I was talking with a group of farmers yesterday, and one of them asked me how I thought the U.S. economy would fare under a Trump presidency. I responded that it’s very difficult to say how anything or anyone would fare under a Trump presidency, since he has stated fewer clear policy positions than any other candidate, and even those have changed from time to time. A larger point (which I didn’t go into) is that we Americans usually consider the economy the No. 1 issue in presidential elections, and we tend to judge candidates for the world’s most important leadership job on how we think they’d affect the economy. Yet the evidence of the past 70 years shows that presidents barely affect the economy at all.
That statement sounds extreme, and surely, you’re thinking, it can’t be true. Okay, let’s see how the economy has performed under all of America’s post-World-War-II presidents. We find that it has done much better under Democrats than Republicans. The most recent and comprehensive study, by Princeton’s Alan Blinder and Mark Watson, finds that the economy’s annual growth averaged 4.35% under Democrats and 2.54% under Republicans – an “astoundingly large” difference, they report. Aha, you may say, Blinder worked in the Clinton White House and has often taken liberal positions on economic issues; maybe he put his thumb on the scale in doing the research. But no, a range of other researchers over the past several years have observed the same effect, and the evidence in Blinder and Watson’s paper is overwhelming.
So Democrats are better for the economy? Not necessarily. Even though the economy does better under Democratic presidents, it doesn’t follow that the president is the reason. In fact, Blinder and Watson conclude, “Democrats would no doubt like to attribute the large D-R [Democrat-Republican] growth gap to macroeconomic policy choices, but the data do not support such a claim.” Instead, they find, the difference arises mostly from “several variables that are mostly ‘good luck,’ with perhaps a touch of ‘good policy.’”
Other economists agree. Austan Goolsbee, former chairman of President Obama’s Council of Economic Advisers, has said, “I think the world vests too much power certainly in the president, probably in Washington in general, for its influence on the economy, because most all of the economy has nothing to do with the government.” Bill Clinton liked to boast that America created far more jobs under Democratic presidents than under Republican ones, but even Democratic economists say no president deserves much credit (or blame) for changing job numbers.
Nonetheless, we voters will likely behave as usual, attributing the economy’s performance to the president and his party; voluminous research shows that the economy is a major factor in presidential election outcomes. And the candidates will certainly promise economic miracles; Trump, for example, says he’d be “the greatest jobs president that God ever created.” Let’s just take those promises for what they are: indicators, at best, of a candidate’s policy leanings, and very far from assurances of what a president would or could do.
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What We're Reading Today
GOP Senators unite around plan to block Obama nominee
Senate Majority Leader Mitch McConnell announced that the Senate will not hold any hearings with a Supreme Court nominee picked by President Barack Obama. The Republicans on the Judiciary Committee, which had signaled it might host hearings, signed a letter saying it wouldn't. McConnell said he would likely not even meet a candidate to succeed Antonin Scalia via a courtesy call. Democrats vowed to make this an issue throughout the election season. Politico
Takata lied about airbags to customers
More than a year after recalls of Takata airbags began - and after two deaths had been linked to malfunctions - Takata sent doctored data regarding a potential solution to its largest customer, Honda. The revelation is in a report by the Senate Committee on Science, Commerce, and Transportation. The company never implemented that solution, but investigators are using it as a symbol of deceit by Shigehisa Takada's company that they claim continued after the airbag issue, which has led to 24 million recalled vehicles, was uncovered. NYT
Honeywell and United Technologies CEOs can't get along
One reason United Technologies has rejected Honeywell's $90-billion merger proposal may involve the CEOs. Fortune's Shawn Tully reports that Honeywell proposed that CEO David Cote would run the combined company, with no role for United Technologies CEO Greg Hayes. Also, when Cote first submitted the offer, he went straight to the United Technologies board without letting Hayes know the bid was on its way. Fortune
Viacom open to selling part of Paramount
CEO Philippe Dauman said the media giant is exploring a sale of a minority stake in the movie studio. The decision comes as investors have argued that the company needs to reduce its size. Paramount has dragged down Viacom, which has been struggling as some of its once mighty cable channels, such as MTV and Nickelodeon, have performed poorly. Analysts speculate that selling a Paramount stake could signal that Sumner Redstone's company will eventually sell more of its parts piecemeal. Los Angeles Times
Building a Better Leader
Court rules venture capital firm to pay back $331,269...
...in wages and damages to employees classed as unpaid interns. CNET
Women do more unpaid work...
...than men every day. That keeps them from doing more paid work, like starting businesses, says Melinda Gates. Fortune
Instead of fearing disruption...
...first define what it means. Then decide to react by investing in the disruption or acquiring a disruptor. MIT Sloan Management Review
The Nevada Caucus
Trump wins Nevada caucuses
The victory marks Donald Trump's third straight victory in Republican primaries. He received over 45% of the vote; Marco Rubio placed second with over 23%, just ahead of Ted Cruz's 21%. A number of procedural complaints emerged, including allegations of poll volunteers wearing candidate gear, which Cruz and Rubio may use to downplay Trump's victory. Fortune
GOP powers step up efforts to fight Trump
As the candidates move to Super Tuesday next week, mainstream Republican groups increasingly fear that Trump could win the nomination. In response, a number of groups, including Our Principles PAC and The Club for Growth, plus myriad conservative advisers and strategists have stepped up efforts in the Super Tuesday states. But Trump has used these establishment attacks to build support. WSJ
Rubio and Cruz battle for second
A major reason Trump has continued to top the polls is that Rubio and Cruz split votes and campaign donations. Last month Cruz raised over $1 million more than Rubio in the 11 Super Tuesday states. Over two-thirds of Cruz's money came from his home state of Texas, but he out-raised Rubio in seven other Super Tuesday states as well. USA Today
Up or Out
Tribune Publishing has named Justin Dearborn CEO, replacing Jack Griffin. Chicago Tribune
Asako Suzuki will become the first woman promoted to Honda's senior executive ranks, becoming an operating officer in April. WSJ
Fortune Reads and Videos
Nike's Phil Knight gives Stanford $400 million
It's the largest gift ever to the school; it will fund a graduate-level leadership program. Fortune
Facebook gives the "like" button some company
Users will choose from six icons they can use to express their approval (or disdain or other judgments) of friend's photos. Fortune
One in three tech CEOs don't think gender diversity...
...on the board is very important. But they want thought diversity. Fortune
Johnson & Johnson ordered to pay $72 million
The company was found liable for a woman's death from ovarian cancer, which was linked to J&J's talc-based Baby Powder and Shower to Shower products. Fortune
Today's Quotes
"[G]iven the particular circumstances under which this vacancy arises, we wish to inform you of our intention to exercise our constitutional authority to withhold consent on any nominee to the Supreme Court submitted by this President to fill Justice Scalia’s vacancy. Because our decision is based on constitutional principle and born of a necessity to protect the will of the American people, this Committee will not hold hearings on any Supreme Court nominee until after our next President is sworn in on January 20, 2017.” - A letter signed by the 11 Republican members of the Senate Judiciary Committee. Chuck Grassley
"The world's greatest deliberative body? They're not going to deliberate at all in this most important responsibility they have. All we want them to do is do their job." - Senate Minority Leader Harry Reid reacting to the decision. Politico
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