US Presidents as economic managers

Brian Riedl in National Affairs:

Purely partisan narratives are often wrong; the familiar cliché that the economy is stronger when Democrats are elected president is no exception. Pointing to a simple correlation over a small number of presidential terms to assert that Democratic presidents are better stewards of the economy is as lazy as assuming that Democrats are worse on foreign policy because the vast majority of post-1865 war casualties have occurred on their watch.

In exploring the question of partisan differences in presidential management of the economy, it is important to emphasize the small degree of control federal policymakers really have in this arena. The U.S. economy is a $23 trillion machine powered by 330 million Americans and influenced by billions of people around the world. The effect of most federal policies on short-term economic performance is, at best, marginal.

What’s more, presidents do not control the business cycle, even if the business cycle plays a part in the outcomes of presidential elections. Since 1990, their economic records have instead been dominated by four events: the 1990-1991 recession, the late-1990s bubble bursting, the 2007-2008 housing crash, and the 2020 pandemic. None of these events was fundamentally a function of presidential policy, yet all four occurred at times that fed the perception that Democrats bring better economic news than Republicans. With the pandemic economy sure to recede, President Biden is set to become the next beneficiary of this accident of timing.

Ultimately, the notion that there is a simple partisan pattern to the health of the economy is an extension of the exaggerated politicization of our understanding of contemporary American life. Presidents are chief executives of the federal government; they are not masters of the universe. They can play a role in setting the direction of public policy, and can shape how our government responds to events. In short, presidents matter, but partisan narratives are no substitute for economic analysis.

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