President not only factor on economy, experts agree
HARRISBURG — President Obama and Republican presidential nominee Mitt Romney agree with Americans that the weak economy tops other issues facing the country, but neither candidate would confess there's much a president could do about it, even if he had free rein.
Their proposals to counter the national hangover from a recession that began five years ago will resonate through the election. Polls typically find people worry most about the economy. Romney blames Obama for the sour economy and a federal debt that climbed to $16 trillion under his watch. Obama's supporters blame former President George W. Bush.
Yet economists, political scientists and historians contend the president has only marginal influence on the U.S. economy — largely because of forces outside a chief executive's control, such as global markets.
“It's pretty limited,” said James Hoefler, a political science professor at Dickinson College in Carlisle. “When you layer the partisanship over top of it, it becomes really difficult. Given the global nature of the economy, and with so many of our manufacturing jobs overseas, it really is true that when Greece sneezes, we all get a cold.”
Moody's Investors Service on Tuesday warned that if congressional negotiators don't reach agreement next year on debt stabilization, the ratings agency likely would downgrade the nation's debt rating.
The Federal Reserve on Thursday unleashed bold steps to stimulate the economy by making it cheaper for consumers and businesses to borrow and spend, and said other actions might be necessary if unemployment remains high.
The Labor Department released a jobs report in August that fell short of expectations.
If Congress does not reach a budget deal, about $1.2 trillion in spending cuts and tax increases automatically kick in on Jan. 2, which could send the economy back into recession and drive up unemployment. The House passed legislation to avoid the spending cuts and to renew Bush-era tax cuts for one year; the Senate deadlocked over taxes and did not address cuts. Obama suggested replacing across-the-board spending cuts with tax hikes and cuts elsewhere in the budget.
The government likely will again reach the debt limit by the end of the year, forcing more negotiations in Congress on raising the limit to pay the nation's bills, Moody's noted.
“The economy is like a huge ship, and it takes a really long time to turn it around,” said Alison Dagnes, a political science professor at Shippensburg State University.
“The polarization in Washington is the biggest hindrance to recovery,” she said. “As long as the two sides refuse to compromise, as long as they take stands to win partisan battles instead of paying attention to the nation as a whole, and as long as they go forth with a ‘hell no' attitude, the nation will suffer.”
Heritage Foundation economist J.D. Foster, a senior fellow, said a president can't do much to affect the economy in the short term but wields considerable influence over “setting the table for future economic growth” through tax and regulatory policies.
It takes 18 months to two years for a government-provided tax incentive for business to take hold, said Robert P. Strauss, professor of economics and public policy at the H. John Heinz School of Public Policy Management at Carnegie Mellon University. Changes in monetary policy can take nine months to bring noticeable effect, he said.
Asked how much influence a president has on the economy, Strauss said: “Less than he thinks.”
Romney argued at the Republican National Convention in Tampa that Obama owns the economy after three and a half years. Obama asked for more time in his speech wrapping up the Democratic National Convention in Charlotte.
Democrats, from party leaders to rank-and-file delegates, argued at their convention that Obama inherited a bad economy when he took office.
The recession, lasting from 2007 to 2009, became a “global phenomenon” for which people blamed Bush, Foster said.
Now, said Strauss, “there's a lot of fear European private banks are at risk because they held a lot of the mortgage-backed securities that went bad. The global financial experience is another kind of constraint on what the U.S. can do.”
The production of solar panels is an example of how global forces can affect countries' economies, Strauss said. The Chinese government utilized technology and subsidized panel production, creating state-owned businesses with cheap labor. That enabled China to gobble up a 50 percent share of the solar panel industry.
“How can you compete with that?” Strauss asked.
Stephen Hess, senior fellow emeritus with the Brookings Institution in Washington, worked on the White House staffs of Presidents Dwight Eisenhower and Richard Nixon and became an adviser to Presidents Jimmy Carter and Gerald Ford.
When it comes to a president's influence on the economy, Hess said, “The easiest thing to say is that he isn't the only player. He is a more important player than anyone, with the possible exception of the Fed chairman.”
Since 2006, Ben Bernanke has chaired the Federal Reserve Board, an independent central banking system for the United States that monitors monetary policy. The president appoints — and the U.S. Senate confirms — the board's seven members.
“As a general rule, presidents get too much credit when things go right and more criticism than deserved when things go wrong,” said Kasey Pipes, the Norris senior fellow at the Eisenhower Institute at Gettysburg College. The economy is much more dependent on small-business expansion, investors and innovators, said Pipes, a historian.
Presidents rank “two, or three at the most” on a scale of 1 to 10 — with 10 representing complete control — in terms of their impact on the economy, Pipes said.
Presidents Bill Clinton and Ronald Reagan may have had the greatest impact on the economy in modern times, experts said.
President Franklin D. Roosevelt “had a huge effect on the economy because he expanded the government so significantly,” Dagnes said, building upon initiatives such as public works projects that his predecessor, Herbert Hoover, tried in order to combat the Wall Street crash of 1929. A war-time economy with industrial production aided Roosevelt.
“In this political climate, such an increase in the size and scope of the government would be impossible,” Dagnes said. “But this helps to clearly define the differences between the two presidential candidates and their parties: The Dems think the government can be used to help, and the GOP thinks that the government should stay out of it.”
The Associated Press contributed to this report. Brad Bumsted is state Capitol writer for Trib Total Media. He can be reached at 717-787-1405 or firstname.lastname@example.org.