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    « We, the Sheeple.... | Main | Does Mitt Romney Have What it Takes? »
    Tuesday
    Aug072012

    So Who Really IS Better at Managing Our Money?

     

    Polls are a funny thing. They purport to tell us what we think, but it’s perhaps more accurate to say that they tell us what we feel.  And what we feel, it turns out, may not be borne out by the facts.

    Take, for example, a recent USA Today/Gallup poll:  Conducted just a couple of weeks ago, the poll’s results tell us that we prefer Mitt Romney (and, correlatively, the GOP agenda) for handling our economy. By more than 2-to-1 margin (63% to 29%), we seem to believe that Mitt would provide better stewardship, stewardship which, ultimately, should mean less pain and more pleasure, wallet-wise. Oh, sure, we like Obama better (by a similar 2-to-1 spread), but when it comes to the economy (which another poll, this by Rasmussen, tell us is the number one thing we care about when lever-pulling-time comes around), apparently we prefer the smug, rich guy.

    That certainly seems to be the conventional wisdom, doesn’t it? That the GOP does a better job with our economy than the Dems?  That business does better and the stock market rises when conservatives plant their flags in the round room?

    Well, not so, argue Bob Dietrick and Lew Goldfarb in their new book Bulls, Bears and the Ballot Box: How the Performance of Our Presidents Has Impacted Your Wallet, in which they rank eleven presidents—starting from one financial crisis and ending at another—on their relative success in guiding the United States economy. (Note: they combine Kennedy/Johnson and Nixon/Ford because of the extenuating circumstances in each case.)  Their findings, supported by a number of statistical factors including (among others) GDP growth, stock market returns, trade balances, inflation, and unemployment rates, suggest that it’s the Democratic party that has been friendlier to the economy, and that goes for  both businesses and individuals.

    The authors believe, as they write in the preface, that “Every president plays a vital and unique role in the performance of our nation’s economy. In fact, each president…has been the de facto chief executive officer (CEO) of the country.” They go on to weight presidential stewardship according to what they call the Presidential Rules for Economic Success, or the “PRES Rules,” and then rank the eleven presidents according to the Presidential Rankings for Economic Stewardship, or the “PRES Rankings.” These rules and rankings are broken into three pillars—Financial Health, Personal Wealth, and Business Prosperity.  The factors and principles used to assess performance is based heavily on the historical and ideological underpinnings of Marriner Eccles, the first chairman of the Federal Reserve Board, joint architect of the New Deal under Franklin Roosevelt, and—oh, yeah—a Republican.

    So who comes out at the top? In the author’s view, we’ve done best not under the supposedly business-friendly Republicans, but under the Democrats. In fact, Democrats take the top three spots, with the JFK/LBJ combo at the top, followed by FDR and then Bill Clinton.  It’s Eisenhower who breaks the string, but it’s a Dem again—Truman—in the next spot.  It’s not until 6th place that we reach the iconic Ronald Reagan.  And bringing up the rear? Herbert Hoover wins that (dis)honor, presiding as he did over the arrival of the Great Depression. But just ahead of him is Bush II and the Great Recession that will forever be his legacy.

    The authors then carefully construct the case president by president, devoting a chapter to each.  Charts and graphs abound, but it is to the authors’ credit that the charts do not bury the text, but rather illuminate it. The writing style is clear, crisp, and concise, making for an easy-to-read layperson’s book rather than what could have been the terrifying offspring of a PoliSci text and an Econ 101 final exam.

     The book does leave open questions, however, particularly in what the authors choose not to analyze.  For example, it seems no surprise that financial crises would hurt the rankings, and so seeing Hoover and Bush II at the bottom comes off as merely the confirmation of intuition.  But is there something different about those two occurrences? Should they, perhaps have been subject to a different kind of analysis? And what of the role of war? Four of the top five slots are held by presidents who, arguably, had the economic benefit of a war machine to boost the economy. The analysis doesn’t factor that either in or out of the rankings.

    And there’s the question, too—one I’ve asked numerous times—if Bill Clinton wasn’t actually more Republican than Democrat….

    Still, even with these open questions, the book provides ample food for thought and, perhaps most importantly, invites us to challenge—once again—what too many absorb too easily as “conventional wisdom.”

    Bulls, Bears and the Ballot Box can be purchased at Amazon, and more information can be found at the book’s website.  Also, be sure to tune in Tuesday evening, August 7 at 8PM Eastern where co—author Bob Dietrick will appear on The Middle Ground with hosts Eric Byler and Michael Charney.

     

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    Reader Comments (4)

    A little push to demand-side always yields great results overall. The stronger the supply-side push, the worse the results.

    August 7, 2012 | Unregistered CommenterTubino

    It's interesting that they place FDR high on the list, considering that he presided over the rest of the Great Depression and a world war. UCLA economic professors researched FDR's policies and found that they extended the Great Depression over 7 years.

    Herbert Hoover had the same kind of policies, tax rates and spending like FDR, just not as bad. That's why FDR and Hoover should be ranked the same.

    Clinton had a combination of Republican policies from congress, and the Tech Boom of the late 90's that went bust in mid 2000, just before GWB took office. So GWB had the Tech bust, then 9/11 to deal with, then the housing boom/bust at the end of his term, which was seeded in the 90's by Clinton.

    Eisenhower, JFK/LBJ and Truman had it easy because we were the only untouched industrial base for the world after WW2. JFK and Eisenhower both cut taxes and regulations, while Truman increased.

    Reagan cut taxes after the disaster of Carter and had 9% boom, and recessions went from about every 4 years to 10 years. GHWB increased taxes and had a dem congress and ended up with a recession.

    I'm curious, why didn't they include Presidents over the last 100 years? It would show Coolidge, Harding in a greater light, while Wilson had a depression and WW1. If the authors were honest, they would show Republican president and congress do the best on average.

    August 8, 2012 | Unregistered CommenterCitizen Journalist

    Thanks for the thoughtful response, Citizen. The book in question takes a specific 80-year period for analysis, beginning with Hoover and ending with Bush II (bookended by financial crises, if you will). I recommend taking a look at the book's website for a bit more info on what the authors chose to look at in doing their analysis. -- Michael Charney

    August 8, 2012 | Registered CommenterMichael Charney

    I’m sorry, but the very premise of the book does not make sense to me. There are two camps of economic thought in the US; those that believe the economy should be driven by the Fed as it controls the interest rates (cost of money) and those who think that the Federal Government should do it through its power to tax and spend. The President does appoint Fed board members once each 14 years, but once appointed they are virtually free to do as they please without political influence and/or fear of retribution. As for taxing and spending, the Article I, Section 8 of the Constitution specifies that, “1. The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defense and general Welfare of the United States; 2. To borrow Money on the credit of the United States;”. The President does not. So the question that is begged is, are Presidents actually “driving” the economy or are there grades really based on being at the right place at the right (or wrong) time?

    The fact is, virtually every president has acted only in an advisory capacity in determining the amount of money spent and taxes levied by the Federal Government, thus leading to the conclusion that the President gets way too much credit when things go well and way too much blame when things go wrong. For example, many economists agree that it was Newt Gingrich and his Contract with America that drove the prosperity of the 90’s, not President Clinton.

    Conversely, in order to pull us out of the Great Depression, FDR expanded the role of the presidency to include massive spending powers (the beginning of the end of checks and balances), but many historians argue the exact affect it had on the economy. It did put people to work which was at least a morale booster. However, all economists agree that it was WWII that caused the full recovery and actually fueled prosperity thereafter.

    In the end, if you are worried about the state of our economy, you best focus your efforts on two things; your local congressional elections and how you spend your own personal income.

    August 14, 2012 | Unregistered CommenterDan Aronson

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