Lew Goldfarb is a CPA, business lawyer, law professor, and co-author of the new book, Bulls, Bears, and the Ballot Box. He is director of the Entrepreneurship and Community Development Clinic at the University of Cincinnati College of Law.
Mitt Romney touts his success in business as a reason why you and I should vote for him in November. If history is a good indicator, this is a poor reason indeed. Romney asserts: "Americans need a conservative businessman to get this economy moving again, not career politicians. That is why I am running." A recent Wall Street Journal/NBC News Poll shows that six in 10 Americans buy this argument, believing Romney's business experience gives him an edge over Barack Obama in improving the economy. While Romney's argument may sound logical, there is reason to believe that it is wrong.
As co-authors of the new book, Bulls, Bears, and the Ballot Box, Bob Deitrick and I have compiled an immense amount of economic data from trusted sources, analyzing it in many ways. No matter how you slice and dice this data, it is clear that a negative correlation exists between presidents with prior success in running a business and success in stewarding our nation's economy.
In the past eight decades, four of our nation's leaders had success in business before moving into the White House. Herbert Hoover was an engineer and consultant who, by all accounts, did a fine job managing mining operations; Jimmy Carter experienced success in agribusiness, turning significant profits while operating his family's peanut farm; George H.W. Bush gained considerable wealth owning and operating an oil company; and his son, George W. Bush, although he struggled to match his father's success in the oil business, was successful as a managing partner of the Texas Rangers.
None of these successful businessmen succeeded as chief stewards of our nation's economy. In fact, in the opinions of most historians and economists, all failed miserably as economic leaders.
Bulls, Bears, and the Ballot Box corroborated these opinions using our Presidential Rankings of Economic Stewardship, or PRES, Rankings. The book evaluates and ranks the economic performance of the past 13 presidents using this customized ranking system, consisting of a diverse and objective cross section of 12 different economic indicators (stock market returns, GDP growth, debt accumulation, percentage of months in recession, income disparity, growth in average disposable income, average unemployment rate, average change in unemployment rate, percentage of years of acceptable inflation, growth in industrial production, average trade balance, and growth in corporate profits).
Consistent with other historical rankings, the four presidents who brought business success to the Oval Office finish at the bottom of our PRES Rankings. On 11 of 12 economic measures, the nine presidents without prior business success (Franklin Delano Roosevelt, Harry Truman, Dwight Eisenhower, John F. Kennedy, Lyndon Johnson, Richard Nixon, Gerald Ford, Ronald Reagan, and Bill Clinton) outperform the four presidents with such business success (Hoover, Carter, H.W. Bush, and W. Bush). Even more relevant to the election in November, Barack Obama outperforms those presidents who had previous success in running a business on nine of 12 economic measures.
Why do these results hold? The skills needed to be a successful businessman diverge widely from the skills needed to be a successful steward of our nation's economy. A successful business leader charts a course based on profit projections, and measures progress based upon profits or losses and rate of return to shareholders and investors, as measured in dollars and cents. Alternatively, success as the country's chief economic steward is measured by whether the president is able to advance policies that create an economic climate in which both private businesses and state and local governments can thrive; in which people can find work at a living wage; in which fair opportunities are created for all socioeconomic classes; in which consumers, workers, and the environment are protected from abuse; and in which the neediest have a safety net.
These economic accomplishments are not measurable simply in dollars and cents. Whether the federal government experiences a surplus or deficit during the president's term is not by itself determinative of economic success or failure.
In other words, compared to a business leader, the president works in a more complex universe with more moving parts and more uncontrollable variables. He must understand and contemplate the impact of his decisions on multiple stakeholders from different walks of life, not just a finite group of shareholders or investors. His progress depends on persuading, negotiating, and compromising with people who hail from opposing parties and have varying points of view.
When contemplating a run for the presidency in 1988, he later recalled, Lee Iacocca, former Chrysler boss received this advice from then Speaker of the House Tip O'Neill:"You're used to running a big corporation. When you make a decision in the morning, you either earn a profit that day or you don't. You can't run a government that way. It would drive you crazy. You wouldn't last a year…."
As Iacocca suggests, the American people should not equate managing the U.S. economy with managing Bain Capital. Instead, they should heed the lesson of history. When Mitt Romney asks for support because of his private sector experience, voters should respond skeptically and demand a better argument.