“Today’s program looks at the economic power of the president. Mike, whenever a new president takes office there seems to be an expectation the person will almost single-handedly fix our economic ills. I think we are now experiencing this with President Trump. Is this a realistic standard for any president?”
“Well any president faces several constraints in terms of, what’s called, trying to manage the economy. One is the business cycle. The business cycle is simply the irregular ups and downs in the economy and economic growth. It includes periods where we’re achieving faster growth, as well as recessionary periods where we at first slow down, then actually constrict.”
“Some say this is due, the cycle is due, to things like the inventory cycle, the investment cycle, and those are really outside the control of the president. So that’s one constraint.”
“Another constraint are what we call structural factors. These are related to the average age in the economy. They’re related to how many people, for example, are young and coming into the economy when they tend not to be as productive. And again, these are things that are virtually beyond the control of the president.”
“You have monetary policy. That’s controlled by the Federal Reserve. The president doesn’t have direct control over the Federal Reserve. The president can appoint members to the Board of Governors of the Fed, but they have very, very long terms with the exception of the chair. And of course the Federal Reserve has a lot of control over federal interest rates. So the president doesn’t control interest rates.”
“What the president does have influence on with the Congress is fiscal policy: taxes and public spending. But again, here it’s a shared control. The president can’t dictate taxes, can’t dictate public spending. It all has to go through Congress. So I think there are a lot of headwinds against any president if that president tries to be in charge of the economy.”
Mike Walden is a William Neal Reynolds Distinguished Professor and Extension Economist in the Department of Agricultural and Resource Economics at North Carolina State University who teaches and writes on personal finance, economic outlook, and public policy.