No wonder presidential candidates’ economic policies get so much attention during the campaign. Quite a bit of evidence shows that the state of the economy -- especially what’s happening with inflation, growth and employment -- has a large impact on voters. When the economy is doing well near the election, it boosts the vote for the incumbent party. Conversely, when the economy is doing poorly during the run-up to the election, voters shun the incumbent party. But that doesn’t really answer the more important question: How much influence does the president actually have over the economy? The stock answer is that presidents get too much credit when the economy does well and too much blame when it slumps. The boom-and-bust cycles that are inherent in capitalist economies depend on forces that are independent of any president’s actions. It’s mostly luck that determines how the economy is doing when it’s time to elect a president. However, it’s not right to conclude presidents don’t matter for the economy. During normal times when mild fluctuations ripple around the economy, the task of keeping things on a stable growth path depends mainly on the actions of the Federal Reserve. The chair of the Fed, who’s chosen by the president, has a large impact on how monetary policy is conducted. In addition, members of the board of governors (which includes the chair), who are also appointed by the president, have a majority of the 12 votes on the monetary policy committee. So if they’re unified, they can set the policy agenda. The system was set up so that no president can appoint more than the chair plus two members of the seven-member board during an eight-year term, but that requires board members to serve their full 14-year appointments. In recent years, board members have resigned far before the end of their terms, and both President Barack Obama and George W. Bush have been able to appoint all of the board members. However, during Obama’s tenure, Congress refused to hold hearings on his appointees, or voted against them, leaving the board short-handed, but it still has a large enough block of votes to shape policy.
Read More: CBS News