bush, a victory attributed to Bush’s alleged lack of concern about the struggles of the middle class.
Since then, no presidential candidate can be faulted for ignoring the economy while on the campaign trail.
Candidates’ message, Bourdreaux said, sounds like, “Elect me -- I’m the savior.”
“I blame people for falling for that,” Bourdreaux said.
Candidates know voters assign responsibility for the economy to the president, so Obama and Romney have little choice but to play the part of economist-in-chief.
“When the economy is good, voters reelect incumbents, and when the economy is bad, they throw them out,” said Brad Coker, managing director at Mason-Dixon Polling & Research in Fernandina Beach, Fla.
This year’s election looks so close that it’s likely to be determined by the Labor Deparment’s monthly employment reports to be released Oct. 5 and Nov. 2, Coker said.
The economy is the rare issue that affects voters of all ages, races, religions and ideologies. Only part of the electorate cares about Medicare, and only some voters have kids in school or obsess over foreign policy. But everyone is affected by the economy.
So it follows that presidential candidates perpetuate the “myth” that they control the economy, Dubner said.
“We like to believe that someone has the ability to snap their fingers and fix things,” Dubner said.
The U.S. economy is so complex, and the law of unintended consequences so strong, that government rarely musters a clean solution to an economic problem. SunTrust’s Miller said sometimes the president does fix things — but the effects are as likely to be measured in decades as in months or years. For instance, he said, tax cuts during the Reagan administration boosted production — but that boost took 10 years to show up in the economy.
The bottom line, Miller said, is that voters would be wise to treat economic promises from either candidate with skepticism.
“Politics has a life of its own, and it’s based on emotion,” Miller said. “Emotion is much easier to understand than the complexities of economics.”