Presidents Receive Too Much Credit or Blame for the Economy

It is often stated that people give presidents receive too much credit or blame for the economy, but the popular misconception about presidential management of the economy is seldom ever corrected. 

As I have noted in earlier posts, presidents do not manage the economy, as they would in socialist systems, as the Constitution of the United States grants relatively little economic power to the federal government.  The economy is not the responsibility of government.  The responsibility of government is to protect the rights of the people.  Protecting the people from all enemies foreign and domestic is the primary economic benefit of government. 

There are mostly indirect economic aspects to other federal government policies, but not an economic policy, per se.  The federal government, like other governments, affects the economy through its fiscal policy (taxing and spending), but it only represents about one seventh of the economy.  The federal government also influences the economy through regulatory policy (e.g. it is illegal to steal or defraud).  Monetary policy affects the economy, but it is controlled by the Federal Reserve.  Although the Chairman of the “Fed” and its Board members are appointed by the president, they operate independently of the president and Congress and their terms of office overlap presidential administrations.  One area where the federal government does have an economic role is in promoting trade because trade is an aspect of foreign relations.  The government makes trade permissible and obtains favorable terms, but it is up to the people to make the trades themselves.  In short, although the federal government does not have economic responsibilities, its policies do have an impact on the economy.  Note I do not refer only to the president, but to the federal government as a whole because Congress shares responsibility for policies that affect the economy.

Contrary to the idea that government’s purpose is to promote the economy, the duty of protecting liberty necessitates that government harm the economy to some degree in order to allow commerce to occur freely.  For example, taxes are a drag on economic growth because they remove money from the entire economy for the operation of government.  Regulation is necessary, but burdensome, even if kept to a minimum.  The federal government must impose trade sanctions on foreign states as part of foreign policy.  It is the responsibility of government to harm the economy as little as possible in accomplishing its end. 

A lack of basic knowledge of economics, the purpose of government and the U.S. Constitution has led many people to give too much credit or blame to government, especially the federal government and to presidents in particular, for the state of the economy.  Also, they do not acknowledge sufficiently the affect of various external matters, such as the policy of other governments (e.g. the States), natural disasters, scientific discoveries, or foreign events that benefit or harm the economy, making it even more difficult to give all the credit or blame to the federal government, let alone the president.  See also my post from August of 2011,  External Influences on the Economy Are an Excuse for Obama, but not for Bush, http://williamcinfici.blogspot.com/2011/08/external-influences-on-us-economy-are.html.

It is a current popular misconception that somehow President George W. Bush is responsible for the current recession although few people could identify exactly which of his policies were supposedly harmful to the economy or why, just as few people could identify which policies of President Bill Clinton were supposedly beneficial to the economy until his later compromises with the Republican Congress to cut taxes. 

In my next three posts, I shall discuss how Bush’s fiscal and trade policies, which President Barack Obama has largely followed, are not responsible for causing the current recession, while identifying its real causes and those long-term Democratic federal government policies that exacerbated it.