March 13, 2012

It's Not the Economy, Stupid--It's Entitlement Spending

David M. Primo

Senior Affiliated Scholar
Summary

Presidential actions rarely have dramatic effects on the macro-economy in the short run (and almost never in a positive direction). But voters tend to believe otherwise.

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US News posed the following debate topic question:

According to employment statistics from the Labor Department, the jobless rate in the United States has been dropping steadily since August, and the economy added 227,000 jobs last month, making February the third straight month of job gains over 200,000. Likewise, civilian labor force participation, the number of people working or looking for a job as a percentage of the entire working-age population, grew by 0.2 percent in February—the largest single-month jump since 2010, albeit a modest one. Manufacturing and temporary employment also grew in February, indications that may signal continued improvement.

The Obama administration has heralded the good economic news as being a result of the president’s American Recovery and Reinvestment Act, but many still believe that the president’s policies have failed. The economy lost jobs in government and construction last month, and unemployment remains disproportionately high among blacks, Hispanics, and young people. Obama’s critics point toward rising gas prices and a still historically bad unemployment rate as signs that Obama could be doing a better job on the economy.

Is Obama turning the economy around? Here’s the Debate Club’s take:

Mercatus senior scholar David Primo provided the following response:

No president—President Obama included—is captain of the USS Economy. Presidential actions rarely have dramatic effects on the macro-economy in the short run (and almost never in a positive direction). But voters tend to believe otherwise, in part due to the promises of candidates and the media's portrayal of presidential power. As a result, a president's electoral fortunes are closely linked to the state of the economy come election time.

View his full response at US News