Ten Miles Square


January 12, 2012 9:50 AM Economists Scoff at Obama, Romney Job-Creation Myths

By Ezra Klein

Mitt Romney’s campaign would have you believe that every job lost over the past three years is President Barack Obama’s fault. That includes the 820,000 jobs lost in January 2009, even though Obama didn’t become president until the 20th of the month.

It includes the 726,000 jobs lost in February 2009, before any of Obama’s policies had gone into effect. This suggests that Romney holds a deeply ambitious view of a president’s power to influence the labor market — a view, as we’ll see, that’s not shared by economists who were responsible for White House economic policies in recent administrations.

Romney, too, discounts the president’s power when he highlights his own record in Massachusetts. In fact, Romney’s campaign asks us to believe that every job created in Massachusetts while he was governor was Romney’s doing. Obama might deserve the blame for the jobs lost on his watch, but George W. Bush, who was president during Romney’s governorship, gets no credit for the jobs created on his. Romney also claims that every job created by any company that Bain Capital LLC had a hand in should also be credited to Romney — even if the job was created long after Bain separated from the company. Heads, I created a job; tails, you lost one.

The Obama campaign isn’t much better. They want credit for every job created, but not for every job lost. They also want Democratic economic policies to get credit for the jobs created under Bill Clinton’s presidency (what tech bubble?) and for Republicans’ economic philosophy to take the hit for the financial crisis that began during Bush’s administration (what Clinton-era opposition to the regulation of derivatives?).

Governor Rick Perry’s campaign, meanwhile, assigns Obama responsibility for every job lost nationwide, but Perry gets credit for every job created in Texas. Neat trick. And he, like all Republicans, wants the jobs created under President Ronald Reagan added to conservatism’s side of the ledger.

Believing the Unbelievable

To buy much of this requires you to hold deeply ridiculous beliefs about the American economy. You must believe that Obama bears responsibility for events that predate his presidency and deserves applause for the demand created by aging cars and worn- down machinery. You must believe that Congress, which controls fiscal policy, and the Federal Reserve, which controls monetary policy, bear little or no responsibility for the economy, but that the president, who controls neither fiscal nor monetary policy, is the primary driver of job creation. You must believe that governors have absolute power over state economies and that global demand is irrelevant. You must also renounce belief in Christmas — or at least its influence on the consumer-driven economy.

Virtually no one really believes these things. But partisans and the news media routinely act as if they are true. They make up a useful shorthand that is arguably good for the political system: Better for presidents to believe re-election hinges on economic performance than, say, on the quality of their attack ads.

It would be even better if voters had a consistent benchmark for judging a president’s performance. The question — and it’s a tough one — is how to separate the very real influence a president has on the economy from the myriad other factors that weigh on whether consumers spend and businesses hire. I put the issue to an exclusive club of economists who have an unusually fine-grained understanding of what a president can and can’t do: the former chairmen of the president’s Council of Economic Advisers. I asked each the same question: How much of national job creation during a presidency can we properly attribute to the president?

In Their Words

“Very little,” wrote Harvard’s Martin Feldstein in an e- mail. Feldstein led the council under Reagan, and he didn’t see much role for the president in normal economic times. “The key is growth of population and labor force participation. Policy — primarily monetary policy — affects cyclical conditions and therefore the unemployment rate. Fiscal policy is usually irrelevant but with interest rates at the current level there has been a role for fiscal policy.”

Laura D’Andrea Tyson, a Berkeley economist who served under Clinton, emphasized the need to consider timing in our evaluations. “There are significant lags between the time a President proposes a policy, the time it is enacted by Congress and the time necessary for it to take effect,” she wrote to me. “These lags should be taken into account in measuring the economy’s job performance under a President. The first year probably should not count at all in terms of assessing the effects of a new Administration’s policies.”

N. Gregory Mankiw, a Harvard economist who served as the council chairman under George W. Bush, directed me to a blog post he had written on the subject. “Randomness is a fact of economic life,” Mankiw wrote, “and it would be a mistake to judge a president by the economic outcome during his administration. It is better to look at the decisions the president made, and to acknowledge that the outcome is a function of those decisions and many other factors not under his control. As an economist, I have views about what best practices are for economic policy, and I judge presidents by how closely they adhere to those principles.”

“Unfortunately,” he concluded, “that evaluation process is not quite as simple and objective as the reader might have hoped for. But I don’t think there is a better alternative.”

Austan Goolsbee, the council chairman under Obama, tried to lay out a four part test: “Everyone kind of knows they need to ask what conditions was the person handed, what did they do, what was happening elsewhere, and what would have happened if he wasn’t there?”

Those questions, Goolsbee admitted, are tough to answer. But whatever the answer is, it needs to take into account that the president’s control of the economy is at best incomplete. “Despite continued scrounging around in the basement,” Goolsbee said of his time in the White House, “I was never able to find the lever you flip that lets the economy grow and create jobs.”

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Ezra Klein is a columnist for Bloomberg View.


  • sjay on January 12, 2012 4:00 PM:

    Well, what is the "tech bubble effect" for jobs created under the Clinton administration. Is there any solid analysis as to what proportion of Clinton-era jobs was created by a "tech bubble" as opposed to a) Clinton fiscal policies; b) an effect, but not a speculative bubble, of the technological innovation of that era?

  • Robert H on January 12, 2012 7:25 PM:

    Politicians are not in control of the economy. They are at its mercy.

  • Jack H. on January 13, 2012 8:42 AM:

    And yet...just yesterday I heard some Republican on the teevee assure me that Obama has "no plan for the economy." Um, isn't that exactly what Republicans have always lived and died for--no central planning? Ha!

  • Neil Bates on January 13, 2012 11:09 AM:

    Robert H: they are more at the mercy of the people who own the economy. As Captcha reminds me, it's a chess game.

  • square1 on January 13, 2012 11:33 AM:

    Ezra generally makes a legitimate, if not particularly insightful, point: that politicians routinely claim credit for all the good stuff and blame others for all the bad stuff.

    He could have saved himself a lot of time and keystrokes by simply reminding his readers of the old saying that "Success has many fathers, while failure is an orphan".

    Does the President have much control over the economy? I find it is easier to answer this question by answering two other questions first: Does the federal government have much control over the economy? And how much control does the president have over the federal government?

    The answer to the first question is that the federal government has massive, massive, massive control over the economy. Too often we act as if the unemployment rate is beyond the control of humans, sort of like the daily temperature.

    In fact the unemployment rate can be set much like interest rates can be set by the Fed. If we have an unemployment rate that has generally fluctuated between 8-10% for a couple of years, it is because we have effectively CHOSEN to keep unemployment at that level.

    The fact is that more government spending lowers the unemployment rate and less government spending increases unemployment. You can argue that, right now, the government shouldn't CHOOSE to set unemployment at 5%, just as you can argue that the Fed shouldn't CHOOSE to push interest rates to 10%. But that doesn't mean that both aren't choices.

    The next question is how much power the president wields over the federal government, particularly on domestic spending. This is a question that has been subject to considerable debate. Some believe that Obama has been frustrated by obstructionist Republicans and Blue Dogs. Others argue that if Obama had wanted policies that would have significantly reduced unemployment then it would have been very politically difficult for any opponents to frustrate his agenda, particularly early on in 2009.

    Those who agree with the latter argument largely believe that Obama likes to use the GOP and the Blue Dogs as a useful excuse for failing to enact policies that he doesn't really support anyway (Did the president, personally, ever want a $1.5T stimulus spending proposal? No.)

  • Goldilocks on January 13, 2012 5:19 PM:

    Really interesting. Surprising no one mentioned Congress, and particularly the House of Representatives, who have stymied most of President Obama's worthy initiatives.

  • square1 on January 13, 2012 5:25 PM:

    Surprising no one mentioned Congress, and particularly the House of Representatives, who have stymied most of President Obama's worthy initiatives.

    Such as?

    There really aren't any economic initiatives that the President has proposed that were blocked by the GOP House up until the president's jobs bill was blocked in October, some of which was later passed in piecemeal form.

    Even if the President had gotten exactly what he wanted and Congress had passed his jobs bill by the end of October, as proposed, we would likely only now be starting to feel the effects of that bill. In short, it is hard to point to any legislation that was blocked by the GOP that would have had a significant impact on the economy before the past month or so.

  • Nick on January 13, 2012 8:24 PM:

    Hey Ez -- Auditioning for Politifact? Maybe Politico? This smacks of 'both sides are the same' disease. Give us a break. Job growth under Democratic presidents beats hell out of the GOP years. Coincidence? Would McCain have passed a stimulus that kept us out of Depression II? Isn't that the issue, not this Economic class paper you've given us here?

  • earthworx on February 05, 2012 7:00 PM:

    So the President has little or no control over the economy; really? Perhaps you could then explain that ever since they've been measuring economic growth the economy has always done better under democratic administrations than republican ones. Then maybe you could then explain why England (and most of Europe) have seen their economies crater after following the austerity measures they put in place themselves. Or maybe you could explain The Great Recession, how the Clinton and Bush administrations followed a policy of financial deregulation, which in turn led to a bubble economy (caused by unregulated mortgage-backed investments and derivatives), and then brought down the global economy. Remember Brooksey Born, how about Dick Durbin?

    Then you say presidents have little control over fiscal policy. So I guess in your view the Reagan and Bush, Jr. tax cuts have no connection to the economy. As for monetary policy, the Treasury Sec. and the Fed Chairman have regular meetings to discuss and coordinate policy. Read "Too Big to Fail", Berneke and Paulson had regular breakfast meetings to discuss policy.

    As for your fourth paragraph, it seems it was written to check that false equivalency box; everybody does it. Overall a very poorly thought out article. I had expected better of you.