As many of our radio show listeners and blog readers know I am somewhat of a history buff. I especially enjoy American economic and political history, and very often the two intersect. It seems that a president’s time in office - specifically - can be tied very closely with the US economy. Sometimes it is justified and other times not. One analogy I have always appreciated is that of the rodeo: the sitting US President is the bull rider and the economy is the bull. The bull rider can have an impact on the beast’s movements but if the bull is having a bad day, look out!
One of the largest and most robust periods of US economic growth came during the 1990’s. That expansion lasted 120 months and GDP growth averaged 3.6% per year. The S&P 500 experienced a compound annual growth rate of 17%. President Bill Clinton was in the White House for most of that run. Should he get the credit for that? How much of his policies were responsible for the increase in economic output? It is incredibly hard to say for sure, but one must not forget that he did not invent the internet and that probably had more to do with the economy than anything else. In fact, most of the developed world experienced buoyant growth during the late 1990’s. Mr. Clinton was only the President of the US. It seems that maybe the bull was in a good mood during his rodeo.
Conversely, if we examine the presidency of Jimmy Carter, we can see the bull was not having a good day. Inflation averaged just under 10% per year during Carter’s four-year stint in the White House and that alone will ruin any presidency. But it certainly was not his fault that inflation had gotten so out of hand, that phenomenon had started 10 years earlier in the mid 1960’s. Carter even lowered corporate taxes, deregulated many industries and increased the standard deduction and personal exemptions in an attempt to invigorate the economy. Geopolitical events also crushed his presidency: military conflicts in the Persian Gulf lead to a doubling of the price of oil in the late 1970’s and US automobile drivers had to wait in very unusual lines to buy gasoline.
Many people would be surprised to learn that since World War II one of the most economically successful presidencies was Lyndon Johnson. During his 4 years in the White House, GDP growth averaged 5.3% (highest among post war Presidents) and unemployment averaged 4.17% (lowest among post war presidents). Was Johnson a good bull rider or was the bull in a good mood? Again, it is difficult to say but most likely, as with all Presidents, it’s probably a little bit of both.