The Economy: It's not controlled by just one guy
By David M. Woods
Published September 15, 2006, 10:24 am in Economic Issues.
Fill in the blank on the following sentence, then select which ending is true and accurate:
________ was elected President of the United States, and the economy:
a) went up, thanks to him.
b) went down, and it's his fault.
Based on the editorials and opinions that the typical American is subjected to on a daily basis from various media, it seems that most would easily consider the above quiz a no-brainer.
But as thinking, rational adults, we should ponder this whole concept of an economy controlled by one person. It's almost like the President has two buttons on his desk: a green one to make the economy grow, and a red one to make the economy shrink, so it's all just a matter of electing someone with the brains to press the green one, not the red one.
Without a doubt, the office of the President has considerable power, and the decisions he makes and the policies he pursues will indeed have an effect on the economy. But the actions of the sitting President are not the only factor that influences the economy.
Let's start with the government at the federal level. The President is, at most, only a third of the U.S. government. Assuming that the Constitution is properly followed, the actions of the other two branches of government also effect the economy.
And that's just the federal government. State and local government actions have a major impact on the economy.
And that's just government. Yes, government yeilds considerable power when it comes to either stimulating the economy, inhibiting the economy, or getting out of the way so that the economy can grow by itself. But there's more to economics than just politics. The actions of millions of businessmen, workers, entrepreneurs, engineers, marketers and consumers can have a profound effect on whether the economy thrives or sputters. On the negative side, you have natural disasters, crime, terrorism, and other calamities which can destroy wealth.
And that's just in the United States. The economy is global, and what happens in the rest of the world affects us, and vice versa.
And although it's true that government actions play a big role in what the economy does, keep in mind that government actions are not instantaneous. It may take years, perhaps decades, for government economy policy to bear fruit.
The basic flaw among those who thought they knew the true answer to the 1-question quiz is that they are jumping to conclusions. They are taking two independent facts, which in and of themselves may be true, and infering some sort of relationship. It's like saying: "Today I am wearing a red shirt. And today, the sun rose in the east. Therefore, in conclusion, we can surmise that the reason the sun rose in the east is because of the red shirt I am wearing."
Likewise, it may be true that George W. Bush or Bill Clinton or whoever was elected to the White House. And it may be true that the economy has gone up or gone down (although even that is debatable; pundits and economists don't always agree on that "fact".) But before putting any set of facts together and drawing a conclusion, especially when it relates to politics, consider all the circumstances.
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