In an excellent post, Greg Mankiw laid out why it doesn't make sense to judge a president's economic policy the way most of us do now:
"Even the best physicians have patients die. And even witchdoctors can have patients recover...Randomness is a fact of economic life, and it would be a mistake to judge a president by the economic outcome during his administration. It is better to look at the decisions the president made, and to acknowledge that the outcome is a function of those decisions and many other factors not under his control. As an economist, I have views about what best practices are for economic policy, and I judge presidents by how closely they adhere to those principles. "Often, events on the macroeconomic scale are too difficult to disentangle from one another. It's very easy to judge a president by the economy during his time in office. However, the impact of the president on our economy is a lot smaller than most people think. Mankiw makes a strong case for gauging a presidents actions in an intelligent manner, instead of a simple one.
I agree that a president should not be completely responsible for the economic climate during their tenure. However, I do NOT think that they should escape all ownership of national economy. While some of the economy is out of a president’s control, there is certainly a great deal of influence that a president wields in such issues. Examples include waging foreign wars, drafting trade agreements, and signing legislation (such as stimulus and bailout laws). The president has substantial influence over the business climate with federal budget that he drafts and signs, which includes provisions on tax rates/tax rebates/tax credits. Last but certainly not least the president nominates the chairman of the Federal Reserve Bank.
ReplyDeleteAlso, we should keep in mind that a president should take ownership of a failing economy (as Obama has done to a certain degree) because they will always take exclusive credit for a booming economy, a la Bill Clinton.
I agree with your first paragraph, as does Greg Mankiw. His point was that the best way to judge a president isn't by the success of the economy, but instead by the decision the president made about the economy.
ReplyDeleteA classic example is Richard Nixon. Milton Friedman told Nixon not to put price controls and salary freezes into place, and Nixon knew it would be bad for the economy. But Nixon did it anyways because he gained popularity by doing something stupid, yet popular.
You're right that success has a thousand fathers, but failure is an orphan. But because people want to take credit for the good and pass off the bad, we should go hand-in-hand with it? I don't think so.