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President Barack Obama might be a savior of the economy or have one of the worst records ever, depending on your viewpoint. But when you put all the aspects of his economic performance together, how does his record really stack up compared with the jobs done by other presidents since World War II?
It’s an important question for the 2016 election because we need to know where Obama’s policies can be associated with success, if at all, and where the economic course needs to be changed.
His detractors point to the low growth rate of the gross domestic product and the increase in the national debt. His defenders point to the reductions in the unemployment rate and the federal budget deficit, and to the rise in the stock market.
My book, "The President as Economist: Scoring Economic Performance from Harry Truman to Obama," uses these and 12 other well-established indicators to calculate a performance score for each president going back to Truman. The top score is 100, zero is average, and negative scores are below average.
Here’s how the 12 postwar presidents rate:
Economic Influence
Performance during each administration, based on 17 indicators.
Source: Richard J. Carroll
Obama comes in eighth out of the 12, but still records a positive score, indicating a roughly average performance. That is based on six full years of his record, from 2010 to 2016. (This analysis leaves two years to go, because I allowed one year for the effects from the previous administration to subside -- more on that later.)
That is not a stunning performance, but it is a major improvement over that of his predecessor, George W. Bush, whose economic score was significantly lower than even Jimmy Carter’s. Rest assured, in this analysis a president’s score takes into account what he inherited and what he left behind. That’s one reality that both benefited and hampered Ronald Reagan’s and Obama’s scores.
Kennedy had the best record, but it was only for three years. There was no normal business cycle -- that is, a recession -- during his short presidency. Truman is in second place; his performance was impressive because it was recorded over eight years.
It’s also important to look at the margins between the rankings. Compare the scores for Obama and Richard Nixon, for example. Though they follow each other in the rankings, Obama recorded a significantly stronger economic record than Nixon did. So did Bill Clinton, at No. 5, compared with Ronald Reagan, at No. 6. And though Obama is two places below Reagan, his economic score is not that much lower.
Strengths and Weaknesses
We’ve already mentioned a few of the strengths and weaknesses in the Obama economic record. Maintaining a low inflation rate, cutting the federal deficit by two-thirds, reducing the unemployment rate and expanding exports all boosted his score.
Obama’s critics might challenge the notion that a president has anything to do with inflation. Would the same critics be so skeptical of Obama’s performance if they knew that the biggest positive in Ronald Reagan’s score was the reduction in inflation -- even though Carter, not Reagan, appointed Paul Volcker, the Fed chairman who reduced inflation?
The big improvement in stock prices was another significant positive for both Reagan and Obama. Based on that indicator alone, Reagan would be No. 2 on the presidential performance list, and Obama would be No. 4.
On the negative side, while GDP growth has been positive for 25 of the past 27 quarters, the rate of growth under Obama has not been stellar. In fact, at 2.1 percent, it is the fourth-lowest growth rate of any president’s and below the postwar average of 2.9 percent.
Another indicator that gets lost in the partisan back and forth is jobs growth. It is true that the unemployment rate has plummeted under Obama, a very good thing. It is also true that labor participation has fallen considerably. That fact moderates the unemployment accomplishment. But by how much?
An indicator that takes the participation rate into account is simply the growth in the number of employed people. The Obama administration can claim 76 straight months of jobs growth. That’s pretty darn good, but the rate of job growth during his administration, given the falling participation rate, comes to only 1 percent. Only three presidents had lower job growth rates (the two Bushes and, this may surprise you, Eisenhower).
It’s nice for job growth to be going steadily in the right direction, but it would also be nice if it rose faster.
The average share of federal debt, its increase, the average budget deficits and the balance of trade are also significant negatives for Obama, just as they were for Reagan and the Bushes. Obama has had one positive area relating to the budget that the others didn’t have -- the reduction of the deficit. Bush’s 2009 budget deficit of $1.4 trillion was nearly half (47.4 percent) of the total budget. Obama’s 2015 deficit was $438 billion, or 12.5 percent of the total budget.
The presidential economic score takes into account that problems created by a previous administration bleed into the next, at least for a period. So the Carter “stagflation” of 1981 is not part of Reagan’s record because the clock doesn’t begin until 1982. George W. Bush’s record does not reflect the burden of the 2001 recession after the dot-com bubble burst.
Likewise, Obama’s record begins in 2010, with the economy in bad shape, but no longer in free-fall. A one-year “lag” does not fully account for longer-term effects like those from Clinton’s financial deregulation and George W. Bush’s financial stewardship leading up to the 2008 crisis, but it does capture most of the “bottoming out” (or peaking) of the previous president’s policies.
The scores also abide by a politically conservative article of faith: An increase in the federal government, as measured by taxes and expenditures as a share of GDP, is counted negatively on a president’s record. The lower those numbers are as a percentage of GDP, the better the president’s score.
To be clear, the analysis follows this approach, not because smaller government is necessarily better, but because it means that the president was able to achieve private-sector growth, employment creation and so on with fewer federal resources. If the economy achieved more with the same or fewer resources, then it is more efficient.
Obama’s record also has to be seen in the context of a couple of larger economic phenomena that provided no help to his score: the need to reduce consumer debt that had soared under George W. Bush (“de-leveraging”) along with excessive real-estate inventory, and the below-average growth in the global economy after the financial crisis. Both proved to be sustained drags on the U.S. economy, but were no fault of Obama’s.
Once the financial crisis hit in 2008, consumers began spending less. From the third quarter of 2008, total consumer debt, including mortgages, credit cards and auto loans, fell for 19 of the next 20 quarters, dropping by $940 billion. This figure is on the upswing again, but paying off debt is a good thing, and this should cast Obama’s economic score in a better light.
(Under his predecessor, paradoxically, total consumer debt doubled to more than $12 trillion, yet the growth rate under George W. Bush was the lowest for the postwar presidents.)
Obama and the U.S. have not gotten much of a boost from the global economy, either. The global growth rate has hovered around 2 percent to 2.5 percent, well below the global growth rate during the Reagan, Clinton and George W. Bush administrations.
What is the takeaway then on Obama’s economic performance? When you take the slow global growth and domestic consumers’ retrenchment on debt into account, the record emerging from his rather calm and cautious approach is one to build on, not one to be cast aside.
- The other indicators include the inflation rate, growth of employment, productivity growth, gross private investment, personal savings, real interest rate, percent of the population below the poverty line, exports share of GDP, trade balance, federal budget growth rate and share of GDP, and tax revenue share of GDP.
- Eisenhower had three recessions: 1954, 1958 and 1960. Though he had some great growth years in between, the negatives brought his average down to 0.9 percent.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
