Walt Laws−MacDonald | Show Me The Money!
Good night and good luck
Published: Thursday, November 8, 2012
Updated: Thursday, November 8, 2012 08:11
In case you truly have been living under a rock, President Barack Obama was reelected Tuesday night, sweeping nearly every key battleground state and winning the popular vote — which, oddly enough, doesn’t matter.
Though the Romney camp had high hopes for the race, it became clear early on in the night that the states that needed to swing to Romney simply were not going to go his way. Nate Silver returned to his position as election messiah and Trump had a terrific Twitter meltdown.
As I mentioned in an earlier column, neither Obama nor Romney would cause the economy to immediately grow — or collapse. This recession did not begin with one sweeping policy change, and it will not end with one either.
U.S. markets finished higher Tuesday afternoon, with some seeing this as a sign that Obama would win later that night; again, this has little to do with any sort of policy Obama would enact the next day. Some — myself included — saw this more as a result of the expectation that Ben Bernanke would remain chairman of the Federal Reserve. Let’s pause for a second: I just analyzed a stock index’s rise as a sign that Wall Street believed Obama would win, because that would mean that the Fed’s “easy money” policy would remain in place. Still like politics? Me neither.
“What does that mean?” you’re hopefully asking yourself. The Federal Reserve controls the money supply — the amount of money that circulates in the economy — by controlling interest rates, among other tools. Bernanke, a Bush appointee and a Republican, has kept the country’s monetary policy extremely loose throughout the current recession. Wall Street likes this because it can borrow money on the cheap, and, ideally, Americans should like this because they, too, can borrow cheaply in the form of home, auto, education and other loans.
But then markets opened significantly lower Wednesday morning. This time people blamed the fiscal cliff, which, again, is really freakin’ important, but Romney would not have suddenly changed this issue either.
Though Romney sees the Fed serving a less active role in the recovery and hoped to use tax cuts to improve the economy (and somehow also reduce the deficit — what?) it leads us to a greater problem with analyzing economic policy: The president of the United States doesn’t control the economy these days.
American manufacturing giants like Caterpillar and General Motors have had their profits hurt by Eurozone instability, while both FedEx and General Electric mentioned China’s growth slowdown in their earnings calls. Most businesses operate in several different economies, and their own performances depend on how each one of those economies fare.
Any politician that says they’re going to “create jobs” is flat out wrong. You can make job creation easier, sure. But actually create jobs? Even the best legislation could not perfectly predict how the economy will react.
That’s why this election was about social issues: same−sex marriage, healthcare and the legalization of marijuana (as NBC’s Brian Williams put it, “There’s a lot of weed on the ballot tonight”). I don’t agree with everything on Obama’s plan for the economy, but at this point it’s a bit of a crapshoot. It’s easy to be wrong — see: anyone who advocates for a return to the gold standard — but being right depends on much more than business know−how.
As I told my mother last night, I’m socially liberal before I’m fiscally conservative. To put it simply, I’ll take equality over economic growth any day. So good night, pundits, and good luck, Mr. President. You’ll need it.
Walt Laws-MacDonald is a sophomore majoring in quantitative economics. He can be reached at Walt.Laws_MacDonald@tufts.edu.