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The American president is widely viewed by the public and media as the nation's single most influential political and economic figure. But social scientists have often concluded that presidential words fall "on deaf ears" or have little lasting impact on policy or public opinion. Then why did Bill Clinton make 12,798 public references to the economy during his eight years in office compared with Harry Truman's mere 2,124 during his own two terms? Why George W. Bush's 3,351 remarks during his first term? Did all these words matter?
The Politics of Economic Leadership is the first comprehensive effort to examine when, why, and how presidents talk about the economy, as well as whether the president's economic rhetoric matters. It demonstrates conclusively that such presidential words do matter.
Using an unprecedented compendium of every known unique statement by U.S. presidents about the economy from World War II through the first George W. Bush administration, Dan Wood measures the relative intensity and optimism of presidents' economic rhetoric. His pathbreaking statistical analysis shows that presidential words can affect everything from approval of the president's job performance to perceptions of economic news, consumer confidence, consumer behavior, business investment, and interest rates. The impacts are both immediate and gradual. Ultimately, Wood concludes, rhetoric is indeed a tool of presidential leadership that can be used unilaterally to affect a range of political and economic outcomes.
ON JULY 2, 2004, as the election season got underway, President George W. Bush spoke on the U.S. economy from the East Room of the White House. The White House press release for this event was entitled "Over 1.5 Million Jobs Created and 10 Straight Months of Job Gains." In his remarks, President Bush noted that the U.S. economy had been through a lot during his administration, with a recession, national emergency, corporate accounting scandals, and a war. The tone of his remarks on the economy, however, was decidedly positive. He made multiple references to his administration's tax policies, which he claimed were stimulating job growth and the economy. The president also alluded to growing consumer confidence, increasing personal income, record home ownership, improved manufacturing, and a robust job market. He claimed that all of these factors bode well for the future of the U.S. economy. Through this election season speech, the president was obviously trying to foster the notion that his stewardship of the U.S. economy had been good during his first term.
Various surveys released shortly after the president's speech provide a reality check on the president's remarks. They suggest that the president may have been singingto a deaf audience. In separate polls conducted by CBS News/New York Times and the Associated Press, around 57 percent of survey respondents viewed the nation as "on the wrong track," and a majority of survey respondents "disapproved" or "strongly disapproved" of the president's handling of the economy. The monthly ABC News/ Money Magazine poll of American attitudes about the economy released five days later found that 59 percent of respondents gauged the state of the nation's economy as either "not good" or "poor." Fully 45 percent of survey respondents rated their own personal finances as either "not good" or "poor"; around 58 percent of those same respondents viewed the current time as "a not so good time" or "a poor time to buy the things you want and need." Obviously, there was a disjuncture between the president's words and the perceptions of ordinary citizens.
Of course, the president's speech was only part of a continuing strategy by the administration to use economic rhetoric for political ends. From the 2001 inauguration through January 20, 2005, the president alluded to the economy 3,351 times in various speeches, news conferences, radio addresses, and other public appearances. This was an average frequency of about 70 times per month. In relative terms, over this period the president devoted more public remarks to the economy than any other issue except national security.
The tone of President Bush's economic remarks, however, changed considerably over the course of the administration. During the 2000 election campaign, candidate Bush had promised a large tax cut to his conservative supporters. A large tax cut is ill advised, however, when the economy is "overheated" since it would be inflationary. Indeed, over the two years prior to the 2000 election, the Federal Reserve Board had raised interest rates six times in an effort to cool down the economy. In December prior to the presidential inauguration, the unemployment rate had been a mere 4 percent, and recent economic growth had been robust. Nevertheless, during the 2000 election campaign and after the inauguration the president attempted to justify a reduction in taxes as a move to stimulate the economy. The president seemingly "talked down" the economy to persuade Americans that a tax cut was needed.
Four days after the inauguration a reporter asked the president how he could convince congressional Democrats to go along with his large proposed tax cut. He responded, "I think the evidence is going to become more and more clear that the economy is-it's not as hopeful as we'd like, which I hope will strengthen my case" (Remarks Prior to a Meeting with Bipartisan Congressional Leaders and an Exchange with Reporters, January 24, 2001). Later in early February, the president spoke to Republicans at a congressional retreat. He said,
It is so important for us to understand some facts. One, the economy is slowing down. And it's important for us to combine good monetary policy with good fiscal policy.... I come from the school of thought that by cutting marginal rates for everybody who pays taxes is a good way to help ease the pain of what may be an economic slowdown. I'm going to make that case over and over and over again until we get a bill through. (Remarks at the Republican Congressional Retreat in Williamsburg, Va., February 2, 2001)
The president was true to his words to congressional Republicans. Over the next three years, he repeatedly pounded home the message that the U.S. economy was doing poorly and that tax cuts were needed to stimulate jobs and economic growth. Between the inauguration and September 2001, the president made an average of twelve pessimistic comments about the economy each month. During September, the month of the terrorist attacks, the president alluded to poor U.S. economic performance seventeen times.
As it turned out, economic growth did slow in 2001. The National Bureau of Economic Research (NBER) determined that a recession had occurred between March and November. Whether the slowdown was a self-fulfilling prophesy or simply a matter of chance, the first Bush tax cut came at an opportune time. The Economic Growth and Tax Relief Reconciliation Act of 2001 (PL 107-16) reduced taxes by roughly $1.3 trillion over the next 10 years. It reduced the estate tax, cut the top four income tax rates, shifted the tax burden away from upper-income groups, and carved out a new 10 percent tax bracket from part of the existing 15 percent bracket. The president had achieved the largest tax cut in U.S. history, thereby keeping a campaign promise to core partisan supporters.
The president, however, did not achieve all he had promised during the 2000 election campaign. Therefore, he continued the same strategy over the next two years to push for even more tax cuts. In response to the president's efforts, in March 2002 Congress passed the Job Creation and Worker Assistance Act (PL 107-147), which provided tax relief for businesses and an extension of benefits for unemployed workers. According to the NBER, at this point the economy was no longer in recession. A year later when the economy was obviously no longer in recession, the president signed yet another piece of tax legislation that gave the third largest tax cut in U.S. history. The Job and Growth Tax Relief and Reconciliation Act of 2003 (PL 108-27) provided an additional $350 billion in tax cuts for the nominal purpose of stimulating economic growth and producing more jobs.
Over three years the president had accomplished three large tax cuts to produce the sharpest reduction in federal revenues in U.S. history. Large federal budget deficits resulted that are projected to last through the next decade. The largest beneficiaries of the Bush tax cuts were upper-income groups and investors. The tax-cutting campaign was purported by the Bush administration to be in response to what the National Bureau of Economic Research classified as the mildest recession since World War II (Nordhaus 2002).
During this period, the president was more pessimistic about the economy than any past president. There was also an obvious increase through this period in consumer pessimism. Between the 2000 election and early 2003, the University of Michigan's Index of Consumer Sentiment, a measure of consumer confidence, declined by around 40 percent. As the introductory vignette suggests, most Americans were skeptical about the economy and the president's economic leadership. This economic pessimism among citizens may have related somehow to the president's continuing pessimism.
In early 2004, public opinion about the president's economic leadership did not bode well for reelecting the president. Accordingly, during the election season the president became increasingly optimistic, assuming the role of cheerleader for administration policies and the economy. The president touted the three tax cuts as responsible for turning around a weak economy. Unemployment had fallen to 5.4 percent by August. There was little evidence of inflation, and economic growth averaged around 3.5 percent. The president needed to produce a perception of effective economic leadership to bolster the upcoming reelection effort, so he claimed credit for a set of economic statistics that were less positive than when he took office. Interestingly, the optimistic tone of President Bush's remarks dropped precipitously immediately after his 2004 reelection.
WHY DO PRESIDENTS TALK SO MUCH ABOUT THE ECONOMY?
President Bush talked more about the economy during his first term than about any topic except national security. This pattern of continuous presidential attention to the economy is typical of modern presidents. Unless there is an international crisis, they talk more about the economy than any other issue. A core research question addressed in this book is "Why?" Why do modern presidents feel so compelled to emphasize the economy in their public remarks?
Of course, presidential remarks about the economy have not always been so intense. President Truman alluded to the economy in a public setting about 2,124 times in his roughly eight years in office, or an average of about twenty-three public comments about the economy each month. This relatively low level of presidential attention continued through the Eisenhower administration, but increased gradually for the Kennedy through Nixon administrations. During the stagflation era of the 1970s, the frequency of presidential remarks on the economy increased sharply. President Ford mentioned the economy in a public setting 3,799 times in about two and a half years. This was over five times as often as Presidents Truman and Eisenhower. During the Clinton administration, which adhered to the mantra "It's the economy stupid!" presidential attention to the economy increased sharply again. President Clinton mentioned the economy in a public setting 12,798 times in eight years, or around 133 times per month. This was about six times as often as Presidents Truman and Eisenhower. As noted earlier, this pattern of elevated presidential attention to the economy continued through the George W. Bush administration.
Modern presidents are on a permanent campaign (Blumenthal 1982; Gergen 2000; Ornstein and Mann 2000), and emphasis on the economy is a major part of that campaign. "Going public" has become an important dimension of governing in America, with presidents from Richard Nixon through George W. Bush devoting an increasing amount of White House resources to public relations (Jacobs and Shapiro 1995a, 1995b; Kernell 1997). A major component of the permanent campaign is a focus on the president's stewardship of the economy. Thus, a simplistic answer to the question of why presidents talk so much about the economy is that contemporary presidents believe it is a useful public relations ploy.
The introductory vignette suggests, however, that presidential rhetoric has no real impact on public opinion. If this is true, then this motivation is questionable. If presidential rhetoric is ineffective, then presidential attention and energy would be better spent behind the scenes building coalitions to address a range of pressing issues such as health care, Social Security, education, or the environment. Thus, the research reported in this book serves a practical purpose in informing scholars and presidents alike as to the efficacy of presidential efforts at rhetorical leadership.
More generally, this work intends to increase the body of scientific knowledge about the public presidency. I specifically want to explore what factors determine variations through time in the intensity and tone of presidential remarks about the economy. Are presidential remarks on the economy mere politics, as suggested by the economic rhetoric of George W. Bush? Are presidential remarks on the economy a response to political conditions, such as approval ratings, public opinion, or election year incentives? Is presidential rhetoric on the economy a response to the economy? If so, what is the nature of that response? More generally, do presidents attempt to lead the economy through rhetoric that can spark economic optimism and potentially alter economic behavior?
THE INSTITUTIONAL CONTEXT
As noted, the frequency of presidential remarks about the economy has increased through time. Some of this increase may be due to the changing nature of the presidency as an institution. The presidency generally has become more rhetorical through time. For example, Tulis (1987) describes the rise of the rhetorical presidency from the early days of the Republic through modern times. He argues that presidents beginning with Theodore Roosevelt and Woodrow Wilson increasingly used rhetoric to place the presidency at the center of the political system. Similarly, Edwards (1983) describes the development of the public presidency whereby presidents increasingly use public relations to influence Congress, the media, and public opinion. Hart (1989) documents these changes further by analyzing presidential speechmaking from Truman through Reagan and concludes that modern presidents have spoken more and more through time, but may actually say less. Similarly, Hinckley (1990) describes the rise of the symbolic presidency, as presidents have increasingly used rhetoric to play on the media stage to shape public images.
The evolution of the public presidency may be important to an increasingly rhetorical style of presidential leadership. It does not explain, however, why presidents have focused so much of their rhetorical attention on the economy. Rather, we must also consider the particular economic institutions that have emerged to understand increasing presidential attention to the economy. Through time, multiple institutions have evolved, culminating in a modern presidency that is now the chief economic policy-making actor in the United States.
The evolution of presidential responsibility for the economy began with the Great Depression. The despair and devastation of massive unemployment, lost wealth, and widespread poverty produced a cry for help from the federal government. The cataclysmic economic downturn altered citizen expectations about the role of the central government in promoting a strong national economy. With the Great Depression also came an intellectual shift which recognized that "laissez-faire" markets could no longer be trusted, and that the national government should be a mechanism for addressing market failures (Heilbroner and Singer 1999, 261-87).
The response was the election of President Franklin Roosevelt in 1932. The first Roosevelt administration achieved few concrete policies to remedy the depression. Indeed, the United States was still experiencing severe economic hardship during the second Roosevelt administration up to World War II. Nevertheless, Roosevelt was a dynamic rhetorical leader who spoke optimistically about the future (Burns 1956; Schlesinger 1960). Through weekly radio addresses and speeches, he directed attention to himself to inspire confidence that prosperity would return. The president's chief accomplishment was to alter the political culture surrounding public expectations for government management of the economy (Cohen 2000).
Following World War II, a feared return of high unemployment and the rise of Keynesian economics led Congress to pass the Employment Act of 1946 (PL 79-304). This legislation formally institutionalized an activist role for the president, charging government with promoting "maximum employment, production, and purchasing power." From this point forward, presidents were required to make an annual Economic Report to Congress detailing the current and future state of the economy, as well as the administration's plans and recommendations for promoting these goals. The president also received an advisory staff within the Executive Office of the President through the creation of a Council of Economic Advisors.
Excerpted from The Politics of Economic Leadership by B. Dan Wood
Copyright © 2007 by Princeton University Press. Excerpted by permission.
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List of Illustrations ix
List of Tables xi
CHAPTER 1: Presidential Words and the Economy 1
CHAPTER 2: Measuring the Intensity and Tone of Presidential Rhetoric about the Economy 17
CHAPTER 3: What Determines the Intensity and Tone of Presidential Rhetoric on the Economy? 34
CHAPTER 4: Four Cases of a President’s Rhetorical Leadership of the Economy 63
CHAPTER 5: Do Presidents Affect Public Approval of Their Job Performance through Economic Rhetoric? 109
CHAPTER 6: Does Presidential Rhetoric on the Economy Affect Economic Behavior and Performance? 136
CHAPTER 7: Why Should We Care about Presidents’ Economic Rhetoric? 161