It’s Not the President, Stupid (Ep. 65)

(Photo: Anna Fox)

Our latest Freakonomics Radio on Marketplace podcast is called “It’s Not the President, Stupid.” (You can download/subscribe at iTunes, get the RSS feed, listen via the media player above, or read the transcript here.) The gist: it’s time to admit that the U.S. economy doesn’t have a commander-in-chief.

Over the years, we’ve regularly visited the question of how influential the president of the U.S. really is. This segment focuses on the president’s influence over the economy — which, if you believe polling data, will be the central concern for many voters as the 2012 election unfurls.

In this Marketplace segment, you’ll hear from Austan Goolsbee, the University of Chicago economist who has served President Obama as both campaign adviser and chairman of the Council of Economic Advisers:

GOOLSBEE: I think the world vests too much power, certainly in the president, probably in Washington in general for its influence on the economy, because most all of the economy has nothing to do with the government.

You’ll also hear from Freakonomics blog regular Justin Wolfers, who, along with co-authors Erik Snowberg and Eric Zitzewitz, examined the stock market’s reaction to the 2004 presidential election, during which it was erroneously declared that John Kerry had beaten George Bush, when in fact the opposite turned out to be true. (Ungated paper here.)

FWIW, here’s a TV interview I did with Yahoo! Finance on the topic a few weeks back. And we’ll soon be releasing an upcoming hour-long podcast with an updated version of the President episode, in which you’ll hear at some length from Goolsbee, Steve Levitt, and Donald Rumsfeld. I asked Rumsfeld about parallels between the roles of president and CEO of a company (a role Rumsfeld himself has held). His answer was most interesting:

RUMSFELD: Well, they’re really very, very different, and being good at one doesn’t suggest that one would necessarily be good at the other. The political world is a thing of a different order. Because the powers are divided, a president has to spend a great deal of time dealing with the Congress and dealing with the media, because you communicate to the Congress and the public through the media. And almost anything that’s proposed is going to be debated and discussed openly, immediately. In business, conversely, I mean I could go into a corporation and decide that I want to freeze the dividend, and I could do it as CEO. I could decide I’m going to open a research facility in country X instead of Country Y. I could decide I’m going to downsize or sell off a division, and I did it. And you can be wrong, as well as right, to be sure. But at least you are able to do it. You know, in government, if we put something in place, in one of the departments or agencies, the Congress wants to have hearings on it, they want to pull the plant up by the roots every five minutes to see if it’s still growing and traumatize it, and the press wants to critique it before it’s even fifteen minutes old. It’s enormously different.

If I were a presidential candidate’s campaign adviser, here’s what I’d like him or her to say:

My fellow Americans, I have precious little control over the U.S. economy, even though I and my fellow candidates pretend the opposite is true. There is no “increase employment” button I can push once I get to the Oval Office, no “lower gas prices” button either. It’s true I have a little influence on the direction and shape and velocity of the economy, but mostly it does what it does. So if it gets worse on my watch, you shouldn’t necessarily blame me – and if it happens to get better, you shouldn’t give me too much credit, either.

If I actually did get my candidate to deliver that message, even just once, how long do you think it would be before I got fired?


While I believe there is little a president can do to make the economy better, he and Congress can make it much, much worse with poor fiscal policy.


Crippling levels of ill-conceived regulation doesn't help, either. Nor do cabinet level shakedowns of private enterprise.


I somehow don't find it surprising that a few months before the election that Austan Goolsbee would suddenly proclaim that the president has little to do with the economy. Wouldn't want to take credit for his disasterous economic policies, especially his energy policies, with gas prices at record highs. Obama ran against Bush claiming that he crashed the economy and hasn't stopped blaming him for every problem since. Goolsbee is little more than a tool that learned the lesson that "Those that can, do. Those that can't, teach".

Steve O

Obama and his administration lying about the Presidents' influence on the economy doesn't mean they are any different...that's politics.


Mmm. "The President does matter, stupid!" might also be a reasonable article.

Anyone who thinks major policy decisions don't affect the economy is nuts. Just because there isn't an unemployment up/down button doesn't mean that you can't make things change. You can, only the machine is complex and doesn't always behave predictably. This is rather obvious, I'd have thought.

Freakonomics should not be throwing out simple-minded drivel just because it sounds cool.

Enter your name...

If anyone who thinks major policy decisions don’t affect the economy is nuts, then what do we call the people who believe that the US presidents actually get to make major policy decisions? The President can't spend any money without Congressional approval, and even minor executive orders can be overturned by Congress whenever it wants.

Shelley Holroyd

If I had the chance to get any candidate to deliver that message, I wouldn't care if I got fired. Although, I believe I would be immediately! Still, it would be a life achievement to have achieved truth, and honesty in a political campaign with one sweeping effort.

Thank you for your thoughtful work. I am a devotee.

Caleb b

Imagine you own a business, say a coffee shop.

Then imagine the government tells you that it has created a ton of new rules for you to follow, but not all of them are fully understood yet and if you break any, even ones not interpreted yet, you are in trouble. Would you react by expanding?

Alternatively, imagine you're a home owner and the government says, "we're going to allow mortgage fraud for the next 8yrs!" what do you think will happen?

Now multiply this by the whole economy and tell me that politicians, with the President being the leader, don't affect the economy.

Enter your name...

The claim here isn't that "politicians" or "the government" have no effect. It's that the single human in the Oval Office, operating all by himself, has very little effect, because he has very little direct control.


Lots of this debate center on dealing with an economy as a "thing" to be managed. It is not: The economy is an emergent property of the society that hosts it, the sum of all exchanges made within the society and as such is strongly influenced by political policy, the deregulation and abuses in the mortgage industry the poster mentioned. If the society values wealth over quality of life, the economy will create wealth. Government, too, mirrors the values of the society that hosts it. In short, as the most visible agent of Government, the President has an influence over the society and thus over the economy.

joeyjojo shabadoo

When people say "president so and so is ruining the economy" I always say "you're giving them too much credit. They aren't smart/powerful enough to make that much of a difference". Although I would say that government policy does seem to have quite an affect on consumer/investor confidence, which does influence the economy.

Steve O

I would counter that the media's reaction to policies have a much bigger effect on consumer confidence than the actual policies.


So long as presidential candidates continue to run on platforms dealing with issues that they don't control (either because it's in the hands of Congress or the rest of the globe), I think we reserve the right for criticizing them for not doing a better job.

Don't want to be blamed for not reducing unemployment? Then don't promise lower unemployment.


Another thing to consider is the reaction time of the economy. The economy usually doesn't feel the full effects of a President's actions - good or bad - until his successor is in office. Thus we can plausibly point to Bush's actions in his first term having set the stage for the economic problems that Obama has had to deal with, while Bush in turn benefitted from the effects of Clinton-era policies...

Andrew Jackson

Did Bush affect the economy with his Tax Cuts, the war in Iraq, and massive downsizing of the Securities and Exchange commission before the meltdown?


Hmm, so when the economy is terrible under Obama it's "the President has no effect on the economy" but when the economy was not so hot under Bush it was "jobless recovery" and "Bush's fault." And you wonder why people think that there's a media bias?


There are some clear historical patterns though that shouldn't be dismissed.

DJIA has performed substantially better under Democrats in the White House than
pubs, both during Clinton and Obama, as compared with gw bush/reagan-bush.

Deficit reduction was substantially better under Clinton than reagan-bush, and dramatically better than under gw bush where Clinton's surplus in 2001 became bush's gift of a trillion dollar deficit to Obama.

These are facts, can't be denied.

Also, if you compare the incompetencies of pubs, whethere reagan-bush dramatic debacle in Lebanon and Iran/Contra, or gw bush disastrous iraq war and ineffective management of afghan, again no denial. Compare with the peace and prosperity under Clinton, or the killing of bin laden and downfall of Libyan dictatorship under Obama.

The patterns are chrystal clear to an honest eye. Or take the clowns running for 2012 pub prez nom---please. Even senior pub pundits have already capitulated the 2012 presidential election.



You dislike both parties pretty much equally? Really? Future Freakonomics podcast subjects - contraception and economics
women's health and economics
cancer screening and economics (pap smears - take a look at the state level and women's health plans)

the economic impact of women not being able to drive in Saudi Arabia
the economic impact of girls being taught to read in any society

When the parties that you dislike equally focus on the ECONOMY equally, for a fresh as a daisy change, it will be a whole new day.
Wake the eff up.


You didn't say where any facts were in error.

I only give the facts which do show the Democrats far superior
in governing and consistently made a difference in the economy.


Per the Rumsfeld quote/observation....indeed, they are quite different jobs and his descriptions seems correct...but here is the rub. Influence may be more important than direct control. Thus, a person who can influence in any sector the president my engage in has advantage over one who can not. Influence comes from knowledge of and acquaintance with those in both the political/private world who really do direct and control. In this case the US has an economic problem then the president needs to be one who can do that...however, next time the driving issue maybe foreign policy or natural disasters. In other words, there isn't a person who can be the best president for times and in all cases. As an example, would Lincoln had been a great president if his situation had been different? So, for us it is economics....four years from now who knows?