How much can the president – one man – shape the U.S. economy, a $14.4 trillion tangle?
Some economists say President-elect Barack Obama can have an outsized influence on the economy. They argue that a well-timed stimulus package could lead to a swifter recovery. He could also, with cooperation from Congress, shepherd in long-term policies that could remake trade, regulation or healthcare over a four-year term.
Others argue that the notion of presidential influence on the economy is nothing more than myth-making.
Economics columnist Robert Samuelson this summer dismissed presidential economic influence, including Reaganomics and Clintonomics, writing, “Sensible voters … should recognize that if presidents could control the business cycle, recessions would never occur, there would always be ‘full employment' and inflation would remain forever tame.”
Here are some questions and answers about what's within a president's economic power and what isn't.
Q. In what areas do presidents exert the most economic influence?
Presidents are hugely influential in setting the policies that can shape the economy. Bill Clinton fought for the North American Free Trade Agreement, or NAFTA; both Clinton and the current President Bush championed deregulation. Franklin Roosevelt brought the nation Social Security.
Such initiatives make history. But their economic impact is hard to measure, said Dan North, chief economist at accounts-receivable insurer Euler Hermes.
When presidential policies reshape the economic landscape, their results are sometimes difficult to see until years later. For instance, many economists now argue that the deregulation of the last decade set the scene for the credit problems that are now plaguing the economy.
Q. So what are a president's most important economic moves?
The answer may be his choice of appointees, since they can have much greater immediate influence than his policy choices. Paul Volcker, who served as chairman of the Federal Reserve System under presidents Carter and Reagan, is credited with taming runaway inflation.
President-elect Obama, when he takes office, will be able to nominate a new treasury secretary, and Federal Reserve Chairman Ben Bernanke's four-year term will expire in one year.
Q. What are Obama's economic priorities?
First will be deciding how to implement the $700 billion rescue program Congress passed last month. Also, Obama has proposed a 90-day moratorium on home foreclosures by companies getting assistance from the bailout bill, and he supports a second stimulus bill, perhaps as large as $150 billion, to boost the economy.