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Saturday, June 2, 2012

The Presidency, the Economy, and the Limits of Power

Our chapter on economic policy stresses the limits of fiscal policy and debunks the myth that any president has magical power over the economy.  The New York Times reports:
The bleak jobs report on Friday predictably had heads snapping toward the White House, looking to President Obama to do something. Yet his proposed remedies only underscore how much the president, just five months before he faces voters, is at the mercy of actors in Europe, China and Congress whose political interests often conflict with his own.
Alan J. Auerbach, an economist at the University of California, Berkeley, said, “Frankly, I don’t see what President Obama can do right now other than to forcefully present a detailed plan for action and challenge Congress to take it up.”
But “short of a real crisis,” as in 2008, Mr. Auerbach, an expert on fiscal policy, added, “I doubt that there is anything he can do to spur meaningful legislation before the election.”
As lackluster as the American jobs data was, with unemployment inching up one-tenth of a percentage point to 8.2 percent, the news from Europe was far worse: the jobless rate in the euro zone hit 11 percent, the highest since tracking began in 1995. “There’s really nothing the U.S. can do,” said Charles Calomiris, professor of finance and economics at Columbia Business School.