Reaganomics VS Obamanomics

Yesterday a friend of mine stated that Obama “doubled down” on the national debt, and that debt

under Reagan grew by 1-3% annually. I have heard him or others make similar statements in the past so I decided to do my own research.

To quote Adam Smith "I am always willing to run some hazard of being tedious in order to ensure that I am perspicuous." Things get a little wordy, or, even worse, mathy below, so skip to the chart if detail is not your thing.

The facts are below.

National Debt (Source: St. Louis Fed)

Reagan served as president from Jan 20th, 1981 to Jan 20th, 1989

At the end of Q1 1981 National debt stood at 964,531 million USD

At the end of Q1 1989 National debt was 2,740,898 million USD

This equals a total growth of 184% or a compound annual growth rate of 13.95%

Obama served as president from Jan 20th, 2009 to Jan 20th, 2017

At the end of Q1 2009 National debt stood at 11,126,941 million USD

At the end of Q1 2017 National debt was 19,846,420 million USD

This translates to a growth of 78% or a compound annual growth rate of 7.50%

My friend also stated that Reagan inherited a worse economic situation than Obama. We will evaluate

this claim by looking at three key economic indicators. Unemployment, Inflation, and GDP.

Unemployment (Source: BLS.gov)

In 1980 National Unemployment rate was 7.1%, it rose to 7.6% in 1981 and then to 9.7% in 1982

before falling every year thereafter and eventually reaching 5.3% in 1989

In 2008 unemployment was 5.8% it rose to 9.3% in 2009 and then 9.6% in 2010 before falling every

year  thereafter and eventually reaching 4.4% in 2017

Inflation (Source St. Louis Fed)

From Jan 1980 to Jan 1981 Inflation was 11.8%, from Jan 1981 to Jan 1983 inflation averaged 5.96% annually .

From Jan 2008 to Jan 2009 inflation was -0.47% (deflation) although all of the deflation took place

between July, 2008 and December 2008 when the CPI fell 3.48%. From Jan 2009 to Jan 2011 Inflation averaged 2.16% annually (Source: St. Louis Fed).

GDP (Source: St. Louis Fed website)

Both Reagan and Obama experienced recessions.

There was a recession right before Reagan took office. In 1980 real GDP (billions of USD annualized) fell for two quarters from 6,837.641 in Q1 to 6,688.794 in Q3 a peak to trough contraction of 2.18%

The recession in 1982 spanned 5 quarters from Q3 1981 to Q4 1982 real GDP (Billions of 2012 dollars) fell from 6,978.135 to 6,802.497 a peak to trough contraction of 2.52%

From Q4 1982 to Q4 1988 real GDP grew from 6,802.497 to 9,009.913; 4.80% annually

The 2008 recession lasted  5 quarters from Q1 2008 to Q2 2009. Real GDP fell from 15,761.967 in

Q4 2007 to 15,134.117 in Q2 2009 a peak to trough contraction of 3.98%.

From Q2 2009 to Q4 2016 real GDP grew from 15,134.117 to 17,784.185; 2.17% annually

Debt/GDP Ratio (Source: St. Louis Fed website)

Some may argue that measuring total debt is not as meaningful as looking at debt as a percentage of GDP.  Since total debt can grow indefinitely as long as it does not grow faster than GDP this

is a valid point to make.

As of Q1 1981 Debt/GDP was 30.87 by Q1 1989 Debt/GDP had grown to 49.73 a 61.1% total

increase or 6.14% annual growth in Debt/GDP

As of Q1 2009 Debt/GDP was 77.30 by Q1 2017 Debt/GDP had grown to 103.57 a 34.0% increase or 3.72% annual growth in Debt/GDP

Summary

	Reagan	Obama
Total % National Debt Growth	184%	78%
Total % Growth In Debt/GDP	61.1%	34.0%
Unemployment in First Two Years of Office	7.6%, 9.7%	9.3%, 9.6%
Inflation Threat	Stagflation	Deflation
GDP Contraction	2.52%	3.98%
Recovery Annual % GDP Growth	4.8%	2.17%
Final Unemployment	5.3%	4.4%

Conclusion

Both Reagan and Obama faced difficult economic conditions in the first years or their presidencies.

Both saw high unemployment, and GDP contraction, though Obama faced deflation as opposed to

Reagan’s stagflation. Both responded by cutting taxes and pushing expansionary fiscal policy which

contributed to large increases in the national debt. Both saw a reduction in unemployment, a

stabilization of inflation, and a recovery of GDP growth. Reagan enjoyed a much higher GDP growth

during his recovery, however this growth came at the price of significant increases in national debt.

Note: My goal is not to push a political agenda. I am not endorsing the policies of either president or

passing judgments on their decisions. I also think it is important to note that there are a number of

factors that contribute to inflation, growth, and unemployment, and the president is limited in his ability to control most of those factors. The performance of the economy, and changes in the national debt should not be the sole criteria for judging the performance of any president.

-Joe Bailey