"It's the economy, stupid," was the message that James Carville famously delivered to his staffers during the Clinton campaign of 1992.
It still is. As my career was in economics, I may be biased. But I insist that if the economy were functioning better for working people and they were optimistic about their economic futures, Donald Trump would still be known primarily as a financial wheeler-dealer and producer of idiocy in the non-world of television. And Bernie Sanders would still be a back-bench Socialist unknown outside of Vermont. And Hillary Clinton would be president.
It doesn't matter that President George W. Bush left President Obama with an American economy in the tank, and the world economy on the edge of total collapse. It doesn't matter that President Obama saved the automobile industry, took unpopular measures to rescue the financial system, and pushed through a mild stimulus program that brought the economy out of the Bush Great Recession. Or, that President Obama's efforts were opposed by Republicans more interested in seeing Obama fail than they were in improving the lives of Americans. It would be nice if the so-called "liberal media" would remind us of all this, but that's another story.
What matters is that Donald Trump had a simplistic economic message, however disingenuous, that resonated with people for whom the economy was not working.
Sure, Mrs. Clinton lost the Electoral College for reasons too numerous to list here. But "We're stronger together" just didn't cut it, especially in Wisconsin, Michigan, Ohio, and Pennsylvania that turned out to be key to the Electoral College.
With a stronger economy functioning for more people, and a more optimistic electorate, Mrs. Clinton could have overcome the "perfect storm" in which everything that could have gone wrong did.
Most voters these days express little confidence in government. These same voters blame government, specifically the president, when things don't go well. The way is paved to elect a strong man with simplistic answers to "fix" the economy.
This brings us to the role of government in the economy. While the major share of the economy is private sector, government policy plays a major role. Let's briefly review some basics.
The major tools with which government affects the macro economy are fiscal policy and monetary policy. Also important and are laws, rules, and regulations affecting a wide range of economic activities.
Fiscal policy is basically tax and spending policies that affect income and employment. A standard canard of conservatives is that "government doesn't create jobs." That's eyewash, utter nonsense. Listen to the most conservative Republican congressman yell and scream when a defense contract is canceled in his district, or a military base proposed for closing.
Government definitely affects employment through its taxing and spending policies. Taxes enable spending on education, transportation, and much else on which the private sector depends. Laws and regulations regarding trade, banking, safety, and all the rest of it affect employment and the economy. Fiscal policy is the responsibility of the president and the Congress, "the deciders," as W. Bush would, however inelegantly, affirm.
Monetary policy affects the availability of money and credit in the economy, the responsibility of the Federal Reserve System. The Fed, as it is colloquially known, operates independently of the president and the Congress. However, the seven members of its governing board are appointed by the president, with confirmation of the Senate, for staggered 14-year terms.
The primary decision-making body of the Fed is its Federal Open Markets Committee, chaired by Janet Yellen. The FMOC sets short-term interest rates (technically the Federal funds rate) that affect other interest rates. This, along with other measures such as banking reserve requirements, affects the availability of money and credit in the economy. The tools of the Fed are weak compared to the fiscal policies of the president and the Congress, but are nevertheless closely followed by the financial and business community.
Numerous other government entities play advisory and supporting, roles, and are responsible for our financial infrastructure.
For example, Cabinet officers, including those of Agriculture, Interior, Transportation, Commerce, and Energy, and non-Cabinet (but Cabinet level) agencies such as the Environmental Protection Agency have authority to set regulations that have a wide range of economic, implications in addition to affecting health, safety, and the environment.
The National Labor Relations Board and the Federal Communications Commission set rules and procedures regarding labor and communications, respectively.
The U.S. Trade Representative in the Executive Office of the President is obviously important.
Other entities serve in advisory and/or coordination capacities. The Council of Economic Advisors was created by the Full Employment Act of 1946. This council consists of three economists appointed by the President and confirmed by the Senate. This Council currently has a staff of some twenty economists and three permanent statisticians. The council's economists are generally senior economists on leave from academia or on temporary leave from other government organizations. In addition to rendering economic advice and counsel to the president, the council prepares the annual Economic Report of the President.
Another unit, the National Economic Council, was created by executive order in 1993. It operates within the Executive Office of the President and is comprised of a presidential appointee and department and agency heads whose jurisdictions impact the nation's economy. The NEC's purpose is to coordinate various government agencies and advise the president on his economic policies.
The Department of the Treasury is important in maintaining the nation's financial infrastructure. It's Bureau of Engraving and Printing mints coins and prints paper currency. More familiar to most voters is Treasury's Internal Revenue Service (IRS), responsible for collecting taxes and administering the Internal Revenue Code set by Congress.
The relative importance of various government entities can vary. For example, the NEC has become more visible than the CEA in recent years.
Which economic units, if any, will have President Trump's ear? Stay tuned.
- John Waelti of Monroe, a retired professor of economics, can be reached at jjwaelti1@tds.net. His column appears Fridays in The Monroe Times.
It still is. As my career was in economics, I may be biased. But I insist that if the economy were functioning better for working people and they were optimistic about their economic futures, Donald Trump would still be known primarily as a financial wheeler-dealer and producer of idiocy in the non-world of television. And Bernie Sanders would still be a back-bench Socialist unknown outside of Vermont. And Hillary Clinton would be president.
It doesn't matter that President George W. Bush left President Obama with an American economy in the tank, and the world economy on the edge of total collapse. It doesn't matter that President Obama saved the automobile industry, took unpopular measures to rescue the financial system, and pushed through a mild stimulus program that brought the economy out of the Bush Great Recession. Or, that President Obama's efforts were opposed by Republicans more interested in seeing Obama fail than they were in improving the lives of Americans. It would be nice if the so-called "liberal media" would remind us of all this, but that's another story.
What matters is that Donald Trump had a simplistic economic message, however disingenuous, that resonated with people for whom the economy was not working.
Sure, Mrs. Clinton lost the Electoral College for reasons too numerous to list here. But "We're stronger together" just didn't cut it, especially in Wisconsin, Michigan, Ohio, and Pennsylvania that turned out to be key to the Electoral College.
With a stronger economy functioning for more people, and a more optimistic electorate, Mrs. Clinton could have overcome the "perfect storm" in which everything that could have gone wrong did.
Most voters these days express little confidence in government. These same voters blame government, specifically the president, when things don't go well. The way is paved to elect a strong man with simplistic answers to "fix" the economy.
This brings us to the role of government in the economy. While the major share of the economy is private sector, government policy plays a major role. Let's briefly review some basics.
The major tools with which government affects the macro economy are fiscal policy and monetary policy. Also important and are laws, rules, and regulations affecting a wide range of economic activities.
Fiscal policy is basically tax and spending policies that affect income and employment. A standard canard of conservatives is that "government doesn't create jobs." That's eyewash, utter nonsense. Listen to the most conservative Republican congressman yell and scream when a defense contract is canceled in his district, or a military base proposed for closing.
Government definitely affects employment through its taxing and spending policies. Taxes enable spending on education, transportation, and much else on which the private sector depends. Laws and regulations regarding trade, banking, safety, and all the rest of it affect employment and the economy. Fiscal policy is the responsibility of the president and the Congress, "the deciders," as W. Bush would, however inelegantly, affirm.
Monetary policy affects the availability of money and credit in the economy, the responsibility of the Federal Reserve System. The Fed, as it is colloquially known, operates independently of the president and the Congress. However, the seven members of its governing board are appointed by the president, with confirmation of the Senate, for staggered 14-year terms.
The primary decision-making body of the Fed is its Federal Open Markets Committee, chaired by Janet Yellen. The FMOC sets short-term interest rates (technically the Federal funds rate) that affect other interest rates. This, along with other measures such as banking reserve requirements, affects the availability of money and credit in the economy. The tools of the Fed are weak compared to the fiscal policies of the president and the Congress, but are nevertheless closely followed by the financial and business community.
Numerous other government entities play advisory and supporting, roles, and are responsible for our financial infrastructure.
For example, Cabinet officers, including those of Agriculture, Interior, Transportation, Commerce, and Energy, and non-Cabinet (but Cabinet level) agencies such as the Environmental Protection Agency have authority to set regulations that have a wide range of economic, implications in addition to affecting health, safety, and the environment.
The National Labor Relations Board and the Federal Communications Commission set rules and procedures regarding labor and communications, respectively.
The U.S. Trade Representative in the Executive Office of the President is obviously important.
Other entities serve in advisory and/or coordination capacities. The Council of Economic Advisors was created by the Full Employment Act of 1946. This council consists of three economists appointed by the President and confirmed by the Senate. This Council currently has a staff of some twenty economists and three permanent statisticians. The council's economists are generally senior economists on leave from academia or on temporary leave from other government organizations. In addition to rendering economic advice and counsel to the president, the council prepares the annual Economic Report of the President.
Another unit, the National Economic Council, was created by executive order in 1993. It operates within the Executive Office of the President and is comprised of a presidential appointee and department and agency heads whose jurisdictions impact the nation's economy. The NEC's purpose is to coordinate various government agencies and advise the president on his economic policies.
The Department of the Treasury is important in maintaining the nation's financial infrastructure. It's Bureau of Engraving and Printing mints coins and prints paper currency. More familiar to most voters is Treasury's Internal Revenue Service (IRS), responsible for collecting taxes and administering the Internal Revenue Code set by Congress.
The relative importance of various government entities can vary. For example, the NEC has become more visible than the CEA in recent years.
Which economic units, if any, will have President Trump's ear? Stay tuned.
- John Waelti of Monroe, a retired professor of economics, can be reached at jjwaelti1@tds.net. His column appears Fridays in The Monroe Times.
