Why "Knowing How the Economy Works" Is Not Enough

This week will see the release of The 4% Solution: Unleashing the Economic Growth America Needs, a collection of essays from the George W. Bush Institute with a forward by the former president himself. It's true that annual GDP growth never actually reached 4 percent during Bush's two terms in office and averaged only 2.4 percent even if we generously exclude the disastrous year of 2008. But look at it this way: Who knows more about what the president ought to do about the economy than Dubya does? After all, there's only one living American (Bill Clinton) with as much experience being president, so Bush must have the answers we need.

A ridiculous argument? Of course. That's because experience only gets you so far. It's obviously a good thing, all else being equal, for the president to know a lot about the economy, just as it's a good thing for him to know a lot about foreign affairs or domestic policy. But the truth is that although the government has to solve many practical problems, and it's important to have smart, knowledgeable people in government to work on them, the presidency is not a technocratic position.

For a long time, Republicans grasped this much better than their opponents. It was the Democrats who seemed to prize experience and knowledge, looking admiringly at candidates who understood how government works and could be counted on to manage the problem-solving efforts that would be required, while Republicans favored candidates like Ronald Reagan and George W. Bush, who argued that vision was more important than skills. Yet this year, Republicans have nominated a candidate with no discernible vision whose candidacy is based almost entirely on the knowledge and management experience he supposedly gained in business.

It's odd that for someone whose argument is so much about his preparation and experience, Mitt Romney barely ever mentions the one job he held that actually resembles being president—the governorship of Massachusetts. But we've had former governors who made excellent presidents and former governors who made terrible ones. And the brevity of Barack Obama's tenure in the Senate didn't stop him from amassing what was arguably the most impressive string of legislative victories in half a century during his first two years in office.

Mitt Romney barely bothers to persuade the voters that he will be able to get things done in Congress or that he understands foreign policy. Instead, the phrase he repeats over and over on the campaign trail is "I know how the economy works." The current arguments over Bain Capital notwithstanding, this has been the basic rationale for Romney's candidacy, that during his time in business he gained a body of knowledge and a unique insight that will allow him, as president, to make dramatic improvements in the economy. During the primaries he argued that this experience would make him a better president than his Republican opponents, and today he argues that it would make him a better president than Barack Obama.

But if there were a magic key to unlock spectacular growth and widely shared prosperity, you'd think we would have found it by now. There hasn't been a president in decades, the current one included, who didn't have lots of businesspeople working in his administration. And Barack Obama talks to corporate leaders all the time. If Romney knows something they don't, he hasn't told us what it is. If you read through his economic plan, you'll find that it contains the same things Republicans always advocate: lower taxes, reduced regulations, free trade, and so on. You've certainly heard Romney say that his business experience helps him understand the economy. But have you ever heard him say what exactly he learned that no one else knows?

Perhaps he plans to unveil this remarkable insight once the election is over; if so, one can hope that as a patriotic American he'll share it with the country even if he loses. Because even if it involved some policies that conservatives like, you can bet that President Obama would be happy to take the bargain if it would deliver something like the sustained 4 percent growth George W. Bush promises. If you really could create a humming economy just by cutting taxes for the wealthy and creating some "Reagan Economic Zones" (yes, that's something Romney proposes, though he doesn't say much about what it means), Obama would do it. The reason he doesn't isn't that he's a socialist; it's that the argument isn't all that persuasive.

So no, Mitt Romney is not in possession of a secret that can deliver us to economic nirvana. We can try to determine whether anything less than admirable happened at Bain Capital during Romney's time there, and if so how much responsibility he bears. But even if all those questions are answered in Romney's favor, it wouldn't change the fact that the policies he advocates are derived not from his experience but from his politics and his moral perspective, just as Barack Obama's are.

I'm not sure if Romney actually believes that keeping taxes for the wealthy as low as possible and scaling back regulations really does bring prosperity for all. But if he does, it isn't because he concluded that after a careful examination of the evidence (if that were the case, the last decade would have been the most prosperous in American history). He favors those policies because that's what his party believes and because they reflect his values. Romney may "know how the economy works" in certain ways. But that knowledge isn't enough.

Comments

Of course it takes more than knowledge of any subject to successfully implement it principles. Certainly having participated in taking poorly run and failing companies and fixing them (even though they were diverse and unique) says something about being able to organize a recovery effort. Is he a leader that can get the right information and then guide the implementation?

Romney was also a Governor and ran a large scale effort in the Olympics, so he has a broad experience at organizing big projects. All of this is far more than our current President had in 2008, and using GWB as you have, then clearly Obama does not know how to fix it, So far even GWB's performance would be better than what we have now, so why give Obama more time, when he had not articulated any plan, just more hyperbolic rhetoric about how important the group he has screwed (middle class) are.

Knowing how the economy works may not be sufficient, but it is necessary. What is clear after 3.5 years is that Obama doesn't have a clue about how the economy works - his latest rant in Roanoke proves that beyond a doubt.

And when did Mitt Romney ever say or propose that his plan would be to keep taxes as low as possible for the wealthy? If anything, he has implied that he would keep taxes as low as possible for ALL Americans - and what's wrong with that?

Personally, I prefer "I know how the economy works" to "hope and change." Hope isn't a plan obviously, but it works for the gullible and naive. And with a nation that pays more attention to American Idol than to politics, it just might work again. Lord help us.

You're right. "Knowing how the economy works" is not a sufficient qualification to be a successful President. But it is a necessary one. And unfortunately for us all, the current incumbent does not have it.

More Obama excusnikism BS.

The problem is not the "economy", it is unemployment. We are consuming less than we are producing. We've been unsuccessfully trying to fix this by raising our consumption, but perhaps the solution is simpler? Perhaps we simply don't need to work quite as much? What if we had more professional-grade jobs at less than 40hrs per week? What if we had more access to affordable education, so that fewer of us actually needed "jobs" to do something creative?

You must be a work at home member of Obama's Economics Staff. Where is the heck do you come up with the "We're consuming less than we produce??? Have you seen the $16 T deficit? Do you think that that comes from consuming less than we produce? How about the trade deficit? Have you seen that? Does that come from "producing"more than we consume? ... I swear, all you Obama Supporters need to take the next yellow brick road to Oz and buy yourself a brain.

I have not fully decided if I will vote for Obama, don't be so fast to assume things.

So, let's say, as you suggest, that we are in fact consuming more than we are producing. In order for something to be consumed, it must be first produced; if not by us, then somewhere, by somebody. So, have we been living on free gifts from foreign countries? If not, where is it coming from?

I am sorry for being flipant Mark... I am just saying that you don't borrowmoney at a rate of $16T dollars unless we are consuming more tha we produce... You ask where is it coming from? The answer, first China ( at over a Trillion Dollars) and most recently from the Fed who have actively kept the printing presses rolling to cover our ever growing appetite for more entitlements and more government spending... These presses have been running under the banner of a "loan" which will probably never be paid back and ultimately written off causing a tidal wave of monetary dilution and inflation that will attack every American's savings, probably just in time for retirement.

Obama is a Lawyer who wants to think that he knows about Business and Economics, but he has had no training or experience in it and unfortunately for an unsuspecting nation, we will be paying for it dearly in the coming years.

Definitely not the Fed - because, the Fed does not produce what we consume. Money is not production, but only a medium of exchange. It does not magically turn into a car you drive, a hamburger you eat, or a house you live in. Someone has to produce these things, and if it's not us, someone is else is doing it for us. When you said China, that rings true. Also, other countries, who are buying our government and personal debt (such as home loan bundles bought by foreign governments and investors). We can say that China and others are producing things for us and giving them to us on credit. And, at some future point, we are expected to produce more than they, and give the difference back.

My equation needs to be corrected - we are not "consuming less than we produce". We are "consuming less than what we produce plus what we get on foreign credit".

So, it seems that either we (1) take less credit, so that we produce more of what we consume, reducing domestic unemployment; or (2) use credit in a better way, so that instead of it creating chaos through unemployment, it actually improves the state of things. I like option 2 better, but if that's too complicated, we should do option 1.

There is one other very interesting topic here. The countries that are giving us this huge credit, for example China, they are certainly taking a big risk that the only way we could repay our government debts is by printing the money, and repaying them in a currency of much lesser value. Why would they take such a huge risk?

I am sorry for being flipant Mark... I am just saying that you don't borrowmoney at a rate of $16T dollars unless we are consuming more tha we produce... You ask where is it coming from? The answer, first China ( at over a Trillion Dollars) and most recently from the Fed who have actively kept the printing presses rolling to cover our ever growing appetite for more entitlements and more government spending... These presses have been running under the banner of a "loan" which will probably never be paid back and ultimately written off causing a tidal wave of monetary dilution and inflation that will attack every American's savings, probably just in time for retirement.

Obama is a Lawyer who wants to think that he knows about Business and Economics, but he has had no training or experience in it and unfortunately for an unsuspecting nation, we will be paying for it dearly in the coming years.

You must be a work at home member of Obama's Economics Staff. Where in the heck do you come up with the "We're consuming less than we produce??? Have you seen the $16 T deficit? Do you think that that comes from consuming less than we produce? How about the trade deficit? Have you seen that? Does that come from "producing" more than we consume? ... I swear, all you Obama Supporters need to take the next yellow brick road to Oz and buy yourself a brain with your next public assistance check.

No shortage of "Obama Haters" today, and you seem to be the king of the hill. All of you that distort the president's record on economics seem to completely disregard the absolutely inane opposition encountered by this man. When you have a political party that, on the night of the inauguration determine that their best course of action is to simply oppose everything the president proposes.... Well, how is that supposed to work? The number one priority of this same party is to prevent the reelection of the incumbent? There is ample evidence to deduce that the Republicans are willing to allow the economy to stagnant/fail, if it can cause Obama to lose the election. As for that sixteen trillion dollar deficit - only a true Obama hater would ascribe that totally to him. Funny, when the economy crashed and tax revenues declined, the military expected to be paid, Congressmen expected their salaries and insurance, Social Security obligations were still in place, Medicare/Medicaid requirements were all there, etc. And, how does this deficit effect consumer consumption? Your insulting "yellow brick road...." comment simply exposes you as another simplistic right wing shill, an expert at invective, but a zero at actual solutions.

You really should stop with the kneejerk fallback of obstructionist congress. Really, only 1/2 of congress which is 1/3 of government has been opposition held for 1/2 of Mr. Obama's 1 term. Further, do you really expect everyone to believe that prior to Mr. Obama the opposition party happily went along with all that the previous presidents had to say? Is it your position that Mr. Reid and Ms. Pelosi were constant supporters of Mr. Bush? Is it your belief that said Reid and Pelosi were actively campaigning for Mr. Bush's reelection in 2004, or do you believe that the democrat party were hoping for Mr. Bush's defeat in 2004? If you believe democrats campaigned against Mr. Bush prior to his reelection in 2004, then explain how anything has changed.

Oh dbtexas, you give Republicans far too much credit... Obama's problems with the Economy aren't the Republicans, it's his own failed policies and his absolute complete lack of knowledge in what makes an Economy work... He's a lawyer by training who probably doesn't know what a P&L is let alone having ever been responsible for one... Yet he supposes that he can effectively manage the world's largest Economy?

He acts and talks as though he has a great new plan for resurrecting his failing economy, but it's always the same thing..."Incur more Debt"... Entrust the Government to infuse all capital in the market... The truth is that he could not even get enough Democrats to support his policies even when he controlled both houses of congress for two full years and for two full congressional sessions (2008-2010).

He was however, able to shove a $3T unpopular Entitlement down our collective throats which helped to insure that the Dems couldn't and wouldn't be able to control both Legislative Houses going forward.

No dbtexas, America has had enough of lies and financial failure... They are ready to show this President and his supporters that Government is the product of the people and their entreprenuerial spirit and not vice- versa.The people will vote to have Politicians allow them to once again create the demand needed to revitalize this Economy by the spending their own money from unspent taxes... They will not vote to have this President take our money and our jobs and decide themselves where they will create demand.

You're right, I don't support the Obama Policies, they have proven to be non-starters and in some cases miserable failures...Hope and Change from this President has turned into more of the same.

More access to affordable education? Like the free k-12 education courtesy of our public schools?
What if unicorn poop would fuel our factories without leaving a carbon footprint? What if, what if, what if????

"Knowing how the economy works" might not be enough, in and of itself, but it's certainly a good start and ought to be a job requirement for the presidency.

It most definitely beats not having a clue how the economy works outside the DC beltway, which accurately describes the current occupant of the White House.

Is this author implying that it isn't necessary to understand the economy to be President? If he is he's right... Someone can be a terrible President and not understand the Economy... Obama is living proof.

Unfortunately for your anthem here, Mr. Obama has proven time and again he would most certainly forego 4% per annum growth if it meant accomplishing his agenda. If you don't recognise this, it is your rose tinted glasses, not that Mr. Romney "needs" to more than understand business.

This is not just about the president, no one in the whole administration has any private sector experience, he can not turn any technical problem over to a technocrat which is a garbage word if i ever heard one. Romney is a problem solver not a technocrat. You seem to be making an argument that real ability is a handicap for a president.

This is not just about the president, no one in the whole administration has any private sector experience, he can not turn any technical problem over to a technocrat which is a garbage word if i ever heard one. Romney is a problem solver not a technocrat. You seem to be making an argument that real ability is a handicap for a president.

Paul
I'm a conservative and agree with the heart of your analysis. Romney has no fundamental solution, unless he was to become a die-hard protectionist overnight. On the other hand, allow me to suggest that none of the parties have an understanding of economics, nor do the technocratics, because since its inception with Adam Smith there has not been a sound theory of economics upon which to run this nation (only sound industrial policy which evaporated in the 1960s). It is precisely why we are in decline, there is no functional alternative. Why would I say something like this? Consider the following: Karl Marx suggested free trade as the fastest means to destroying capitalism, while Daniel Webster claimed the primary reason we have our US Constitution was to stop the economic chaos unleashed by free trade with Britain under the Articles of Confederation. Yet, astonishingly we have three political parties which have adopted unwittingly Karl Marx's advice, while the Chinese have adopted Webster’s advice. The Tea Party seems to be oblivious to Webster’s claim, and the average Republican has no idea that Lincoln was a protectionist, and that his party remained protectionist until the 1960s when it became an economic mirror image of the Democrats who have historically been free traders. The dangerous error therefore the modern politician makes is the failure to make a critical distinction between free international markets and free domestic markets. The reason for this, as the new website rescuingeconomics.wordpress.com suggests, is that there has never been a sound theory of economics to make sense of the success of protectionism. Explaining the intricacies of this failed dynamic is the goal of the sites’ associated book, The Un-Republican, by Geldstone. In spite of its conservative tone (written for the Christian market), I strongly urge you to take a look and consider bringing Geldstone's proposition to the attention of the American people. I'd like to believe that the courageous reporter who does so will change the course of this country's economic fate. I'm convinced anything short of a new theory of economics will fall short of a solution. The electorate is oscillating between parties for this reason and unable to make sense of the heart of the problem.. Take a chance and take a look.

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