The political economy of U.S. economic performance: is the president responsible?

• Published in: Korean social science journal (Seoul, Korea ) Vol. 40; no. 1; pp. 39 - 51
• Main Authors: Bohte, John, Heo, Uk
• Format: Journal Article
• Language: English
• Published: Singapore Springer Singapore 01.06.2013; 한국사회과학협의회
• Subjects: Methodology of the Social Sciences; Social Sciences; 사회과학일반; Fiscal policy; Presidential management of the economy; Economic performance
• ISSN: 1225-0368; 2196-4424
• DOI: 10.1007/s40483-013-0003-0

A recurring theme in electoral politics is that American voters hold the president responsible for the state of the economy. Ironically, many Presidency scholars argue that presidents are ill equipped to manage the economy because other variables compete with and complicate the effects of fiscal policy. These include international variables, private market forces, and monetary policy, among others. Using simultaneous equation methods, we examine the direct and indirect effects of fiscal policy on economic performance while controlling for a variety of other determinants of economic performance. We find that fiscal policy plays a significant role in influencing unemployment and economic growth in the United States, even after controlling for a variety of other determinants of economic performance. We close by discussing the importance of linking the econometric modeling literature with the literature on presidential management of the economy.