Chief Executive Magazine, November 1997

The only things politicians are more eager to do than shirk responsibility for their mistakes is to claim credit for beneficent events they had no hand in creating. A current debate inside policy and political circles over just who is responsible for the current economy--72 straight months of expansion, tranquil price indexes, and unemployment under 5 percent--illustrates this well.

Since the debate is in Washington, our government is assumed to be the central cause. Under contention is which set of government policies--and which set of government officials--prepared the soil for the bountiful harvest.

A recent survey of 200 CEOs and CFOs of top performing companies turned up evidence that few of the current leaders in Washington are likely to find heartening. The poll conducted by Investor's Business Daily and Technometria Institute of Policy and Politics found that America's top executives give little credit to Washington's elected officials. And when they do send credit Washington's way, it is not the current crop of politicians who earn the Kudos, but those farsighted supply-siders of the Reagan administration.

The three factors that triggered the last wave of growth, the executives reported, are productivity gains, federal reserve policy, and information technology. The top three sustaining it are low inflation, productivity gains, and federal policies.

The first elected politician to appear on the list was Ronald Reagan, in sixth place. Twenty-six percent of executives credit his policies for triggering growth. "I think the government played a big role in the early '80s by deregulating the economy," Richard Sim, CEO of Applied Power Inc.,m told Investor's Business Daily. "I think that unleashed a lot of competitive forces that have been very healthy to this day."

Bush came up at 14 percent. President Clinton was deep in the cellar--next to last-with only 8 percent of CEOs and CFOs crediting his policies. Citing the administration's urge to regulate and focus on redistributing wealth, Thomas Sansome, CEO of Jabil Circuit, a computer peripheral company in St. Petersburg, FL, told Investor's Business Daily, that "Clinton has been no friend to business."

Sims concurs. "Clearly, the Clinton administration has a tendency to want to pile on more regulations, more costs," according to Sims. "And that is counter to creating economic wealth for the nation."

But while the individuals who have had more than a small hand in creating the current economic expansion give but a peripheral role to Washington's policy-makers--American Enterprise Fellow and Washington Post columnist James Glassman calls them "little more than supernumeraries, but players in this great economic opera"--the debate rages in Washington over just who is responsible.

The New Democrats, allied with many in the mainstream media, claim credit for President Clinton, since the bulk of expansion has occurred under his watch. Never mind that the expansion was underway before he was elected. Never mind that one of his top priorities upon entering office was a Keynesian stimulus package that would have killed a smooth expansion. Correlation proves causality: Clinton is presiding over the expansion, therefore he prompted it.

Conservatives, free-marketers, and supply-siders have a different--more accurate--interpretation. Like Seagate's Sims, economists such as Lawrence Kudlow, chief economist at American Skandia Marketing, Inc., and UC Irvine Professor Richard B. McKenzie, credit Reagan with preparing the soil in which the economy is flourishing.

The government is too big and clumsy an actor to fine tune the economy; its role is to set the parameters, keep monetary policy stable, and tend to the regulatory garden to keep the weeds from choking off the produce. Kudlow, who served in the Office of Management and Budget in the Reagan administration, boasts that this is exactly what they did. As for the deficits, Kudlow maintains that you have to look at what they bought: low inflation, tax cuts, and a cold war victory.

Richard McKenzie, who argued in his book What Went Right in the 1980s that Reagan's policies were unjustly maligned by candidate Clinton and the liberal media, agrees, "Bill Clinton can thank his lucky political stars for the economic turnaround that began long before his presidency."

However the debate ends, the fact is that the economy is humming. If it keeps up at current levels, and assuming we don't have any more balanced budget deals which actually increase deficit spending, there may soon be another, more substantive debate in Washington: What to do with the surplus dollars flowing into the Treasury.

We know what Reagan would do with the money: Give it back to the people who earned it with across-the-board tax cuts.

Washington's policy makers are 'little more than bit players in the great economic opera.'