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.
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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 https://currencythoughts.mystagingwebsite.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.
These numbers pretty much align with the ones I pulled several years ago. I used the Economic Report of the Presidency. I did have lower numbers for Reagan. I think it matters when you pull the numbers (exact start and end date) and which set of numbers you use (several can be pulled from the same report, depending upon various factors). If you go back even further in time, you get similar results. The bottom line is, Republicans tend to be ideologues, coming into office with a long-established idea about how to handle economies under any sort of circumstance. Democrats tend to tell their Treasury people to put together a plan based upon the needs of the economy at the time. I think the number suggest the latter is the kind of approach an intelligent person pursues.
I’d be curious how the results would change if we introduce a 1-year time-shift in the data, giving the presidents a year for their policies to have effect.
@Gary: The current president is the idealogue of idealogues, with a Senate record more extreme than Jim DeMint and to the left of Bernie Sanders (only self-described Socialist senator).
[…] achieved the three fastest rates of growth and four of the top five on that ranking,” wrote Larry Greenberg in the September 2008 issue of Currency […]
Making assertions that presidential administrations dictate growth rates is childish at best. American history and current events and technologies has a great deal more to do with the reasons for GDP than any policies that were enacted at the time of any given president. Also, the seated president doesn’t create policy. That’s the job of congress.
You are guilty of first stage thinking.
Peapers-
I see no assertions made about the actual presidents themselves. In fact it seems that you are the one making these assertions. All these statistic say is what happened to GDP growth during the years of presidential administrations. Never once does it imply responsibility on any one person but rather what occurred during these administrations. Sounds to me that you have trouble accepting simple statistics that counter personal ideals. Maybe its you who is guilty of first stage thinking.
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This type of discussion is useless because (1) the sample size is extremely small,(2) gov’t policy, good and bad, often spills over to the next president, and (3) the stats are often a coincidence of timing that the presidents had nothing to do with.
These points were understood and discussed when the first study was done in August 2008. The data aren’t perfect. No data are, but “useless” is far too dismissive of findings that are very lopsided. All five indicators in 1960-2000 favored the same party. Mark, your first and second points are somewhat contradictory. The sample size is small because the intervals between presidential party changes are wide apart, happening in 1961, 1969, 1977, 1981, 1993, 2001, and 2009. A dozen, eight or even four years ought to be sufficiently lengthy for a government to take responsibility for what happens on its watch. Bad luck is part of the game, like injuries on a sports team. Good management plans for surprises and makes the necessary adjustments to overcome the problem. Nobody had worse misfortune than Carter. Excessively loose monetary policy by the Fed when Arthur Burns was chairman had prepped the U.S. and global economies for a spike in inflation by the late 1970s, and the catalyst was a combination of world food supply shortages and two OPEC oil price shocks. Over the long run, bad breaks should even out between the parties. One party shouldn’t be significantly better on all criteria over a 50-year period without the presence of a structurally superior management style. A fourth point that you do not make is that we have shared government, and often different parties control the White House and Congress. However, no congressman ever said “the buck stops here,” for the simple reason that it doesn’t. America’s CEO, Board Chairman, Commander in Chief, and head of state rests in the office and persona of the president. For better or worse, that person get the glory or the blame. Historians don’t so much talk about great or bad congresses, but they do rank presidents.
When I set out to do this study, I did not have a preconceived idea what I would find or if I would find anything consistent enough to make an interesting story. But I knew this hadn’t been done, even though the information is readily available. I was very surprised that Democrats did better than Republicans. The facts speak for themselves.
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I, too, have studied economic changes since 1900. I have attempted to include party control of congress with the presidential party. I would suggest you do so, because indications are that the congressional control of congress with the president party favors best economic performance with a republican controlled congress and a democrat president.
Unfortunately, there is only one unique “purity” period in 112 years when there was total republican control of congress and a democrat president. That is during the last four Clinton years, when spending became controlled and the budget was balanced; and the country had great economic growth—albeit much of it because of the internet bubble. You’ll also note that 1995 was the first year, in 40 years, of republican control of the US House—to the well established credit of Newt Gingrich. And you might want to also reflect the impact of the immediate Gingrich-Clinton showdown (govt shutdowns) that changed the direction of Clinton toward those balanced budgets.
Presidents don’t have the power you imply—they just think they do. It is a bit disingenuous to claim that the President has the greatest power, yet the current President admits he is “powerless” without a Congress that will give him what he wants. But it is always easier to point either credit, or blame, on one person (the President).
For better or worse Harry Truman was right. “The buck stops here”. Congress may hold the purse strings in theory, but the federal budget starts and stops on the president’s desk.
Why is it that in Ronald Reagan’s case some people want to raise him to the status of a deity, but in the case of any given democratic administration the same people want to point out “congress holds the purse strings”?
The data is lopsided and speaks for itself. I have actually seen this before, but not with all of the nuances presented here. A strong economy cures most of society’s ills therefore I support the party with the track record of success. Like the author said, all of this information is readily available.
It is NOT simplistic thinking to recognize that Democratic presidents are great and Republican presidents are evil.
Here’s irrefutable evidence presented by a self-serving independent thinker which proves beyond a shadow of a doubt that we must elect Democrats if we wish to save this country of ours.
OBAMA _ OBAMA _ OBAMA
Not taken into account in this analysis were the economic conditions inherited by a president. Republicans often inherited an economy already in or sinking into recession (Nixon in 1968, Reagan in 1981, Bush in 2001 and Obama in 2009(. Other presidents have inherited recovering or robust economies, as did Clinton in 1993 — in spite of his mantra of “it’s the economy, stupid.” To suggest that because economies did somewhat better under Democratic presidents than under Republicans simply does not answer the question of “why?” And how much of the poor performance of some Republican administrations can be laid to exogenous shocks such as the 9-11 attack on the nation and the ensuing wars, or the stultifying effects of Democratic programs and policies that distorted the marketplace? The expansion of the welfare state under Democratic administrations unquestionably slowed growth. Look at growth rates in Europe and you will see the dampening effect of welfarism. Moreover, the current economic crisis we face was not the result of cnservative or “Republican” polices of the Bush administration, but the final payoff of decades of liberal tinkering with the housing market through the CRA and the cosseting of Fannie Mae and Freddie Mac by Democrats. Not mentioned in the analysis was the long period of expansion of the economy from 1983 to 2007 which featured conservative policies of low taxation. The deficits of that period were exacerbated by the huge growth of mandatory entitlement spending, and the brief surplus of the late 90s was the direct result of a Republican conrolled congress that demanded fiscal discipline, and also had the “peace dividend” from the end of the Cold War to work with to reduce federal spending.
Your results really show the pitfalls of analysis by “President at the time”. First of all, analysis by who controls the House of Representatives would give a very different outlook (all revenue bills MUST start with the approval of the House). Here, Bill Clinton’s “successes” would be shown to be due to a Republican House and the downturn under George W Bush would be more correctly aligned with a VERY far-left House and Senate. The JFK success (with a Democrat congress) is very much legitimate. CUTTING TAX RATES by 70% unleashed an American economy that had been languishing (under Democrats and Republicans) for more than 15 years. As another alternative, you might analyze your data on the basis of lower tax rates versus higher rates. Clearly, lower tax rates would correlate much better with economic expansion.
This point has been made by some other readers. I presume, then, that you find Romney’s question, “Are you better off than you were four years ago” duplicitous and irrelevant. The president is the only person in government elected by everyone. There’s a natural reason why former president Harry Truman said the buck stops here. Juxtaposing U.S. vital economic trends against the House of Representatives lacks the elegance and simplicity of running the test against the president. There are many more ball control changes, too, since the House is elected every two years, not every four. In 40 years from JFK to Clinton, the party of the president only shifted four times: 1969, 1977, 1981 and 1993. The empirical work of this exercise was consequently manageable. Should the recovery in 1934-36 be credited to Hoover? If our collective well-being really depends on the HoR, all but one of whom is not on my ballot or anybody elses for that matter, then there’s in effect the tiniest shred of accountability between voter and elected leader.
For this study to have any real substance whatsoever, you would need to take into account controlling parties of Congress, what bills were passed during that presidents administration and which party introduced those bills, effects of those bills, the economic trends at the time that President took office, trends as that president left office, and,really, more factors that would be too numerous to list here. Presidents do get all the credit or criticism, however, in most cases, this praise and criticism should go to Congress. Presidents have always been swayed by America’s election of representatives to Congress. Just as an example, say a Republican is elected to the White House with a Republican Senate and a Democratic House. Initially, the House will bow to the Republican Senate and President. After two years, lets say America votes in a Democratic Senate. At this point, the Republican President will then give in more to the Democratic party as the feeling would be that the “People” want to see Democratic policies implemented. This is a compelling reason to NOT vote in a politician. You can think of it as the President is the quarterback. He gets all the blame or credit, but he could not be the least bit effective without his offensive line giving him good protection and his recievers making catches. Congress is the offensive line and we are the ones “catching it”.
@Bill:
You said: the downturn under George W Bush would be more correctly aligned with a VERY far-left House and Senate.
Are you kidding me?!?! Bush had a Republican House AND Senate up through 2006. Very far-left? Did you mean to say very far right and just make a typing mistake? The 2000-2006 Congress was full of neo-cons that trashed the balanced budget they inherited (remember those Bush tax cuts) as well as voting us into a war with Iraq….or have you forgotten about all of that?
Also JFK did not cut taxes **BY** 70%. He cut the top marginal rate down **TO** 70%. There’s a world of difference between the two. It also gives lie to assertion of Republicans who insist, against quite a bit of evidence to the contrary, that raising taxes on the top marginal earners will stifle the economy. The economy grew quite nicely in post WW2 period in spite of top marginal rates that exceeded 90%!
Compare that to now. Top rates just recently went up from 35% back to 39.5% and yet you had pinheads like Blackstone’s CEO comparing this to Hitler invading Poland.
Ridiculous.
Conservatives should stay away from these data facts,if most Americans knew the truth not propaganda,this country would turn far to the left.You can twist & turn the facts to your side,but remember the president has a veto.