It’s no Longer the Economy

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One idea that seems to have died is that the president of the United States runs the economy and is personally responsible for it.

The U.S. economy is doing well, but George W. Bush is not getting credit. The Bush folk have tried to say the tax cuts did it, but their argument falls flat.

Likewise, Bill Clinton didn’t get much political mileage for his boom. Nor did Al Gore. In the 2000 campaign some academic had an historical model that predicted Gore would win handily because of the economy. Part of the reason he didn’t was his own personality and ideas, but another part was that people no longer looked to the president as a kind of economic Rambo.

It used to be that when the economy fell into recession, the president was expected to offer a “recovery package.” Bush did push through his tax cuts, which had a quick pay-out provision, so this idea is not entirely dead. But the clamor for it was less intense in the last recession than it was a generation before. Basically, people knew the recession wouldn’t be that bad and that the politicians couldn’t do much about it.

A third of a century ago, inflation rose and President Nixon imposed wage and price controls. He did this not because he was convinced they would work, but because, politically, he had to do something. This imperative was the legacy of the New Deal and World War II.

I was in journalism school in the mid-1970s, and remember covering a speech by Rep. Henry Reuss, chairman of the House Banking Committee, in which the Wisconsin Democrat proposed comprehensive federal wage, price, and credit controls. No mainline Democrat would propose that today. Reuss’ proposal fitted not only the ideology of the time but the personal history of Reuss: he had been counsel for Franklin Roosevelt’s Office of Price Administration in 1941-42, and chief of price control in the military government of Germany in 1945. People forgot the same story about the influential modern-liberal economist John Kenneth Galbraith: he had been a price controller during World War II. It stained his view for life.

That institutional memory for the New Deal is almost completely gone. There are many things that the V.S. government tries to control, but there are actually some things that it used to control that it has let go of. Part of this change came under Reagan, but much of it was simply that the war generation retired. As it did, political assumptions shifted.

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