Wednesday, July 11, 2012
The Obama economy?
One of the most maddening things in our political discourse is the indeterminacy of macro-economic arguments, i.e., the nature and extent of government policy on the economy. One of the dumbest things we do is to assume that the President (or a Governor) has the ability to control - and, therefore, to "run" the economy.
This doesn't mean that public policy doesn't affect the economy, only that the impact is more attenuated and confounded than we think.
So what are we to make of this chart, posted by Harvard economist Greg Manikw, showing labor force participation?
One thing we can say is that there seems to be little support for the notion that Bush era tax cuts tanked the economy. The onset of the recession seems to have been well after they went into effect and, in fact, the years following their implementation were marked by rising employment. Maybe you can argue that the recession was the result of cumulative deficits caused by lower tax rates and increased spending (Bush 43 was a spender), but you'd need to find your support elsewhere.
But conservatives and liberals will read the chart differently with respect to Obama administration policies. Conservatives - and I admit this is my view - will find evidence that Obaman stimuli didn't work. The recovery has been historically anemic and it looks like Obama spent huge sums of money for shovel ready projects that did not exist and stimuli that did not stimulate.
Defenders of the President can take two approaches. The first is to say that it stopped the decline. The chart provides some superficial evidence for that but there are at least two problems. One is that it would be necessary to know how much of the 2009 stimulus package was spent in that year - before the decline abated. The other is that downturns inevitably bottom out. The administration did not expect the package to stabilize employment but to increase it. That did not happen to any material degree.
The second ploy is to criticize the President from the left - an attack that is unlikely to drive voters into the arms of Romney. On this view, the problem is that the stimulus - as humongous as it was - needed to be larger. The only problem with what didn't work is that we needed more of it.
If both of these arguments seem like matters of faith - susceptible of neither proof or disproof - it's because they are. Both seem implausible to me but I don't think I could prove them to be wrong.
What I do know is that - fairly or not - this is a tough record on which to run for re-election. If Obama is re-elected, it will be historic. Presidents tend not to be re-elected with numbers that look like this.
Cross posted at Purple Wisconsin