The Democrats are substantially right when they answer Ronald Reagan’s famous campaign question -- Are you better off today than you were four years ago? -- in the affirmative. Gross domestic product per person is higher, and so is the stock market. It’s not fair to blame Obama for the surge in unemployment that occurred in the first six months of his administration. Even this statistic has improved since August 2009.
The question, however, is the wrong one. No matter how powerful and skillful a president may be, he is not omnipotent. Obama is not responsible for the economic mess he found when he took over as president, as Franklin Delano Roosevelt was not responsible for Pearl Harbor. A president should be judged for his ability to play the cards he has been dealt, not for his luck (or lack thereof).
Heading into November’s election, voters should be asking which president would have done a better job with the cards Obama was dealt. Although such hypothetical questions are hard to answer, a quick look at the record suggests the winner would be Romney.
Consider the Affordable Care Act, Obama’s primary legislative achievement. Even if you are a hard-core supporter of health-care reform, you have to concede that the new law didn’t have any positive impact in the past four years, and might have had some negative ones. All the good changes advertised by the Obama administration will take place only after this year’s election, leaving us to suffer the cost of uncertainty now.
Indeed, one wonders why Obama spent so much time and political capital on a reform that he himself didn’t consider urgent -- most of the law won’t take effect until 2014 -- at a time when employment was plummeting, the banking sector was on the verge of collapse and more than 10 million American households owed more on their mortgages than their homes were worth. Obama campaigned like a pragmatist in 2008, but when he took power, he governed like an ideologue, sticking with his priority at the expense of the economy.
Romney would almost certainly have acted differently. Whatever you might think of his political priorities, he is the ultimate pragmatist. He governed Massachusetts like Obama promised to govern the country: trying to fix problems, not to advance an ideology.
Even in dealing with unemployment, Obama advanced an agenda. He used the crisis as an opportunity to expand government spending in sectors dear to him, such as green energy, construction and education. No doubt, the stimulus program was necessary, but it should have focused on subsidies to employment (a payroll-tax cut) and incentives for purchases of durable goods (a temporary sales-tax rebate). Romney the pragmatist would have been more likely to focus on the most effective measures to reduce unemployment, rather than on pushing a liberal agenda.
Didn’t Obama save the American automakers, while Romney would have let them go bankrupt? This comparison is at best disingenuous. Bankruptcy does not imply liquidation. American Airlines Inc. and United Airlines went through bankruptcy, and they are still flying. Even under Obama, Chrysler Group LLC and General Motors Co. went into bankruptcy.
The main difference in Obama’s recipe was that the government bailed out union health-care and pension plans. Opinions may differ on whether this was fair, but it was done the wrong way. The government bullied the bankruptcy judge and creditors into giving preferential treatment to the unions’ financial claims, overstepping existing contracts. This behavior undermined the rule of law that is a crucial element of America’s attractiveness to investors.
What about financial regulation? In principle, it’s reasonable to expect that Romney would have been more sympathetic to Wall Street’s interests, a bias that could have been an impediment to much-needed reform. In practice, it’s hard to imagine he could have done worse than Obama and Treasury Secretary Timothy Geithner, who enacted regulations that increase the cost of doing business while failing to solve the problems that caused the crisis. In fact, Romney probably would have done better. He might not have introduced much effective regulation at all, but he would have avoided the populist and anti-business rhetoric Obama was forced to use to please his electoral base.
Voters might find plenty of reasons to vote for Obama on ideological grounds. With his gaffes, Romney gives them plenty of other reasons. But they shouldn’t choose Obama on the assumption that his performance over the past four years was better than Romney’s would have been. And they should ask themselves: Why should the outcome be any different during the next four?
(Luigi Zingales is a professor of finance at the University of Chicago Booth School of Business and a contributing editor of City Journal. He is the author of “A Capitalism for the People: Recapturing the Lost Genius of American Prosperity.” The opinions expressed are his own.)
Today’s highlights: the editors on why GM must remain Government Motors awhile longer, on making air conditioners more green and on why Europe must get its banking union back on track; Betsey Stevenson and Justin Wolfers on Mitt Romney and taxes; William D. Cohan on JPMorgan’s missing $6 billion; Albert R. Hunt on the best way to handle Iran; Jeff Rubin on the end of growth.
To contact the writer of this article: Luigi Zingales at Luigi.Zingales@chicagobooth.edu
To contact the editor responsible for this article: Mark Whitehouse at firstname.lastname@example.org