“Fact-checking” political candidates is all the rage, but sometimes the checkers themselves need to be scrutinized, especially when the facts relate to the economy.
There is no substitute for an informed and skeptical electorate. But many people apparently don’t retain everything they are taught in junior-high social studies. So a quick review of some basic civics and economics is useful.
Start with economics.
First, the effects of government, whether legislative or executive branches, on the economy are much less than many people believe. Yes, government can do things that are positive and things that are negative, but most aspects of how an economy performs are due to factors outside of government, including technological innovation, events in other nations that affect resource prices, and so forth.
Second, even legislation with short-term objectives, like tax changes intended to motivate greater household spending or saving, takes substantial time before having any effects on an economy.
Then review some eighth-grade civics.
Any legislation, including an annual budget, requires acts by both Congress and the president. The Constitution makes clear that for any money to be spent, it must be authorized and appropriated by Congress. And these bills, like any others, must be signed by the president to be valid. The president has no power to spend money except as appropriated by Congress and Congress cannot spend money on its own.
The Constitution also specifies that any tax bills must originate in the House of Representatives, the more democratic of the two bodies.
Now some specifics. In a Florida debate, Newt Gingrich asserted that his leadership as Speaker of the House led to four years of budget surpluses in fiscal years 1998 to 2001. A wire service “fact checker” article pooh-poohed this, saying that because 1998 was Gingrich’s last year in the House, he could claim success for only one year of the four.
This is incorrect. Fiscal year budgets begin on Oct. 1 of the prior year and should be enacted before that date. So the budget for fiscal 1998 was largely decided in 1997 and that for fiscal 1999 was in 1998. Newt was directly involved in both. Moreover, the growth of spending in several discretionary categories did slow over the period Gingrich was speaker. Achieving surpluses in any of these four years would have been difficult indeed without such earlier restraint. The Republican leaders in both houses can rightly claim some credit for this fiscal success.
However, so can Bill Clinton. Moreover, the steady decline in deficits relative to GDP, from 1992 through 2000, was due primarily to the increased revenues resulting from the tax hikes sought by George H.W. Bush in 1990 and by Clinton in 1993. On the spending side, the 20 percent decline in inflation-adjusted defense spending afforded by the collapse of the Soviet Union was the biggest factor.
Furthermore, prosperity based in part on the Internet boom and in part on increasingly lax Fed monetary policy boosted both personal and corporate tax revenues.
Understand that the former speaker was only one factor among many. But his role is one in which he can take honest pride.
An ABC News fact-check story online said: “When Obama took office in 2008 …” While he was elected in 2008, Barack Obama did not take office until 2009. And it takes a considerable amount of time for a new president to get any legislation to Congress, much less through it. So it is an error to ascribe the outcome of that fiscal year to a newly inaugurated president. To the extent presidents have responsibility, the 1981 deficit belonged to Jimmy Carter, not Ronald Reagan, and the 2009 deficit to George W. Bush, not Obama.
Yes, Reagan sought and got tax cuts that applied to calendar year 2001, just as some of Obama’s stimulus package did increase the fiscal 2009 deficit. In both cases, Congressional Budget Office studies showed legislation sought by the new president accounted for about 20 percent of the year’s deficit but that the other 80 percent would have occurred even if the policies and budget of the outgoing administration had continued exactly as before.
Much more could be said about politicians claiming credit and ascribing blame for economic outcomes. And there will be ample opportunity to do so over the next 10 months.