Obama Economic Post Mortem - Is He The Worst President (Economically) In U.S. History?

| About: ProShares UltraShort (TBT)

Based on economic growth during presidential terms minus the respective growth in federal debt during their terms, the short answer is, Obama probably is the worst President (economically), at least since WWII. No one else is even close to the debt Obama (& Congress) has created...+$1.8 trillion in just the last 13 months.

Even worse, when gauging the growth in marketable Treasury debt which now sits at $14.4 trillion.

    • 1776-->2007 +$5 trillion (35% of current total)
    • 2008-->2016 +$9.4 trillion (65% of current total created in the last nine years).
    • The Obama administration and Congress during his 2 terms are presently responsible for creating 56% of all US marketable debt, and will likely be 57%+ by Trump's inauguration (chart at bottom of article).

Still, Bush Sr., Bush Jr. and Reagan had huge structural, population, and demographic advantages over Obama and the fact they did so poorly is shocking. Somewhat surprising also is the strong performance of Carter alongside Clinton.

The raw GDP growth vs. growth in federal debt, by president, in the chart below (the Obama numbers include an est. 2.5% Q4 GDP growth). Keynesians must shudder at the ineffectiveness of greater federal debt to result in greater economic activity (Trump...you may want to ponder that before setting off on new misadventures in fiscal stimulation).

But perhaps a focus on federal debt and GDP alone is misleading...perhaps a wider view of the influence of total US credit growth alongside federal debt growth impacting GDP growth will help (the chart below shows the change in each, per presidential term). In short, more debt ain't getting it done anymore.

Still, there were winners under Obama. If you held equities or were a home owner (or landlord), times were very good. The chart below shows the % rise in the Wilshire 5000 (representing all public companies actively traded in the US), the Case Schiller home price index, and the rise in marketable Treasury debt. The rise in equities under Obama is numero uno, thanks to a lot of new debt.

Regardless of Clinton or Trump, The Next 8 Years Are Going To Be The Worst Economic Period In US History
Regardless who was chosen as president for the next two terms, 80% of the population growth in the US will come from 65+yr/olds (chart below). This is the inverse from Clinton's & Reagan's presidencies which were the benefactor of the strongest demographic and population changes with 80% of the growth coming from the working age population. In short, as population growth among the young peaked in the 80's, (and has now slowed to a crawl), the Fed has been dropping rates all along to incent the decelerating growth among the young to indebt themselves further...but the population growth to consume(r) our way out of this debt bubble is never coming.

Below, the reversing make-up of population growth from the peak under Clinton to the upcoming bottom under President Trump (particularly in the second term). And all these numbers assume continued current levels of immigration - if that slows (or a Trump deportation occurs), the numbers of young will be even further reduced.

What About Rating Presidents on Jobs Created?

As you may have guessed, I believe the population, demographic, and business cycles are a little bigger than any one president. So, to gauge job creation, the chart below shows Treasury marketable debt vs. the Federal Funds interest rate cycle (quarterly). Also, in the boxes the change in marketable debt per interest rate cycle vs. full time jobs creation (net) per cycle (peak to peak).

The sharp acceleration of marketable debt and the deceleration of full time jobs creation is very apparent. The decelerating growth in jobs vs. the surging debt is rather important as it's only through more jobs that a larger economy and tax base is created that is hopefully sufficient to pay back the debt (LOL) or more likely simply service the ever large debt load.

Absent the growth in jobs and tax base, the only other option to constrain the debt service is to lower the Federal Funds rate (think NIRP or negative interest rates wherein the largest corporations are paid to take loans and the government pays itself to issue new debt and banks charge savers to hold their money).

Finally, the changing federal funds interest rate, per presidential term. Noteworthy is that rates have been raised during every Democrat's term and declined during every Republican's term since Eisenhower. I can promise you, rates will decline during Trump's term so long as the Fed continues to be the Fed.

Conclusion:

Ok, Obama is definitely the worst. Still, in all fairness to Obama, he really had no politically viable options although he showed himself (and Congress) to have zero political courage (I know, shocking for politicians) to initiate the painful structural reforms that are so necessary. Will Trump have the guts to initiate the necessary changes or just fall in line with the rest of the politicians in spending and giving away goodies to all his friends?

About this article:

Expand
Want to share your opinion on this article? Add a comment.
Disagree with this article? .
To report a factual error in this article, click here