Guess Which Presidents Really Oversaw Economic Booms
(Bloomberg Opinion) -- Growth in gross domestic product is an obviously flawed measure of a president’s economic record. Presidents often inherit good times or bad times from their predecessors, events entirely outside a president’s control can push growth up or down, and the most consequential presidential economic decisions often prove consequential only years after that president has left office.
Still, GDP growth isn’t the worst measure, either, and it is certainly being used a lot at the moment, so we might as well get it right.
How does one get it right? Well, I think the best way is to take the inflation-adjusted GDP numbers from a president’s first and last quarters in office, and use them to calculate a compound annual growth rate. This gets you a different, more accurate number than just averaging all the quarterly GDP growth numbers during a president’s time in office, and it gets you a different, much more accurate number than averaging annual growth numbers.
That’s pretty interesting! The prosperous Eisenhower years weren’t all that prosperous, according to this metric. The Bush years, all 12 of them, were the worst of the lot, although the Obama years weren’t much better. Meanwhile, the Carter years were as good as the Reagan years, the Kennedy/Johnson era was amazing, and the Clinton years were pretty great. The Trump years aren’t going badly, either, although of course there’s only been one and a half of them so far.
One big lesson is that it helps not to have a recession while you’re president: Lyndon Johnson, Bill Clinton and Donald Trump are the only ones on the above chart without a National Bureau of Economic Research-certified downturn during their time in office, and John F. Kennedy’s recession experience was limited to a few weeks just after his inauguration. Jimmy Carter and Ronald Reagan should probably get special credit for overseeing strong growth despite recessions (one in 1980 and another in 1981-1982) generally attributed to Federal Reserve Board Chairman Paul Volcker’s harsh if ultimately successful crackdown on inflation.
Eisenhower, meanwhile, had to endure three recessions that were at least partly the doing of Fed Chairman William McChesney Martin Jr., who famously said in 1955 that his job involved taking the punch bowl away “just when the party was really warming up.” Eisenhower’s time in office was also characterized, though, by fast-rising median incomes, a fast-shrinking federal debt (as a share of GDP), and a gigantic increase in infrastructure spending, mainly but not exclusively for interstate highways, that paid economic dividends for decades. So maybe his two terms weren’t really an economic bust, whatever the GDP numbers say. Again, GDP growth is a flawed measure.
One other possible objection is that I’m wrong to measure from a president’s first quarter in office. Presidents are usually inaugurated in the first month of that first quarter, so even though major policy changes usually take at least a few months, it’s not inconceivable that a president’s actions or even words might have some effect on that quarter’s GDP number. So here’s the GDP growth chart measured from the last quarter before a president takes office to the last quarter before he leaves.
This makes things look much worse for Gerald Ford — he took office in the middle of a recession and stayed for less than two and a half years, so shifting things by one quarter is a significant change — and somewhat better for his predecessor Richard Nixon. The other shifts are smaller, although by this accounting, Barack Obama’s presidency ranks between that of George H.W. Bush and George W. Bush, not slightly ahead of both.
Anyway, there you have it. Feel free to print this, clip out your preferred chart and have it framed. But be warned that there will be a GDP update a month from now that may change that Trump number.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Justin Fox is a Bloomberg Opinion columnist covering business. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
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