With November getting nearer by the day, it’s hard to avoid at least hearing if not participating in heated debates over which candidate would do better on this or that issue. Everybody has their opinion on which candidate would be best for the economy, but usually the arguments you hear are based more on emotion than facts or objective analysis. What’s you’ll tend to notice if you listen to these debates is that people will start with the conclusion they want to believe and back things out to arrive at the question, only using facts that support their position and ignoring those that don’t, of course. Naturally, this is not the most effective way to analyze the candidates and certainly isn’t without bias. So, objectively, which candidate will be better for the economy? My answer is that it doesn’t really matter.
Call Me A Cynic
I believe people put far too much stock in who’s the president. Sure, the president is the nation’s symbolic leader and face of the nation to foreigners, but how much influence does the president have on economic policy independent of congress? The answer is, practically none. This isn’t a mistake, of course. The framers of the constitution made certain to limit the president’s ability to cause damage without interference from congress.
So if the president doesn’t really have that much influence on the economy, why all the debate? Because people focus far too much on “plans.” Obama supporters will cite his tax plan as evidence he would be good for the economy. After all, they’ll say, he will lower taxes on the lower and middle class and thereby stimulate consumer spending. But will he actually lower taxes? Of course not. That’s up to congress. The best Obama could do is ask nicely and maybe play the dirty politics game to win support for his proposals, but he certainly can’t go around just lowering taxes for anybody. Ditto for McCain. Their respective proposals are just that: proposals. In fact, there is absolutely no chance either proposal would make it through congress unchanged. Making judgements based on proposals with no chance of passing seems unwise to me.
It comes down to this: even if McCain were elected, he couldn’t get any conservative legislation past the democratic congress that Bush couldn’t get by now. And if Obama is elected, he couldn’t pass any liberal legislation the democratic congress couldn’t already get through. Sure, a conservative president may veto a bill or two, but political necessity makes it impossible for him to veto all such bills, even if he wanted to. Never mind the fact that both parties are more or less identical in everything but name anyway. The economy is a complicated beast and it’s folly to assume the government can control it or even accurately influence it to any extent. The economy will do whatever it’s going to do regardless of who is elected. It’s out of their hands.
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5 responses so far ↓
1 Curt // Aug 27, 2008 at 10:53 am
Great post and your right, the president has little control of the economy. That said, the current president shouldn’t be blamed for the economy. The real blame should fall on congress. Congress has been the problem for decades. We need new financially conservitive leaders in congress.
Asia is more in control of the economy then the president, with more them 170 billion in Asia money (debt) spend last quarter to support America’s bad habit of over spending. If Asia were to stop lending to us, our economy would be in big trouble and the dollar would sink.
2 ToughMoneyLove // Aug 27, 2008 at 11:04 am
The key factor in answering your question is who the candidate will select as his primary economic advisor. Most politicians know nothing about the science of economics and therefore will be strongly influenced by economic policy advisors. I want a candidate who is advised from the Friedman school, not Keynes.
3 Big Winner // Aug 30, 2008 at 10:38 am
Cool post; one of Ken Fisher’s columns in Forbes talks about this. The market realizes that a Democratic president isn’t as bad as people think, so it recovers, whereas a Republican president isn’t as good for the market as people think, so it returns to equilibrium as well.
4 Carnival of Personal Finance #168 - Fire Up the Grill, It’s Labor Day | One Caveman's Financial Journey // Sep 1, 2008 at 8:35 am
[...] Amateur Asset Allocator - Which Candidate Is Better For The Economy? [...]
5 Lise // Sep 5, 2008 at 11:23 am
Heh. I was ready to be offended by this, as the frugality/PF blogosphere tends to be more conservative than I find comfortable. But this is spot-on. We have to recognize that the power the president himself has over the economy is limited, on purpose, by lateralized government.
On the other hand, as someone pointed out above, the cabinet he picks–and Supreme Court nominations–do matter tremendously.
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