Election years come with an extra share of bold, if not ridiculous, claims from politicians and their supporters. As always, one of the main issues this year is economic management and national debt.
While everyone debates whose plans are more likely to succeed, one of the best tools to understand economic policy is to take a look at history. One of the most important parts of the president’s job is in how they influence the national budget and any consequent debt.
When you review all of the presidents since WWII, it becomes very clear how much different programs and philosophies cost, and it also becomes clear what has and has not worked.
It probably comes as no surprise, but the end of the Great Depression and the activities of WWII lead to the first sustained period of deficit spending in the U.S. While most of the programs and decisions happened under the Roosevelt Administration, Truman had his own impact at the end of the war.
Roosevelt
Love it or hate it, Roosevelt oversaw the fastest, largest and most sustained deficit period in American history. When he took office, national debt was only 20 percent of the GDP, and the U.S. had seen 11 consecutive surpluses. By the end of his presidency, national debt was roughly 120 percent of GDP. Such dramatic spending increases have not been seen since.
Truman
Truman was handed the largest debt in the history of America, but he actually left office with a surplus and a trend that would lead to 40 years of reduced national debt when compared to GDP. The end of WWII saw economic prosperity across the west, and the overwhelming decrease in military spending made the change almost inevitable.
Eisenhower, Kennedy, Johnson and Nixon
The first half of the Cold War saw a sustained drop in deficit spending, despite the United States’ involvement in Korea and Vietnam. Throughout the period, economic growth was sustained and marginal, letting four presidencies in a row enjoy the respective debt drop.
Ford, Carter and Reagan
From 1974 to 1982, debt stayed fairly static. Under the Reagan administration, deficit spending increased for the first time since WWII, and the aim was to stimulate the economy. The plan succeeded, leading the U.S. to its most prosperous growth period, but sustained increases in debt were the major cost.
In the period of time since Reagan the two major political parties in America have become divided more dramatically in their debt philosophies than at any other time in history.
Bush Sr.
George Bush barely still counts as a modern president, but it is worth spending a little time on the effects of his short term. The major takeaway is that the Reagan Administration handed him quickly rising debt levels, and in four years the spending declined and completely leveled. By the end of this administration, deficit spending had almost completely flat lined.
Clinton
The Clinton administration did little to change spending during its eight years, and since economic gains continued to rise, the end result was a net drop in deficit. By the end of Clinton’s terms, the debt as a percent of GDP was just over 50 percent.
Bush Jr.
George W. Bush was handed consecutive surpluses that he used to justify tax cuts. Those combined with sustained military presence in the Middle East to cause a minor reverse in the deficit trend, rising back up to just over 60 percent of the GDP
Obama
In eight years, the Obama administration has produced the second fastest and largest deficit increase since WWII. This is despite the fact that the U.S. has completely withdrawn from Iraq and committed to reduced international intervention during the term.
This is also in spite of the fact that the bulk of the presidency has seen sustained, but slow economic growth. The U.S. GDP is currently the highest it has ever been, and deficit spending is just over 100 percent of that GDP.
Supporters of any establishment will try to justify the decisions. Even so, it’s hard to imagine how the U.S. could have navigated WWII without the huge spending that was seen. Since then, the two major rises have been from Reagan and Obama.
The Reagan presidency was followed by 20 years of the country’s greatest economic prosperity. The Obama administration has overseen the slowest economic growth since WWII. With the exception of FDR, it has also spent the most total dollars of any administration per year, even after being adjusted for inflation.
Simply put, it has been the most financially ineffective presidency in U.S. history, and it trails modern presidencies by orders of magnitude.
Regards,
Ethan Warrick
Editor
Wealth Authority
