Economics, the President, and the Truth

Discussion in 'Politics, Religion, Social Issues' started by kuyu, Aug 17, 2004.

  1. kuyu macrumors 6502a

    kuyu

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    #1
    I feel it's time to dispell the the greatest misconception of our modern political system. Namely, that the President has some control over the economy. Bush and Kerry are both making this a core issue in their bids for election, and I think it's time that "we the people" understand how politicians invent issues and promise to fix them.

    First, the President controls fiscal policy. That is how much money will be spent on this or that. Also, the budgets for programs are ultimately guided by the president. "How much should we spend on education, defense, etc,"

    However, it is the Federal Reserve that controls monetary policy. The FED, for those who don't know, is controlled by a Board of Governers. The current chair of the BoG is Alan Greenspan. The FED is a group of economists that are divided equally between Democrats and Republicans. Every six weeks the FED meets to discuss the monetary policy of our nation, other nations, and the new dynamic created by ever changing markets. Then, by analyzing the strength of American markets in respect to world markets, the FED makes decisions to "steer" our economy (on the macro level) forward. What the FED decides in one meeting is not reported until the close of the following meeting.

    What does this mean for us??? Well, for one it means that Bush and Kerry are not capable of "curbing unemployment", "reducing inflation", or anything like that. They are not capable of spurring higher values of the US dollar. They can't make US products cheaper overseas, or do anything about the move to farm-out cheap labor overseas.

    But, they both claim to be able to make our economy stronger, add new jobs, and squelch cost of living increases. LIARS!!! It's not possible for them to do. They can make taxes higher or lower, but this only helps/hurts, not steers.

    So, why do we put up with this lying??? Got me. I can't stand it. It's like both of them are lying through their teeth to take advantage of the ignorant American who believes the the Oval Office has "magic economy levers".

    An example: "It's the economy, stupid. I promise to create 8 million new jobs as President" The average under any president is 1.8+ million new jobs per year.

    "My tax cuts put money in the pockets of American's that paid taxes, and that ended a recission" In fact, you didn't cause the recession. 911 did. And you can't stop it. We are the economy, not you.

    Sorry it's long. Thoughts??? ;)
     
  2. IJ Reilly macrumors P6

    IJ Reilly

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    #2
    Just a couple of points, mainly of a factual nature.

    First, the recession, such as these things are measured by the traditional metrics, was over by 9-11. Technically, I think it only lasted for the first two quarters of 2001 (somebody can fact-check this for me). The point economists have been making about this recovery is its weakness, especially in terms of job creation and wage growth.

    Second, the President has more economic power than you think. The ability to submit budgets to Congress, and to veto budgets they pass, is of considerable importance to the economy. Bush's tax cuts were intended to produce economic stimulus, and they did to some extent, but they only worked as well as many outside of the political superstructure had forecast (e.g., not very).

    Third, a President can work closely with the Federal Reserve Board on monetary policy. Clinton did this.

    All candidates are going to make overblown claims about their ability to influence the direction of the economy. But that doesn't mean they don't have quite a bit of influence.
     
  3. skunk macrumors G4

    skunk

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  4. kuyu thread starter macrumors 6502a

    kuyu

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    #4
    IJ, good points. Presidents have influence, but not power. ie. A budget is an important part of fiscal policy, but monetary policy is what most presidents claim to be able to control. Bush is promising jobs: monetary policy. Kerry is promising jobs, higher living standards: monetary policy.

    Neither is claiming that "my budget will create jobs", but rather "I will create jobs as president". I guess there are cabinet appointments, and those count as jobs too.
     
  5. IJ Reilly macrumors P6

    IJ Reilly

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    #5
    I've rarely heard a candidate for office address monetary policy specifically or directly. Monetary policy is the amount of money the government prints. In many ways the Fed doesn't have direct control over this either. If Congress and the President decide to spend like drunken sailors on a three-day pass, then the Fed is going to be forced to act, or risk inflation being ignited. So whether they like to talk about these dull and dry matters or not, presidents do have quite a bit of influence over some fundamental economic issues that do matter to us over the long run.
     
  6. Bobcat37 macrumors member

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    #6
    The Fed is a private (edit: I MEANT INDEPENDENT) organization that is in no way owned by our government. So no, our government doesn't print any money, nor do they really have control over it.

    Edit: rest taken out because I was too rude.
     
  7. IJ Reilly macrumors P6

    IJ Reilly

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    #7
    http://www.federalreserve.gov/generalinfo/faq/faqfrs.htm

    Please go away again. Thank you.
     
  8. Lyle macrumors 68000

    Lyle

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    #8
    Umm, wrong.
     
  9. Bobcat37 macrumors member

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    #9
    From your website:

    Maybe my phrasing was poor, but that is simply what I was trying to state. When I said they were "private", I did not mean to imply that they were a profit-making institution, but merely independent from (or NOT OWNED by) our government.

    Again, check your White Pages to see where the Fed is listed.

    Thanks for proving (and clarifying) my point IJ :)

    However I realize that the Fed is definitely accountable to our government, and thus I suppose somewhat "controlled" ("regulated" would probably be a better word) by them.

    PS- thanks for apparently un-ignoring me IJ.
     
  10. Bobcat37 macrumors member

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    #10
    So... how about a few other "economic truths"

    1) The unemployment rate is a poor figure to measure an economy by. (an increase in the unemployment rate could be a good thing just as a decrease in the unemployment rate could be a bad thing)

    2) You can never have 0% unemployment.

    3) Net job creation numbers are a much better growth-measuring standard.

    Everything kuyu is talking about is pretty basic Macroeconomics.
     
  11. IJ Reilly macrumors P6

    IJ Reilly

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    #11
    No, you were completely wrong, and you were sarcastic about it besides. And you still can't admit it.

    I thought it would be only fair to give you another chance. Now I can admit that I was completely wrong about that.
     
  12. Bobcat37 macrumors member

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    #12
    Edit:

    *sigh* Nevermind... I screwed up on one word (private vs independent), sheesh, will you ever forgive me.
     
  13. pseudobrit macrumors 68040

    pseudobrit

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    #13
    Dude, you were flat - ****ing - wrong.

    There's no nitpicking words except in your pathetic attempt to save face when you should be eating crow and apologising.

    Why should we "get back to the topic" after you've insinutated IJ is a blubbering idiot in need of instruction:

    when you can't either:
    • not be rude and tactless
      or
    • know what the hell you're talking about
      or
    • apologise
    ?

    You're in a hole and probably should quit digging.
     
  14. zimv20 macrumors 601

    zimv20

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    #14
    the fed reacts to the economic realities of the day, yes, and to what they see coming. that doesn't mean that others don't have the power to influence the economy.

    factors such as budget items, surpluses/deficits, paying down the national debt, tax policy, social policy and job stimulus are all under control of the WH and Congress.

    the president is the final authority on bills passed by congress, which can and do deal w/ all of the above. so i _do_ say the president has a great deal of influence on the economy.

    if you'd like, we can get into the difference between "influence" and "control."
     
  15. kuyu thread starter macrumors 6502a

    kuyu

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    #15
    Zim, I see what you mean. However, I contend that even in a wonderful economy in which all factors influenced and/or conrolled by the executive branch show strong signs of growth and short-run stability, we can still have economic turmoil at the hands of the FED.

    This simple fact coupled with the FED's ability to buy or sell t-bills and set a target prime rate is a far more important factor in the overall economic health of our nation. Thus, as my original thesis stated, both presidential candidates are willingly using the economic ignorance of most people to capture votes under false pretenses. Furthermore, were a single person able to actually deliver macro-level economic promises, then we would have a socialist economy (which requires perfect knowledge of ALL things, including circumstancial knowledge).

    So, I am merely attempting to dispel the myth that our Presidents have the economic power that they themselves claim to possess and presume to weild in order to help "us" make more rational and informed choices in the voting box. :)
     
  16. Ugg macrumors 68000

    Ugg

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    #16
    i think you've missed out on the single most important aspect of the president in relation to the economy, and that is their personality. It doesn't take a lot of brains to see that ronnie's empty boasts inflated investors' confidence to unrealistic levels nor did jimmy's cardigans and "softness" inspire confidence at all. We can talk about the powers that a president may or may not have but you can never discount the psychological factor.
     
  17. kuyu thread starter macrumors 6502a

    kuyu

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    #17
    So true. So true.

    So this begs the question, Who's more bullish?

    I would say Bush just because Kerry's medical plan will crush the financials for most of the drug sector. We've already seen drug stocks come down abit for fears of this effect.

    Although, Kerry's "new America" could spur a wave of fresh-start sentiment on Wall Street, and lead to an emergence of new capital. Tough to call, that's for sure.
     
  18. Ugg macrumors 68000

    Ugg

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    #18
    I don't think I could say either one is better in this regard. gw definitely favors big business at the expense of the little guys and Kerry would rein in some of the excesses but would probably remove some of the ugly American factor when it comes to the loss of American exports abroad.

    The people who are buying from the drug companies are mostly old and mostly on fixed incomes. Just because they are paying less for their medicine doesn't mean the economy is going to tank but that they'll be spending it on other things so other businesses will benefit.

    I do think that Kerry could give a breath of fresh air to the biotech and alternative energy and technology industries. After thinking this through a little more I think Kerry is the more likely to benefit American business in the long run, gw has spent too much of US companies goodwill and since that is for many companies the largest items on the balance sheet, Kerry can only be good for business.
     
  19. zimv20 macrumors 601

    zimv20

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    #19
    well, the markets haven't moved markedly from the time bush has taken office. so i'd say traders aren't terribly bullish on bush.
     
  20. Neserk macrumors 6502a

    Neserk

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    #20

    I can tell you this about drugs and pharamceuticals (sorry, internal speller is down). My doctor is treating me for insomnia. I went to pick up a months worth of meds... $140 :eek: That is just ridiculous.
     
  21. kuyu thread starter macrumors 6502a

    kuyu

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    #21
    I'm not saying that Kerry's plan is good or bad for us. I'm saying that price fixing medication will kill the income statements, balance sheets, and cash flows of medical companies. Their profits will fall and so will the stock values. If the stock values fall far enough they will go out of business (they're in it to make money). Then who will we buy medicine from. Who will invent new treatments and cures? We certainly can't trust Uncle Sam to tell us what to take and when to take it (time for your Soma everybody!).

    Kerry is going to be walking a tight-rope in deciding what the prices of this and that should be. Too high and we see no benefit. Too low and you kill the drug industry. Hope he knows where the right price is... :confused:
     
  22. IJ Reilly macrumors P6

    IJ Reilly

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    #22
    I wasn't aware that Kerry was proposing price-fixing medications. Can you point me to a statement to that effect?

    Also, no company ever went out of business because their stock price dropped.
     
  23. zimv20 macrumors 601

    zimv20

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    #23
    i'm not buying into your doom and gloom scenario. you realize that health care companies negotiate lower prescription drug prices all the time, yes? and that the exported drugs are typically much cheaper to the end consumer than those of us in the US? (e.g. canadian consumers get the same drugs for much less, hence the popularity of going there to get them. it's SO much cheaper that one can still take the trip and come out ahead)
     
  24. skunk macrumors G4

    skunk

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    #24
    It's the drug companies' doom and gloom scenario. It's so gloomy you instinctively reach for the Prozac.
     
  25. Leo Hubbard macrumors newbie

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    #25
    It would be just as ridiculous if you expected someone else to pick up the costs of your drug bill.
     

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