There's something in me that just snapped when I saw a Biden tweet favorably comparing his job growth stats in his Presidential tenure to Reagan's and Trump's. As an experienced researcher (although not trained in economics), I know the economy is a complex phenomena affected by likely scores (if not more) of salient factors, including the competitive markets for private industries, supply and demand. A President has little direct influence on the economy. He is constitutionally limited in what he can do. He cannot tax, spend or regulate on his own. State legislators and governors, along with local officials, have had mote influence on health security issues and police powers during the pandemic by the Tenth Amendment.
This does not mean a President doesn't have impact on the economy. In the long term, he can influence some impact on the general economy. He can sign or veto trillions of dollars in government spending, a significant percentage of a $21.4T economy, including up to half the population in government healthcare programs (with a cost share by state governments) and significant underwriting of upper education funding. He enforces regulation over interstate commerce, the pharmaceutical industry (drug approvals, patent laws, etc.) He has significant influence over federal tax policy, immigration, and foreign trade. which can affect global supply chains, labor migration, etc. But many of these are longer-term issues, and macroeconomists will tell you there's often a lag of months before we witness effects of policy changes in the overall economy.
So when Biden, with only 4 full months in office, starts comparing new job gains versus Reagan and Trump, it goes beyond chutzpah and delusion. Reagan inherited a stagnant, inflation-bound economy where the Fed Reserve chair at the time fought with record, recession-provoking high interest rates. Trump was a different case; he inherited a 4.7% unemployment rate, much closer to natural full employment, and a record streak 6 years of monthly job growth.
Biden inherited an economy already in recovery from the COVID-19 shock, with the stock market largely rebounding from over a sharp correction around the beginning of spring 2020. Two vaccines were approved weeks before Biden's inauguration; that alone improved prospects of workplace safety over the year ahead for employers. Biden's tweet was putting lipstick on a pig over the latest job numbers; he, of course, didn't acknowledge the fact that economists had expected more job gains. There were two other policies he's pursued which one could argue could have harmed or deferred full recovery.
First, he and his Democratic-controlled Congress actively sought morally hazardous unemployment pay supplements that in many cases provided income exceeding prior worker job income. In theory, this would have enabled said worker to defer returning to the workplace. Many employers report staffing problems. (For example, I have gotten multiple emails from vendors like grocers and Sam's Club promoting employment availability at local stores. I don't recall that happening pre-[pandemic.) The supplement was reduced in final bill passage, which mitigated some of the economically perverse policy effects, but Biden fully embraced the concept.
Second, Biden actively sought more than doubling the national minimum wage as part of his pandemic relief package. Restaurants and other employers of lower-skilled/experienced workers were already hard hit by local/state pandemic restrictions to the point dining-in was more of an exception than the rule. (The last time I checked, my local McDonald's only allowed drive-throughs and carry outs.) The $15/hour state/local mandate had adversely affected employment in locations like Seattle BEFORE the pandemic. Some progressives still don't understand many branded affiliates are locally-owned businesses. This policy would have been imposed in states or regions with a lower cost of living and made it even harder to reopen following the pandemic. Yes, the national wage increase did not make the final bill, but Biden insists he remains committed to the policy goal. The point remains that his policy preferences would have reduced, rather than stoked economic growth. Never mind the fact that a large plurality of minimum-wage workers are not heads of households, and almost 97% of jobs pay more than the minimum wage, which tends to be transitional for low-experience workers. Allowing entry-level workers to get their foot in the door of the labor force through voluntary exchanges is a moral imperative.
Now another anti-growth policy Biden embraces is record spending, including a proposed $6T FY22 budget (with expected tax revenues near $4T). The national debt is rapidly approaching $30T, well over national GDP. Among other things, just interest payments servicing the national debt are about the third highest item of federal spending (next to senior entitlements), more than the defense budget. This leads to an ominous situation where debt service crowds out other, more core federal spending initiatives. I'll not repeat all of an excellent Mercatus post on the relevant issue, but I'll include the following 2 excerpts:
Countries with debt-to-GDP ratios greater than 90 percent have median growth roughly 1.5 percent lower than that of the less-debt-burdened groups and mean growth almost 3 percent lower.
As America’s federal debt burden continues to grow, the government must increase borrowing in order to fund its expansive spending programs. This increased government borrowing competes for funds in the nation’s capital markets, which in turn raises interest rates and crowds out private investment. With entrepreneurs in the private sector facing higher costs of capital, innovation and productivity are stifled, which reduces the growth potential of the economy. If the government’s debt trajectory spirals upward persistently, investors may start to question the government’s ability to repay debt and may therefore demand even higher interest rates. Over time, this pattern of crowding out private investment coupled with higher rates of interest will drive down business confidence and investment, which drags productivity and growth down even further.
Biden's spendthrift policies are toxic; he doesn't even have a policy for overhauling chronically underfunded senior entitlements, which will likely mean the gap will need to be funded out of general revenues, crowding out other public spending. His revenue solution for everything is: soak the rich, borrowing Comrade Bernie's class warfare rhetoric. There's a major problem: there aren't enough rich people to cover spending shortfalls, and by some estimates (Friedman's law) it costs the public government twice as much to do something (taking into account deadweight losses from taxation).
So what does one make of the frequent observation that the economy seems to prosper more under Democratic Presidents (just Google on the topic and you'll find dozens of posts on the topic). Now let me first point out that I don't have any dogs in this fight. In the past I was a registered Democrat and then a Republican. I was an alienated conservative, and in particular, I was horrified by Trump's hostile takeover of the GOP in 2016, abandoning fiscal conservatism, free trade, and immigration.
In a way Trump was just the breaking point as I had seen the promise of the Tea Party largely dissipate. The GOP House didn't come close to a balanced budget, unwilling to cut politically popular spending. Trump had promised to liquidate the national debt in 2 terms, but it was empty rhetoric. He dealt away sequester budget constraints to win larger military spending.
Now from a policy perspective, the GOP comes closer to my preference of limited government, decentralization of government/authority, and free markets/trade. Gene Epstein, in the podcast below, comes close to my fundamental position that market liberalization is correlated to economic growth: a lower government footprint in terms of tax and regulation, lowering barriers to global exchange and migration.
What are we to make of observed success under Democratic Administrations? Well, as Epstein also notes, is recent GOP Presidents have had bad luck with recessions; Trump ended his with the COVID-19 contraction, George W. Bush's terms were bookended by recessions, .George HW Bush experienced one in part resulting from restrictive Fed policy and an oil price shock, and Reagan suffered a long one in his first term. On the other hand, Clinton didn't have one during his 2 terms, and Obama's share of the Great Recession ended in his fifth month in office, otherwise in expansion over the rest of his 2-terms, although the slowest recovery in recent American history.. It's hard to blame Presidents for problems caused by Federal Reserve monetary policy, oil shocks, or pandemics; the Fed, although members can be nominated by a President, is largely independent, with Congressionally assigned mandates. I would also point out Nixon, Ford, Reagan, and Bush 41 never had control of the House of Representatives, and Bush 43 and Trump lost the House and/or the Senate in their last terms. So when Epstein backed out the recessions under all Presidents, he found the differences between Democrat and Republican Administrations were overall negligible in terms of the economc performance, not surprising given my points of the limited constitutional role of the Presidency.
I'll close by embedding Epstein's episode with Tom Woods on the general point; he made additional points of possible interest to the reader.
