Don't Anthropomorphize The Economy

Here’s a nice graph from the Financial Times:

These graphs are very manipulative, as we think we are seeing the impact of various presidents on the economy.  But is that really so? I’ve argued that the performance of the US (economic, military, social, etc.) is about 3% the president and 97% other factors.  Three percent is not nothing; it’s way more influence than a blogger has.  But it’s not enough to be decisive.

This tendency to think in terms of a “Bush economy”, or an “Obama economy” is especially pronounced in election years.  But which indicator is decisive?  Should we look at the graph and conclude that Trump inherited an economy that was already improving, or should we acknowledge that it gets harder to create jobs once we reach a low unemployment rate, and hence Trump outperformed expectations?  There’s a bit of truth in both views.

I don’t believe that, deep down, people actually believe the economy is a test of a president’s performance.  They may make that claim when it’s convenient, but I don’t think they really believe it.  Here’s why:

1. Ask a Democrat about the current economy and they’ll often say that Trump just got lucky; the low unemployment is not related to anything he did.  He inherited an improving economy from President Obama.  Republicans will argue just the opposite.  So does that mean that Republicans believe that the economy is determined by the President, and the Democrats take my view?  Not really.

2. During most of the past 100 years the situation was reversed.  On average, the economy (and stock market) did better under Democratic presidents.  So if the president actually did determine the course of the economy, then this would be evidence that “proved” Democratic economic policies were superior.  FDR was an improvement over Hoover, The Kennedy/Johnson years were better than Nixon/Ford, or even Eisenhower (who presided over three recessions).  Clinton did better than either Bush, etc.  You might argue that Reagan did much better than Carter, but even that was mostly on inflation, not real economic growth (which was strong under Clinton).

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Currency Trader 1 month ago Member's comment

Americans increasingly vote for divided government, which works better than unified government.