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?

Caleb b

The President matters in that he has veto power. So if the president already has a majority in the house and senate, anything can get passed, but it is the president that has the final say.

Even then, they might need to wait until Christmas Eve at 9pm and bribe an entire state (Nebraska) in order to get really unpopular bills passed.

The Juggernaut

By logical extension of the argument that the President or the government in general cannot significantly impact the economy, we would have to accept the following:

The actions taken by both the Bush and Obama administrations to avert the financial crisis by shoring up the banking system or the actions taken by the collective European Union to avert the Greek crisis had no effect on the economy. This argument would imply that had no action been taken, we would be in roughly the same economic situation with or without the actions taken by the various governments in these situations. I don't know what data analysis can be performed to determine if this is the case, but the logical conclusion, if one believes that either or both of these crises would have caused significant economic damage, is that the President and or government in general does wield significant power to impact the economy.

I also believe that if we take the long run policy approach view vs. the general test of short term actions, we will find that these long run policy decisions do have significant impact on both individual economies and the global economies as a whole. I think that there is a quote that goes something like "war is economic policy carried out by other means".



The president doesn't directly effect the economy but he can indirectly. Like the low interest rate is supposed to influence people to borrow. He can't force people to borrow nor can he force lenders to give credit. He can cut taxes for businesses, but that doesn't necessarily mean the producer is going to hire people to produce more products (especially when the demand isn't there). He can give incentives to people who spend money, but that doesn't mean I'm going to spend my money on something that I don't need. He can only offer incentives, people aren't entitled to taking them.


Are you asking us to believe that, had George W Bush worked as hard to prevent the Iraq War as he did to create it, the American economy would be in the same state it is today?

Rubbish! Economics' research methodology, the fruits of which make Freakonomics attractive to the educated non-economist, is discredited by your claim.

True, there is no "Create Jobs" button in the Oval Office, but that does not imply that the President's actions and words do not affect the economic health of the United States.

John Mattson

Having read through the comments and realizing that there isn't a consensus on this issue... I am still left wondering how Mr. Dubner makes a decision on the presidential election. If, as he says, the President doesn't have any real power over the economy; what criteria does he use to pick a candidate. It would seam that the only questions left to answer are social and military. In that case, aren't you deciding to vote on societal changes that the president also can't deliver or on military ones that can't be predicted? Maybe you have to decide based on a feeling of who the candidate might pick for a supreme court justice? No, that might get "Borked" or the President could pick someone who changes his thoughts over time. Both of those have happened. You can't pick based on who will take us to war anymore, both parties do that now. The last "Small Government Guy" increase the size and debt of the government. Our current "Tax and Spend Guy" can't get a tax increase through or increase spending. So how do you make your decision Mr. Dubner?


Grant Sutton

I am curious about the economic prospective of voting in a parliamentary election vs the republic style elections we have in the United States. It seems to me when electing a representative they have the power to change more quickly and have less entrenched sides. I have met people that won't vote for a party because of something horrible it has done in the distant political past. It also seems the political debate is healthier in the countries. Is it time we rework our government? If you look at their ability to reform healthcare it seems dramatically better.


Surely this was a joke. You are economists, right? You are well aware that the consumer drives the economy and small business drives the consumer through employment and much is influenced by consumer confidence. So how can anyone argue that the president does not matter? He has a large influence with consumer confidence.

The current president has done more to undermine consumer confidence then anyone I can think of in recent history. When you make speeches for two years trashing business, loading up on regulations, threatening new taxes, and bailing out businesses that should have been allowed to fail then you undermine consumer and small business confidence. It's that simple.

You missed the mark in a big way this time.


Just 'google' it, Joe, and you'll find you're wrong in the typical republican way, meaning absent of facts.
Why has Obama raised more money than all the clowns put together? Twice as much from the millionaires at bain cap than romney. Wonder what those boys know?
In 2008 Obama beat mccain in 8 of the 10 richest zips in the country. The smart and the rich will vote Democrat again this year.
DJIA went from about 300 to 60 under hoover/republican philosophy 1929-32, whereas the DJIA has gone from about 8000 to 13000 since Obama came to power. Now that's consumer confidence, or investor confidence---over 100 million investors in U.S.
It's repubs that have and always have missed the mark. Not one successful prez since teddy r.


Txdave22 the article is about the customer having little effect on the economy. Either you believe that or not. I Iagree that the Dow Jones 30 Industrials on Jan 2, 2009 were at 9032 and March 17, 2012 at 13232. And yes this has been the worst recovery in modern history from a recession.

The argument being presented is that the president can affect consumer and small business confidence and thereby affect the economy.

The annual cost of regulation—$1.75 trillion by one frequently cited estimate—represents twice the amount of individual income taxes collected last year. Overall, from the beginning of the Obama Administration to mid-fiscal year (FY) 2011, regulators have imposed $38 billion in new costs on the American people, more than any comparable period on record.

These actions which the excecutive branch controls is why we have one of the worst recoveries on record from a recession.



Where did you get this repub talking point of 38 billion new regs, kinda reeks of fake, but i'm open to link, if you can produce, which i doubt.

Much of new regs under Obama to save the banks. You may recall they nearly collapsed in 2008, now they've passed stress tests. Their stocks are going up, so I don't see what's to complain about.

Jobs are being added to economy no change in regs, of course it will take time after the disastrous cheney/bush reign of error.


Regulations? basically a non-issue, but i googled and this is what Bloomberg News says:

How Obama Compares
Obama’s White House approved 613 federal rules during the first 33 months of his term, 4.7 percent fewer than the 643 cleared by President George W. Bush’s administration in the same time frame, according to an Office of Management and Budget statistical database reviewed by Bloomberg.
The number of significant federal rules, defined as those costing more than $100 million, has gone up under Obama, with 129 approved so far, compared with 90 for Bush, 115 for President Bill Clinton and 127 for the first President Bush over the same period in their first terms. In part that’s because $100 million in past years was worth more than it is now due to inflation, Livermore said.
In the last 12 months through the end of September, the cost range of new regulations is estimated to be $8 billion to $9 billion, a decrease from 2010, according to non-partisan Government Accountability Office reports analyzed by Bloomberg. That total put the average annual cost of regulations under Obama at about $7 billion to $11 billion, compared with the $6.9 billion average from 1981 through 2008 in current dollars, according to the OMB data.
Bush Record
The record came in 1992 under George H.W. Bush when that total hit $20.9 billion in current dollars. In the last year of Ronald Reagan’s term it was $16 billion in today’s dollars.

Question is: are pubs, including those in government ignorant, liars or both. Whatever, Joe, like you and the whining leaders (for only a short while longer) of the House: dead wrong.



I am open to believing your hypothesis that the President alone doesn't affect the economy much.
However, I was diappointed that you mentioned the stock markets short term response to the theory of a Democratic vs. Republican president, but didn't mention this study that looked at how the stock market performed over the last 80 years under actual Democratic and Republican presidencies:

That analysis shows that the market did better under Democratic presidents than Republican.

Kay Shawn

Just wanted to let you know that featuring spritely remarks by Donald Rumsfield isn't much of a way to get people to listen in on the topic of Presidential power...considering Rummy's history of usage of the executive power he's so cutely complaining about....low credibility, guys!


Yesiree, Rumsfeld was the ultra power figure behind Bush. Like closing Fort Monmouth in central New Jersey for reasons no one has been able to figure out to this day. The Army and Rumsfeld said it was going to cost a "mere" $700-million to close a perfectly good 1100-acre Army facility and construct a brand new facility just a hundred miles away in the swamps of Maryland (all this in the midst of the biggest financial downturn in half a century). Turns out that so far it's cost at least $2-billion, and upkeep costs on the deserted facility are mounting daily since nobody really wants to move onto an abandoned Army post, leaving an economic crater to fester in the middle of Monmouth County. Attempts by officials to find out why the post had to be closed and reconstructed in Maryland all came up with the same explanation "this is what Rumsfeld wants." Case closed.


The commander-in-chief may not be the head of our economy, but the senate definitely has more clout. And these guys don't even take the time to read the bills before passing them. I recently stumbled upon a movie while doing some research online. It's called "Fools on the Hill."
You can watch it at

I think it does a good job at assessing the pitfalls of how the senate works and what we can do to put a stop to it.