“The Economy: How Scared Should You Be?” blares Newsweek’s current cover. Inside are some alarmist articles (“Weathering the Storm” … “How To Avoid a Mauling” … “That Rainy Day May Be Here Now”)—plus a column attacking President Bush for irresponsibly spreading alarm about the economy. Doomy talk from the White House can become a self-fulfilling prophecy by weakening consumer confidence, Newsweek warns. Many others, in the media and among Democrats, are saying the same thing. So what about doomy talk from Newsweek?
The end of the great boom was the big story of the year 2000, and the media missed it almost completely. Although the stock market started plummeting in March, as late as Thanksgiving the general drift of economic coverage was still that the American economy had entered a new phase of permanent prosperity, beyond the boom and bust cycles of the industrial age. That tone changed dramatically between Thanksgiving and Christmas, and since then the press has been making up for lost time in grabbing onto every bit of evidence for pessimism.
And what about consumer confidence? Good answer: Journalism’s duty is to tell the truth and not to worry excessively about the consequences. But it is an odd inversion of that principle to suggest that the president has some kind of duty not to tell the same truth. Some say it’s a question of emphasis: The president shouldn’t lie, but he should present the facts in an uplifting manner. This is another nice example of how journalists can deplore politicians’ “spin” and yet demand it at the same time. “Look, George, you’re supposed to be fatuously optimistic, and we’re supposed to throw cold water. Don’t you know the rules?”
Criticism of George W. for poor-mouthing the economy is “gotcha” journalism and knee-jerk political opposition at their silliest. The president is damned if he does, damned if he doesn’t, and damned if he does the opposite. If he were to stay silent, he would be accused of ducking the issue. If he made optimistic noises, they’d say he had his head in the sand and was callously indifferent to the pain. Do you doubt it?
It’s fair enough to accuse the president (as Newsweek also does) of trying to have it both ways on the economy’s prospects. If you go to this page on the White House Web site and scroll down to Table S-14, you will see that the Bush administration’s own official assumptions about the economy are for real growth of 2.4 percent this year and more than 3 percent every year after that until 2011. Robust growth and no recession for the next decade. Bush needs these optimistic assumptions to generate the surpluses that finance his tax cut, just as he needs the pessimistic assumptions of his rhetoric to support the need for this same tax cut. His chief economic adviser, Larry Lindsey, calls the economic assumptions behind the surplus numbers “very conservative.” If Bush believes this, then his pessimistic remarks deserve criticism, not because they are dangerous, but because they are dishonest.
There is something comical about the notion of millions of citizens making major economic decisions based on the prognostications of George W. Bush. If he weren’t president, nobody would give a hoot what he thought. Does getting “elected” [sic] suddenly confer great insight and wisdom upon him? Obviously, it confers the power to act in ways that affect the economy. And the fashionable view that presidents are powerless and all the gears are controlled by the Federal Reserve Board is, at the least, a serious exaggeration. But there is no mystery about how President Bush intends to act, and it doesn’t turn on his insights about the current state of the economy. Thumbs up, thumbs down, whatever: He will push for a tax cut.
Compare and contrast Alan Greenspan. He is someone whose views on the economy would be sought out even if he weren’t in the government. His notoriously gnomic remarks are picked apart for hints of his current thinking. And yet, the markets usually react in the opposite direction from what they think Greenspan is saying. If he suggests that he is more optimistic than the general consensus at the moment, the markets go down. If he seems unexpectedly gloomy, they take heart.
Why? Because even Alan Greenspan’s wisdom about the future isn’t influential enough to seriously affect that future. What can and does affect the future is his power to act. And the nature of that power—narrowly focused, quick to exercise or reverse, nearly unilateral—makes any public comment an important clue about what he might do. So, if he is unexpectedly dour, people figure this means he is more likely than previously supposed to loosen up and reduce interest rates. If he seems optimistic, people give up hope of a little treat from Uncle Alan.
By contrast, the president’s power to affect the economy is more diffuse, longer-term, hemmed in by checks and balances. It is the different nature of that power that makes a president’s remarks about the economy less influential—no matter which office has more power and which officeholder has more wisdom. So let the president speak. It can’t do any harm.
