Comment on U.S. Presidential Election Results and Economic Growth

August 27, 2020

In this year’s bid for a second term, President Trump is taking credit for better U.S. economic growth than his predecessors were able to achieve at least over the first three years prior to the pandemic. For this note, I examined real GDP in the Trump Presidency and compared such to the first terms of his eight predecessors. In six of those cases, the incumbent was reelected. To eliminate some volatility, I calculated annualized growth in half-year increments instead of by quarter. Thus, for each incumbent, there are seven successive periods: the first and second halves of years one, two and three and the first half of the election year. I also calculated the cumulative growth achieved under each first-term president through mid-way of their fourth year. The Trump record is neither the best nor the worst.

The fastest growth by far happened during the Kennedy/Johnson administration when outside of 2.7% annualized growth during the second half of 1962, growth in the other 6 half-year periods ranged between 4.9% and 7.6%. Cumulative growth from the start of 1961 to the middle of 1964 was 20.6%. Second and third place in cumulative growth were taken by Clinton (11.9%) and Reagan (11.8%).

Under Trump’s stewardship, U.S. real GDP expanded at a 2.0% rate in the first half of 2017, 3.4% in the second half of 2017, 3.2% in the first half of 2018, 1.7% in the second half of that year, 2.2% in the first half of 2019, 2.5% in the second half of that year, and then minus 19.4% in the first half of 2020. Excluding the first half of the final year, only Kennedy/Johnson had a higher weakest half-year experience. By the same token, only under Obama was their no half-year period in which growth exceeded Trump’s best reading of 3.4% in the second half of 2017.

A major property of growth in Trump’s first three years is the lack of volatility from half year to half year. Another fact that sticks out is the misfortune of negative growth in the first half of the election year. Carter with a GDP contraction of 3.4% annualized during the first half of 1980 is Trump’s only predecessor to have suffered the same fate, and negative 3.4% is inconsequential next to negative 19.4% growth in the first half of 2020. Because of that plunge, cumulative growth over the first 3-1/2 years of Trump’s presidency was -3.3%, 8.7 percentage points less than under Obama. Obama inherited the Great Recession and absorbed annualized negative growth of 3.0% in the first half of 2009 at the start of his stewardship. Nonetheless, GDP by the first half of 2012 was 5.4% above its level in the final half year of George W. Bush’s term.

In the other presidencies, annualized growth in the first half of the reelection years was 8.5% for Nixon, 7.7% with Reagan, 6.9% with Johnson, 4.9% under Clinton, 4.6% with Bush41, 2.6% with Bush 43, and 2.3% in the case of Obama.

Over the first three years of Trump’s presidency, GDP had risen 6.3% cumulatively. Without the pandemic, it’s very doubtful that Trump’s three and one-half year growth achievement would have topped those of Clinton (11.9%), Reagan (11.8%), Carter (11.5%), Nixon (10.8%) Bush 43 (8.1), let alone that of Kennedy/Johnson. Whether Trump would have outpaced Bush41’s mark of 7.1%  is plausible but not certain. Moreover, in light of the size of the enormous tax cut implemented at the start of 2018, one can argue that not only did Trump have the misfortune of the pandemic but also that the 6.3% rise of real GDP between the final quarters of 2016 and 2019 was in fact a disappointing outcome. Trump blamed an overly tight Fed policy, but that argument isn’t compelling when the rise of the federal funds rate in that period is compared against increases in previous cycles of monetary tightening.

Trump can also boast about the string of six consecutive half years with positive economic growth. Among their first seven such periods, Bush43, Bush41, Reagan, and Nixon didn’t match that feat, but Obama and Carter managed such, and the U.S. economy expanded in all seven half-year periods in the stewardships of Clinton and Kennedy/Reagan.

A final consideration concerns how much of a pass to give the current administration for the recession induced by the pandemic. Is it fair to assign fault in a natural disaster? In this case, the answer is yes because all governments were faced with the same threat to growth. Many took that threat more seriously than the United States, and the consequences of that trust in faith rather than science can be found in the often-cited fact that the United States accounts for 4% of world population but over 20% of all deaths from the Covid-19 virus.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.




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