U.S. Economic Performance of the Last Ten Presidencies
January 23, 2017
John Kennedy began America’s 35th presidency on January 20, 1961 asking citizens to “ask not what their country can do for them” but rather to “ask what they can do for their country.” Making the case for passing the torch on to a new generation, he declared, “let us never negotiate out of fear, but let us never fear to negotiate.” Exactly fifty-six years, two generations and ten presidencies later, Donald Trump last Friday promised sweeping change: “From this day forward, it’s going to be only America first. America first.”
There’s been an elegant symmetry to presidential stewardship over the intervening years between those inaugurals. Five of the White House occupants covering 28 years were Republican, and five covering 28 years as well were Democrats. The shifts in party occupancy occurred infrequently. Democrats served in three periods of eight years of uninterrupted rule, plus another single term of four years. Republicans controlled the executive branch of the federal government in two stretches of eight years each, plus another span of 12 uninterrupted years. Two presidents failed to complete a term, Kennedy due to assassination and Nixon due to resignation in scandal.
The equal intervals of presidential power between the parties affords an opportunity to compare economic performance under the Democrats and Republicans. I looked at five economic vital signs, growth in real GDP, the consumer price index, growth in employment, the Dow Jones Industrial Average, and change in the value of the dollar against Europe’s dominant currency, the mark until 1998 and the euro since then. All trends were expressed as a percentage change per annum.
First, hypothetical presidencies were created by splicing the Democrats together in one grouping and the Republicans in another group as if each had maintained power over 28 straight years. From this standpoint, the periods of Democratic leadership outshined the Republican stewardships on all five criteria.
- Real GDP on average grew 3.5% per year when the president was a Democrat and 2.6% per year when America had a Republican chief executive. While growth in Obama’s final quarter as president, 4Q16, will not be reported until Friday, the assumption made was growth between 2.0% and 2.5%, and it would take a massive deviation from that range to affect the annual 28-year average by even 0.1 percentage point.
- Growth in jobs was 0.9 percentage points higher when the president was a Democrat, averaging 2.1% at such times compared to 1.2% per year during Republican stewardships.
- Consumer price inflation was lower at 3.4% per year during Democratic Party presidencies than the 4.3% annual pace under Republicans.
- Stock market performance was the category with the widest divergence in performance. The DJIA climbed 8.0% per year under Democrats, almost twice the 4.7% a year advance on average over the 28 years when the president was Republican.
- The dollar depreciated at a rate of 3.7% per year under Republican leadership, a development consistent with President Trump’s desire to restore the price competitiveness of U.S. manufacturing. Under Democrats, in contrast, the dollar rose at an average rate of 1.0% a year against the mark and/or euro.
I also compiled the performance of the five categories under each of the ten presidents to see where Obama’s record stacks up against the other nine.
- Kennedy: GDP and jobs expanded 5.3% and 2.3% per year. The DOW advanced 4.0% a year, and the dollar fell 1.5% a year against the mark. Inflation of 1.1% was very subdued and lower than for any of the other presidents.
- Johnson: GDP grew 5.1% a year in Johnson’s guns and butter economy. Jobs rose 3.8% per annum, but inflation nearly tripled to 2.9%. The dollar was unchanged, and the DOW rose 5.4% a year.
- Nixon: Real GDP growth slowed to 2.7%. Inflation more than doubled to 6.2% per year. Two devaluations and an eventual abandonment of fixed dollar exchange rates resulted in a 7.6% per annum decline of the dollar against the mark, and the DOW fell by 2.8% per year. Jobs climbed at a 2.2% pace.
- Ford: GDP growth of 2.9% was similar to Nixon’s pace, but employment expansion of 1.1% per year was noticeably slower. He served the shortest time of any of these ten presidents and came into office during a recession. Dollar/mark declined 2.9% a year, and the DOW advanced 9.1% a year. Inflation continued to accelerate, averaging 7.0% per year in the period.
- Carter: The former governor of George gets a bad rap because of the big spike in inflation to 10.4% per year. But growth of 3.2% was higher than under his two Republican predecessors. The equity index slid 0.7% a year, and the dollar fell at a 4.4% rate on balance.
- Reagan: Strong growth in real GDP of 3.6% per year and jobs of 2.1% was counterbalanced by inflation of 4.2% and a 1.0% per annum net drop in the dollar. The DJIA climbed on balance by 11.2% per year in spite of a single-day record plunge of 22.6% on October 19, 1987.
- Bush41: Inflation of 4.2% on average was no lower than during the Reagan presidency, and the dollar depreciated by 3.5% per year on average. Real growth of 2.2% was low, and employment growth of merely 0.6% was even worse. The DOW advanced by 9.8% per year.
- Clinton: There was good economic performance all around: GDP rose 3.8% per annum on average. Jobs climbed 2.4% a year. The post-Carter deceleration of inflation resumed with an average pace of 2.6% over this eight-year period, which also was a golden age for the dollar. With a mantra proclaiming a strong dollar to be in the best interest of the United States, the U.S. currency posted net appreciation against the euro/mark of 3.5% per year. Also, the DJIA climbed 11.9% per year. In Clinton’s second term, a previously chronic fiscal deficit morphed into a huge surplus.
- Bush43: Fiscal strength was squandered. GDP growth in this 8-year period of 1.8% per annum was less than half as much as during the Clinton years. Inflation of 2.4% was similar, however. Worst of all, employment eked out only a 0.1% per year increase, and the DOW rose just 0.3% annually. The dollar fell 4.0% a year against the euro.
- Obama: In spite of a 4.32 million worker plunge in employment over the first 13 months of his presidency, jobs managed to climb at a 1.0% annualized rate over all eight years on balance. Real GDP growth matched the 1.8% pace of his predecessor, but stock market appreciation at an 11.8% per annum rate almost matched the Clinton years. Nobody since Kennedy had lower inflation. Total CPI on average climbed 1.7% per year. The dollar on average appreciated 2.4%, making Obama and Clinton the only presidencies in which the dollar was stronger at the end than the beginning.
Although Trump is not a typical post-WWII Republican, he fits the GOP mold from an economic standpoint far better than what Democrats generally do. Like Reagan and Bush43, a mix of deep tax cuts, greater spending, and broad deregulation has been proposed. Hopefully, such yields better results this time around. But that’s not the consensus of people that follow this stuff. Protectionist trade policy, restraints on immigration, hostile stances on public education and affordable housing are likely to exert drags on overall economic performance, not necessarily at first but eventually. So too might the dampening effect on U.S. animal spirits of a transformed foreign policy and divisive social policy.
Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.