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Posted by on Mar 22, 2013 in At TMV | 8 comments

How Much Power Does The Government Really Have Over The Economy ?

In this posting I wanted to discuss how I think that really no President has the chance to have much impact on the economy no matter how long they serve. It’s simply too complex and variable for one person or even one administration to have much effect.

For example right now we are dealing with the housing market and the many programs in place to try and improve the situtation. The programs to improve the credit markets and to lower interest rates are helpful and will make it easier for people to purchase homes.

But that is only helpful when there are people to buy homes and the central part of the problem with the market is that those people are not there, at least not in sufficient numbers. A big part of the problem we are dealing with is that the construction industry simply built too many houses.

In the past when we had housing market slumps it was largely due to economic issues and thus could be resolved by programs like we have today. People only owned one house, or perhaps two at the most and thus there was no glut on the market. But now we have people with three, four or five homes and when they abandon them there are not people to move in to them.

This problem will only be solved with time and thus nothing the government does will really solve things, though it certainly will help some people get into homes. On the other hand I do think the government can do things to hurt the economy (for example if the government were to raise interest rates that would hurt the housing market even more)

This is just one example but I think it applies to much of the rest of the economy. Some things are just too big and other things simply require solutions that cannot be provided by anything other than time. Obviously this does not mean the government should not do anything, it is important for it to remain involved. But it seems to me that the impact it can have tends to be on the smaller level and more in terms of helping people through a problem time while it works itself out rather than solving that problem.

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