Historical Financial Effects Of Past Presidents

Historical Financial Effects of Past Presidents

There is a historical connection between presidents and the economy, even if some of it is only perceived. Typically, we will judge a president’s success by the state of the economy upon their exit from office. How much control over the economy does a president have?

Updated on Feb 15 2020

It’s Presidents’ Day! Originally a celebration of George Washington’s birthday, the holiday has now become a day to honor and celebrate our nation’s presidential leaders. On the third Monday in February, we can always expect celebrations, reenactments, and displays that honor our history. And, it’s also a good time to consider the economic impact that the role of president has on our economy. During any political cycle, we hear a great deal about the economic impact a president or presidential candidate can wield, a potentially looming recession, and the fact that we all should have saved more. But, do you know exactly how presidents affect the economy? Read on to find out:

There is a historical connection between presidents and the economy, even if some of it is only perceived. Typically, we will judge a president’s success by the state of the economy upon their exit from office. But, how much control over the economy does a president have? It may be less than you think. The American economy is an extremely complex system that is constantly being affected and influenced by near countless factors. Additionally, the economy itself is cyclical and will regularly and naturally dip and rise over time. Of course, there are factors that help determine these up and down trends, but this ebb and flow will occur naturally. But, many folks will unduly attribute all movements within an economy, good or bad, to the decisions of the sitting president.

When it comes to a president’s direct impact on the economy, it is likely more limited than you originally thought. Naturally, a president can impact the economy through dictating economic and commercial policies, as well as by appointing Federal Reserve officials who more directly impact economic policies. So, while the president can and does put forth economic ideas and concepts, they are rarely enacted so easily.. To truly enact any economic policies, the president must do so in conjunction with Congress. In this context, it could be said that Congress has more direct control over the economy than the president, as they can only act with Congress’s approval. And, if Congress is in direct opposition to the president’s proposed policies, they will likely never be enacted. So, keep this in mind when considering the relationship between presidents and the economy.

Looking back on the economic growth of past presidents, some figures may be surprising. Presidents JFK and Lyndon B. Johnson boast the largest periods of economic growth while in office, with GDP rising by 5.5% and 5.07% respectively. On the other hand, Presidents Bush II and Obama had the smallest increase overall, with only 1.8% and 1.78% respectively. But, as we’ve learned, presidents don’t affect these figures as directly as we’re led to believe. These figures have been determined by a complex mass of factors, with the president and their decisions being only one of the components. Because of this, solid financial planning on your part will dictate your future more directly than the president of the time.

Now, none of this is to say that there is no correlation between presidents and the economy. Of course presidents affect our economy. However, these direct effects can often only be seen over time. For example, entering into trade agreements with other nations can provide economic growth and stimulation, however this typically occurs over a longer period of time. And, because these effects can take longer to become apparent, they aren’t often attributed to the president who enacted them. Other economic policies can see long-term effects. Minimum wage, for example, can be a policy that a president enacts with great effects on the economy. These effects will also take some time, potentially longer than a president’s stay in office, to become apparent.

So this President’s Day, reflect back on our history and past presidents. And, be sure that you don’t get too caught up in the idea that the president controls your financial destiny. Instead, take the time to think about your financial goals and how you can achieve them. The first step will usually involve finding a financial advisor that works for you. You can explore your options today and enjoy your Presidents’ Day!

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