The state of the economy is the big issue in the 2012 presidential election, as it is in every presidential race. But is this really logical? An “economy”, after all, is not a set of policies promulgated by the government. It’s the collective result of literally billions of transactions every day. How realistic is it to think the policy differences between President Obama and Republican challenger Mitt Romney are really going to drastically affect all this one way or the other?
Now this isn’t to say government policy can’t have an impact around the margins. Whether you’re a conservative who favors cutting taxes or a liberal who favors increasing spending, you can put money into the hands of the voters, as candidates repeatedly remind us. True enough, but in spite of the rhetoric you hear from other side, the policy differences between Obama and Romney.
Obama wants to restore Clinton-era levels of taxation on the top brackets. Romney wants to maintain Bush-era income tax brackets. Say what you will about the merits of either, but to scream “socialism” or “trickle-down economics” is to be more into the rhetoric than the reality.
Proof of how minimal the presidential impact is on the economy can be established by looking at the track records of Ronald Reagan (1981-89) and Bill Clinton (1993-2001). Under both presidencies, the economy boomed. Reagan was a supply-sider who sharply reduced taxes. Clinton raised them. The federal budget was in the red under Reagan, it was in surplus under Clinton.
Economic experts can debate endlessly about what level of taxation is appropriate and how important a balanced budget is, but when it came to the bottom line of growth and employment in these two Administrations, there wasn’t a dime’s worth of difference to be found. Which suggests that maybe who’s president doesn’t matter in terms of the economy nearly as much as we think it does.
One might argue there were similarities between Reagan and Clinton—both were in office when the opposition party controlled Congress for the bulk of their tenures. Both believed in deregulation, particularly of the financial sector. But here again, while the merits of divided government and deregulation can be up for legitimate debate, I don’t know that it’s the decisive factor for economic growth.
If there were a truly sharp contrast between two presidential candidates—let’s say one who wanted to return to the 70 percent marginal income tax rates of the pre-Reagan years and one who wanted to return to the extreme business-friendly economics of the late 19th century Gilded Age, the differences would be steep enough that it would matter.
But when the argument is over whether the top tax rate should be 40 percent or 35 percent, or whether the tax rate on stock transactions should be 15 percent or 20 percent, maybe it’s time to tone down the rhetoric and focus one’s vote on areas where a president really matters.
Dan Flaherty is the author of Fulcrum, an Irish Catholic novel set in postwar Boston with a traditional Democratic mayoral campaign at its heart, and he is the editor-in-chief of TheSportsNotebook.com