Listening to Economic Advice like Military Advice
Very few presidents are able to campaign on their military expertise. The last president who could lay claim to military leadership experience was Dwight Eisenhower, Supreme Commander of the Allied Forces in Europe during World War 2 and a five-star general. Other presidents must offer reassurances that they will make military decisions only after careful consideration and advice of military leaders.
As for economic expertise, the same thing can be said. Though some past presidents, including George W. Bush, have business degrees, very few (if any) have degrees (let alone advanced degrees) in economics. Bill Clinton did study economics while at Oxford, but he never received a degree in the subject. Yet politicians, especially those currently running for the Republican presidential nomination, seem to emphasize their remove from influence of economists, even going so far as to suggest that Ben Bernanke, chairman of the Federal Reserve, had committed treasonous acts. Politicians would do well to treat the advice of economists with the same weight they give to the advice of military leaders.
Politicians listen to the advice of military leaders because A) the topic is of vital national interest, B) they lack experience themselves, and C) they need others (troops and others) to follow and accept their commands. The same thing can be said for economics. The economic policies of the United States can have a direct impact on the health of our economy. Though the Federal Reserve is insulated (wisely) from government intrusion, Congress can pass legislation that can affect the economy. Furthermore, in times of great crisis, Congress can authorize emergency action to help shore up our financial system. Such an event occurred recently, when Congress approved the Troubled Asset Relief Program (TARP) to provide much needed liquidity to major financial institutions. This action was prompted based on the sound advice of economists, and it ultimately helped reduce the severity of the impending recession. Without such action, the effects of the financial collapse around the world would have been even more severe.
But would Congressional leaders and the president have known such action was desperately and imminently needed without the advice of economists? The answer to this question is unclear. Mr. Bush, president at the time, was no Jeb Bartlett, the president from the television show The West Wing and a Noble Prize winner in economics. Instead, Mr. Bush had to rely on the advice of others who knew much more about the financial system. In these complex matters, deferring to expertise is the wise thing to do.
Deferential treatment toward economists helps make the right decisions about emergency action, and it also helps ensure that banks and other private businesses feel a sense of reassurance about the economic policies of the nation. Consider this possible outcome had Congress not passed the TARP. Ford, or any other large manufacturing company, frequently relies on short-term loans from banks in order to keep their company running. For example, Ford may have been waiting for a return on a major investment overseas; the investment had tapped their cash reserves, leaving them unable to make payroll without a short-term loan. If banks suddenly stop lending because they themselves aren’t sure how much money they have (given foolish investment in various toxic derivatives), then Ford can’t get the money it needs to pay its employees. To avoid having employees work without pay, Ford is forced to shut down all its factories and temporarily lay off all employees. But if the banks are reassured by Congress’s actions and if Ford feels confident that the markets retain liquidity (at least enough for them to squeak by), then the economy can continue mostly normally. Obviously large layoffs did occur, but few as dramatic as the worst case scenarios we can imagine.
Some politicians and candidates might argue that economic consensus is seldom found and that the president needs to show a strong will when it comes to economic matters. This is definitely true. But military consensus may not always occur either, and setting a general priority is different from dictating just how to accomplish the goal. A president can set forth to reduce budget deficits, but he should defer to economic advisors on the best way to achieve the goal. Without this advice, radical cuts can actually stall the economy further; this is exactly what happened in Britain after the election that installed David Cameron as Prime Minister.
Let’s hope that claims of treasonous activities are simply campaign rhetoric. After all, President Obama campaigned to end the war in Iraq but, when elected, proceeded to do so in a very cautious way following the advice of military leaders. Still, even rhetoric can cause problems. Part of the president’s job is to instill confidence about the nation’s course; suggesting that the Federal Reserve is weakening the economy does nothing to encourage recovery, especially when such statements are clearly made without any economic expertise.
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