Mazel: A Key to the Economy
| January 21, 2016
It’s not what you spend it’s where you spend Back in 1928 when the average American earned about $17 a week Democratic presidential candidate Al Smith mocked a Republican Party campaign ad promising Americans “a chicken for every pot and a car in every garage.” “Can you imagine in your mind’s eye a man at $17.30 a week going out to a chicken dinner in his own automobile?” Smith asked belittling both possibilities during a campaign stop in Boston two weeks before Election Day. Smith’s cogent observation didn’t help much. Republican Herbert Hoover whipped Smith in a landslide. But a year later the stock market crashed and America tumbled into the depths of the Great Depression when $17 a week represented a princely sum with unemployment above 20%. Four years later Hoover was voted out and no Republican saw the inside of the Oval Office again for the next 20 years. The battle over which political party manages the American economy more effectively is still raging. Republicans and their backers contend their ostensibly conservative economic policies including lower taxes and spending cuts fuel economic growth and free the private sector to beat the path to prosperity. Democrats and their supporters argue that their macroeconomic policies including higher government spending and intervention boost consumer demand and even out the playing field. Ask Alan Blinder and Mark Watson of the Woodrow Wilson School and Department of Economics at Princeton University a duo who have studied economic performance under the last 16 administrations and they’ll furnish you with a decidedly unprofessorial answer as to why economic growth averages 1.8% a year higher under the Democrats. “It seems we must look instead to several variables that are mostly ‘good luck ’ with perhaps a touch of ‘good policy ’ ” Blinder and Watson write in a research report they prepared two years ago. “Specifically Democratic presidents have experienced on average better oil shocks than Republicans (some of which may have been induced by foreign policy) a better legacy of productivity shocks more favorable international conditions and perhaps more optimistic consumer expectations.” The unexpected decline of oil prices by two-thirds in the waning days of the Obama administration is one confirmation of the professors’ finding that positive oil shocks smile on Democratic administrations more than Republicans. And reading between the lines the high correlation they found between “mazel” and economic performance shows that the resident of the Oval Office is far from the highest power on earth. Robert Shapiro an economist and former undersecretary of commerce for economic affairs in the Clinton administration partially corroborated that latter view when he told US News and World Report last October: “The main role a president plays is to not make big mistakes that can hurt the economy and hurt incomes.” But good mazel and keeping out of trouble doesn’t account for everything and the next president will still have to put in his or her hishtadlus. Shapiro offers two guidelines to help perplexed voters differentiate between the banal campaign promises of presidential contenders and those ideas that offer true promises of chicken dinners cars and garages to park them in. The first is to focus on where they propose to spend taxpayer dollars. The increased levels of public investment in education infrastructure and basic nonmilitary research under the Clinton and Reagan administrations (which Shapiro said was head and shoulders above such investments made by America’s last two presidents Bush and Obama) paid dividends. “Such investments can help bolster labor force skills and worker productivity and ultimately help drive both economic growth and wage gains ” Shapiro told US News and World Report. Those investments resulted in sharp employment gains averaging 242 000 new jobs per month under Clinton and 156 000 per month under Reagan. Both Clinton and Reagan were also stingy with their overall spending programs. “Reagan stabilized the deficit and Clinton eliminated it and then it exploded under Bush and has remained relatively high under Obama ” Shapiro noted. The dual goals of higher spending and government thrift appear to be on a collision course but in reality they run on parallel tracks when the government spends in the right places and in proportion to the public need. It’s a matter of setting priorities and investing for long-term gains that will benefit the people rather than zeroing in on increasing spending on or indiscriminately slashing existing programs that don’t foster economic growth. The candidate that can articulate best that it’s not how much you spend but where and how you spend it and for what ultimate purpose is the one that is worthy of serious consideration at least for voters whose greatest concerns revolve around pocketbook issues. —Binyamin Rose
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