NationStates Jolt Archive

I posted this to dispel these myths that I have seen on this forum that go something along the lines of these quotes:

“The President can’t control the economy.”

“The President can’t affect the economy.”

“Congress can’t control the economy.”

All of these ideas are myths. The president and congress can control the economy through fiscal policy. Fiscal policy is used to stimulate aggregate demand. The tools available with fiscal policy are changing the tax rate and changing government spending. Expansionary fiscal policy is used to prevent or end a recession. To utilize expansionary fiscal policy you can either cut taxes or increase government spending. Taxes have a lesser affect on aggregate demand than government spending. Contractionary fiscal policy is utilized to prevent or end an overheating economy. This is done by raising taxes or decreasing government spending.
This type of economics is know as Keynesian Economics, which came about during the great depression. The idea of Keynesian Economics came about from John Maynard Keynes. The source for this information can be found here: en.wikipedia.org/wiki/Keynesian_economics - 58k

Keynesian economists focus on the short run more than the long run. Keynes’ famous quote was “In the long run you will be dead.” Like all of the economic theories it does have its flaws. The major economic theories are Classical, Keynesian, Monetarist, Supply Sliders, and the newest is Mixed Economics. Believe it or not Bush jr. and Clinton both used the same type of economic theory, Mixed Economics. Clinton did not think up the idea of Mixed Economics, but he was the first president to use the idea.
Mixed Economics, which is utilized by most politicians today, is simply combining all economic theory. Clinton used this along with N.A.F.T.A. and W.T.O. to stimulate the economic boom found in the 90s. This boom caused real G.D.P. to rise 7.3% in one quarter. G.D.P. is found with this formula:

G.D.P.= C + I + G + (X-M). C is the variable for house hold spending, I is the variable for Business spending, G is the variable for government spending, X is the variable for exports and M is the variable for imports.

To check my G.D.P. percentage and the rest of this post please go to any of these sites:

www.bls.gov
www.bea.gov
www.whitehouse.gov

All of the information I am about to talk about can be found there. Right now the Republicans are telling you the economy is great and the Democrats are telling you it is terrible. The truth is it is doing fair. Last quarter there was a substantial increase, but this quarter is not as good. GDP is down to a positive 1.7%. The inflation rate is 2.5%, the target is 2%, so we are slightly over in that area. The inflation rate can be found at the CIA website. The unemployment rate is good right now at 4.7%, but after the war this may rise immensely. The deficit for this fiscal year is 305 billion, and the nation debt is around 7 trillion (this is an approximation the exact number can be found with google) which has increased from the 5 trillion since bush got in office. The DOW is doing okay, the DOW can be found everyday at CNN.com.
One final rumor to dispel is that the United States economy is dead, which I think this one was started by communists, and socialists. If the economy in the U.S. was dead then we would not have a G.D.P. at all and we have a very large potential (potential is like saying normal) G.D.P., in fact the U.S. G.D.P. is higher than any other countries is.

In general, you are correct. However, the bulk of the fiscal policy power comes from the Congress because the President no longer has the power to shape fiscal policy through the line-item veto. Also, we may be reaching the point where fiscal policy actions are going to start crowding out other investments and decrease the overall benefits of deficit spending.

The US economy is expected to come in at 5.0% this quarter and unemployment is trending downward. Producer inflation is relatively tame, but consumer inflation is still high (probably due to the passing on of built-up costs by the producers from last year). The labor market is approaching full employment and wages are starting to rise as productivity slows. I would say 2006 will be a good year for the economy, but the Fed has to be vigiliant against inflation; the concern seems to be far more towards the inflation side than slowing growth.

It's definitely going to have stronger employment growth compared to 2006 given the trending down in initial claims and consistently higher payroll growth in the first three months.

Also, the best measures of the performance of the overall stock market are the Nasdaq, NYSE, Russel 2000, and S&P 500. The Dow is a good indicator of the health of the largest corporations, but can be distorted due to the imbalances in the index.

You are right about the crowding out of the Fed raising interest rates and president's tax cuts. I agree there, which crowding out is one of the flaws to fiscal policy. But the president can veto spending and he is supposed to work with congress on the budget and what fiscal policy tools to use. And I appreciate an intelligent response to this.

You are right about the crowding out of the Fed raising interest rates and president's tax cuts. I agree there, which crowding out is one of the flaws to fiscal policy. But the president can veto spending and he is supposed to work with congress on the budget and what fiscal policy tools to use. And I appreciate an intelligent response to this.
It is my estimation that Vetalia happens to be pretty capable in this particular arena.

Meh, fiscal policy is getting less and less relevant when capital and investment flows freely across borders and the exchange rate is floated.

Indeed, the way things are going, we might soon get to a point where the Fed is going to be extremely limited too. Then international capital markets make that sort of decision.

It's all becoming one world economy, and without some sort of world government/regulatory agency, things will make for an interesting study into the validity of the free market on the grand scale.

It's all becoming one world economy, and without some sort of world government/regulatory agency, things will make for an interesting study into the validity of the free market on the grand scale.
I’m sure it will work out fine for all of humanity, except for third world countries…

In general, you are correct. However, the bulk of the fiscal policy power comes from the Congress because the President no longer has the power to shape fiscal policy through the line-item veto. Also, we may be reaching the point where fiscal policy actions are going to start crowding out other investments and decrease the overall benefits of deficit spending.


In the entire history of the US, the President had the line-item veto for what--about two years-- before it was declared unconsitutional?

Alright, to really dispel Economic myths - some jokes:p :

An economist is a trained professional paid to guess wrong about the economy.

An econometrician is a trained professional paid to use computers to guess wrong about the economy



TOP 10 REASONS TO STUDY ECONOMICS

1. Economists are armed and dangerous: "Watch out for our invisible hands."
2. Economists can supply it on demand.
3. You can talk about money without every having to make any.
4. You get to say "trickle down" with a straight face.
5. Mick Jagger and Arnold Schwarzenegger both studied economics and look how they turned out.
6. When you are in the unemployment line, at least you will know why you are there.
7. If you rearrange the letters in "ECONOMICS", you get "COMIC NOSE".
8. Although ethics teaches that virtue is its own reward, in economics we get taught that reward is its own virtue.
9. When you get drunk, you can tell everyone that you are just researching the law of diminishing marginal utility.
10. When you call 1-900-LUV-ECON and get Kandi Keynes, you will have something to talk about.



Mathematics brought rigor to Economics. Unfortunately, it also brought mortis.



Q: How has French revolution affected world economic growth?
A: Too early to say.



Did you hear of the economist who dove into his swimming pool and broke his neck?

He forgot to seasonally adjust his pool.

When Albert Einstein died, he met three New Zealanders in the queue outside the Pearly Gates. To pass the time, he asked what were their IQs. The first replied 190. "Wonderful," exclaimed Einstein. "We can discuss the contribution made by Ernest Rutherford to atomic physics and my theory of general relativity". The second answered 150. "Good," said Einstein. "I look forward to discussing the role of New Zealand's nuclear-free legislation in the quest for world peace". The third New Zealander mumbled 50. Einstein paused, and then asked, "So what is your forecast for the budget deficit next year?"



What's the difference between an economist and a befuddled old man with Alzheimer's?

A. The economist is the one with the calculator.

An economist is someone who doesn't know what he's talking about - and make you feel it's your fault.

Economists are people who are too smart for their own good and not smart enough for anyone else's.

A woman hears from her doctor that she has only half a year to live. The doctor advises her to marry an economist and to live in South Dakota. The woman asks: will this cure my illness? Answer of the doctor: No, but the half year will seem pretty long.

Q:Why did God create economists ?

A:In order to make weather forecasters look pretty good.



I asked an economist for her phone number....and she gave me an estimate.

One night a policeman saw a macroeconomist looking for something buy a lightpole. He asked him is had had lost something there. The economist said, "I lost my keyes over in the alley." The policeman asked him why he was looking by the lightpole. The economist responded, "it's a lot easier to look over here."

Forecasting is like trying to drive a car blindfolded and following directions given by a person who is looking out of the back window.

http://img149.imageshack.us/img149/3280/rofl4ft.gif

Actually a LOT of those jokes were pretty damned funny :D

http://www.studip.uni-goettingen.de/pictures/smile/irre.gif

Meh, fiscal policy is getting less and less relevant when capital and investment flows freely across borders and the exchange rate is floated.

Indeed, the way things are going, we might soon get to a point where the Fed is going to be extremely limited too. Then international capital markets make that sort of decision.

It's all becoming one world economy, and without some sort of world government/regulatory agency, things will make for an interesting study into the validity of the free market on the grand scale.

Oh a world economy has been on the rise for a long time, and it is directly due to the increase in technology over the past few years. The saying is the world is becoming "smaller." The Fed is completely independent of congress and the president. It was set up that way by president wilson and will most likely stay that way.

Alright, to really dispel Economic myths - some jokes:p :

An economist is a trained professional paid to guess wrong about the economy.

An econometrician is a trained professional paid to use computers to guess wrong about the economy



TOP 10 REASONS TO STUDY ECONOMICS

1. Economists are armed and dangerous: "Watch out for our invisible hands."
2. Economists can supply it on demand.
3. You can talk about money without every having to make any.
4. You get to say "trickle down" with a straight face.
5. Mick Jagger and Arnold Schwarzenegger both studied economics and look how they turned out.
6. When you are in the unemployment line, at least you will know why you are there.
7. If you rearrange the letters in "ECONOMICS", you get "COMIC NOSE".
8. Although ethics teaches that virtue is its own reward, in economics we get taught that reward is its own virtue.
9. When you get drunk, you can tell everyone that you are just researching the law of diminishing marginal utility.
10. When you call 1-900-LUV-ECON and get Kandi Keynes, you will have something to talk about.



Mathematics brought rigor to Economics. Unfortunately, it also brought mortis.



Q: How has French revolution affected world economic growth?
A: Too early to say.



Did you hear of the economist who dove into his swimming pool and broke his neck?

He forgot to seasonally adjust his pool.

When Albert Einstein died, he met three New Zealanders in the queue outside the Pearly Gates. To pass the time, he asked what were their IQs. The first replied 190. "Wonderful," exclaimed Einstein. "We can discuss the contribution made by Ernest Rutherford to atomic physics and my theory of general relativity". The second answered 150. "Good," said Einstein. "I look forward to discussing the role of New Zealand's nuclear-free legislation in the quest for world peace". The third New Zealander mumbled 50. Einstein paused, and then asked, "So what is your forecast for the budget deficit next year?"



What's the difference between an economist and a befuddled old man with Alzheimer's?

A. The economist is the one with the calculator.

An economist is someone who doesn't know what he's talking about - and make you feel it's your fault.

Economists are people who are too smart for their own good and not smart enough for anyone else's.

A woman hears from her doctor that she has only half a year to live. The doctor advises her to marry an economist and to live in South Dakota. The woman asks: will this cure my illness? Answer of the doctor: No, but the half year will seem pretty long.

Q:Why did God create economists ?

A:In order to make weather forecasters look pretty good.



I asked an economist for her phone number....and she gave me an estimate.

One night a policeman saw a macroeconomist looking for something buy a lightpole. He asked him is had had lost something there. The economist said, "I lost my keyes over in the alley." The policeman asked him why he was looking by the lightpole. The economist responded, "it's a lot easier to look over here."

Forecasting is like trying to drive a car blindfolded and following directions given by a person who is looking out of the back window.

You forgot this famous economist joke.
Two economists are walking down the street. One of them sees a twenty dollar bill and says pick it up. The other says dont bother if it were realy there it would already be gone.

In the entire history of the US, the President had the line-item veto for what--about two years-- before it was declared unconsitutional?

Exactly. The President has had little or no control over the fiscal policy of the US beyond his ability to veto entire bills, so the bulk of government control over the economy lies in the Congress rather than in him.

You are right about the crowding out of the Fed raising interest rates and president's tax cuts. I agree there, which crowding out is one of the flaws to fiscal policy. But the president can veto spending and he is supposed to work with congress on the budget and what fiscal policy tools to use. And I appreciate an intelligent response to this.

He's highly limited in that, however. By vetoing an appropriations bill, even one loaded with pork, he sets him self up for political fallout; it's entirely likely that the President could be labeled "anti-welfare" or "anti-military" for vetoing something that in all reality should have been vetoed for being filled with useless spending that does not help either the economy or the fiscal situation of the US government.

He's highly limited in that, however. By vetoing an appropriations bill, even one loaded with pork, he sets him self up for political fallout; it's entirely likely that the President could be labeled "anti-welfare" or "anti-military" for vetoing something that in all reality should have been vetoed for being filled with useless spending that does not help either the economy or the fiscal situation of the US government.

Oh of course he is limited, all branches are limited. The reason why I think that he is taking so much over the spending is that his party controls both houses of congress. So it would seem like they would want the same thing. If you are saying that government is wasting, then yeah they do that all the time. Waste is good to government, it is not good to business. Unless they can get subsidized which I am strongly against. Pork is good to government it pretty much always has been. Especially right before any kind of an election. Each congressman (rep and dem) will get a "pet project" for their state to help them with the election. Seems like the logical thing to do would be to put the money where it needs to be or, you could give it back to the people. But congress is not going to do that. One of the interesting things about Gov. Ventura is that he would give all they money back each year that was not used. I am in favor of that idea.

Exactly. The President has had little or no control over the fiscal policy of the US beyond his ability to veto entire bills, so the bulk of government control over the economy lies in the Congress rather than in him.

The only influence of the Executive Branch lies in the veto?

I think not.

The only influence of the Executive Branch lies in the veto?

No, but other options are tougher to use when your approval rating is at 33% and your party's got itself in serious political trouble.

No, but other options are tougher to use when your approval rating is at 33% and your party's got itself in serious political trouble.

Now you've gone for arguing about the Presidency in general to a specific President at a specific time.

Meethinks one is still not powerless when one's party controls both houses of Congress and the Supreme Court -- in addition to the Executive Branch.

I posted this to dispel these myths that I have seen on this forum that go something along the lines of these quotes:

“The President can’t control the economy.”

“The President can’t affect the economy.”

“Congress can’t control the economy.”

All of these ideas are myths. The president and congress can control the economy through fiscal policy. Fiscal policy is used to stimulate aggregate demand. The tools available with fiscal policy are changing the tax rate and changing government spending. Expansionary fiscal policy is used to prevent or end a recession. To utilize expansionary fiscal policy you can either cut taxes or increase government spending. Taxes have a lesser affect on aggregate demand than government spending. Contractionary fiscal policy is utilized to prevent or end an overheating economy. This is done by raising taxes or decreasing government spending.
This type of economics is know as Keynesian Economics, which came about during the great depression. The idea of Keynesian Economics came about from John Maynard Keynes. The source for this information can be found here: en.wikipedia.org/wiki/Keynesian_economics - 58k

Keynesian economists focus on the short run more than the long run. Keynes’ famous quote was “In the long run you will be dead.” Like all of the economic theories it does have its flaws. The major economic theories are Classical, Keynesian, Monetarist, Supply Sliders, and the newest is Mixed Economics. Believe it or not Bush jr. and Clinton both used the same type of economic theory, Mixed Economics. Clinton did not think up the idea of Mixed Economics, but he was the first president to use the idea.
Mixed Economics, which is utilized by most politicians today, is simply combining all economic theory. Clinton used this along with N.A.F.T.A. and W.T.O. to stimulate the economic boom found in the 90s. This boom caused real G.D.P. to rise 7.3% in one quarter. G.D.P. is found with this formula:

G.D.P.= C + I + G + (X-M). C is the variable for house hold spending, I is the variable for Business spending, G is the variable for government spending, X is the variable for exports and M is the variable for imports.

To check my G.D.P. percentage and the rest of this post please go to any of these sites:

www.bls.gov
www.bea.gov
www.whitehouse.gov

All of the information I am about to talk about can be found there. Right now the Republicans are telling you the economy is great and the Democrats are telling you it is terrible. The truth is it is doing fair. Last quarter there was a substantial increase, but this quarter is not as good. GDP is down to a positive 1.7%. The inflation rate is 2.5%, the target is 2%, so we are slightly over in that area. The inflation rate can be found at the CIA website. The unemployment rate is good right now at 4.7%, but after the war this may rise immensely. The deficit for this fiscal year is 305 billion, and the nation debt is around 7 trillion (this is an approximation the exact number can be found with google) which has increased from the 5 trillion since bush got in office. The DOW is doing okay, the DOW can be found everyday at CNN.com.
One final rumor to dispel is that the United States economy is dead, which I think this one was started by communists, and socialists. If the economy in the U.S. was dead then we would not have a G.D.P. at all and we have a very large potential (potential is like saying normal) G.D.P., in fact the U.S. G.D.P. is higher than any other countries is.

wasn't the fiscal boom of the 1990s attributable to the tech boom? did Clinton have anything to do with that?

i'm under the assumption that he didn't, but if you (or anyone) has information to the contrary, I'd be interested to hear it.

wasn't the fiscal boom of the 1990s attributable to the tech boom? did Clinton have anything to do with that?

i'm under the assumption that he didn't, but if you (or anyone) has information to the contrary, I'd be interested to hear it.

LOL.

So is it your assertion that the President has no influence on the economy?

Or are you just trying to deny Clinton any credit for the economy during his Presidency?

I don't think anyone really thinks that Presidents/congress don't have control over the economy. That's simply a ludicrous statement, and flies in the face of years of economic and fiscal policy of all kinds. For example, don't tariffs affect the purchase of foreign goods vs. domestic goods? That was one of the few federal taxes in existence in the early years of the United States, and to say it had no effect on the economy is sheer ridiculousness.

However, I think that what is true is that, in a true free market, the government should not be setting out to manage affairs so as to control the economy. Rather, they should allow for good business and economic environment to create stable conditions and stable growth. This is effectively what we have, it's just what constitutes controlling and what constitutes creating good business and economic environments vary person by person.

LOL.

So is it your assertion that the President has no influence on the economy?

Or are you just trying to deny Clinton any credit for the economy during his Presidency?

beyond trying to get Congress to pass his tax cuts or raises and spending policies...

after that, it's up to businesses, consumers and investors.

LOL

as to Clinton's contribution to the tech boom, well, I figure he didn't have a whole lot to do with inventing/producing/distributing that new technology... starting the companies (unless he got in as an investor, I suppose)... etc.

I don't think anyone really thinks that Presidents/congress don't have control over the economy. That's simply a ludicrous statement, and flies in the face of years of economic and fiscal policy of all kinds. For example, don't tariffs affect the purchase of foreign goods vs. domestic goods? That was one of the few federal taxes in existence in the early years of the United States, and to say it had no effect on the economy is sheer ridiculousness.

However, I think that what is true is that, in a true free market, the government should not be setting out to manage affairs so as to control the economy. Rather, they should allow for good business and economic environment to create stable conditions and stable growth. This is effectively what we have, it's just what constitutes controlling and what constitutes creating good business and economic environments vary person by person.

I don't think anyone's saying that the government (Congress has to pass or deny the president's ideas...) doesn't have ANYTHING to do with the economy...

but the fact is, this is a market-based economy, mostly free-enterprise.

Which means that businesses, consumers and investors do the most to determine the health of the economy.

How do taxes affect us?

Simply: The more money you keep, the more you can spend or invest. In that sense, government can exert influence on the economy.

Exactly. The President has had little or no control over the fiscal policy of the US beyond his ability to veto entire bills, so the bulk of government control over the economy lies in the Congress rather than in him.

So, ULTIMATELY, if what passes The President's desk, save in the case of a Super-Majority in Congress, does not meet with his approval he can reject it. Therefore The President, more than any single person in Congress or any agreggate thereof up to a 2/3 majority, has direct control of and final responsibility for fiscal policy even before his select group of policymakers help shape legislation.
Next, most Presidents run on their fiscal policy. Even in a time of war, fiscal policy is a major campaign point. They accept responsibility by advertising themselves as responsible. Therefore don't accept any mouthpiece's excuse that the President is not responsible for fiscal policy and thereby responsible, to some extent, for the economy.

It's simply and undeniably wrong and it's not hard to see as such if you just think about it rationally.

Presidents accept the job and the role (if you appreciate the difference,) of responsibility. Period.

- snip -

The president doesn't set interest rates. All it takes is someone like the malestrom Greenspan setting federal reserve rates, and you can very easily end up in a boom and bust cycle regardless of who is in the whitehouse.

Unless you are saying that Bush is doing a pretty good job right now, as far as the economy goes.

The president doesn't set interest rates. All it takes is someone like the malestrom Greenspan setting federal reserve rates, and you can very easily end up in a boom and bust cycle regardless of who is in the whitehouse.

Unless you are saying that Bush is doing a pretty good job right now, as far as the economy goes.
yeah, a lot of people argue that Greenspan (he's still heading the Federal Reserve Board, right?) is the most powerful person in the world, not the U.S. President :D


or, at least, the second most powerful person in the world

The president doesn't set interest rates. All it takes is someone like the malestrom Greenspan setting federal reserve rates, and you can very easily end up in a boom and bust cycle regardless of who is in the whitehouse.

Unless you are saying that Bush is doing a pretty good job right now, as far as the economy goes.

Presidents do, however, influence the Federal Reserve. They nominate the Board of Governors and the Chairman and Vice-Chairman.

Granted the terms are staggered to minimize the effect of a single President, but there is some influence.

yeah, a lot of people argue that Greenspan (he's still heading the Federal Reserve Board, right?) is the most powerful person in the world, not the U.S. President :D


or, at least, the second most powerful person in the world


Greenspan is no longer on the Federal Reserve. He retired on January 31, 2006.

http://www.federalreserve.gov/bios/
http://www.rte.ie/news/2006/0131/greenspana.html

Presidents do, however, influence the Federal Reserve. They nominate the Board of Governors and the Chairman and Vice-Chairman.

Granted the terms are staggered to minimize the effect of a single President, but there is some influence.

A president has say in who is appointed.

As a practical matter, he has no control over fed policy however. Just like Bush Snr. discovered.

I'm not sure that most politicians - including presidents - are that interested in fed policy anyway. (Mostly because the media and the general public aren't). They mostly seem to appoint insiders anyway.

Possibly if interest rates continue to rise, and therefore the price of everyone's house takes a tumble, people might start to show more interest in central bank policy. But I doubt it. A lot of people in the UK still have difficulty with it.

wasn't the fiscal boom of the 1990s attributable to the tech boom? did Clinton have anything to do with that?

Clinton didnt have anything to do with the tech boom, though that doesnt stop them from trying to take credit. After all, Gore invented the internet ;)

Clinton didnt have anything to do with the tech boom, though that doesnt stop them from trying to take credit. After all, Gore invented the internet ;)

Question:

Do you honestly think Gore said that are are you just being humorous?

It's impossible to tell anymore.

Clinton didnt have anything to do with the tech boom, though that doesnt stop them from trying to take credit. After all, Gore invented the internet ;)

The reason why I gave Clinton some credit for the economic boom in the 90s was his passing NAFTA and the WTO.

I don't think anyone really thinks that Presidents/congress don't have control over the economy. That's simply a ludicrous statement, and flies in the face of years of economic and fiscal policy of all kinds. For example, don't tariffs affect the purchase of foreign goods vs. domestic goods? That was one of the few federal taxes in existence in the early years of the United States, and to say it had no effect on the economy is sheer ridiculousness.

However, I think that what is true is that, in a true free market, the government should not be setting out to manage affairs so as to control the economy. Rather, they should allow for good business and economic environment to create stable conditions and stable growth. This is effectively what we have, it's just what constitutes controlling and what constitutes creating good business and economic environments vary person by person.

What you are thinking about, if I understand you, is that until F.D.R. every president we had was a classical economicst. Which classical economic theory is in some circles still the best theory, believes that you should leave the market alone. That there should be no influence by the government in the economy. Classical economic theory believes that fiscal policy is useless and that monetary policy results in total crowding out.

yeah, a lot of people argue that Greenspan (he's still heading the Federal Reserve Board, right?) is the most powerful person in the world, not the U.S. President :D


or, at least, the second most powerful person in the world


Ben Bernanke is the new person in charge.

yeah, a lot of people argue that Greenspan (he's still heading the Federal Reserve Board, right?) is the most powerful person in the world, not the U.S. President :D


or, at least, the second most powerful person in the world


Ben Bernanke is the new person in charge. A monistorist economicst would say that ben bernanke controls the economy.

beyond trying to get Congress to pass his tax cuts or raises and spending policies...

after that, it's up to businesses, consumers and investors.

LOL

as to Clinton's contribution to the tech boom, well, I figure he didn't have a whole lot to do with inventing/producing/distributing that new technology... starting the companies (unless he got in as an investor, I suppose)... etc.
Perhaps you know of his "computer in every home" declaration in a SOTU address early on? Perhaps you'll follow up on that?