To draw upon Amanda's post and her reference to an interesting piece by Fareed Zakaria, it is interesting to think about the determinants of US economic performance, particularly in election season.
One thing to consider from Krugman's chapter 7. Nestled in the analysis are a couple of tidbits. First, note that the "hard work" in changing the economic malaise of the late 1970s was done by Fed chairman Paul Volcker. Now think about time lags, as Amanda notes. Volcker was appointed in 1979. By Jimmy Carter. Did Reagan get credit for what a Carter appointee did?
And, to be clear, this is not a one-sided partisan thought experiment. Notice that Krugman suggests the Clinton era jobs record would have been nowhere near what it was with someone else at the head of the Fed. Greenspan didn't take the punch bowl away just as the party got started. Did Clinton get credit for Greenspan's own "irrational exuberance"?
In short, you can find arguments on either side of this politically (and this certainly informs the current debate on Capitol Hill over whether Ben Bernanke is "helping Obama" or just "helping the economy"). But the larger question is: just how much leverage does monetary policy have over our economic performance?
Put another way: who is the most important person shaping economic policy in the United States? The President? Or the Chair of the Fed?
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