The United States is a constitutional democracy. The president is elected (democratically one hopes) but serves in a constitutional government.
The ability of the president to manage the economy is limited. In 2007, the federal government spend about 20 percent of the GDP, while state and local governments spent about 15 percent. Obviously, state and local governments make their own spending decisions, and in fact when the federal government increases spending in a recession to stimulate the economy, state and local governments tend to decrease spending to balance their budgets in the face of decreasing tax revenues.
A key point is that in 2007, about two-thirds of spending was done in the private sector. When people lost their jobs or feared losing them, they spent less. When people saw their investments in their homes and in retirement accounts go south, they spent less. Banks stopped lending. Companies, facing loss of sales, spent less on production.
Moreover, in an increasingly global economy, the strength or weakness of the European economy affects that of the United States. These days China, Japan and other Asian economies have grown so much that they too significantly affect the American economy. Indeed, we have a large trade with other American nations.
Government has two major economic policy instruments: monetary policy and fiscal policy. Monetary policy is in the hands of the independent Federal Reserve. The Constitution gives the Congress the power to legislate taxes and federal government spending -- that is control of fiscal policy.
So what can the president do? He has the bully pulpit, and can encourage public support for good policies. He has the services of millions of government employees behind him, and can lead them to provide information and analysis on economic problems and their solutions. He can present a proposed government budget to the Congress. He is the leader of his party, and can demand (with varying success) that the members of his party in the House of Representatives and the Senate vote in support of his preferred fiscal policy; indeed he can participate forcefully in the inter-party negotiations over taxes and spending. He can conduct the economic foreign policy of the government attempting to influence monetary and fiscal policy of other governments.
Listening to either Romney or Obama over the last couple of weeks, you might thing the president will have lots of power to control the economy. As President Obama and presidents before him have discovered, it isn't that easy. One of the 435 members of the House of Representatives or of the 100 members of the Senate may not feel that he/she has much power over the economy, but together the legislators probably do have as much or more influence over the economy as the president.
Much of the power of the president over fiscal policy depends on his ability to work with the Congress to get things done. Romney has no experience with the Congress; Obama had most of a term in the Senate, and has had mixed experience with the Congress in his first term in office. The success of the president with Congress next term will depend not only on which man is elected president, but on the composition of the next Congress.
Still, after all these caveats, the economic policies of the candidates for the presidency is important. Actually, the President's economic policy will be largely determined by his economic team. Neither Obama nor Romney is a professional macro-economist. Romney if elected will discover that the management of national economic policy is a lot harder than managing the finances of a business. Obama has had four years to learn how very difficult it is to lead national economic policy. But clearly, Romney favors "trickle down" economic policies, while Obama focuses more on those serving the middle class. Obama emphasizes the role of the government in building and maintaining infrastructure, effectively managing energy policy, improving human resources, and encouraging technological innovation for the long term health of the economy.
The Other Major Responsibilities of the President?
According to the Constitution, the president is the commander in chief of the military forces of the United States. Obama has ended one war and is on schedule to end another, our longest war. He has used military force more successfully in three years to decimate the highest echelons of Al Qaeda than his Republican predecessors did in the previous seven years. He recognizes that nuclear threats are coming from Iran and North Korea, as well as from poor control of nuclear materials and from teh weakness of the government in Pakistan; he is taking action to reduce those threats, and he recognizes that Russia shares concerns for all those threats and can be an important partner in their reduction. Romney, with no military background that I can identify, thinks that the government should spend lots more on the military that the Department of Defense has requested.
According to the Constitution, the president also makes foreign policy with the advice and consent of the Senate. Romney has international experience as a business leader, but recent blunders (e.g. England, Palestine, Russia) suggest he has a lot to learn about foreign policy. Obama came to office with little foreign policy experience (albeit with a personal history that must have given him strong foreign policy interests), but has led U.S. foreign policy for three and a half years. Both will depend heavily on their foreign policy teams (in fairness, all presidents do). Obama has assembled a strong team; Romney is depending on the Republican team that advised George W. Bush.
The president heads the executive branch of government. His domestic policies guide in the preparation of proposals to the legislature, and he leads in the management of the domestic programs authorized and funded by the Congress. As in the case of economic policy, he has a bully pulpit, the support of the federal government staff in gathering and analyzing information, and is the leader of his party and can influence legislation on domestic policy. As we have seen, presidents have great influence on the education and health programs of the nation. Romney has experience as a one-term governor of Massachusetts, but seems to have renounced the policies he embraced in that role. Obama stresses his legislative success in passing health care reform, efforts to strengthen human resources through education and training, and his underlying philosophy of building the middle class and giving opportunities to the poor. The parties differ on immigration policy, primarily in their approaches to illegal immigrants now in the United States.
President Obama said in his speech last night that there is a clear choice before the electorate. It is not a choice dependent on which man most loves his family, nor which you would most like to spend an evening with. It is a choice of which governing philosophy you prefer, which man would build the team around the White House that would do the better job, which would be the most effective in dealing with the Congress, which would conduct the better economic, military, foreign and domestic policies of the United States.
I suppose there have been even more important choices before the electorate -- perhaps in 1860, 1916, 1932 and 1938. Still, this is clearly an important election. I hope the electorate makes the right choice.
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