Presidential GDP Dance Off: Reagan vs. Trump

We test Trump’s claims around the “greatest economy…in the history of the world” by framing Reagan vs. Trump GDP numbers.

• We look at the economic growth under Ronald Reagan for a frame of reference on what unfolded in the booming 1980s as that period started two decades of bull markets that also brought more than a little excess in the expansion of the credit markets.

• Trump’s performance pales in comparison to the Reagan years, and the numbers don’t lie (even if many people do).

• We keep the commentary brief and stick to just the quarterly GDP numbers as a reality check on the “greatest economy” nonsense with the post-2000 economic growth stories offering little in terms of bragging rights to anyone since the Clinton 1990s boom.

• The bottom line is that the Reagan and Clinton economies crushed Trump and Biden but only one of those ignores the point. No contest in Trump vs. Reagan. Referee stops the fight.

In keeping with the spirit of Guardians of the Galaxy, we pit two of the GOP headliners against one another with objective economic numbers to test Trump’s theories around “his economy” as quoted from his convention speech:

“The best economy in the history of our country, in the history of the world. We had the greatest economy in the history of the world. We had never done anything like it. We were beating every country, including China, by leaps and bounds. Nobody had seen anything like it.”

The bar chart above breaks out the numbers by quarter from 1Q81 to 4Q88 (for Reagan) and 1Q17 to 4Q20 (for Trump). We run medians for the 8 Reagan years and for each of the individual terms. 

As detailed in the chart, Reagan posted very strong growth numbers. He was a great orator, but he also let his numbers do his talking for him.  The proof is in the headline GDP numbers. As a reminder, Reagan walked into a stagflationary environment with a very aggressive monetary tightening regime under Volcker and at absolute UST rates that dwarfed the post-ZIRP normalization policies Trump faced. We include some yield curve histories below from our recent Yield Footnotes publication as a memory jogger (see Footnotes & Flashbacks: State of Yields 7-21-24).

The medians across the quarters overall in Reagan’s 8 years and for each 4-year term were ahead of Trump as detailed in the chart. We prefer showing the quarterly rates, but basically Trump posted 3 years of 2% annual growth rates and one negative -2% handle year with COVID.  Reagan posted 3 different 4% handle annual growth rate years in his collection and a 7% year plus another 3 years of 3% annual growth. Trump produced none of those. The quarterly GDP growth rates build up to a head of steam under Reagan and rolled into his second term. His Vice President, George HW Bush, was handed a very strong run rate when he was elected in 1988.

We will look at Clinton quarters separately, but he had 5 annual GDP growth rates of 4% handle years to zero for Trump. Even Carter had 3 of 4 years higher than Trump’s best year. After a while, people should start to wonder why this “greatest economy” nonsense is not called out more frequently even as he repeats something so easily disproved by the record.

The Carter lesson is sobering for the Democrats since he crushed Trump on employment growth and had 3 years of much better GDP growth rates than Trump. The inflation severity that kicked into high gear in 1979 and destroyed 1980 was a dagger.  Waves of deregulation added to the stress of industry adjustments.

The double-dip of 1980-1982 was as ugly as it gets in terms of gut-wrenching structural change in the economy with massive pain served up on the manufacturing and transportation sectors among others (see UST Moves 1978-1982: The Inflation and Stagflation Years 10-18-23). Reagan’s economic policies, tax cuts, and restructuring actions armed a private sector with confidence in their ability to adapt to clearly articulated economic policies (whether you liked them or not).

Budget deficit battles back then were no picnic, but the early setbacks set the bull market in motion in equities and deregulation sent the economy into a mode where nominal GDP doubled in the 1980s.  Credit markets soared and helped those growth rates. Of course, there was a “bill to pay” later on some of the credit excesses by 1989.

The oil patch felt the sting of the oil price collapse into 1986 on the first Saudi/OPEC oil price war, so some regions like Texas don’t have such fond memories. That is why bragging about low oil prices comes with an asterisk for some regional economies.

Reagan formerly ruled the mentality of conservatives…

For those keeping score on Presidents who exceled in managing economies, Ronald Reagan brought structurally lower taxes and extensive reforms in economic policy. He saw a deep recession turn into a booming economy. At the time, the second leg of the 1980-1982 double dip recession was the longest and worst since the Great Depression.

Reagan spearheaded the end of the Cold War. He did not kiss Soviet dictator butts and referred to the Soviet Union as the “Evil Empire” in a speech to evangelicals in 1983. He was a catalyst for bringing down the Berlin Wall.  He also had a very positive message on America and its role in the world for good. 

Reagan was not an anti-immigrant xenophobe and spoke glowingly of what immigration brought to the US.  Reagan was a teenager when the Immigration Act of 1924 was enacted. That was a time when the Ku Klux Klan national membership peaked in the millions across the South and the North. Anti-Catholicism was rampant in the US in 1924 and again in the 1928 election. Basically, if you are an Irish, Italian, or German Catholic, these elements hated (and often mistreated) your grandparents or great grandparents. I am old enough to have heard some of their stories. That is food for thought for those who have ancestors who faced such hatred if they embrace a different version of it today.

I was just reading a book about Al Smith (Empire Statesman), who was a legendary Democrat and 4-term Governor of New York. That is a story for another day, but the periods of the 2024 and 2028 elections have a lot in common with what we see today in political culture wars (earlier banning of immigration and voting rights for Chinese in the late 1800s spread to other Asians, annoying the Japanese, which did not end well in 1941 for various reasons). The realities of xenophobia and Christian (Protestant) extremist movements in the 1920s was evident in hateful anti-Catholic political literature and of course prohibition (a Catholic “wet” brought the threat of “Popery, Rum and Romanism”).

Antisemitism, racism, and Jim Crow ruled the 1920s, but that is not likely to show up in some history classes in the future. Someone will call “facts” a theory (see Martin Luther King Jr. - MLK was a Fact – Not a Theory 1-15-24).  It is so much more benign when the erasure of facts is just about static GDP numbers. It is remarkable that the 1920s are even relevant today.  But they are.

Reagan policy was shaped by what worked and what did not work.  Reagan enacted tough immigration policies that offered paths to citizenship, but he did not run hate campaigns with screeching dog whistles. One of his last speeches was on immigration.   It is worth listening to it again this year.