The Limits of Presidential Power & Influence

Sometimes we Americans act as if our presidents are kings, or at least dictators, who can effect change and impose their will without restrictions. The people who campaign for the office in our quadrennial elections do nothing to dissuade us from this misapprehension by promising us the moon. We tend to credit the president and his political party when things are going well, and blame them when things aren't. There are many things that are outside the control of the government, and even within the government, our system is such that the three branches of government are antagonistic to each other, rather than cooperative. In a parliamentary system, the head of government, usually titled the Prime Minister, is the head of the party that holds a majority in the legislature. In the United States the executive and legislative branches are often controlled by different parties, and even the two houses of Congress can have majorities from different parties. 

First let's look at the constraints imposed by the structure of the federal government itself. In order for a president to be able to transform his campaign promises into reality several conditions must be met. First, both Houses of Congress must be controlled by the president's party. Second, in the Senate, the president's party must have a filibuster-proof majority, currently 60 votes. The president's party's various factions must be in agreement about his agenda. Finally, federal judges, including the Supreme Court, must be in agreement that the agenda does not run afoul of constitutional restrictions. Right now, only one of those things is true. While the Democrats have a majority in both the House and the Senate, the majority is quite slim in both chambers. The Democratic caucus is also far from united. Senators Manchin and Sinema get a lot of press, but there is a wide gulf in ideology between the liberal/progressive wing and the conservative/moderate wing. There is by no means agreement within the Democratic Party regarding the direction that should be taken. We must also take into account an opposition party that seems uninterested in anything but obstruction on the national level. 

The very structure of the government written into the Constitution virtually guarantees gridlock. 

The second strain of impedimenta to a president implementing his agenda is the economic structure of the country. It's not enshrined in the Constitution, but the economic system that we operate under is regulated capitalism. I say regulated capitalism rather than free market capitalism because there is without a doubt involvement on the part of the government in the way businesses can operate. Minimum wage laws, safety regulations, environmental regulations, licensing requirements and more, all impact how a business can operate. Nonetheless, government does not dictate what business you can be in, does not set prices, does not determine levels of production, nor does it effectively limit how many business you can own, despite the existence of anti-trust laws. Inflation, when it occurs, is due to a number of market forces, as well as public perception that there will be inflation. While there are things that the government, in the form of the Federal Reserve, can do to combat inflation, often times government action has unintended consequences. 

Presidents usually don't have the luxury of enacting their campaign promises, but often end up dealing with unforeseen events. George W. Bush campaigned on domestic issues, relying on his executive experience as a governor of a large state, but didn't expect 9-11, which defined his presidency. Barack Obama, late in his campaign, realized that he'd be dealing with a recession, Donald Trump was riding high, bragging about a fairly healthy and recovering economy but was flummoxed by the arrival of the Covid pandemic. Joe Biden thought be could coast along as the economy recovered from Covid, but was surprised by a Russian invasion of Ukraine and rampant inflation. Nobody gets what they thought they were getting. 

I'm not at all upset that an American President can't always accomplish what he wants. (Of course I am appalled at all the anti-democratic actions that are being undertaken to continue rule by the minority, but that's another story) A president who always gets what he wants with only token opposition is what's known as a dictator. We had one a few years ago who thought he was one, but we voted him out. 

Another Blog Post About Social Security

Here's another is my series of blogs about the Social Security Trust Fund:

Every person who is currently working has payroll taxes deducted from their paycheck. This money goes into the Trust Fund.

Every person who is currently receiving benefits receives a check (or automatic deposit) that is drawn from the Trust Fund. 

Until recently the cumulative payroll deductions were greater than the benefits paid out, resulting in a surplus in the Trust Fund. 

Hold that thought.

The operating budget of the United States Government is funded by various taxes. Money goes out according what is allocated in the budget submitted by the president and approved, with any revisions, by Congress. In most years, the allocated expenditures exceed the tax receipts, this is the deficit. 

Congress has to make up the difference, which is done by borrowing money. The government, unlike private individuals, does not go to the bank to take out a loan. The government issues securities such as Treasury bonds, which can be purchased by individuals and businesses. The government pays them back (with interest) after a set time period. 

Let's go back to the Social Security Trust Fund.

At the end of 2020 there was a $2.9 billion surplus in the Trust Fund. 

This does not mean that there is $2.9 billion cash setting in a bank vault, or even a bank account somewhere. By law, the surplus in the Trust Fund is converted to Treasury bonds, which pay interest from the general budget to the Trust Fund, but are repaid upon maturity. 

This is where the general fund deficit and Trust Fund surplus cross paths.

If Congress needs to borrow money to fund the deficit (let's set aside for now the question of whether deficit spending is sound fiscal policy) it wouldn't make fiscal sense to borrow all of it from the public if there is government money being generated by Trust Fund surpluses. And that's what happens every year there is a Trust Fund Surplus - the ledgers at the Social Security Administration record a reduction in their cash account and an increase in their cash receivables account. 

What about all that money that Congress, or Bush, or Obama, or whoever, "raided" from the Trust Fund to pay for the Iraq War, or to fund the Contras or the Affordable Care Act? It's a myth, a misunderstanding of how the Trust Fund works. There is no cash to be raided from the Trust Fund and diverted to a president's pet projects. 

Of course it could be argued that a deficit was unnecessarily inflated, knowing that the Trust Fund Surplus could be utilized, but the Trust Fund Surplus was going to be converted to Treasury Bonds regardless, so it's not a very persuasive argument. 

So what's all this about there being nothing left in the Trust Fund in just a few years? 

Unfortunately, that's true. For all my talk about surpluses, the Trust Fund isn't running surpluses any longer. The surpluses were due mainly to there being more working people than retired people. For a few years, that has been reversed. Interest on the Treasury bonds has kept the prospect of an annual deficit at bay, but pretty soon the Trust Fund will be cashing in those bonds in order to pay out all benefits at current levels. It's estimated that all bonds will be cashed out in around 12 years. Does this mean that Social Security is out of money? No, but it is projected that the income from payroll tax will only be able to pay out benefits at around 70% of current levels.

This is a problem. Not only because Congress will have to take one or more of the following actions:

1. Decrease what Social Security recipients receive
2. Prop up the trust fund with tax revenue
3. Increase the payroll tax (including removing the upper limit on wages subject to payroll tax)
4. Increase the retirement age

But with the possibility of funding the deficit with Trust Fund surpluses removed the downsides of deficit spending (which I won't get into here) will be exacerbated. 

But bottom, line, Congress needs to take some kind of action, and soon. 

And by action, I mean something other than pointing fingers at the other side and misrepresenting their positions.