It's Not the Economy, Stupid--It's Entitlement Spending
Voters should forget the short-term economic picture and focus on what the president has not done for us lately
March 13, 2012
No president—President Obama included—is captain of the USS Economy. Presidential actions rarely have dramatic effects on the macro-economy in the short run (and almost never in a positive direction). But voters tend to believe otherwise, in part due to the promises of candidates and the media's portrayal of presidential power. As a result, a president's electoral fortunes are closely linked to the state of the economy come election time.
Instead of judging the president on the short-run performance of the economy, Americans would receive a far greater benefit from judging the president's performance in an area over which he and Congress have direct control: entitlement spending. The reform of programs like Medicare would have significant long-run economic benefits by reducing the risk of a future debt crisis and alleviating fears that government spending will increasingly crowd out private sector activity. When creditors lose faith in a country's ability to pay its debts, the consequences are immediate and severe—just ask Greece and other euro zone members. And even if default is not imminent, the steady increase in entitlement spending diverts money to the government from the private sector, which constrains consumers and investors today through higher taxes or tomorrow through debt repayment.
For politicians, these risks pale in comparison to the significant electoral risks associated with entitlement reform. And President Obama, like most politicians, values re-election above all else. Until voters begin punishing incumbents who refuse to make difficult choices—instead of rewarding those who avoid hard choices—entitlement reform will not be a priority. Presidents will continue to take credit and receive blame for an economy over which they have little control, and the country's fiscal picture will continue to worsen.
President Obama has offered no meaningful proposals to restructure Medicare and other entitlement programs, the biggest threats to our fiscal future. Judged on these terms, President Obama receives a failing grade.