U.S. GDP Growth Under Different Presidencies
September 26, 2008
In this fifth and final examination of a key economic indicator during the last nine presidencies, I turn to the most important one of the bunch, real GDP growth. Price stability, a healthy labor market, a well-regarded and firm currency, and a robust stock market are each favorable pre-conditions for sustainable and brisk expansion in real economic activity. The first four items represent intermediate objectives. Economic growth, and more specifically per capita growth, is a more ultimate prize.
For the forty years from 1961 to 2000, the president was from the Democratic Party half of the time and from the Republican Party for the rest. Each side had four presidents in those 40 years. During the administrations of the four Democrats, real GDP expanded 4.1% per annum, 1.2 percentage points faster than the average growth during Republican administrations of 2.9% per annum. Growth over the 7.5 years that George W. Bush has been president has averaged just 2.3% per annum.
The Democrat administrations achieved the three fastest rates of growth and four of the top five on that ranking. Real GDP advanced at an annualized rate of 5.2% during the Kennedy years, 5.1% during the Johnson years, and 3.6% when the Clinton administration was in power. GDP rose 3.5% per annum in the Reagan years despite a severe recession in 1981-2. Growth averaged a respectable 3.2% per annum when the Carter administration governed — and yes, some people no doubt were better off in 1980 than 1976 — and the Nixon years experienced growth of 3.0% per annum. In none of these presidential periods was growth substantially less than the 3.4% average pace for the whole second half of the 20th century.
Both Bush presidential periods and the Ford years experienced growth of barely more than 2.0%. The growth rate in the first Bush presidency was 2.1%, identical to the performance of the Ford Administration. The current Bush administration has achieved marginally faster growth of 2.3% per annum. However, that pace has also been substantially less than the long-term trend. From several respects, the current administration’s performance is puzzling, worrisome, and instructive. It is puzzling because a 7.5-year period will be less sharply influenced by a recession than an administration with a shorter lifespan like Ford’s and because fiscal policy and monetary policy were loose. Also, productivity was strong during this period. It is worrisome because this is the most recent presidential observation and might reflect a stochastic downshift in what the United States can expect in long-term average growth. It is also worrisome because the banking crisis and the drag from the implementation of solutions to the current problem suggest that worse times may lie ahead. Finally, it is instructive in discrediting the theory that war is good for growth. Sometimes that has been unquestionably true. World War II helped America escape the depression, and growth was very buoyant when the Vietnam War was fought in the 1960′s. The wars in Iraq and Afghanistan and tightening of homeland security have not given a discernible lift to growth.
Tags: Dollar
ShareThis
What is your source on average yearly GDP growth per presidency? I want to quote this statistic but need a more reliable source than you (because I don’t know who you are!).
Quarterly GDP data are collected and released by the Bureau of Economic Analysis of the Commerce Department. I used those figures to calculate average per annum growth under each presidency since Kennedy. Details about my background can be found by clicking http://currencythoughts.com/about-the-blogger/ or going to the “about the blogger” link on the home page of this site.
Hi, Larry. Neat site. I was wondering whether the GDP figures for all periods were fully deflated (in other words, taking inflation into consideration). Second, how do you account for differences in performance across the presidencies? Third, could you compare government spending as a percentage of GNP or GDP for the same periods as a possible explanation for slow growth? Fourth, are you affiliated with either U.S. political party and do you have any sort of axe to grind, here? Fifth, whom do you consider the greatest president in modern times for economic health and legacy overall? Best, Ben
Yes, when comparing the economic performances of different U.S. presidential administrations, GDP data were adjusted for inflation. I do not have an answer for why the results are so much better under the Democrats. Frankly, I was surprised by some of my findings, especially in the case of inflation. No, I don’t work for either political party. I tend to question all strongly held ideolgical views. I’m suspicious of any dogma and prefer the politics of the center. Since the advent of television in national politics, I don’t think the U.S. has had a “great” president, and I think those are connected developments. Lincoln, who spoke in a high-pitched voice and was not especially photogenic, probably would not win an election now. The nation enjoyed a strong economy, improved public finances, price stability and peace during the Clinton years. Rubin might be the best Treasury Secretary this side of Hamilton. But Al Qaeda took root when Clinton was president, and many of his accomplishments got reversed afterward. I think for greatness, one needs an enduring legacy that affects U.S. history in some way for generations to come.
“I think for greatness, one needs an enduring legacy that affects U.S. history in some way for generations to come.”
I think for greatness, one need an enduring legacy that affects U.S. history in some positive way for generations to come.
I hate to get technical, but we have plenty of folks leaving enduring legacies that affect U.S. history. That has been part of the problem. The federal debt is but one small example.
My question is about the significance of the house and senate in determining the effects of GDP in your data. It might be a Democratic president but, if the house and senate are Republican majority ruled at that time, wouldn’t that make a difference? Just curious.
That’s a very good question and one I considered at the outset. I did not introduce the composition and control of the Congress to simplify the study. There would have been too many possibilities with three entities (president, senate, HoR), each of which could be Republican- or Democrat-controlled. And I would have needed to break the 50 years of data into 25 2-year increments because there is a congressional election every other November. There was a nice symmetry in dealing with twenty years with a Democrat in the White House and 20 years with a Republican over the 40 years from January 1961 to January 2001. Also, power changed rarely, so I could assume that each a president bore responsibility for the economic record on his watch.
I also decided to conduct the study focussing on the president for other reasons. The presidency is a more powerful branch of government than the congress. Historians do not rate congresses the way that presidencies are ranked. Harry Truman famously had a sign on his desk that read, “The buck stops here.” Can you imagine a senator doing that? Note that I did a similar study of U.S. economic performance under different Fed Chairmen.
I have also done my own studies and was surprised to find that although CNBC is always pushing how much better the stock market does under Republicans, the actual facts are exactly opposite. Stock price growth under Democrat Presidents averages 12.3% annually and under Republicans it averages 8% since 1930.
Here are a couple of interesting articles with statistics that is more in depth into the differences of Republicans and Democrats on stock market and GDP performance.
The Democratic Dividend, The stock market prefers Democratic presidents to Republicans. Why?, By Carol Vinzant
http://www.slate.com/default.aspx?id=2071929
Are Republicans or Democrats Better for the Stock Market? by Jeremy Siegel, Ph.D.
http://finance.yahoo.com/expert/article/futureinvest/3022
I am not sure where CNBC gets its information but you would think that a stock market news network would know which party has the best record for stock market gains? Go figure!
Thanks for your comments.