The Relative Comment

soothing waves of relativity

Marketplace Morning Report Reminder

with 5 comments

As the 2012 Election slouches towards November, I thought I’d put up a quick note  from this morning’s Marketplace Morning Report (an essential part of every TRC morning, and one I recommend you add to start your day).

Jeremy Hobson and Josh Brown, of Fusion Analytics, were discussing yesterday’s NH Primary, and Mitt Romney’s warning that President Obama is leading the United States into European-style Socialism (adorable). So Hobson asked if the folks on Wall Street agree, and think that Romney would be better for the economy.

Said Brown: No. Brown called it the ‘dirty little secret’ of American politics: the president, no matter who it is, cannot improve the economy. He can make it worse, but there is actually nothing he can do to make it better. (When Marketplace puts up this transcript, I’ll post the quote, but this paraphrase is pretty close).

I’ve made this argument before, and still agree. The President is capable of ruining the economy, but that doesn’t mean the President can do much to repair it. There’s no reason to think that had McCain won in 08, we’d be better off, or to think that if Obama loses in12, we’ll be better off. Because, frankly, politics doesn’t improve the economy.

**UPDATE: Marketplace has the piece up on their website, and here is Josh Brown:

 Here’s the dirty little secret: the truth is, they could make things much, much worse, but there’s very little they can do to improve things. So typically, when you look at who’s in the White House, who controls Congress, it’s all a myth — there is no correlation. No one is any better than anyone else between Democrats and Republicans.
As a matter of fact, if you would have said back in 2008, I can’t believe they’re going to elect Obama — he’s anti-business, he’s anti-capitalism; in the meantime, the S&P 500 is up over 50 percent since January of 2009 when Obama was sworn into office.
So I think the president’s impact on the economy is not quite what politicians would like it to be.

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Written by Christopher ZF

January 11, 2012 at 09:34

5 Responses

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  1. CZF, I don’t think that this can be correct that “The President is capable of ruining the economy, but that doesn’t mean the President can do much to repair it.” It sounds like pop economics to me. First of all, just logically, if the structure of government and the practice of politics can make the economy “much worse,” it stands to reason that the structure of government and the practice of politics can make the economy “much better.” And I tell you what, if Ron Paul were to win the election in 2012 and pass his economic plan to do away with the Federal Reserve, I think you would see a much different economy. The structure of government has an enormous impact on what the economy looks like. The way we structure our tax system incentivizes spending and saving decisions and politics locally and in DC effects how much and for how long these incentives or disincentives will be around. These are simple examples but I think there are many more on the macro- and micro-economic scale. I just think that if you believe the government and politics can ruin the economy, then you should believe that they can improve the economy too. There is a definitional problem. What is a better economy versus a ruined economy? When I look at wealth disparity for example and see that there is increasing wealth disparity, I tend to think that the economy is getting worse, even if the GDP is increasing and CEOs or Wall Street are telling me that their bonuses are bigger than ever. So, one’s philosophy about the economy clearly colors my view on this issue. If I were a Ron Paul libertarian, or an Ayn Rand libertarian, I may think that individuals reach their full potential and economies reach their peak, only when the government gets out of the way. Wealth is then a gauge of success and the economy is working great if people are free to make what they can. I recognize that I am over-simplifying libertarian thought there, but I think the point about the economy holds true. We have an incomplete picture of what a good economy looks like. But I just don’t think it makes sense to say that politics and government can only affect the economy in one direction. I don’t defend the President all that much these days, but I am a firm believer that the stimulus that he helped pass and that Bush before him got off the ground, was essential to stopping a potentially free-falling economy. And the actions that he took to save GM and other automakers saved an enormous amount of jobs and allowed for a quicker recovery of jobs already lost by then. Like it or not, this was politics and the President made a difference. It was a lessoned learned from the Great Depression that allowing the free market to try and correct itself can make for a very long recovery.

    JZ

    January 11, 2012 at 14:52

    • I will respond to this as a whole later. But note your logic will fail.

      think of all the things that I could ruin, but that I could not repair. that is not difficult to reason. at all.

      czfinke

      January 11, 2012 at 14:55

      • there are many things, but an economy isn’t one of them, economies can get better and can get worse, once you have baseline from which to work

        JZ

        January 11, 2012 at 14:57

  2. JZ.
    I don’t necessarily disagree with you above, but I also don’t think you are talking about what I am talking about.

    I think that the President cannot grow the economy. Sure. He can put policies in place to foster growth…he can triage where needed…he change tax structures to incentivize whatever…all that can and has been done.

    But all that doesn’t matter until the actors in the economy decide to act. And the President cannot make that happen. Obviously. Companies have to decide to hire, people have to decide to buy houses, lenders have to decide to loan, etc etc etc. And all of that is out of the President’s control. No matter who the President is.

    czfinke

    January 12, 2012 at 12:35

  3. My reading: the president *can* improve the economy *but* 1) the potential improvement is much less than most people think (and much less than the campaign rhetoric claims) and 2) the ability to cause economic harm is greater.

    I would argue that this is overly pessimistic and that actually the president can’t change the economy all that much either way (Clinton got to much credit, Bush got too much blame).

    To the Paul/Liberterian point. Yes, the government has a fair bit of impact on the overall economy; however, our government is designed to change slowly. Even if Paul were elected president I think he’d find it impossible to radically change very much of the 80+ years of economic policy that FDR started us on. He could achieve some of it but it would be a fraction of his vision.

    The main flaw in this reasoning is this: what about a modern FDR who breaks the rules and strong arms everyone into radically rebuilding everything?

    jkeillor

    January 13, 2012 at 15:47


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