As an outsider to the investment community, I am constantly struck by its obsession with politics… and particularly with the role of the president. Attention and money flow to candidates in the belief that there is a unique importance to the president in shaping the republic’s future.
I find that interesting because, in my view, the American president is one of the least powerful national leaders in the world. This is particularly true in domestic affairs where he is a very visible, but a rather minor player in crafting policy. Russian President Vladimir Putin or Chinese President Xi Jinping are obviously more powerful than the American president. But so is British Prime Minister David Cameron, who operates in a parliamentary system where his ability to pass legislation is far greater than the American president’s.
The 3 Branches of Government
The president represents one of three branches of government, presiding over 50 states, which also have their own rights to legislate. All legislation must pass through Congress.
Both the Senate and House of Representatives have the power to determine whether legislation is adopted or rejected. The speaker of the House can frequently choose simply not to allow a bill to come to a vote. In the Senate, any senator can prevent a bill from coming to a vote by speaking incessantly, and a handful of senators can take the floor and block the vote.
The president can veto legislation, but Congress can override the veto. The president cannot compel action or control the outcome.
So for example, while President Barack Obama got healthcare reforms through Congress, the final legislation was far from the bill he wanted. He had to bargain away some of the rest of his legislative agenda just to get these reforms through Congress. The level of effort required to achieve anything is enormous.
Then there is the third branch of government, the Supreme Court, which has the power to invalidate any legislation or presidential decision. For example, the court blocked implementation of Obama’s plans to cut power plant emissions.
The US federal government is composed of these three branches. However, we should also mention the Federal Reserve, which is the government body that has the most influence over the economy. Like the Supreme Court, the Fed was designed to operate independently of the president and Congress. Although the members of its Board of Governors are nominated by the president and confirmed by the Senate, the Fed is not answerable to either.
The president ultimately has limited powers over Congress and the Supreme Court. He can nominate Supreme Court justices but only with the concurrence of Congress.