The U.S. Economy is Complex and Slow-Moving
I saw two animated statistical graphics recently that reinforced and sharpened a belief that I’ve had lurking in my head for years.
Links to the graphics are below (I would embed, but they’d both be useless unless full-size):
Both are fascinating to watch – each has colors which indicate a value, and they change over time as the years and corresponding presidential administrations tick by.
It’s fun to look at certain color combinations, consider the president who was in office at the time, and think, “Well,he obviously did a great (or crappy) job.” Look at the unemployment rate during Clinton’s administration, for instance – at one point, the entire country turns some shade of blue (which is good). It’s good during Bush II’s term as well, right up until the recession hits in 2007.
What it reinforced to me is this: it’s disingenuous to correspond the welfare of the country at a specific time to the sitting president.
Everyone wants to do this, of course, because we love to play right and wrong, especially when we’re taking sides. “Things suck right now, so it much be the fault of our current president.” Or “Things were awesome back in [insert random year here] because that president was great.”
I don’t think this works. The cause and effect chain of the U.S. economy is just too great and too delayed for the direct correlation that we’re trying to pretend is so simple and obvious.
When considered as a complex system, the U.S. economy is likely the second most complex in the world (the first being the Earth biome). The number of potential inputs, processes, and outputs is so great as to prevent simple correlation. Doing Thing A might result in Thing B years later, or it might result in Thing C immediately, or it might result in Things D-Z three decades from now. We pretend that this is easy to predict, but I suspect we’re kidding ourselves because the truth is scary: often, we just don’t know.
The U.S. economy defies granular projection. We can make gross projections (“if we raise interest rates, the stock market goes down”), but finer-grained forecasts get far-fetched, and even more so when we’re tying to project an output multiple steps removed from the input:
If we lower tax rate A, it will increase investment of type B, which will improve businesses of type C, which will employ of people of type D in region E, which will require training of type F, which will improve the market for higher education of type G.
A direct correlation from A-G is absurd. The only people who can say this with a straight face are people who stand to make money from it.
Furthermore, some “projections” are only accurate in hindsight. Forty years from now, we might look back at Decision X and say, “well of course we got Outcome Y, what were we thinking?” This is clear only because Outcome Y is removed from Decision X by those four decades. The U.S. economy doesn’t turn on a dime. We can make a change and not have that change actually do anything for a long time, and in the meantime it might have created 10 different side effects that we never saw coming.
So, is four or eight years of a presidential administration enough time for a president to enact policies that have a measurable, culpable, and significant effect on the U.S. economy? If a president does something in his first year in office, will it have had a big enough effect by the time he leaves for us to draw absolute judgment? And will this judgment hold? Looking back fifty years from now, will we draw the same judgment?
I doubt it, yet we do this all the time. The economy boomed during Clinton. Was that his doing? Or was he just benefiting from a natural delay before the wise policies of Bush I took effect? The recession hit hard during Obama’s term. Was this his fault, or was it the sins of Bush II coming due?
(I especially hate it when one side tries to spin it both ways. The Right has often said that Obama should stop blaming his predecessor and accept the Great Recession as his own problem. Yet they’re quick to say that Clinton simply rode the wonderful economic wave created by Bush I and Reagan. You can’t have it both ways.)
I absolutely think the president can have a dramatic effect on the U.S economy. I’m just not sure it will happen while he’s sitting in office. We like to pretend it does, but to think that the U.S. economy is this nimble and immediate is just naïve.