The new Bloomberg Businessweek features an extreme close-up of President Obama with the cover line "Lucky or Good? The Truth About the Obama Recovery." That promises a lot. But it's a subtle misdirection play. The analytical piece that it refers to, with its graphics, instructional arrows and candy colors, fails to satisfy either the cover line or the subhead. It really does not deal at all with the question of whether the president can or did affect the business cycle -- the assumption of the article, of course, has to be that he can, otherwise why slog through all these various decisions? -- and the "truth" of the recovery remains a shrugging, well, it was messy, wasn't it? Here's the concluding paragraph. You tell me whether the administration is "lucky" or "good."
The choices Obama made helped bring about this result [the recovery], even though he had help from the Fed, and even though they don't quite explain the recent strength of the recovery. But the business cycle operates by a logic all its own. It cursed Herbert Hoover and blessed Ronald Reagan. Obama's good fortune is that this sudden upturn is occurring just when he needs it the most.
Okay, so he's lucky and good. This sort of argumentative incoherence is common when journalists and pundits try to fix blame or offer credit to the administration for the economy. There's been a lot of this lately. Ron Suskind (Confidence Men: Wall Street, Washington, and the Education of a President) and Noam Scheiber (The Escape Artists: How Obama's Team Fumbled the Recovery) have both recently published books (a review of Scheiber's is here), which go over, albeit in much greater detail, roughly the same ground covered by Businessweek.
We get the early underestimation of the severity of the crisis, the arguments over stimulus, the mounting fiscal concerns, the clash over various policy initiatives, the political gridlock. Again, to engage in this kind of historical analysis requires a belief that policy and policymakers matter; that individuals, embodied by the president, can fix a failing economy (or mess up a good one), turn the economic ship around, improve unemployment, make the birds sing. This notion is particularly powerful among the political punditocracy. In this way of looking at policymaking, the determinism of the economic cycle is set aside -- after all, voters don't give a crap about academic theories. They want results. Expectations are thus high. Economics is a hard science; failure to accurately predict is viewed as a grievous sin, a failing. The past is continually judged by the reality of the present. Obama was a failure before the recovery strengthened; now he's lucky and good; if he's re-elected and the recovery continues, he'll be a genius, until something goes wrong.
We get every one of those ideas in the Businesweek story's introductory section. Businessweek seems convinced that to be effective an administration needs a "clear economic philosophy." The only two examples it initially tosses up are Reagan and George W. Bush, who essentially share the same conservative philosophy of tax cuts, supply-side stimulus and, broadly speaking, free markets and deregulation. Of course, however you come down on the issue of cycles versus policies, much of the crisis of 2008 did stem from aspects of that philosophy, which even Alan Greenspan later admitted. Is economic pragmatism not a philosophy? Did Bill Clinton, who arguably enjoyed even better economic times (plus a surplus) than either Reagan or Bush, require a philosophy? Businessweek trots out several Republican economists who suggest that Obama has been done in (despite the recovery) because he lacks a theory.
"I can't infer a theory," says Glenn Hubbard, Columbia Business School dean and former economic adviser to Bush.
"I've watched the president for a long time, and he's very smart, but he doesn't have a policy rudder," says Douglas Holtz-Eakin, who ran the Congressional Budget Office in the Bush years and advised Sen. John McCain's 2008 presidential campaign.
What does that mean? Mostly, it seems to mean that if Obama doesn't fully embrace your economic faith, then he has no faith at all, that he's a sort of economic atheist. But that's not the case at all. He and most of his advisers subscribe to a pragmatic form of Keynesianism; that is, they believe that you can use the powers of the government, including fiscal policy, to nudge the business cycle this way and that (the joke here is that Bush, Reagan and most presidents are closet Keynesians in practice). Indeed, a bit later, Businessweek tries to hoist Obama upon his own Keynesianism, first by suggesting he made a big mistake by not seeking a large enough stimulus -- at crucial moments, the magazine ignores or downplays the forbidding politics of Republican opposition in Congress to just about anything -- and then for not being, believe it or not, either John Maynard Keynes or Franklin Roosevelt. Again, a kind of incoherence rules these analogies. Obama is quietly downgraded because he did not take the kind of "sweeping new policies if he thought they could help, even risky or unproven ones." That's true, with two caveats: This isn't the Great Depression, and unlike FDR, who had large majorities in Congress for the '30s and was starting from a very different kind of government, Obama had either a very thin majority or a fractious and divided Congress. (That said, the Supreme Court dismantled a lot of the New Deal soon after it was tossed up, FDR famously triggered a second downturn in 1937 by cutting spending, and most economists believe World War II finally generated recovery, not the New Deal.)
As for Keynes, Businessweek says Obama is both like him and unlike him: "Like John Maynard Keynes, Obama believes government can and should act to alleviate downturns." -- again, who doesn't this side of Ron Paul? -- "But he's disinclined to challenge political constraints, settling for what he's able to get." Of course, Keynes was a civil servant and an academic who never ran for office, which makes that implied criticism of Obama beyond absurd. Maybe Larry Summers isn't Keynes, but so what? It's not the Summers administration.
Ah, but it's the silly season. Presidents generally can't win when the political pundits go looking for an economic angle. If the economy is good, it's the cycle. If it's bad, it's their fault. If they have a sophisticated economic theory, the pundits dismiss them as wonks who can't satisfy the yearnings of the electorate. If they emphasize politics over economics, they get labeled as lucky (as Clinton did). Realities of short-term versus long-term get ditched. Who cares? None of this has much to do with what actually occurs in that exploration of uncertainty and contingency that is economic policymaking, and no one really wants to tackle the question of what effect presidents can realistically have. That would be too difficult and, besides, voters couldn't care less.
Robert Teitelman is editor in chief of The Deal magazine.
The Morning Email helps you start your workday with everything you need to know: breaking news, entertainment and a dash of fun. Learn more