Posted 8/25/2008

"IT'S THE ECONOMY," STUPID

That's the advice James Carville gave young Bill Clinton when he was running against President H.W. Bush in 1992.

Now Clinton was really bright, a Rhodes Scholar and all. So why couldn't he figure out the winning strategy himself?

Because the press, understanding neither economics nor business, keeps dwelling on the political, and sometimes the military. Economics is Chinese to the press and to historians (who are reporters with Ph.Ds).

Historians have always ranked American presidents according to political and military criteria.

But how would our presidents rank if viewed on the basis of economic performance?

Thomas Jefferson is revered for writing the Declaration of Independence, but historians have not ranked him very high as a president. Yet in 1803 President Jefferson made the Louisiana Purchase, which nearly doubled the size of the U.S. (Today that area would account for 23% of the U.S. and about $2.5 trillion in GDP). Jefferson put us on the road to becoming the world's dominant economic power.

Napoleon said, "This accession of territory forever affirms the power of the United States." Without Jefferson's action, we probably could not have become the "arsenal of democracy" which defeated the Axis in World War II. Without the Louisiana Purchase, America would have been absent its industrial and agricultural heartland in World War II. Jefferson's action was all the greater because it was opposed bitterly by the Antonin Scalias of his day – the "strict constructionists" of 1803 who insisted that the acquisition of territory was not provided for in the U.S. Constitution.

Andrew Jackson was the hero of New Orleans, defeating the best the British had to offer by creating an army out of a ragtag bunch of volunteers, local scallywags, Indians and pirates. He was revered as President for making democracy truly mean "of the people" and not "of the property owners." Militarily and politically, Jackson was a great man.

But as an economic force, he was one of history's biggest failures. Trying to preserve an agrarian society by holding back industrialization, Jackson single handedly destroyed the U.S. Central Bank by transferring all federal deposits to local banks. The result was three years of wild, unregulated lending, accelerated industrialization, a huge economic bubble and the terrible economic crash of 1837 which set the country back years. The U.S. Senate was so upset that the body censured Jackson. Later the censure was withdrawn. Economically speaking, Jackson was one of our worst Presidents.

James Polk, the eleventh President, has been treated far too lightly by historians. The press of that period did not respect him because his wife Sarah seemed to wear the britches in the family. He also didn't look very heroic. Reporters didn't like Polk. Besides, he was only a one-term President. (Successful Presidents are those who serve two terms, like Grant.)

But from the perspective of economic performance, Polk was clearly one of our five best Presidents. His war with Mexico added Texas, California, New Mexico, Arizona and most of California to the USA. Those states account for a huge percentage of our Gross Domestic Product. Then, without a shot being fired, he maneuvered the British out of the Oregon Territory, thus adding incredible wealth to America. Altogether, he added 810,000 square miles of territory to the U.S.

Finally, he restored banking stability by creating the treasury system and a new national bank. He was the last "strong President" before the Civil War. And by the way, the only reason he served but one term was the breakdown of his health. He died a few months after leaving office.

Herbert Hoover came to the office of President as one of history's most distinguished businessmen, engineers and philanthropists. His private charity saved hundreds of millions from starvation in Europe shortly after World War I. In Polish, "to Hoover" meant to help. But historians are right, he was a terrible President. But they are wrong as to why.

The press recently claimed that "Hoover was trapped by the Great Depression and did nothing about it." Actually, the country would have been better off if he had done nothing. Instead he transformed a U.S. recession into a worldwide depression by signing the Smoot-Hawley Tariff Act, which brought world trade to a standstill. Then he tightened credit just when the country was desperately in need of money. His actions had a terrible effect on America because nobody at the time seemed to understand the law of supply and demand. Hoover created a situation where we had too little money chasing after far too many goods. World War II pulled the country of the Depression by flooding the country with money, which generated production and which created jobs.

John F. Kennedy has not emerged as a very good President. He engaged in the Bay of Pigs disaster without providing needed air support for the free Cubans. He appeared so weak and vacillating on foreign policy that Soviet Premier Khrushchev felt emboldened to plant Russian missiles on Cuba. The resulting Cuban Missile Crisis came within a whisker of creating World War III – a nuclear war.

But completely overlooked by the press and the historians was his extraordinary economic performance. The country was slowly emerging from the severe 1958 "Eisenhower Recession," which saw Pittsburgh with a 22 percent unemployment rate. In his campaign against Richard Nixon, Kennedy vowed "to get the country moving again." The country, sick of economic stagnation, bought into the promise and he was elected. His programs fulfilled the campaign promise, setting off one of the longest periods of economic prosperity the country has ever seen. From an economic perspective, Jack Kennedy was a real winner as President.

In the current Presidential campaign, no one in the press has seemed to get at any real questions about the global economy and our role in it.

The Project for Excellence in Journalism claims the current press is so disinterested in the current economic slowdown that it is not providing adequate coverage for the electorate. According to its research of 5,000 news stories between January 2007 to July 2008, stories about the presidential race outnumber economic coverage 5 to 1 –- despite the fact that the economy is the public's number one concern. In addition, the data seems to indicate that when the press does write about the economy, it uses outdated facts, further under-performing the public need.

As a result, we will have no idea which candidate, Obama or McCain, will make the right decisions at what could become a permanent turning point in U.S. economic history.

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