American presidents and the economy

September 25, 1994|By Neal Lipschutz

The American economy has shown solid if unspectacular growth so far in 1994. Consumer inflation remains under control. Things are basically OK. Anyone want to thank the president?

Unlikely -- and it's unclear if President Clinton deserves the credit. There's the Federal Reserve's monetary policy, corporate cost-cutting that's helped profits and the business cycle itself, to name a few reasons. But imagine if inflation and unemployment rates were zooming up near double-digit levels. Who would get the blame then? The president, of course.

That's the political reality of economic life for every administration. Voters tie the president closely to the economic indexes only when they are going the wrong way.

But the tools at any administration's disposal to try to fix things are limited. There's Congress (with its own ideas, and sometimes controlled by the opposing party), the Federal Reserve (usually preoccupied with fighting inflation), and the lag between making a proposal and its implementation. That can leave a president fighting yesterday's war on the recession/inflation conundrum.

A reporter's view

Few people have had a better seat than Hobart Rowen from which to observe our presidents and their cabinet officers grapple with the ever-changing problems of jobs, prices, trade and regulation. For nearly 30 years, Mr. Rowen has written authoritatively on these matters as a reporter and columnist for the Washington Post. In this book, he chronicles the economic crises, big and middling, that's he's covered. He finds the responses of six presidents mainly wanting.

Mr. Rowen takes us on a journey from Lyndon Johnson to George Bush (with some comment on the early days of Mr. Clinton). As can be inferred from the book's title, Mr. Rowen believes policy missteps, from Vietnam spending-induced inflation in the 1960s to the big tax cuts and resulting huge federal budget deficits of the early 1980s, helped knock this nation from the preeminent economic position it enjoyed in the years after World War II.

While clearly written and obviously the work of a very knowledgeable journalist who had access to all the major movers and shakers, the book's summary approach is at the heart of its problem. There's too much ground to cover in even a fairly lengthy book such as this to give more than cursory treatment to the many administrations and economic decisions.

What results is a recap that breaks little new ground for those familiar with the topics, yet isn't detailed or contextual enough to enlighten fully those with little knowledge of our recent economic history. The reader would have been better served if Mr. Rowen emphasized his columnist's role throughout, synthesizing his many years of coverage into broad themes and trends common to more than one presidency.

Mr. Rowen does chart the limits of federal power to influence our complex, capitalist economy by detailing the shortcomings of various pro-growth and anti-inflation policies. His own views, dropped quickly in bits and pieces spread through the narrative, are of a mainstream economic pragmatist who believes the federal government should take an aggressive role in managing the economy.

Mr. Rowen has little use for those presidents and economic lieutenants who thought the government should stay out of the way and let the market economy take care of itself.

Of William Simon, who served as Treasury secretary to presidents Richard M. Nixon and Gerald Ford, Mr. Rowen writes: "Simon couldn't acknowledge -- or understand -- that Adam Smith's invisible hand was not perfectly discriminating in a modern, complex society, that government had to act to protect the public in the many instances when the so-called free market failed."

But even most conservative economists don't claim a free market is perfect, only that it has the ability to be self-correcting, albeit at the cost of human suffering and dislocation as some industries and regions decline and others rise. As Mr. Rowen himself notes, governmental remedies for economic problems

often have unintended consequences.

America's role

The book's strongest chapters are on America's changing role in the international economy. Mr. Rowen traces the history of economic summits, the rise and fall of OPEC and of the Latin American debt crisis.

His chapter on Japan is level-headed (he's no "basher"). Mr. Rowen rightly argues that despite unfair trade practices, most of the reasons for our perennial trade imbalances with Japan can be found on these shores.

In all, this is a useful and intelligent recap of recent economic history from inside the beltway. One only wishes there could have been more analysis and insight from such a close observer of the scene.

Mr. Lipschutz is a writer who lives in New York.

Title: "Self-Inflicted Wounds: From LBJ's Guns and Butter to Reagan's Voodoo Economics"

Author: Hobart Rowen

Publisher: Times Books

Length, price: 447 pages, $25

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