Remember President Barack Obama -- the guy whose policies would surely wreak havoc on the American economy, killing jobs and prolonging the economic slump he inherited from George W. Bush? Amid stronger-than-expected economic growth and an increasingly robust labor market, that right-wing boogeyman has gone missing. Contrary to conservative claims, Obamacare and environmental regulations haven't destroyed the economy, and with Obama's approval ratings on the rise as economic fortunes improve, Republicans confront the possibility that come 2016, voters will decide that they're better off than they eight years before.
But how much does Obama have to do with the economic upswing? That's the question Nobel Prize-winning economist Paul Krugman tackles in his New York Times column today. As Krugman notes, presidents typically have little influence on the economy's performance; business cycles fluctuate, regardless of which party holds the White House. To the extent that policy does shape the economy, it's often monetary policy, set by the politically independent Federal Reserve, that determines the country's economic climate. Krugman observes that the so-called Reagan boom of the 1980s was primarily the result of Fed chairman Paul Volcker's decision to lower interest rates after years of tightened monetary policy aimed at combatting inflation.
While presidents may have less power over the economy than popularly imagined, Krugman contends that the same rule doesn't necessarily apply when it comes to the Obama-era economy. Though it may have been too small given the scale of the Great Recession, economists overwhelmingly agree that the president's 2009 stimulus package proved pivotal in softening the recession's impact.
Of course, the Republican takeover of the House of Representatives in 2010 ushered in a new era of austerity, precisely when the economy still required further countercyclical fiscal policy. Still, Krugman writes, Obama aided the recovery in another crucial respect. Although conservatives vociferously denounced the Federal Reserve's stimulus measures, they failed to force the Fed to abandon its expansionary monetary policy. By affirming the central bank's independence, Obama helped forestall a Fed capitulation to right-wing demands, Krugman argues. Had a Republican president been in the Oval Office, we may have witnessed an entirely different outcome.
So Obama may not be singlehandedly responsible for the recovery, Krugman concludes. But his right-wing critics have been exposed as "knaves and fools":
Last but not least, even if you think Mr. Obama deserves little or no credit for good economic news, the fact is his opponents have spent years claiming that his bad attitude — he has been known to suggest, now and then, that some bankers have behaved badly — is somehow responsible for the economy’s weakness. Now that he’s presiding over unexpected economic strength, they can’t just turn around and assert his irrelevance.
So is the president responsible for the accelerating recovery? No. Can we nonetheless say that we’re doing better than we would be if the other party held the White House? Yes. Do those who were blaming Mr. Obama for all our economic ills now look like knaves and fools? Yes, they do. And that’s because they are.