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It's NOT the Economy, Stupid 

Washington pretends it's part of the game

t has to be right up there on the top 10 list of great American charades. Every time there's a dip or surge in the economy, the pundits and politicians in Washington pull out their bullhorns and shout each other down over who's responsible for it and whose stimulus plan is going to solve it. This sort of high-pitched theatrics drives me nearly to distraction because I'm certain that if these people were smart enough to attain positions of national prominence, they're also smart enough to know that there's almost nothing a president or a political party can do in the short term to "fix" or "jumpstart" an economy. This fact may be politically inconvenient, but that doesn't make Washington any less irrelevant to what's going on right now in this country's economy. None of the current debate over why the economy is the way it is deals honestly with the mistakes the consumers and investors of this country made in the decade before September 11. The stock market hasn't deflated because some politician screwed up. It was grossly over-inflated during the 1990s because small-time investors and some fund managers made the mistake of sinking everything into internet and technology companies that had never made a profit and carried huge debt. As retirement portfolios swelled and the economy reached new heights that were largely an economic fabrication, people spent money like there was no tomorrow. After the stock market readjusted itself, the Enron, WorldCom and Arthur Andersen scandals finished off whatever shreds of confidence investors had left in it. And Sept. 11 certainly didn't help. Washington had little to do with any of this, and with the exception of Alan Greenspan and his rate cuts, Washington will have little to do with the inevitable economic recovery.

Economists agree on little, but nearly all of them put the life cycle of a recession at 18 to 24 months. Political policies can certainly have some effect on that cycle, but only around the edges, and only over the course of a year or two. In other words, unless Congress votes to slash Federal taxes in half and does away with the capital gains tax tomorrow, we're not likely to see much immediate impact on the economy beyond the short-term psychological effect of one stimulus package announcement or another. Think about it. How big an impact can a $670 billion tax cut plan really have on a growing -- yes it is still growing -- $10 trillion economy over 10 years? Not much, and they know it.

Unless Congress chooses to go along with the president on his economic plan, there's very little he can do and virtually nothing he can take credit for in the complex maze of daily commercial and personal transactions on the part of 250 million people that make up the "economy."

The pundits and politicos may try to take credit and pass blame for the parts of the economic drama of the past 20 years that happened to roughly coincide with one presidency or another, but the fact of the matter is that the dates just don't match up. If Ronald Reagan was responsible for the roaring 1980s, was he also responsible for the stock market crash at the end of his presidency? And if George I was responsible for the recession that occurred while he was president, then should he also get credit for its end, which, according to the National Bureau of Economic Research, the official authority on the business cycle, occurred a full year and a half before Bill Clinton took office?

Neither side of the aisle wants to talk too much about the fact that Clinton inherited an economy that was growing at slightly more than 3 percent a year before he took office. Why? Because then the Democrats can't claim that his leadership or the large federal tax increase under Clinton in 1993 pumped up the economy of the 1990s. And the Republicans, who took over Congress in 1994, can't claim that they caused the roaring economy either with their so-called welfare reform and balanced budgets, which Clinton eventually embraced because the Republicans controlled Congress. The truth of the matter is that welfare spending is now 33 percent higher than it was in 1993. And the rate of growth? Contrary to popular fabrication about the "biggest economic expansion in history" in the 1990s, the highest average rate of growth in this country -- 3.9 percent -- occurred between 1947 and 1970. The average rate of growth for the first 70 years of the last century was 3.5 percent. The average rate of growth between 1992 and 1999? An historically slow 3 percent I'm sure no one wants to take credit for.

The truth of the matter is that the Washington politicians need the economy a lot more than it needs them.

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