Reagan vs Biden

I recently saw a Facebook post from one of my acquaintances which portrayed a man with a shovel approaching the grave of Ronald Reagan. When asked why he would want to dig up the ex-president, he replied something like, "even dead, he is better than what we have now."

Since my friend is of similar age as myself, I wondered if he remembered that all these statistics about inflation and mortgage interest rates that reveal 40 year highs, reference the early 1980's when, you guessed it, Ronald Reagan was president. In other words, it was during Reagan's two terms, from 1980 to 1988, that these new high numbers are being compared. 

So, assuming that their may be other interesting facts, as opposed to rose colored glasses memories, I thought I would research some economic data, comparing Biden's current term to Reagan's first term and the overall administration from 1981 to 1988. 

Here is what I found.

https://www.macrotrends.net/countries/USA/united-states/inflation-rate-cpi

Since 1960, inflation exceeded 10% only 4 times; 1974, 1979, 1980, 1981 with rates of 11.05%, 11.25%, 13.55%, 10.33% respectively. Nixon was president in 1974 (he resigned in August of that year), Carter in 1979 and 1980, Reagan (elected in Nov 1980) in 1981. The 1970's. as a decade, featured horrendous inflation, averaging 7% per year during that decade. In comparison, from 2010 to 2019, inflation averaged less than 2% (about 1.8%) each year. 

Since 2020, inflation has increased, 1.23% in 2020, 4.7% in 2021, and 8% in 2022. Now, we can debate how much influence Biden's policies had on rising inflation. Certainly, injecting lots of money into the economy to keep average people afloat during the pandemic, and afterwards, was a factor. But, considering that high inflation was not specific to the US these last two years, then clearly outside factors, supply chain disruptions, war in Ukraine, among just two, also led to higher inflation world wide not just here. 

Like Biden, Reagan inherited economic problems from his predecessor, high inflation being one of them. From that high of 13.55% in 1980, inflation under Reagan declined to 10.55% in 1981, 6.13% in 1982, 3.21% in 1983, then, other than 1986 when it was only 1.9%, inflation ran between a low of 3.55% in 1983 to a high of 4.3% in 1984, finishing at 4.08% in 1988. During Reagan's 8 years in office, 1981 to 1988, inflation averaged about 4.6%. A good achievement when compared to the 1970's 7% per year.

We only have 2 years for Biden, 2021 and 2022 which have averaged over 6% each year. If 2023 comes in around 4%, that would equate to about 5.3% for the first 3 years. Comparable to inflation during Reagan's first 3 years which averaged about 6.4% but we must give Reagan a partial pass since he inherited such a high rate from Carter.

Using the same source, macrotrends, GDP growth for 1981 through 1983 (1982 was a negative year) averaged 1.7%. But, beginning in 1984, GDP growth averaged almost about 5.4%. Overall, GDP growth for the 8 terms for Reagan averaged around 3.5%. As comparison, GDP growth for Obama's 8 years averaged under 2% while during Clinton's 8 years GDP increased an average just under 3.9%. 

Since Clinton's GDP growth was better than Reagan's and inflation only increased an average of 2.6% during those 8 years (compared to Reagan's 3.6%) perhaps that cartoon I referenced earlier should have shown the man asking Clinton to come back rather than digging up Reagan...

Again, with only 2 years of GDP growth for Biden, 5.95% and 2.06% which averages to about 4%, that is comparable to Reagan's 8 year average, much better than his first 3 year average but less than those last 5 years.

How about unemployment?

https://www.thebalancemoney.com/unemployment-rate-by-year-3305506

While Reagan inherited high inflation and lowered it during his first term, unemployment, while high at 7.2% in 1980, increased during Reagan's first four years, averaging 8.725%. While it gradually came down during his 2nd term, the lowest rate was 5.3%, and the overall average unemployment during his 8 years was 7.43%.

As comparisons, unemployment averaged around 5% during Clinton's 8 years, about 5.5% during Bush 2's presidency. Even during Obama's 8 years which started with the 2008 economic meltdown, averaged less than Reagan's 2 terms, at just about 7.2%, although the last 3 years averaged only about 5%.

Under Trump, unemployment continued to drop, averaging only about 4.5% for his 4 years, even including the pandemic year of 2020. But again, with only 2 years data, unemployment under Biden has averaged below 4% which far outpaces Reagan's first 3 years (about 9% average). In fact, there has not been a presidential term with a higher unemployment rate that Reagan's 8 years average since the Great Depression years ending in 1941.

I wonder if that guy with the shovel would still want Reagan considering that data set?

In 1980, having voted in my 2nd presidential election, I was not a home owner, not all that focused on economic issues. Hey, I was an irresponsible young man. But by 1989, I was married and looking for our first house. The only thing we qualified for, mortgage wise, was a variable rate negative amortization deal. In other words, the interest rate was to change yearly, and, even if it didn't go up or down, our payment was less than the actual interest which was accruing which meant our debt was increasing every month. As it turned out, the 11% interest rate gradually lessened, and we were able to begin increasing equity in the home within 2.5 years as opposed to the original 5 year estimate. 

I don't need stats to know it was tough going then, and while home interest rates are over 7% now, after being under 3% for quite a while, they are not 11% as they were in the 1980's. 

I have a theory that in 20 or 30 years, the Biden presidency may be compared to Reagan's. Both were considered too old when in office, both inherited a mess from the previous president, both came across as the steady, grandfatherly type, a form of stability needed in a time of turmoil. 

Whether Biden's economic numbers fare well should we end up with 8 years to compare, is unknown, but I imagine that in terms of inflation and unemployment, I would favor Biden having the advantage. Should the economy break out after inflation gets back under 3%, he may end with a clean sweep in the three areas I have detailed. 

And then, who knows, perhaps a cartoon of a man with a shovel approaching Biden's grave will be circulating on the internet in 20 or 30 years with the caption, even a dead Biden is better than the current resident in the White House. Let's hope that the source of that cartoon has actual numbers to justify the sentiment.