A Tale of Two Cities by Charles Dickens begins with the line, "It was the best of times; it was the worst of times." The line certainly fits today. The national economy is doing very well, yet there is a great cloud of scandal hanging over the President’s head, dividing the country into Clinton supporters and detractors. I refuse to say anything about the scandal, because, after all, The Bayou Business Review is a New York Times publication, whose motto has long been "All the news that’s fit to print." I’m afraid that anything I would say on the matter would be no more fit to print than what has gone on in the White House in recent years. Instead, the President’s job approval ratings shall be my subject.

In spite of an embarrassing scandal confronting the President, 70% of those polled have consistently given him high marks on his job performance. The reason has been obvious. Job approval ratings for Presidents have consistently been tied to the performance of the U.S. economy. People blame the President when times are bad and give him credit for prosperous times; job approval ratings for Presidents correlate with the health of the economy. Essentially, if people are prospering, they are happy and give the President credit for their wellbeing, but blame him if they are having trouble making ends meet or finding a job. We live in one of the most prosperous times the country has seen in the past 50 years, with exceptionally low unemployment and low inflation and interest rates, so the President gets good marks.

The only problem is that it is a great error in logic to rate the President by the economy’s performance. This error in logic has been given the name, the post hoc, ergo propter hoc fallacy, which is just the Latin name for "after this, therefore because of this." It is an error to say that because A occurs before B, that A causes B. Just because Clinton took office and then the economy improved does not mean that Clinton made things get better.

Economies fluctuate because producers must invest in productive capability in advance of consumption. If producers’ plans aren’t matched with buyer’s later plans to buy, the producers will have to cut back, which will involve layoffs and reduced orders of supplies. There are natural fluctuations and there are fluctuations that are inflicted by governmental policies.

In the 70s, our economy faced a lot of fluctuations because politicians and the Federal Reserve tried to stimulate the economy. The stimulation usually involved reductions in interest rates through expanding credit and money by the Federal Reserve Banks, creating more dollars in the economic system. With borrowing cheaper, many companies would invest more, expanding the economy.

The problem with money expansion is that if that it is inflationary. When inflation was noticed as a problem, the Federal Reserve would clamp down on credit, driving up interest rates, choking off investment spending and layoffs ensue.

In the late 70s, the Fed Chairman appointed by President Carter halted this stop and go Federal Reserve monetary policy and things settled down after several years to a long expansion with little inflation. Reagan was at first blamed for the recession of the early 80s and then given credit for the long expansion that occurred afterward.

It may be possible that taxing and spending policies can stimulate the economy, but this is a matter of debate among economists. The problem is that by the time that a President and Congress can react to any downfall, things have usually swung back the other way, so that their expansionary policy takes effect when the economy is already expanding on its own.

The President has less to do with the performance of the economy than the people with foresight or vision to attempt new undertakings, the entrepreneurs. Such new undertakings increase when the entrepreneur is allowed to keep more of her profits. High income tax rates and capital gains tax rates sap the enthusiasm of the entrepreneur.

Whether the economy is going well or not, whether you have a good job or not, look elsewhere for credit and blame. Mirrors work well for this.