Which presidents have been best for the economy?

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GOP front-runner, real estate mogul and reality television star Donald Trump has vowed to be "the greatest jobs president that God ever created." To do so, he'd need to unseat former Democratic President Bill Clinton, who averaged nearly 242,000 monthly job gains during his eight years in the White House.

Trump's Republican rival Jeb Bush has promised 4 percent annual gross domestic product growth if he's elected to office. But four of the five presidents who have overseen the largest average economic expansions since World War II have been Democrats – John F. Kennedy, Lyndon B. Johnson, Clinton and Jimmy Carter.

Over the last six decades or so, history has tended to favor Democratic presidents in terms of economic performance. The country's unemployment rate has been lower at the end of every Democrat's tenure since Kennedy took office in 1961. Ronald Reagan, meanwhile, is the only GOP president since Dwight Eisenhower took office in 1953 who can say the same.

But how much do presidents actually impact the economy? Are Democratic policies actually better for domestic growth?

Not necessarily, according to a study conducted last year by researchers at Princeton University.

"Democrats would no doubt like to attribute the large [Democrat-Republican] growth gap to macroeconomic policy choices, but the data do not support such a claim," the researchers wrote in a report aimed at determining why the economy tended to post better numbers under Democratic administrations. "If anything, and we would not make too much of small differences, both fiscal and monetary policy actions seem to be a bit more stabilizing when a Republican is president – even though Federal Reserve chairmen appointed by Democrats preside over faster growth than Federal Reserve chairmen appointed by Republicans by a wide margin."

The report looked over a variety of factors, including employment and gross domestic product growth, to figure out why Democrats seemed to oversee more thriving economies than their Republican counterparts. The study ultimately determined that differences in performance come down to "'good luck,' with perhaps a touch of 'good policy.'" Democrats, for example, have been beneficiaries of a greater number of oil shocks which has helped control inflation and has put more disposable income into the hands of consumers. But when volatile energy and food components are stripped out of inflation calculations, prices in the U.S. don't seem to rise and fall under particular administrations.

"The main role a president plays is to not make big mistakes that can hurt the economy and hurt incomes," says Robert Shapiro, co-founder and chairman of Sonecon advisory firm and former undersecretary of Commerce for economic affairs. "But it's interesting. There were certain policies that were followed by both Reagan and Clinton that were abandoned by [George] W. [Bush] and not advanced effectively by [President Barack] Obama that have an effect."

Shapiro notes that the levels of public investment in "education, infrastructure and basic non-military research" under the Clinton and Reagan administrations are head and shoulders above such investments made by Bush II and Obama. Such investments can help bolster labor force skills and worker productivity and ultimately help drive both economic growth and wage gains.

"Another difference is Reagan stabilized the deficit and Clinton eliminated it, and then it exploded under Bush [II] and has remained relatively high under Obama. Obama has a better record there than Bush, but that's a distinction between this presidency and those ones."

Obama and Bush II carry the not-so-desirable distinction of increasing the federal deficit by more than any other president post-World War II. They've also added the most debt to the country over the same period.

Presidents are also subjected to the peaks and valleys of business cycles and oftentimes inherit problems without enough time to take preventive measures. The U.S. was thrown into recession only a few months after Reagan took office in the 1980s, and the Great Recession had already begun by the time Obama entered the White House in 2009.

So economic performance in 2016 and beyond may not ultimately be up to those running for office. The winner, regardless of political affiliation, will inherit an economy that's showing signs of slowing down. Job growth this year has averaged only 198,000 new positions per month, well below 2014's 260,000 average additions. And an expected interest rate liftoff later this year or sometime in early 2016 could slow business investment as borrowing capital becomes more expensive.

But the economy is hardly down and out. Shapiro notes that persistently low oil prices, renewed stock market stability and slow but steady income gains could put voters in a comfortable position when the polls open in November 2016 – which could be bad news for the GOP.

"The voters are going to be more demanding of 'How are you going to make my life better?'" Shapiro says. "The Democrats can say, 'When we came in, the economy was collapsed, and we've restored it. We've restored income growth. We've restored unemployment.'"

Whether that's thanks to the Obama administration or thanks to underlying economic trends is open to interpretation.

Copyright 2015 U.S. News & World Report


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