"We have a $14 trillion economy. The idea that presidents can control it lies between an exaggeration and an illusion. Our presidential preferences ought to reflect judgments about candidates' character, values, competence and their views on issues where what they think counts: foreign policy; long-term economic and social policy -- how they would tax and spend; health care; immigration. Forget the business cycle."
***Reagan's cut in tax rates probably helped slightly, but the overall tax burden wasn't much reduced. In 1988, taxes were 18.2 percent of gross domestic product (GDP), slightly above the post-1950 average until then (17.8 percent of GDP). With a military buildup, spending restraint was negligible. In 1988, federal outlays were 21.3 percent of GDP, only slightly lower than in President Carter's last year (21.7 percent).
Bill Clinton had little to do with the causes of the 1990s' economic expansion: low inflation, low oil prices, a computer and Internet boom, a stock market boom. The claim made for Clintonomics is that paring the federal budget deficit in 1993 provided the essential catalyst by reducing interest rates. But long-term rates in 1994 were actually higher than in 1993. Many forces affect rates aside from the budget deficit: inflation and inflationary expectations, saving behavior, Federal Reserve policy, overall credit demand.
Clinton's contribution was self-restraint. Unlike Nixon and Carter, he didn't meddle with the Fed. He was a "conservative" in a pragmatic way. He knew when to leave well enough alone.
While Presidents may not help, I remain convinced they have a lot of power to hurt the economy.
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