U.S. Economic Performance Under Obama and Bush43
January 26, 2012
With the 2012 U.S. presidential campaign heating up, traffic has risen noticeably to an article on this site that was posted in August 2008, which compared growth, inflation, and the performance of share prices, the dollar, and job creation under different presidencies since the Kennedy administration. Some of the figures upon which that original study was based were modified subsequently by benchmark revisions. The study of August 2008 was redone three years later in an updated version screened on August 8, 2011. For purposes of debate, the findings in this more recent update are a better information source to use. Nonetheless, the main revelation of the first study that the U.S. economy performed significantly better when the president was a Democrat than a Republican was not overturned in the second crunching of numbers. The two studies tell the same story.
When an incumbent president runs for reelection, the record of the incumbent tends to be the central issue. As Ronald Reagan famously put things in the 1980 election, voters should ask themselves, "are you better off now than four years ago?" If yes, select four more years, but if not, it’s time for fresh leadership. The focus on this metric is very sharp at the moment. Republicans point out the sluggish pace of the recovery and claim that three years is enough time to have seen more impressive results. In his defense, Obama has reminded the nation what he warned in his first inaugural: America faced serious and many challenges that would be met but not easily or quickly. The implicit message from Republicans is that America was in a downturn at the start of the Obama Presidency just as it had been when Bush43 took office but that a four-year presidential term is sufficient time for the new incumbent to take responsibility for economic conditions over the full span of its stewardship when seeking a second term.
So much has changed structurally in the U.S. and global economies since the Clinton administration that the most relevant comparison for 2012 election purposes is that between the Bush43 administration from 2001 through 2008 and the U.S. performance since Barack Obama was sworn in on January 20, 2009. The tale of this tape is told below. In compiling Obama’s three-year performance, full-2011 data is available except for GDP growth. In that particular case, 4Q numbers are being released tomorrow. The consensus forecast of economists is annualized growth of 3.0% last quarter, and the growth rate from 4Q08 to 4Q11 would be 1.4% per annum if the actual 4Q11 result lies anywhere between 2.5% and 3.5%. In light of that, GDP growth of 1.4% for Obama has been assumed below.
|% Per Annum||Bush43||Obama|
Bush43 over eight years and Obama over three had very similar rates of GDP growth and headline inflation. Core inflation and the rate of employment growth were each a half percentage point less under Obama. Job creation during both presidencies has been abysmal and well below America’s long-term trend of about 1.8% per annum. From the standpoint of equity prices and the dollar against the euro, America’s economy performed appreciably better during the Obama years than during the Bush43 Presidency. Only the final year of President Bush’s eight years in office was marred by the Great Recession, yet his record is somewhat worse than Obama’s.
Another valid comparison might be the current state of the U.S. economy and how the economy was performing in late 1932. Imbalances particularly in the financial services sector lay behind the stock market crashes of late 1929 and late 2008. Both events created upheaval in the global economy. The response of macroeconomic fiscal and monetary policy was very different in the early 1930s from what was done in 2008-11. The view that the original financial market strain was more severe this time than in the late 1920s is not a very disputed assertion, and policies favored by the Republican presidential candidates bear a close resemblance to those actually applied in the early 1930s. Those years serve as a lesson of what might have transpired in 2009-11, if the Fed had stoutly opposed any expansion of its balance sheet and the Federal government had insisted on matching depleted revenues with deep spending cuts. As weak as the documented Obama economic performance above has been, his results looks absolutely stellar juxtaposed against the Great Depression.
In tonight’s debate from Jacksonville, the Republican candidates will slam the Obama economic record, depicting such in the direst terms. But the facts paint a much more decent picture under difficult circumstances.
Copyright 2012, Larry Greenberg. All rights reserved. No secondary distribution without express permission.