COLLEGE STATION, May 13, 2009 – The way a president speaks about the economy affects it, according to research by B. Dan Wood, a political scientist at Texas A&M University who has developed technology for coding spoken sentences.
Wood said he has studied every sentence a president has spoken about the economy since World War II. He used human and machine coding to chart positive, negative and neutral comments and plot them against economic data.
“The short answer is yes: A president can, by being optimistic, create consumer confidence,” Wood concluded in his book “The Politics of Economic Leadership: The Causes and Consequences of Presidential Rhetoric,” published in 2007. His next book, “The Myth of Presidential Representation,” is scheduled for release in August (Cambridge).
Wood, who has taught at Texas A&M since 1988, said what a president says also can affect interest rates, but adds, more indirectly, "When people spend more and borrow less, interest rates drop. When people feel better about the economy they are more willing to spend.” President Obama is merely a fresh face in a role relatively new to American presidents: economic cheerleader. There is a delicate balance a president must find when talking about the economy and Obama appears to be beginning to find his way in the most tumultuous of circumstances.
“Obama tells it like it is,” Wood said. “He has been telling people what they need to hear, not what they want to hear.”
This approach, although not always received well at first, Wood believes is the most effective way to tackle remarks about the economy. “It’s important that the president be truthful,” he said.
Going back as far as President Truman, Wood explained the success and failings of presidential economic cheerleading. Carter, for instance, spoke with optimism but the economy continued to decline because Americans felt a disconnect between Carter’s remarks and the reality they were experiencing. “The economy was doing poorly,” Wood said.
President Reagan inherited a recession when he took office after Carter. “Reagan was perceived as an optimist,” Wood said. “People call him the great communicator; he told it like it was. When the economy was in the dumps, he said it was in the dumps.”
According to the data, Reagan was able to effectively build the confidence of consumers in America because he presided over a major economic growth.
Wood compared the way that Reagan spoke of the economy to President Clinton’s rhetoric. Clinton also was elected into a period of economic decline.
“Clinton was very optimistic. He basically talked us out of a recession in ‘92 and ‘93,” Wood said.
Wood also said that Clinton was lucky. “He did not experience any big bumps in the economy,” he said., adding that under Clinton’s leadership the economy continued to grow. “The economy fed on the president’s optimism and it just created a cycle,” Wood said.
When President George W. Bush entered office, Wood said that the way he referred to the economy was politically motivated.
“He wanted to cut taxes,” Wood said. “He continually talked down the economy until after his re-election in 2004.” And after that, “[Bush] ignored the economy until it tanked,” he said.
Wood said that a president also affects economics when talking about other subjects, such as foreign policy. If the president is being forceful and threatening military action against another country, the prospects of war cause uncertainty in the economy, he said.
Of course, Wood does not attribute the entire health of the economy to the president’s remarks. “They can affect GDP in the 1/2 to 1 percent range, but there are other factors that are much bigger,” Wood said
"If you have some shock, there is not a lot a president can do,” Wood said. This brings back the importance of truth. Americans have to believe the president, he said.
“Bush’s optimism was not perceived well. He kept saying everything was fine,” Wood said. Americans knew that it wasn’t and so, much like Carter, Bush could not connect rhetoric with reality.
Bush also reversed his economic policies, which confused Americans.
"For 7 ½ years of his presidency he was in favor of weak regulation and free markets. He supported supply side economics,” Wood said. When it became clear that more needed to be done to fix things, he changed policies. “He essentially got religion,” he said of Bush’s efforts to use government stimulus and bailouts to stabilize the economy.
“The crisis has given staunch conservatives great pause,” Wood said. It also left the American people with less trust for the president’s economic remarks.
"Obama is telling it like it is, but saying we will get out of this and be much stronger,” Wood said. “He is being a statesman. If things turn around, I presume Obama will follow Clinton’s trend.”