Economic Accountability path.(COMMENTARY)
Byline: Richard W. Rahn, SPECIAL TO THE WASHINGTON TIMES
It is often said success has many fathers, and failure many orphans. Who then should be held responsible for the economy? Should President Bush be held accountable? - Fed Chairman Alan Greenspan? - Senate Majority Leader Daschle?
The person who should be held accountable is that person who has the authority for economic decision-making. One of the first things students of management learn is that authority and responsibility ought to be equal.
From, at least, the time of the Great Depression, presidents have been held responsible for economic performance, yet none of them has had control over all of the key aspects of economic decision-making.
The independent Federal Reserve Board largely controls monetary policy, which, in turn, largely determines the rate of inflation or deflation.
Mistakes in monetary policy can also stifle economic growth, but good monetary policy by itself may not be sufficient to create strong economic growth.
The level of taxation, government spending and regulation also greatly affects economic performance. Congress has the principal responsibility for each of these activities even though a president may have great influence. A president who can push policies through Congress because of a strong party majority or due to persuasive personal abilities can have a strong impact on the economy.
There are also exogenous factors that affect the economy, such as droughts, floods, earthquakes, economic booms and busts in other countries, and wars over which economic policy makers have no control.
Presidents like Lyndon Johnson and Ronald Reagan were able to implement much of their economic programs for good or ill, and are rightly damned or praised for the performance of the economy. Presidents like Gerald Ford and Bill Clinton were much more the victims and beneficiaries of policies over which they had limited control.
The present system of economic governance is politically stacked, in part by design and in part by accident so any politician can blame the other party for poor economic performance or take credit for a good economy. The losers in all this are the voters and the taxpayers with the almost impossible job of penalizing those who make the wrong economic decisions and rewarding those who make the correct ones.
A compounding factor is that many politicians and media people are ignorant about economics so they peddle economic nonsense while other, more knowledgeable but intellectually corrupt, politicians engage in economic demagoguery. The result is that economic untruths are widely believed and good economic policy becomes increasingly difficult to implement.
For instance, many people believe that when Mr. Clinton became president the economy was in recession and when he left office the economy was growing, because some in the news media repeated statements by politicians to this effect as facts. …