Can A President Really Fix A Bad Economy?
President Obama's problem is not unusual. Every president gets the blame when times are bad.
"If there's one issue over which a president can lose an election, it's the economy," says Stephen Weatherford, a political scientist at the University of California, Santa Barbara.
Presidents can influence fiscal policy, if they have the support of Congress — which Obama lacks at this point.
But even when presidents can persuade Congress to go along, there are limits to how much they can influence the economy as a whole, Weatherford says. They can't force firms to hire workers or banks to lend money, for instance.
Nevertheless, presidents always receive either more credit or blame than they deserve for the way things are going. "Expectations are high for the president — too high and unrealistically high," says George C. Edwards III, a presidential scholar at Texas A&M University.
That's a political reality every modern president has understood.
"There's such an exaggerated view of what they can do," says presidential historian Robert Dallek. President Taft said that "people think the presidents can make the grass grow and the skies turn to blue. It's simply out of their reach."
Here's a quick survey of how presidents have responded to economic challenges in recent decades:
Dwight D. Eisenhower, 1953-1961
Two recessions on his watch help Democrats build up congressional majorities in midterm elections that lasted for decades after. Eisenhower didn't want Republicans to continue to be known as the "party of Depression," but he brushed aside calls from his own advisers in 1957 to support stimulus measures. He vetoed public works projects he believed would take years to get going and opposed what he called "slash-bang kinds of tax cutting." Eisenhower told his chief economic adviser, "I realize that to be conservative in this situation can well get me tagged as an unsympathetic, reactionary fossil."
John F. Kennedy, 1961-1963
As a senator, he opposed tax cuts he worried could be "dangerous" by inflating the deficit. In the White House, however, JFK sounded almost like a supply-sider. Deficits were not caused by "wild-eyed spenders," he said, but slow economic growth and recessions. He believed short-term growth would be sparked — and revenues increased — by cutting tax rates. His proposal to lower top income tax rates significantly would not be enacted until three months after his assassination.
Lyndon B. Johnson, 1963-1969
After seeing through JFK's tax cuts, Johnson increased spending in two ways — through his Great Society domestic programs, such as Medicare, and the escalation of the Vietnam War. Johnson was warned revenues were needed to finance both "guns and butter," but he worried that support for Great Society domestic spending would drop if he called for a tax increase. He did push one through in his last year in office, but by that time deficits and an overheated economy were set to worsen inflation well into the 1970s.
Richard M. Nixon, 1969-1974
Having seen up close how voters reacted when Eisenhower didn't do much to pull the economy out of the trough, Nixon tried everything he could think of to prime the pump. He implemented wage and price controls, cut payroll taxes and devalued the dollar to boost exports. He also leaned on the Federal Reserve to goose the economy in the run-up to the 1972 election. This all helped bring about a huge growth spurt, but the reckoning was soon at hand due owing to oil price shocks and rising inflation.
Gerald R. Ford, 1974-1977
In his first address to Congress, Ford called inflation "public enemy No. 1." His WIN buttons — for "whip inflation now"— were soon widely mocked, and the focus on inflation may have been the wrong move for an economy soon to enter a recession. Ford moved to slash federal spending and also proposed the first income tax hikes since 1968. He soon backed off on the latter idea, pushing for tax cuts instead. Congress balked at cutting spending and cut taxes more than Ford had wished. By 1976, the year Ford ran unsuccessfully for re-election, unemployment was down and inflation had dropped by half from two years before. But because he kept changing positions in reaction to Congress, Ford received little political credit, writes Princeton University historian Sean Wilentz in his book The Age of Reagan.
Jimmy Carter, 1977-1981
"Stagflation" — the combination of inflation with slow growth and high unemployment — had become a concern during Ford's presidency but came to dominate Carter's time in office. He succeeded in enacting a $20 billion stimulus package in 1977, but inflation rose every year during his presidency. Paul Volcker, the Fed chairman Carter appointed in 1977, began raising interest rates to choke off inflation, but this also had the effect of dampening growth. Carter's fiscal conservatism — he had hoped to bring down federal spending as a share of GDP from 23 to 21 percent — did not sit well with more liberal Democrats who dominated Congress, so his ability to enact fiscal policies proved limited. "My reading of Carter was that he never really got on top of economic policy," Weatherford says.
Ronald Reagan, 1981-1989
The Fed brought prime interest rates above 20 percent early in Reagan's first term, helping to wring inflation out of the economy but also triggering recession. In 1982, monthly unemployment figures averaged 9.7 percent, helping cost the GOP 26 House seats that fall. "Reagan was below 40 percent in the polls in 1982," says Edwards, the Texas A&M scholar. "There was no narrative that was pleasing to people when unemployment was high and times were tough." Reagan's major economic remedy was a massive tax-cut package enacted during his first year in office. He did raise taxes his second year to address deficits, writing in his diary that this was "the price we have to pay to get the budget cuts." But promised spending cuts never really happened, causing deficits to balloon. Still, the initial package of tax cuts and Reagan's acceleration of Carter's policy of deregulating helped bring about a long period of economic growth, as Dallek notes in his book on Reagan.
George H.W. Bush, 1989-1993
The national debt tripled on Reagan's watch, so Bush, his former vice president, soon made deficit reduction a top priority. In 1990, he crafted a budget with Congress that lowered the deficit in part by raising taxes. Many analysts say that was the right policy, but politically it was a betrayal of Bush's "no new taxes" campaign pledge, costing Bush support among Republicans in Congress and in the 1992 primaries. His general election chances also suffered because of a recession and a widely reported incident in which he appeared to not recognize what a supermarket scanner was. "Bush was seen as out of touch on the economy," Edwards says. "He was just saying we need to continue the course and things would be all right. Indeed, things did get much better, but the better the economy got, the worse the press reports got."
Bill Clinton, 1993-2001
Estimates about the size of the deficit as Clinton took office proved much lower than the reality. Clinton pushed through a major deficit-reduction package during his first year in office, which included roughly $250 billion each in spending cuts and tax increases. The package received no GOP votes in Congress, and Senate Republicans also blocked Clinton's $16.3 billion stimulus package in 1993. The tax hikes helped cost Democrats their Eisenhower-era House majority in 1994. Congressional Republicans in 1997 did reach terms with Clinton on a budget package that helped wipe out federal deficits for three years. Getting the nation's books in balance — along with the dot-com bubble — helped Clinton preside over the longest unbroken economic expansion in U.S. history.
George W. Bush, 2001-2009
The dot-com bubble burst just before Bush took office. Soon after, he sold Congress on the first in a series of major tax cuts. Economic growth continued during most of Bush's time in office, but the country slipped into recession in 2007, caused by the sudden drop in the housing market. The following year, the collapse of the financial markets led to a major bailout package for the banking industry. Job growth, which was weaker under Bush than under any other postwar president, had come to a halt. The national debt, meanwhile, had doubled on Bush's watch.
Barack Obama, 2009-present
Most postwar recessions were short and shallow, but economic downturns triggered by financial markets tend to last several years. The $800 billion stimulus package that Obama signed during his first month in office helped stave off worse conditions, in the eyes of many economists, but didn't bring down persistently high levels of unemployment far enough. There's also a perception, Weatherford says, that Obama's economic measures did more to help banks and domestic automobile companies than struggling homeowners and average workers. Obama inherited a worse economic situation than any president since Franklin D. Roosevelt in 1933, but his inability to restore confidence makes his re-election prospects uncertain. "People may not blame Obama for the economy," Edwards says, "but they blame him for not fixing the economy."