Written by Kilan Duan
When asked, most registered Republican voters said that ‘the economy’ was the most pressing issue for them. From interviews, to polls, to online statistics, some variation of ‘the economy’ is always vying for first place, often alongside the slightly more specific ‘inflation.’ Surveys showed that for 66% of registered Republican voters, ‘the economy’ was most important to them when casting their ballot. This is in marked contrast to the concerns of registered Democrat voters, for whom democracy, potential Supreme Court Justice picks and abortion rights are far ahead of economics of any kind. Still, since so many voters cited ‘the economy’ as their biggest concern, it seems worthwhile to unpack the term. This article is not about picking apart the United States presidential candidates’ approaches to the economy— Americans have already made their decision. Instead, it will break down what ‘the economy’ is, explain the powers of the president, and explore the amount of overlap between the two.
When all these interviewees and poll-responders say, ‘the economy,’ what exactly do they mean? Generally, what American voters seem to be referring to are prices. But prices are one part of economics. Put simply, when we refer to ‘the economy,’ we mean the process or system that facilitates the production and sale of goods and services sold. Approaches to defining ‘the economy’ have changed with time. Classical economic theory, which was once mainstream, has given way to the current mainstream of neoclassical economic theory, which is what our current understanding of “the economy” is based on. Neoclassical economists are concerned with the allocation of scarce resources to human needs, which are thought of as unlimited. It has become a question of efficiency of the allocation process. More notably, neoclassical economists have tended towards mathematical models instead of institutional input, meaning that governments and governmental intervention are viewed as inefficient necessities that are to be minimized as much as possible.
Of course, this is a model approach to economic theory and in practice, institutions like social sciences and politics play a far larger role. We turn now to the powers of the United States president. They are the head of the executive branch of the United States, who among other duties, is charged with appointing the heads of the fifteen executive departments that perform the necessary duties of the federal government. It is the federal government as a whole that is a large player in the economy, and here is where the president has influence, not control. However, this was not always the case — before the 1930s, the government had only concerned itself with tariffs on foreign imports. The 1930s saw the worst economic decade in the history of the United States and as a result, the federal government took on an active role by developing fiscal policy — a means of sustaining a healthy economy by cutting taxes or increasing spending. After World War II, economists worried that the United States would return to the economic deprivation of the 1930s and introduced a second measure of federal control in the form of monetary policy — tools used by the Federal Reserve (the United States’ central bank) that deals with interest rates.
The president can at most make suggestions about the budget of the fiscal policy, but both chambers of Congress must pass the actual budget. The president also has the power to appoint a representative to the Federal Reserve, but this selected person’s term limit is far longer than that of the president’s and they also only have one vote on the board. Thus, the president can influence—not control—both fiscal and monetary policy and install the executive government. They have indirect control over the economy as a whole.
Furthermore, it is also true that the president has significantly more control over the United States’ response to various geopolitical events, which can have ramifications for the domestic economy. The economist Zak Taylor found that between 1789 and 2009, the economy of the United States was at its most stable under Franklin D. Roosevelt (D), Warren Harding (R), Rutherford B. Hayes (R), and William McKinley (R). It was at its worst under Chester A. Arthur (R), William Henry Harrison (Democrat-Republican, Whig), Herbert Hoover (R), and Martin Van Buren (D). In other words, the economy of the United States was strong under a roughly equal number of Republican and Democrat presidents. He concluded that political parties were not necessarily a good predictor of economic policy. Rather, traits like clear policy plans and willingness to compromise positively impacted the economy. Thus, when voters state that the economy was better under one president than another, they do so imprecisely. The economy is not reset after each election; it is continuous, and its fluctuations are not necessarily congruent with presidential terms.
Bibliography
Brendan, Megan. Economy Most Important Issue to 2024 Presidential Vote. Gallup News, 2024.
Taylor, Zak. Does the President Really Affect the US Economy? Georgia: Georgia Tech.
Walden, Mike. You Decide: Can the President Control the Economy? North Carolina: NC State University, 2024.
O’Brien, Robert; Williams, Marc. Global Political Economy: Evolution and Dynamics: 3rd Edition. Palgrave Macmillan, 2004.
Retrospect Journal 