Ranking the Obama Economy
Throughout his campaign to become the 45th president, Donald J. Trump called the U.S. economy “the Obama economic disaster.” As the late senator from New York Daniel Patrick Moynihan liked to say, “Everyone is entitled to his own opinion, but not his own facts.” And the economic facts are cruel to Trump’s claim.
Economists resist giving U.S. presidents too much credit or blame for the economy, because prosperity depends more on luck, history and the effects of government policies over many years than on any president’s use of limited economic-management tools. But there’s plenty of data that can be used to determine how much the economy improved (or didn’t) during the terms of the three Democrats and three Republicans who have occupied the White House since 1976.
Scores of available gauges could be used to measure national economic performance. Here are 14 compiled by Bloomberg that are widely followed and measure a broad range of economic activity -- from job and wage growth to the strength of key sectors like the real-estate and auto industries to the health of stock and bond portfolios that deliver financial security to working people and retirees:
- Total non-farm payrolls
- Manufacturing jobs
- Value of the dollar compared to major currencies
- Gross domestic product
- Federal budget deficit (or surplus) as a percentage of GDP
- Disposable income per capita
- Household debt as a percentage of disposable income
- Home equity
- Car sales
- Hourly wages
- Bond-market performance
- The Standard & Poor’s 500 Index of U.S. stocks
- Gap between U.S. and global stock performance
By tallying and ranking the annual improvement in each of these measures under each of the last six presidents, it’s possible to assign an average overall economic-progress score. The scoring gives equal weight to each measure, so if you think some deserve more weight because they’re more important, you’ll have a bone to pick with the methodology. Still, it’s a reasonable guide, even if a rough one.
By these measures, the economy strengthened the most between 1993 and 2000, when President Bill Clinton was in office, followed by the Obama years, 2009-2016. So whatever you think of Obama’s policy choices, the U.S. economy did better while he was in the White House than it did under all but one of his five most recent predecessors.
Bill Clinton ran on the campaign theme “It’s the economy, stupid” and presided over the best annual return of the stocks in the S&P 500 and the best annual GDP growth. His White House years also coincided with the second-best annual increases in non-farm payrolls, per capita disposable income, dollar appreciation, manufacturing jobs and hourly wages. Clinton is the only president to transform perennial deficits into annual surpluses.
Obama took office during the worst recession since the Great Depression, when the economy was losing 750,000 jobs a month and already had lost a record 9 percent of GDP. He completed his two terms with the largest annual gain in the value of the dollar, the biggest annual decrease in household debt as a percentage of disposable income, and the largest annual increases in car sales and hourly wages. His presidency coincided with the second-highest annual gain in home equity and trailed only the Clinton period in deficit reduction as a percentage of GDP. While non-farm payrolls under Obama had a slower annual increase than they did under Jimmy Carter, Clinton and Ronald Reagan, they rose for 75 consecutive months, the longest streak since February 1939.
The weakest performance by far came under Clinton’s successor, George W. Bush, whose years in office ended with the worst financial crisis since the Great Depression. The 2008 crash sent the economy reeling backward, resulting in an overall decline in stock and home values and car sales and anemic job and GDP growth. But even before the recession began in December 2007, economic activity had been weaker than under any of the five other presidents. Stock prices had advanced more slowly, non-farm job growth was tied for worst and home-equity growth was second-worst.
The second-slowest period was 1977-1980, Carter’s single term in the White House. Those years saw the biggest annual decline in the dollar, the largest annual decrease in car sales, the worst annual loss in hourly wages and the smallest annual increase in productivity. For all that misfortune, there were glimmers of economic strength. The Carter years included the largest annual increase in non-farm payrolls, tied with Reagan’s for the second-most annualized growth in GDP, and saw the biggest annual increase in home equity and the largest annualized rise in manufacturing jobs.
The economic improvement from 1989-1992 under George H.W. Bush was only a little brisker than in the Carter years. It had the slowest annual rise in per capita disposable income and the second-slowest in non-farm payrolls. Home equity grew marginally and manufacturing jobs and hourly wages declined. Even after the politically perilous tax increase to rein in chronic budget deficits – which cost him Republican supporters in his unsuccessful bid for a second term -- he received the second-worst ranking on reducing the deficit. Yet the stock market boomed, with the S&P 500 advancing faster than under any of these presidents except Clinton. Rebounded from a 1987 crash, U.S. stocks outperformed global stocks in the MSCI World Index by the widest margin of the 40-year period.
The election of Reagan in 1980 was followed by the worst recession between World War II and the 2008 financial crisis. A spectacular rebound helped make the 40th president’s economy improve third-fastest of the period under review. It had the biggest annual increase in per capita disposable income and the strongest bond-market performance as measured by the Bloomberg Barclays U.S. Aggregate Total Return Value Unhedged USD Index. The Reagan economy tied Carter’s with the second-biggest average yearly increases in GDP. But the 1987 crash undermined the global performance of the stock market, which did worse than in any presidency after 1976.
So no, President-elect Trump. There’s no Obama economic disaster.
Facts are stubborn things. By measures that count, the last eight years have been a time of steady improvement, though short of a record-setting boom. Only one of the last six presidents led the U.S. during a more vigorous economic period. That was Clinton, and he gives Obama extra credit because of the financial crisis.
“President Obama started with a much weaker economy than I did,” Clinton said in his nominating speech at the 2012 Democratic Convention. “No president -- no president, not me, not any of my predecessors, no one could have fully repaired all the damage that he found in just four years.”
(With assistance from Shin Pei)
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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