Big City Economics – Economic Life Through an Urban Lens

The Election and the Future

I reacted to the election results with a strange mix of elation and foreboding. Elation, of course, because American voters came through and rejected Donald Trump. Our country and our planet will no longer be exposed to the danger of having its most powerful person a megalomaniacal, delusional ignoramus. I wrote when he was elected that we would not get through four years of a Trump presidency without many people dying unnecessarily; so it has been. My relief at having him gone cannot be overstated. The prospect of four more years of his misrule was terrifying, and I don’t think American democracy would have survived in any recognizable form.

Still, there was the disturbing fact that 74 million people voted to continue his reign of racism, corruption and ineptitude. Under normal conditions, a 7-million vote, 4-percent margin of victory would be considered a decisive victory and cause for partisan satisfaction. But this was not a normal election. Never before was a person so manifestly unfit for the presidency, so blatantly corrupt, and so transparently making decisions according to self-serving political calculus running for re-election. Nothing short of an historically lopsided landslide would have proved that a fluke had occurred in 2016, but that American democracy is still fundamentally healthy. That landslide did not occur; our democracy is not healthy.

One thing that puzzled me throughout the Trump years was the response of informed, responsible, allegedly principled conservatives. Through a professional career in Manhattan, my associations have skewed liberal but I have known, worked with, respected and befriended many such conservatives. They might have more faith in market outcomes, put more emphasis on personal responsibility than structural impediments, and have less confidence in government efficacy than I do, but I thought we shared the same basic analytical and ethical frameworks. I always assumed that many millions of such people constituted the backbone of the Republican Party.

So as I watched conservative intellectuals from George Will to Jennifer Rubin to Bret Stephens to William Kristol recoil from Trump, form the Lincoln Project and even leave the Republican Party altogether, I wondered if there was similar movement among their non-famous counterparts. Surely those smart, decent conservatives with business school and law degrees, who form the middle-ranks of Fortune 500 companies and law firms, who have been taught to value scientific management and the rule of law, could similarly see through Trump’s incompetence and narcissism– and could not possibly be comfortable with him in the Oval Office. The 2018 mid-term elections gave me hope that they were out there, but yet….Trump’s approval ratings remained stubbornly stable.

After each of Trump’s violations of decency, rationality or the law– colluding with Russians, obstructing justice, 30,000 lies, extorting Ukraine, weaponizing the Post Office, injecting bleach, mismanaging the pandemic– I checked those approval ratings. Stable. What was going on? Where were all those rational, decent conservatives willing to put country over party?

The 2020 presidential election provided a definitive answer; they were virtually nonexistent. According to the NEP/Edison Research exit poll, a smaller percentage of Republicans voted for Joe Biden than did for Hillary Clinton (6% vs 7%) and a higher percentage voted for Donald Trump in 2020 than in 2016 (94% vs 90%). Trump’s four years of chaotic ineptitude actually won over Republican voters. Is that an illusion created by declining voter identification with the Republican Party? Nope. According to Gallup tracking polls, the number of voters identifying with the Republican Party grew slightly from 2016 to 2020 (43.5% vs 42.6%). Granted, exit polls are in general suspect and the 2020 polls especially so. But their findings are supported by the actual elections results: Trump’s share of all votes cast actually went up, from 46.1% to 46.9%. Biden won the 2020 election because he got a larger share of Democrats’ and independents’ votes, not because Republicans crossed over.

Republican Plan: Squeeze the States

There is a widespread belief that the Trump Administration has no plan for coping with the Covid-19 pandemic. That critique is far too charitable. The Administration, in concert with its enablers in the Senate, does indeed have a plan.

The plan is to plow through the pandemic, keep the economy running and the stock market up, and let the states and the American people deal with the rising body count however they can. In the time-tested tradition of petty swindlers, Trump and Mitch McConnell are orchestrating a fiscal hustle to force the hands of governors and mayors and pin the blame on them if things go terribly wrong.

Asked about a possible second wave of the pandemic during his May 21 visit to a Ford plant in Michigan, Trump responded: “People say that’s a very distinct possibility, it’s standard. We are going to put out the fires. We’re not going to close the country. We can put out the fires. Whether it is an ember or a flame, we are going to put it out. But we are not closing our country.”

How would he know? As we’ve all learned, it’s the governors and mayors who decide whether extreme restrictions on business and individual activity are necessary to protect public health. Trump takes no responsibility.

Although other developed countries have political jurisdictions equivalent to American states and cities, the United States is unique in how much responsibility for funding basic public services it places upon them. The majority of public spending on everyday needs like education, police, roads, parks, transit and healthcare is the responsibility of American states and cities. But when it’s necessary to respond to a widespread threat to public health, states and cities simply don’t have the budgetary resources or flexibility that the federal government has: they cannot run perpetual deficits, have no central banks of their own, and cannot print their own currency.

That’s why we have to keep an eye on Trump’s accomplice. McConnell is making sure that the states and cities are in no position to suppress their economies as they did in the spring. In stark contrast with his urgency for providing financial aid to business, McConnell is dragging his feet on fiscal aid to states and localities, lecturing on how the need for additional aid needs to be carefully thought through, even suggesting that states consider bankruptcy.

The spring shutdown of many state and city economies put their budgets in a deep hole. New York State recently adopted a FY2021 budget projecting general fund receipts $13.3 billion lower than anticipated February. The state expects its revenue losses to total $60.5 billion through 2024. California, a state widely lauded for its early and decisive measures to contain the pandemic, adopted a FY21 budget that anticipates a drop of $20 billion in tax revenue from the prior year and requires expenditure cuts of $13 billion. New York City adopted a FY21 budget that anticipated $7 billion lower tax revenues and $7 billion reduced spending from its preliminary plan proposed in January.

Democrats are pushing for a “phase four” of federal pandemic relief, the centerpiece of which would be aid to states and localities. But McConnell is in no hurry. Said Roy Blunt (R-Mo.), Chairman of the Senate Rules Committee, back in June: “Optimistically, we might move before the Fourth of July. I do think we will move on phase four before the August break.” There was no movement by McConnell by July 4. It just so happens that most states and cities operate on a July-to-June fiscal year, so if they were to avoid draconian budget cuts in their Fiscal 2021 budgets, they needed to know what kind of federal backstop they’d be receiving before the end of June. Senate Republicans surely knew that, and surely enjoyed the spectacle of big-state governors and big-city mayors taking heat for those cuts. So why rush a phase four to get them off the hook?

The House passed a $3 billion phase-four emergency relief bill on May 15, which included about $1 trillion in aid for state and local governments. Almost two months later, there has been little movement toward a Senate version. It’s been reported, however, that McConnell told Trump he wants to hold the total cost of phase-four relief to $1 trillion, which would almost guarantee that state and local aid is far below the amount needed.

Earlier in the spring there was talk of a “first wave” and “second wave” of the Covid pandemic, following the model of the 1918 flu. Increasingly, it’s becoming obvious that the Covid virus will not exhibit the seasonality of the flu and that the U.S. has never squelched the first wave. But however you prefer to characterize the pattern of contagion, it became obvious by late June that it was out of control in much of the country. States began to walk back their re-opening policies and even the ever cautious Dr. Anthony Fauci began to hint of another round of strict shutdowns.

Without additional federal aid, however, few states and cities will be in a fiscal position to order a second round of economic closures and social distancing, no matter how bad the pandemic gets. McConnell knows that and Trump knows that, which is why he’s so confident there will be no more shutdowns. Even if some additional federal aid is eventually delivered in a phase-four bill in August, McConnell will have already delivered his warning to governors and mayors. So that’s the plan, we’re all warriors in Trump’s reelection push and McConnell will do his best to keep the governors and mayors in line.

Beachfront Bargains

Having spent most of my life shuttling between the densest and fourth-densest counties in America, when I finished my tour in city government I thought it would be nice to try out a different lifestyle. So I moved to the East End of Long Island, down the road a piece from where Jackson Pollack did most of his pathbreaking work. My wife had already substantially made the move after her scary and exhausting battle with breast cancer.

Though I still love the city that gave me so much fun, friendship and opportunity, I also love my coastal, exurban environment. Until The Shutdown I continued to spend a lot of time in Manhattan and I can’t wait for this pandemic nightmare to end so I can once again stroll anonymously down Sixth Avenue and dive into a plate of ropa vieja, rice and beans. But as it turned out, my dispersal from the city presaged a Covid-induced flight from the city, and the summer season out here seemed to begin around April 1.

The long-term effects of the pandemic on urban-suburban-exurban residential patterns is a complicated question that I’d like to address carefully at some point, but in a nutshell I’m hopeful that they will generally be positive. In the meantime, the renewed interest in vacation-area real estate gave me a chance to opine, along with some other real estate experts, on one of my favorite topics in this WalletHub feature.

Thoughts on the May Jobs Figures

On June 5, the BLS reported that the national unemployment rate in May dropped to 13.3 percent, from 14.7 percent in April, and that nonfarm employment increased by 2.5 million. The stock market staged a huge rally and the media expressed astonishment. I guess I don’t read enough economic forecasts these days because I was surprised everybody was so surprised.

On May 21 I tweeted:

How can the PPP have committed over $600 billion to firms expected to maintain payrolls, and yet unemployment claims are over 38 million? Either many of those unemployment claims will be withdrawn once the PPP money flows through, or the PPP program has been a complete failure.

The May jobs figures answered my question. The Paycheck Protection Program (PPP) has been at least a partial success. From March 21 through May 30 initial claims for unemployment insurance totaled an astonishing 42.2 million, a number equivalent to about 27 percent of total employment at the beginning of March. But in the meantime, Congress passed the CARES Act, a central feature of which was the PPP. The PPP was intended to limit unemployment during the pandemic shutdown through, essentially, a federal subsidy of business payrolls, as well as to help small businesses survive by providing the liquidity to pay other fixed costs.

The PPP was designed as a loan program, but since the loans are 100 percent forgivable it is, in effect, a grant program. As initially legislated, PPP loans are forgivable if the borrowing firm used 75 percent of the loan for payroll and restored its pre-pandemic employment level by June 30. Through the end of May, 4.5 million PPP loans were approved, totaling $510 billion. However, the program only began taking applications on April 3 and administrative problems caused delays and frustration. Then the program ran out of money and Congress had to enact a new phase of emergency aid to refill it. Money didn’t start flowing to firms in a big way until late April. By then some 28 million Americans had filed for unemployment benefits.

The two criteria for loan forgiveness induced firms with PPP loans to rehire employees who had been laid off; many of those employees probably had already filed for unemployment. Undoubtedly, many firms also recalled workers simply because they wanted to continue operations and the PPP loans enabled them to do so. So it was to be expected that many of the initial unemployment claims were precautionary and, as my tweet suggested, eventually evaporated.

The timing of the rehires, as it relates to the reported unemployment rate, was anyone’s guess. The dip in the May unemployment rate, the survey for which was taken the week of May 10, indicates that the rehiring was relatively rapid. What exactly happens to the unemployment rate in June and July is even more speculative, insofar as Congress, on June 3, passed legislation extending the forgiveness deadline to December 31 (and also lowered the amount of the loan that must be used for payroll maintenance to 60 percent.) So firms are under less pressure to restore their employment to pre-pandemic levels by the end of June. It should not be a surprise if the unemployment jumps up again in coming months, nor should it be a surprise if it stabilizes.

Is the Devil in the Density?

Intensification of the Covid-19 pandemic prompted politicians from all over the country to proclaim the obvious– the districts they represent are not New York. Usually, the denial was issued to justify weak social-distancing policies or moves to “reopen” their economies.

Kay Ivey, Governor of Alabama, defending her resistance to a statewide stay-at-home order, said “We’re not New York. We’re not even Louisiana.” South Dakota Governor Kristi Noem defended her policies with “South Dakota is not New York City.” California’s Gavin Newsome observed, “We’re not New York…there are very different conditions in the state of California.”

Even New Jersey Governor Phil Murphy felt compelled to note that his state is not New York–it’s worse! Murphy: “You know, we’re not New York. Somebody reminded me yesterday that if you drove from New York City to the Canadian border, it’s a 10-hour drive. It’s hard to get more than a three-hour drive in New Jersey.”

Sometimes the not-New-York disclaimer has a moralistic tinge or political edge, but more often it seems to be an allusion to New York’s assumed higher risk profile, and more specifically, to its greater population density. Vita G., a beachgoer in Florida, observed “I think we’re doing the right thing and we’re not high risk. We’re not New York.” Matt Tompter, a brewer and restauranteur in Anchorage, offered “We’re not New York City….the reason Alaska is able to open right now is we are naturally socially distanced.” David Morgan, Sheriff of Escambia County, Florida, was even more explicit. “We’re not New York City. We don’t have the density of population they have there.” Even New York’s Governor Cuomo bought into the density argument: “Why New York? Why are we seeing this level of infection? It’s very simple: It’s about density.”

From Governors on down, people in other parts of the country seem to think that because their home states or towns have a lower population density than New York City, their risk of a coronavirus outbreak is lower. Is that so? And does the new age of pandemic abruptly end the era of Superstar Cities?

The initial outbreak of the pandemic, with its epicenter in New York City, certainly triggered an early rush to blame density as a principal risk factor. In March, The New York Times ran an article entitled “Density is New York City’s Big ‘Enemy’ in the Coronavirus Fight.” Joel Kotkin, in the Los Angeles Times, wrote “…employment and housing patterns and transit modes appear to be very significant, if not decisive, factors” behind the differing coronavirus death rates in LA and NYC, contending that the pandemic vindicates LA’s sprawl. In USA Today, Glenn Harlan Reynolds simply concluded that “density kills.”

That Didn’t Take Long

The ink was barely dry on the Senate’s bill to provide an additional $484 billion of Covid-related economic relief when Mitch McConnell fired the first volley of the next battle. On April 21 he appeared on Fox News host Bill Hemmer’s show and said:

“What I’m saying is we’re going to take a pause here, we’re going to wait at least until May 4th which is the time we’re going to have everyone back in the Senate and clearly weigh, before we provide assistance to states and local governments, who would love for us to borrow money from future generations, to make sure that they have no revenue losses.

“Before we make that decision, we’re going to weigh the impact of what we’ve already added to the national debt and make sure that if we provide additional assistance for state and local governments, it’s only for coronavirus related, coronavirus related matters.

“We’re not interested in solving their pension problems for them, we’re not interested in rescuing them from bad decisions they’ve made in the past. We’re not going to let them take advantage of this pandemic to solve a lot of problems that they created for themselves, and bad decisions they made in the past.”

His office then issued a press release repeating those comments under the heading “Preventing Blue State Bailouts” and the next day he appeared on Hugh Hewitt’s radio show and said:

“I said yesterday we’re going to push the pause button here, because I think this whole business of additional assistance for state and local governments needs to be thoroughly evaluated. You raised yourself the important issue of what states have done, many of them have done to themselves with their pension programs. There’s not going to be any desire on the Republican side to bail out state pensions by borrowing money from future generations.”

He went so far as to make the suggestion that in lieu of aid, states should consider bankruptcy:

“I would certainly be in favor of allowing states to use the bankruptcy route. It’s saved some cities, and there’s no good reason for it not to be available.”

Trump then jumped into the fray, playing both sides of the issue as usual. First he told New York’s Governor Cuomo that he was very open to federal budget aid to states, but several days later tweeted: “Why should the people and taxpayers of America be bailing out poorly run states (like Illinois, as example) and cities, in all cases Democrat run and managed, when most of the other states are not looking for bailout help? I am open to discussing anything, but just asking?” Apparently, conservative media played up the blue-state bailout angle enough to trigger his usual polarize-for-political profit instinct.

Perhaps the most odious comment came from Florida Senator Rick Scott, who said: “It’s not fair to the taxpayers of Florida. We sit here, we live within our means, and then New York, Illinois, California and other states don’t. And we’re supposed to go bail them out?” Considering that Scott’s Columbia/HCA private hospital chain, which he founded and ran, paid $1.7 billion in settlement fines for Medicare and other fraud, it’s a bit galling to hear him talking about what’s fair to taxpayers and what’s not. Moreover, New York State has the largest “balance of payments” deficit with the federal government while Florida has one of the largest surpluses (California and Illinois are roughly in balance).

Of course, the push back against this nonsense was swift. Cuomo slammed McConnell as “reckless” and “irresponsible,” Connecticut Senator Chris Murphy slammed Scott, and retiring Republican congressman Peter King called McConnell “the Marie Antoinette of the Senate.” Paul Krugman, Eric Levitz, and Paul Waldman piled on. Nancy Pelosi said flatly: “We will have state and local and we will have it in a very significant way.”

After making aid to state and local governments a central demand of their negotiations over the third COVID disaster relief bill, it was surprising and disappointing to many Democrats that Chuck Schumer and Pelosi agreed to a bill that included none. With pressure mounting to refund the small business relief program, the Democratic leadership apparently prioritized other demands, including financial aid to hospitals, aid to states and cities for coronavirus testing programs, and set-asides of small business loan program funds for small financial institutions and businesses, while betting that they could win a subsequent battle for state and local fiscal aid. Indeed, there appears to be significant Republican support for state and local aid, even if many Republican officials are laying low so as to not cross Trump and McConnell. In addition to Peter King, for example, Representative John Katko (R-NY) said that phase four had to protect state and local governments, and Republican Senator Bill Cassidy (R-LA) cosponsored a $500 billion aid bill with Democrat Bob Menendez (D-NJ).

Who CARES

For a brief moment I thought that Mitch McConnell might put aside his Machiavellian politics and do what is right for the country. And for a brief moment maybe he did! When the extent of the economic crisis the country was facing became evident in mid-March, Congress passed a $2 trillion emergency measure in a matter of days with relatively little rancor. McConnell, uncharacteristically, seemed to let Treasury Secretary Mnuchin take the lead in negotiating the deal with the Nancy Pelosi, and ordered his troupes to support the bill, which passed the Senate unanimously.

The broad outlines of the CARES act are surprisingly sensible. Subsidies to small businesses were absolutely essential to keep them alive and to keep their payrolls intact as much as possible. I still think it’s rather remarkable that the Republicans agreed to that in the form of the Paycheck Protection Program (PPP), insofar as 75 percent of the forgivable loans must be used to maintain payrolls. It was also somewhat surprising to me that McConnell and the Republicans went along with a significant increase in unemployment insurance benefits and an expansion of eligibility to free-lancers and contract workers. The corporate bailout portion of the CARES act was ideologically awkward for both parties, but it too was essential. The $1,200 tax refunds to be delivered to a broad swath of the public is a clunky and inefficient way to deliver relief but there was an administrative rationale for delivering emergency payments quickly.

Nevertheless, I can’t let the monumental Republican hypocrisy of all this pass without comment. When Obama took office the global financial system was on the brink and the economy was in free-fall, having contracted at an 8.4 percent annual rate in the previous quarter. Obama asked for a fiscal stimulus package totaling approximately $800 billion. He eventually got it, but without a single Republican vote in the House and only after giving major concessions to get the three Republican votes he needed to avoid filibuster in the Senate. Republicans then lambasted it as the “failed stimulus,” opposed every subsequent attempt to further stimulate the weak economy, and harped relentlessly on the “Obama deficits” right through the 2016 election. Once Trump was elected, McConnell and the Republican Party did an immediate about face on fiscal policy, passing a pro-cyclical tax cut stimulus with nary a flinch about the resulting deficits. When the current economic crisis hit with a Republican President desperate for a reelection advantage, Senate Republicans voted unanimously for the $2.2 trillion measure (the House vote is unknown as the bill was adopted by a “unanimous consent” voice vote.)

In any case we’ve seen a broader budget truce than existed during the last economic crisis. Even the Committee for a Responsible Federal Budget, whose very mission is to act as permanent deficit hawk, issued a statement suggesting that “setting aside short-term deficit concerns in order to avoid a depression” is the right thing to do. Nevertheless, I sense some residual doubt among the general public. “Can we really do this?” The short answer is, “Yes, we can.” From 1943 to 1945 the U.S. deficit averaged 23 percent of GDP and by 1946 federal debt held by the public reached 106 percent of GDP. The country did not spend the following decade bemoaning the fact that we ran huge deficits to win the war, nor did the high debt ratio seem to have a constraining impact on economic growth during the 1950s and 1960s. We currently have about an 85 percent debt/GDP ratio and it will surely reach that 1946 figure before this is all over. But we did it once and we can do it again.

Conventional economic theory holds that excessive government debt can suppress the long-term growth of the economy by “crowding out” private borrowing. However, as John Cochrane points out, the Federal Reserve is currently buying government debt faster than the Treasury is issuing it, so there is no sopping up of private savings or crowding out of private borrowers. Moreover, the Fed remits all of its profits to the Treasury, so interest payments on that debt to the Fed quickly return to the Treasury, costing the taxpayers nothing. The future effects, then, will depending on how long the Fed holds that debt and how much it ultimately sells to private investors or other governments. All of this is starting to sound a lot like Modern Monetary Theory.

Modern Monetary Theory (MMT) is a school of thought that holds that there is no real distinction between fiscal policy and monetary policy for countries that issue fiat money, and that inflation is the only constraint on government deficits financed by central bank money creation. It’s been quietly embraced by Bernie Sanders and loudly embraced by Alexandria Ocasio-Cortez, neither of whom are noted macroeconomists. I’ve been wary of it, possibly because of the biases of my conventional training. I’ve approached it much as Keynes predicted classical economists would judge his theories: “(They)….will fluctuate, I expect, between a belief that I am quite wrong and a belief that I am saying nothing new.” I was in a MMT-is-quite-wrong mode until the Covid crisis descended, when I quickly shifted to a heck, it’s nothing new, let’s do it mode. And I wasn’t the only one.

If inflation is, in fact, the only constraint on federal deficits, it doesn’t seem that we have much to worry about for the time being. Quite the contrary, the deflationary pressures are getting a little scary. Ten-year Treasury bonds are now trading at yields under 600 basis points, the CPI fell by .4 percentage points in March and, in a totally mind-bending development, oil prices went negative. The way things are going, we may be praying we meet MMT’s inflation constraint as soon as possible.

The World Changes Again

When I began this blog I had recently left the New York City Comptroller’s Office. During my ten years there I had built up a list of research ideas and policy thoughts that I either did not have the time to get to, or that were too politically sensitive to be pursued under the auspices of an elected official. My intention was to follow up some of those ideas and post them here, hoping that they would accumulate to a reasonably entertaining browsing stop for people interested in similar issues, and maybe even a useful research source for somebody investigating an issue of urban economics or policy.

Then Donald Trump was elected president and much of my research agenda was rendered obsolete. Not because Trump is a detestable individual who should be nowhere near the White House, but rather because he assembled the most extremist, conservative administration in modern American history, and he had Republican majorities in the House and Senate to implement his Fox TV-brand of reaction. Many of my research and writing plans presumed a backdrop of stable government, with policy possibilities fluctuating between center-right and center-left. I might have wanted to investigate particular aspects of environmental policy, for instance, but what relevance did they retain when a climate-change denying administration sought to dismantle environmental regulations rather than improve them? Or, how might thinking about alleviating homelessness have to change when the federal government was actively trying to impede the ability of municipalities to address such problems?

Gradually a list of new research items grew, more relevant to this era of spiteful conservative government and to the period of liberal push-back that will inevitably follow. Then, the novel coronavirus changed the world again. Suddenly, the importance of repealing the caps on state and local tax deductions paled in comparison to the massive fiscal challenges states and cities will face with their economies shut down. Concern about the cost of housing in big cities shifted to concern about whether people will still be willing to live in dense urban environments. Plans to expand urban transit transform into worries over whether the riders will ever return.

By the beginning of April we had seen enough of the virus to know it was a vicious bug and that the social distancing measures were absolutely necessary. In the immediate future there will be a whole lot of death and sorrow, and much human misery in the collateral economic and social damage. Emergency efforts to mitigate the damage will preoccupy the public agenda in coming months, and the recovery of semi-normal economic life will be the policy preoccuption of the next two years or so. It will probably take much longer than that to regain the ground we have lost, especially in terms of the economic interfaces that were flowering all over urban America– the vibrant street life, the proliferating cafes and restaurants, the brimming public transportation, the large employers that were returning from their suburban exiles.

It will probably take five years or more for people to resume their pre-pandemic lifestyles–for travel to recover to the levels of 2019, for people to eat out as much, for events with large crowds to become as common as they were before. It may take a decade or more for the economic damage to be fully repaired–for new restaurants to replace vacant storefronts, for office buildings to be refilled, for the thick ecology of small business contactors to be regenerated. But I’m betting that in the long run the pandemic of 2020 will turn out to be a ditch, not a turning point. There was continuity of the economic and social trends before and after WWII, there was continuity before and after the Great Recession, and I think there will be continuity once again. The big cities will come back, small towns will continue to languish, and we’ll face all the old problems we had before.

Presidents and the Economy

While early opinion polls show a number of possible Democratic candidates beating Donald Trump in the 2020 election, economic models of presidential elections are telling a different story. Some of the most reputable economic models show Trump winning reelection handily on the strength of strong economic fundamentals. Barring an unlikely recession, Trump will undoubtedly make his management of the economy the centerpiece of his reelection campaign.

Most voters seem to think that economic conditions are determined by presidential policies and attribute the strength or weakness of the economy to who’s in the White House. Indeed, questions about management of the economy are staples of political opinion polls. Economists, in contrast, see presidential policies as having relatively little effect on cyclical economic conditions, although they are more prone to believing that sound economic policies can have long-term effects that may manifest long after a president has left office.

Yet, it would be too sweeping to argue that presidents have no short-term economic influence. The effects of tax and budget policies can sometimes have short-term effects (as well as long-term effects that may be hidden from voters), and some regulatory policies may as well. But the biggest economic influence presidents can have usually comes at times of crisis, when the road forks and the consequences of wise or foolish decisions may be fateful. Franklin Roosevelt’s management of the 1930s economic crisis comes immediately to mind. Abraham Lincoln, too, should get more credit for his management of the economic stresses of the Civil War and for his tax and banking innovations. As I will argue, Barack Obama also belongs in that small club of great economic presidents for his handling of the financial crisis and the deep recession he inherited.

Some presidents deserve more criticism for their handling of the economy–Andrew Jackson, for instance–but that is a bit too remote from current concerns. This post will focus on how our past three presidents have affected economic performance, and on how the public ultimately perceived their stewardship.

George W. Bush

The younger Bush inherited from Bill Clinton a federal budget surplus and a minor recession, and he used the latter to justify eliminating the former. That is, he campaigned on and fully intended to give large tax cuts to the wealthy under the already-discredited Supply Side doctrine, but when it became evident that the economy was slipping into recession early in his presidency, he repositioned his tax cuts as counter-cyclical fiscal stimulus. That rationale was enough to give 12 Democratic senators cover to vote for the bill, which passed 58-33 in an evenly divided senate.

Green Resolution

The “Green New Deal” resolution introduced last week by Representative Alexandria Ocasio-Cortez (D-NY) and Senator Edward Markey (D-MA) was a good idea. The Democrats needed to reestablish climate action as a governmental concern and inject it into the 2020 election. With her high visibility, appeal to young voters, and ability to get under the skin of conservatives, AOC could have been an ideal messenger. Like a football team throwing a bomb to its flashy rookie receiver on the first down of the first game, if executed successfully it could have rattled defenses throughout the season. Unfortunately, the pass was dropped and the Dems might now find themselves wishing they had called a more conventional play.

Sticking with the football analogy just a bit, Nancy Pelosi’s Democrats have been steadily grinding out the yardage but run the risk of being sucked into playing Trump’s game. Since possession of the House shifted to the Democrats, the political agenda and news has been entirely dominated by Trump’s boorish calls for his idiotic wall and his reckless government shutdown. Yes, Pelosi has outmaneuvered him at every step, but the Dems are not going to take back the Senate and White House in 2020 just by playing good defense. Meanwhile, their investigative committees have tread cautiously, partly for fear of interfering with the secretive Mueller investigation and partly for fear of appearing mere hecklers. With each passing week the presidential primary roster expands and, especially if Bernie Sanders enters the race, the risk grows that Medicare-for-All crowds out all other progressive issues. So the idea of AOC streaking down the sideline for a big gain on climate change made some sense.

One reason the play didn’t work as planned was that it wasn’t actually planned. Pelosi was forced to distance herself from it and did so in terms that were a little too dismissive for my taste. But who knows what really went on? Pelosi claimed that she hadn’t even seen the resolution before AOC’s press conference. If true, that’s a serious discourtesy. How is the Speaker supposed to support a resolution she hasn’t seen or apparently had any input into?