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 stack up compared to 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 Barack Obama,” uses these and 12 other well-established indicators to calculate a performance score for each president back to Truman. The top score is 100, zero is average, and negative scores are below average.
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.
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.
John F. Kennedy had the best record, but it was only for three years. Truman is in second place; his performance was impressive because it was recorded over eight years.
It’s 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.
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 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: 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.
What is the takeaway 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.
Richard J. Carroll is an economist for the World Bank and author of “The President as Economist: Scoring Economic Performance from Harry Truman to Barack Obama.” He wrote this for Bloomberg View.