How Much Does the President Really Matter?

Pete Souza, Whitehouse.gov President-elect Obama, backstage at the U.S. Capitol on Jan. 20, 2009, just before taking the oath of office.

After a throw-out-the-Dems mid-term election on Tuesday, with Republican promises to unwind Democratic legislation like healthcare reform and an economy that refuses to break into anything more than a cautious jog, we use the Freakonomics Radio podcast to pose a tough question: How much does the President of the United States really matter?

We asked this question on the blog a while back and figured, with the political landscape so fractious and the stakes so high (or are they?), that it was a good time to update and expand, with a broad cast of characters doing the talking. (You can download/subscribe at iTunes, get the RSS feed or listen live via the link in box at right.) You’ll hear from some economists, a Constitutional scholar, a politician, and even a baseball manager.

Justin Wolfers

We open with Wharton economist (and Freakonomics blog contributor) Justin Wolfers, who talks about his love for gambling on political outcomes and does his best to outline the President’s influence. This is gleaned from, inter alia, Wolfers’s research on prediction markets. He describes the 2004 Presidential election (Bush/Kerry) as a “social scientist’s dream,” with a helpful shock to the system:

“If you remember the 2004 race – around about three o’clock election day the polls got leaked. … what you have is four hours in which we basically had a Kerry presidency… So what we can is we can look at how the financial markets perform during those four hours of the Kerry presidency and compare that to, either the four hours prior when it was clearly a Bush presidency, or the four hours after when it was clear that it was a George W. Bush presidency. So, when we do that we see in fact that stocks fell a little bit during the four hours of the Kerry presidency and that they rose a little bit when it became the Bush presidency. So that tells us that the stock market preferred George Bush over John Kerry.”

Although it doesn’t appear in the podcast, an interview with Caltech economist and political scientist Erik Snowberg yielded this insight:

“It seems that the public thinks that the president matters a lot more than our academic research would suggest. There is, actually, some academic research that shows that in counties that are very heavily Democrat, if a Republican wins the presidential election, in the fourth quarter of that year, consumption declines quite a bit. It can decline somewhere between 4 to 8 percent. So that seems to indicate that people think that it matters quite a bit more than it does. The argument in the political-science literature is that it’s like rooting for a team: when your team does really badly, you get upset. People end up spending a lot less money and that doesn’t seem to be borne out by the effects we note in the broader economy.”

Because the President’s job is so vast, and therefore hard to measure in terms of hard influence, we sought to measure the influence of some other types of top-of-the-pyramid leaders. Baseball managers, for one. We spoke to Joe Maddon of the Tampa Bay Rays – he was a great interview; smart, informative, upbeat – as well as “baseball economist” J.C. Bradbury. He argues that managers have little ultimate effect on a team’s performance. But, as with the Presidency, the role is still vital because “you need the final arbiter to say ‘This is the decision we’ve made and we’re going with it.’” That said, Bradbury argues that there’s a significant gap between the public’s perception of the President’s influence and his actual influence:

“I think people think that the President is a benevolent despot determining our fortunes when in reality I think the President is just sitting in the co-pilot seat of a plane that’s already on auto-pilot.”

We also looked into the true influence of corporate CEO’s and, while this segment didn’t make it into the podcast, Harvard Business School professor Rakesh Khurana talked us through the parallels between a CEO and President:

When we ask people, “What’s the most important things that affect firm performance?,” often the CEO is ranked, you know, 6 or 7 or 8 [on a scale of 10] … but if you go back to the research, it’s not that the CEO doesn’t matter, but that they matter in much more subtle and nuanced ways than we typically attribute. So my guess is that CEO’s matter closer to 2′s or 3′s rather than 7′s or 8′s.

About 15 years ago, when people asked why the American economy was doing so well, the simple response was, “Alan Greenspan – the maestro,”?as if you could reduce very complex causes to single individuals.? I think that what we need to do, is really step back as a society and say, “What is it that we expect from our leaders?? What is it that we expect from our institutions?” Because if we don’t do that, I think what we’re likely to do is to continue in this cycle of very high expectations followed by disappointments. Meanwhile what doesn’t get done goes back to the structuring and the health of the institutions that create the conditions for good performance, either in a firm or in our society.

Doug Mills/The New York Times John Ashcroft

We interviewed former U.S. Attorney General John Ashcroft, who shared his view that the President’s major power has historically not been the power of governance:

“When we think of our earliest presidents and the great heroes that we have as presidents, most of them are remembered not so much for their governances as they are for their leadership. If you think about George Washington, few people can mention any of the laws that were passed under his time as President, but they know what he stood for, and the kind of moral tone that he brought to America.”

And the episode concludes with Bernadette Meyler, a constitutional law professor at Cornell University, to whom I could have listened all day. She ably broke down the areas in which the President does and doesn’t exercise real power, pointed out some interesting historical trends, and identified – as did Ashcroft, Bradbury, and others – the disconnect between the President’s job and our view of the President’s job:

Bernadette Meyler

“Well, I really believe that the President isn’t as significant as we imagine him or her to be. We think of the President as having great power to fix the economy for example, or fix international conflicts, and to some extent the President has persuasive authority to do things like that. But the President really can’t just turn around and fix the economy within two years for example.”

This episode was great fun to put together, and I hope you enjoy it. Along the way, you’ll hear some long-forgotten musical performances by Presidents, including Harry Truman, Lyndon Johnson and Bill Clinton. You already know, surely, about Johnson’s legendary powers of persuasion. But did you know they extended to getting his dog to sing?

LBJ Library photo by Yoichi Okamoto President Johnson leading his dog Yuki in song