Economists Scoff at Obama, Romney Myths
Mitt Romney’s campaign would have you believe that every job lost over the past three years is President Barack Obama’s fault. That includes the 820,000 jobs lost in January 2009, even though Obama didn’t become president until the 20th of the month.
It includes the 726,000 jobs lost in February 2009, before any of Obama’s policies had gone into effect. This suggests that Romney holds a deeply ambitious view of a president’s power to influence the labor market -- a view, as we’ll see, that’s not shared by economists who were responsible for White House economic policies in recent administrations.
Romney, too, discounts the president’s power when he highlights his own record in Massachusetts. In fact, Romney’s campaign asks us to believe that every job created in Massachusetts while he was governor was Romney’s doing. Obama might deserve the blame for the jobs lost on his watch, butGeorge W. Bush, who was president during Romney’s governorship, gets no credit for the jobs created on his. Romney also claims that every job created by any company that Bain Capital LLC had a hand in should also be credited to Romney -- even if the job was created long after Bain separated from the company. Heads, I created a job; tails, you lost one.
The Obama campaign isn’t much better. They want credit for every job created, but not for every job lost. They also want Democratic economic policies to get credit for the jobs created under Bill Clinton’s presidency (what tech bubble?) and for Republicans’ economic philosophy to take the hit for the financial crisis that began during Bush’s administration (what Clinton-era opposition to the regulation of derivatives?).
Governor Rick Perry’s campaign, meanwhile, assigns Obama responsibility for every job lost nationwide, but Perry gets credit for every job created in Texas. Neat trick. And he, like all Republicans, wants the jobs created under President Ronald Reagan added to conservatism’s side of the ledger.
Virtually no one really believes these things. But partisans and the news media routinely act as if they are true. They make up a useful shorthand that is arguably good for the political system: Better for presidents to believe re-election hinges on economic performance than, say, on the quality of their attack ads.
It would be even better if voters had a consistent benchmark for judging a president’s performance. The question --and it’s a tough one -- is how to separate the very real influence a president has on the economy from the myriad other factors that weigh on whether consumers spend and businesses hire. I put the issue to an exclusive club of economists who have an unusually fine-grained understanding of what a president can and can’t do: the former chairmen of the president’s Council of Economic Advisers. I asked each the same question: How much of national job creation during a presidency can we properly attribute to the president?
Laura D’Andrea Tyson, a Berkeley economist who served under Clinton, emphasized the need to consider timing in our evaluations. “There are significant lags between the time a President proposes a policy, the time it is enacted by Congress and the time necessary for it to take effect,” she wrote to me.“These lags should be taken into account in measuring the economy’s job performance under a President. The first year probably should not count at all in terms of assessing the effects of a new Administration’s policies.”
N. Gregory Mankiw, a Harvard economist who served as the council chairman under George W. Bush, directed me to a blog post he had written on the subject. “Randomness is a fact of economic life,” Mankiw wrote, “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.”
“Unfortunately,” he concluded, “that evaluation process is not quite as simple and objective as the reader might have hoped for. But I don’t think there is a better alternative.”
Austan Goolsbee, the council chairman under Obama, tried to lay out a four part test: “Everyone kind of knows they need to ask what conditions was the person handed, what did they do, what was happening elsewhere, and what would have happened if he wasn’t there?”
Those questions, Goolsbee admitted, are tough to answer. But whatever the answer is, it needs to take into account that the president’s control of the economy is at best incomplete.“Despite continued scrounging around in the basement,” Goolsbee said of his time in the White House, “I was never able to find the lever you flip that lets the economy grow and create jobs.”
It includes the 726,000 jobs lost in February 2009, before any of Obama’s policies had gone into effect. This suggests that Romney holds a deeply ambitious view of a president’s power to influence the labor market -- a view, as we’ll see, that’s not shared by economists who were responsible for White House economic policies in recent administrations.
Romney, too, discounts the president’s power when he highlights his own record in Massachusetts. In fact, Romney’s campaign asks us to believe that every job created in Massachusetts while he was governor was Romney’s doing. Obama might deserve the blame for the jobs lost on his watch, butGeorge W. Bush, who was president during Romney’s governorship, gets no credit for the jobs created on his. Romney also claims that every job created by any company that Bain Capital LLC had a hand in should also be credited to Romney -- even if the job was created long after Bain separated from the company. Heads, I created a job; tails, you lost one.
The Obama campaign isn’t much better. They want credit for every job created, but not for every job lost. They also want Democratic economic policies to get credit for the jobs created under Bill Clinton’s presidency (what tech bubble?) and for Republicans’ economic philosophy to take the hit for the financial crisis that began during Bush’s administration (what Clinton-era opposition to the regulation of derivatives?).
Governor Rick Perry’s campaign, meanwhile, assigns Obama responsibility for every job lost nationwide, but Perry gets credit for every job created in Texas. Neat trick. And he, like all Republicans, wants the jobs created under President Ronald Reagan added to conservatism’s side of the ledger.
Believing the Unbelievable
To buy much of this requires you to hold deeply ridiculous beliefs about the American economy. You must believe that Obama bears responsibility for events that predate his presidency and deserves applause for the demand created by aging cars and worn-down machinery. You must believe that Congress, which controls fiscal policy, and the Federal Reserve, which controls monetary policy, bear little or no responsibility for the economy, but that the president, who controls neither fiscal nor monetary policy, is the primary driver of job creation. You must believe that governors have absolute power over state economies and that global demand is irrelevant. You must also renounce belief in Christmas -- or at least its influence on the consumer-driven economy.Virtually no one really believes these things. But partisans and the news media routinely act as if they are true. They make up a useful shorthand that is arguably good for the political system: Better for presidents to believe re-election hinges on economic performance than, say, on the quality of their attack ads.
It would be even better if voters had a consistent benchmark for judging a president’s performance. The question --and it’s a tough one -- is how to separate the very real influence a president has on the economy from the myriad other factors that weigh on whether consumers spend and businesses hire. I put the issue to an exclusive club of economists who have an unusually fine-grained understanding of what a president can and can’t do: the former chairmen of the president’s Council of Economic Advisers. I asked each the same question: How much of national job creation during a presidency can we properly attribute to the president?
In Their Words
“Very little,” wrote Harvard’s Martin Feldstein in an e-mail. Feldstein led the council under Reagan, and he didn’t see much role for the president in normal economic times. “The key is growth of population and labor force participation. Policy --primarily monetary policy -- affects cyclical conditions and therefore the unemployment rate. Fiscal policy is usually irrelevant but with interest rates at the current level there has been a role for fiscal policy.”Laura D’Andrea Tyson, a Berkeley economist who served under Clinton, emphasized the need to consider timing in our evaluations. “There are significant lags between the time a President proposes a policy, the time it is enacted by Congress and the time necessary for it to take effect,” she wrote to me.“These lags should be taken into account in measuring the economy’s job performance under a President. The first year probably should not count at all in terms of assessing the effects of a new Administration’s policies.”
N. Gregory Mankiw, a Harvard economist who served as the council chairman under George W. Bush, directed me to a blog post he had written on the subject. “Randomness is a fact of economic life,” Mankiw wrote, “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.”
“Unfortunately,” he concluded, “that evaluation process is not quite as simple and objective as the reader might have hoped for. But I don’t think there is a better alternative.”
Austan Goolsbee, the council chairman under Obama, tried to lay out a four part test: “Everyone kind of knows they need to ask what conditions was the person handed, what did they do, what was happening elsewhere, and what would have happened if he wasn’t there?”
Those questions, Goolsbee admitted, are tough to answer. But whatever the answer is, it needs to take into account that the president’s control of the economy is at best incomplete.“Despite continued scrounging around in the basement,” Goolsbee said of his time in the White House, “I was never able to find the lever you flip that lets the economy grow and create jobs.”
