Presidents can and do have a huge effect on the state of the economy. However, the effect is nothing like it is deemed to be. A complete free market system provides an optimum level of wellbeing for all who live within an economy. Political power is not used to determine who gets what in a free market economy.
Presidents can and do change this situation. The Full Employment Act of 1978 requires the executive branch to engage in central economic planning. Thus, a president is now required by law to change the structure and nature of the U.S. economy.
Prior to the passage of the Full Employment Act of 1978, presidents had a lot less influence over the economy. Even, prior to that, presidents have used their positions as a means of a means of accomplishing various political initiatives.
A good example of this, is when Richard Nixon found a way to take the United States completely off of the gold standard. Exiting the gold standard made it possible to flood the economy with unearned money. What is unearned money good for? The primary use of unearned money is to transfer wealth and income from those who have little or no political power into the coffers of those who have massive political power. While the ramifications of leaving the gold standard were not that noticeable during the Nixon Administration, over time that decision has had enormous ramifications and has created many problems.
During the 80s, Ronald Reagan completely embraced the Full Employment Act of 1978. He initiated Keynesian supply side economic programs with a vengeance. Reagan’s supply side economic policies have been copied and imitated by every president since. Ronald Reagan was also the first president to tamper with the financial markets. Today, we have central planning for the financial markets and a huge asset bubble. A strong stock market is now a complete necessity for any president who wants to be re-elected. Masses of unearned money are now Routinely funneled into the stock market. We now have a stock market that rises completely independently of economic considerations. Enhancing asset prices by government policy is now deemed as a way to stimulate economic growth. Any positives for the economy at large are temporary and fleeting. Wealth and income transfers are more permanent.
Once a president establishes a precedent and that has been a success politically undertaking, presidents who follow normalize the practice.
All presidents get credited with making the economy what it is during their tenures in office. There is not much logic in that notion. However the long term ramifications of a president’s economic programs have a huge impact as time passes.
Any government intervention in the economy constitutes central economic planning. What does central economic planning accomplish? It creates feeding frenzies on unearned money.
Today we have 1000+ page bills passing congress. What do long wordy laws all have in common. All consists of layers of skimming operations. Each establishes a feeding frenzy on newly available federal money. Wealth and income are transferred away from ordinary people and into the large hands of parties with enough political power to lobby to have the laws passed.
What has been the outcome of presidential central economic planning? Income in the country has become concentrated among the upper 1% who have enough political power to enrich themselves through the use of government.
The bottom of the income ladder is starved as their earnings and wealth have declined or remained unchanged. The chart below illustrates how the earning an wealth gap has widened since the passage of the Full Employment Act of 1978. See the green line.
So, a president is credited with what good or bad has happened in an economy during his administration and that is largely a just a convenient way of explaining things. By setting precedents as to what works well politically, presidents completely change an economic system. Politics always focuses on the present and pays no mind to long term ramifications. It is long term ramifications that matter.
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