The announcement of Barack Obama’s cabinet positions has generated begrudging acceptance from conservative quarters. The pending appointments of Timothy Geithner as Treasury Secretary, Larry Summers as Chairman of the Council of Economic Advisers and Peter Orszag as OMB head, serve as a sharp rebuke to voters who hoped/feared that the “Change We Need” would include a sophomoric dismantling of free-market capitalism. In an election that seemed especially polarizing, it is a testament to (although some may argue an indictment of) the stability of the American political system that the individuals eventually chosen to manage our governmental institutions fall within the same relatively narrow band of ideology that McCain’s picks would likely have occupied.
This not to say that the incoming administration won’t do everything it can to position itself as a dramatic shift from its predecessor. Barack Obama has spent the last 12 months (and will probably spend the next 12) casting America’s economic health in the direst terms possible. This time-honored strategy has worked well for previous presidents. Recessions are very effective tools for ousting the incumbent party and if marketed properly, can insure that the previous administration carries the blame for any economic woes that may occur during its successor’s watch. Case in point: during these waning days of the Bush administration, economists have lavished Barack Obama with consolation for the supposed mess that he has inherited. The storyline goes something like this: the irresponsible Bush administration has dug Obama into a cavernous hole that will require at least one term to crawl out of. Obama’s ambitious agenda of change will have to be shelved while he picks up the pieces of a destroyed economy.
While we will have to wait for history to reveal the true economic impact of this crisis- and by extension, the economic policies of the Bush administration- there is ample historical evidence to suggest that economists’ pity for Mr. Obama is misplaced. Since the end of WWII, there have been eight presidents who were elected and able to finish out a term (Kennedy, Nixon and Ford being the exceptions). Only three have left with approval ratings greater than 50% and all three of those were elected into deteriorating economic environments. Bill Clinton (1992-2000) and Ronald Reagan (1980-1988) were elected in the midst of full-fledged recessions, and Dwight Eisenhower (1952-1960) was elected during a slump that followed the period of inflationary spending associated with the Korean War. All three left office with positive approval ratings and a perceived legacy of prosperity firmly in hand.
Conversely, those presidents who entered the White House in good economic times were either voted out of the White House or else forced to hand the keys over to the other party. Harry Truman (1945-1952), LBJ (1963-1969), Jimmy Carter (1976-1980) and George W. Bush (2000-2008) were all elected during periods of positive GDP growth, yet were ushered from the political scene in relative disgrace.
One can draw two different conclusions from this data. The first conclusion is that good leaders succeed irrespective of the challenge, while bad leaders are capable of screwing up anything. The other, more compelling argument is that the economy is cyclical. While presidents can use policy to either extend the length of an economic boom or shorten the period of a recovery, they are in a sense prisoners of timing and expectations. In abstract, most rational people recognize economic cyclicality as a natural, somewhat uncontrollable phenomenon. In practice, they prefer to blame one leader for the downturn and praise another for the recovery.*
Objective analysis may eventually prove George W. Bush culpable (to some degree) for the economic mess, and Barack Obama could emerge as the next great economic turnaround artist. Whatever the outcome, if the past serves as any guide for the future then the odds are stacked in Barack Obama’s favor.
*Note: It should be of little surprise that presidential approval ratings are strongly correlated to the growth of the economy. In the last forty years there have been three deviations from this historical relationship, all related to issues of national security. In 2001, George W. Bush enjoyed record approval ratings in the wake of 9/11 and the subsequent wars in Afghanistan and Iraq, despite a tumbling stock market and economic retraction at home. In 1991 George H.W. Bush presided over a similar scenario, as popularity for the first Gulf War initially overshadowed a receding economy. In 1952, Truman’s slide in popularity came in the wake of Gen. Douglas MacArthur’s firing and reflected growing unpopularity with the stalemated conflict in Korea. The economy actually grew during this initial downturn in Truman’s popularity. By the time the economic began trending downward in late 1952, Truman’s popularity was already low enough that his party was unwilling to support him for a third term.
Posts
No comments:
Post a Comment