“It’s the economy, stupid,” was the slogan James Carville coined as a campaign strategist of Bill Clinton’s successful 1992 presidential campaign against sitting president George H. W. Bush.
One of the hallmarks in the U.S. presidential debate today is Trump touting the success of the U.S. economy - best ever. So is this true? News Forecasters asks, which president has done the best in terms of economic policy historically?
When looking at a president's performance, hard data can't be looked at in isolation as solely a success or failure of a president's policy agenda. Here are six external factors we came up with that have to be considered:
- Starting basis point - from where they started. It is much harder to expand an already good economy vs. an economy that is already bad.
- Geopolitical realities - that a president must face in office. If the country is at war, it may have a significant effect on the economy that would not be there otherwise.
- Innovation - cycles that are occurring that may have little to do with a president's policy.
- Congressional empowerment - in terms of a Congress that is not blocking a presidential agenda, though can be overcome via the ability of a president to work on a bipartisan basis.
- Central banking - policy blocking a presidential agenda, though a president does have the power to nominate his choice of the policymaker members - timing and Congressional approval can also be an issue.
- Natural events - such as earthquakes, hurricanes, droughts, pandemics, etc ..., though these events have largely not been an issue, but could be one day.
Let's look at two general areas in determining economic performance. First the stock market, which is a proxy for good economic policies that are driven by GDP, inflation, trade, profit earnings, innovation just to name a few. Then secondly, one can look at employment and inflation, which are issues many on main street look at.
Looking at the inset chart, we can see a historical view of the stock market of how well U.S. presidents have done relative to the length in months during their administration. On should note that this performance cited here, are raw numbers and not inflation-adjusted.
But for those who live on the ground in the real main street economy, they tend to look at employment and inflation as the main determinate on how the economy is going. Often called the Misery index, it is comprised of the unemployment rate plus the inflation rate. Looking at these same U.S. presidents how have they done relative to this Misery index:
|Dwight D. Eisenhower||1953–1960||9.26||+5.68|
|George W. Bush||2001–2008||8.11||-0.54|
|Donald Trump||2017–Apr 2019||6.29||-1.70|
Now let's compile that data from the two general economic areas and the external factors previously identified. We use a scale of -5 to +5 indicating whether the data item was positive or negative relative to the other president's performance. In addition, we examined the delta of change rather than the raw number relative to other presidents. Feel free to comment if you disagree. Here in table form is the ranking of the U.S. presidents:
|Roosevelt||5||2||n/a||-5||-5||5||0||-3||0||WWII makes a fair analysis difficult.|
|Eisenhower||4||4||3||3||2||3||2||2||0||Benefactor of post-WWII.|
|Nixon||7||-4||-4||-2||-1||1||0||-2||0||Allowed introduction of fiat currency that started the 1970s malaise.|
|Carter||9||-4||-5||-2||0||2||2||-2||0||Accelerated the 1970s high inflation malaise.|
|Reagan||2||4||2||-4||3||3||0||2||0||Credit to pulling the economy out of the inflation and weak growth of the 1970s.|
|Clinton||1||5||3||3||3||5||2||2||0||Best performance though did have the tailwind of the IT revolution.|
|W. Bush||8||-4||0||5||-2||1||-1||-4||-1||Allowed the economy to slip into the Great Recession.|
|Obama||6||1||-3||-5||3||-2||2||2||0||Pulled out of the Great Recession, largely due to Central Banks, to a stagnating economy.|
|Trump||3||3||5||0||3||1||-5||-2||0||Not enough time in office, with a headwind of a contentious Congress.|
(*) Note a low number means that the situation was already poor, making it easier for the president to be successful and hence would get less credit for successes. A high number would be the inverse of this logic.
News Forecasters have already looked at the Trump economic performance in more detail here. So far, so good, but it is early to declare "missing complete." For sure, it will be a crucial issue in the U.S. 2020 presidential election. News Forecasters believes, as stated before, if you like the economy now, it will mostly be the same at election time in 2020. However, some factors could change this. Something to be watched.