Are You Better Off? Reagan vs. Carter, and Obama vs. McCain

By John Schmitt and Dean Baker

In his 1980 presidential debate with Jimmy Carter, Ronald Reagan famously asked the American people whether they were better off than they had been four years ago. Enough voters answered "no" to give Reagan a decisive victory in the election.

Senator Obama is posing the same question today, since Senator McCain promises to continue the economic policies of the Bush administration. One of us (John Schmitt) recently compared all the major indicators of economic well-being in 2008 and 2000.

On 23 of the 25 measures selected, the economy was doing better in 2000 than 2008. The deterioration was sharpest in the measures that concern us most. For example, the unemployment was just 4.0 percent in 2000. The most recent data show the unemployment rate at 6.1 percent. While family income was higher in 2008 than 2000, the gain over these 8 years was a pathetic 0.4 percent, compared to 14.7 percent growth in the Clinton years. Real wages actually fell in the last 8 years, after rising 8.2 percent in the Clinton years.

The percent of the population without health insurance coverage increased from 14.0 percent to 15.3 percent. The share of the country living below the poverty line rose by 1.2 percentage points.

The ratio of federal debt to GDP rose sharply --from 57.3 percent in 2000 to 65.8 percent in 2008. Over the same period, the ratio of foreign indebtedness to GDP rose from 13.6 percent to 17.9 percent. We won't even talk about the price of gas.

Other than the modest increase in family income noted earlier, the only other major indicator that shows the economy doing better in the Bush years than the Clinton years is productivity growth. Productivity increased by 21.9 percent in the Bush years compared to 15.9 percent in the Clinton years. This is a good productivity performance, but it's not much to hang an election campaign on, especially when these gains haven't translated into economic improvements for the typical voter.

In fact, the economic bind facing Republicans in 2008 is far worse than what the Democrats were looking at back in 1980, when voters handed Carter a crushing defeat. By our count, the economy performed better during the Carter years than it did under Bush. By 12 of our 23 measures (two of the recent measures were not available in the earlier period), the economy was doing better in 1980 than in 1976. By comparison, only two of our 25 indicators are better now than they were in 2000.

Many people, even those who voted in 1980, are surprised to hear that as high as the unemployment rate was that year -- 7.1 percent -- it was actually 0.6 percentage points lower than it had been in the year before Jimmy Carter took office.

Real family income was 1.6 percent higher at the end of the four years of the Carter presidency than it had been at the beginning. By contrast, family income had risen by just 0.6 percent over the prior four years. (In eight years under Bush, real family incomes are up just 0.4 percent.)

Several measures, of course, clearly deteriorated during the Carter years. Inflation in the last year of the Carter presidency, for example, was 10.9 percent (because of a faulty measure, the inflation rate reported at the time was 12.5 percent). Real wages also fell 2.2 percent during the Carter years, although this was a smaller drop than the 2.9 percent decline in the prior four years.

Not everyone remembers back a full four years, and for people who just remembered the last year, the picture was certainly not good. Inflation and unemployment were rising and wages were falling. The economy had slipped into recession in 1980 and employment fell by 1.1 percent, the equivalent of 1.5 million jobs today. It is likely that many voters were thinking about whether they had gotten better off over the last year when President Reagan posed his question, not the last four years.

In Senator McCain's case, it really won't matter whether voters think about just the last year or the last 8 years, the picture is bleak in either case. That may not be entirely fair. The economy's performance at any point in time will always be determined to a substantial degree by factors that are not under the president's control. But, that is how the game is played, just ask President Reagan.

Comments

[texastrixie]

I hope in the debate that Obama will note that McCain's doubling of the income tax exemption applies only to CHILDREN. So, if you're retired with no children at home, you wouldn't get anything. If you're a baby boomer whose elderly mother lives with you, you probably won't get anything (because its your mom, not your child), and if you have an adult dependent (like me - almost blind but not quite enough to get Social Security), you won't get any extra either.

And if health care comes up, bring up again that McCain would have workers with health care benefits see extra income tax taken out of their checks, just as if they had extra money for food, rent, etc.

Plus, buying up these overpriced houses helps out the banks (McCain's plan) but making banks re-negotiate the loan makes both the bank and the homeowner be more responsible. The bank charges a lower interest rate (fixed) but makes the loan for a longer period (40 yrs). In the end, the bank makes way more than the house was originally sold for (have you ever seen the amt of interest you pay over 30 or 40 yrs?!), and the homeowner has a place to live and if that was his real reason for buying the home (to live in), there is some chance that he will eventually see the readjust to the original price. There are lots of ways mortgages could be rewritten.

[DrYRHead]

This article does not seem to take inflation into account very well. Over the last 10 years I've seen the costs of most things tripple. However, at the same time my income has only gone up by about 50%, and many people in my town have not seen their incomes increase at all during the last 10 years. Let me see here, incomes have been pretty flat, but the inflation has been about 300%. That bodes BAD for the republicans. It would not matter who was on their ticket.

[Stephen308]

On the surface, the fact that there is a republican in the White House when hard times hit....that's good for Obama.

ON the other hand, Obama's plan to raise taxes massively to cover a massive expansion of government..they suck and would make things worse not better.

And tax cuts for "95%" of us? I hear he also promised tax cuts to voters in his home state if they would send him to the senate and he never even offered a bill or tried. So does he mean it this time when he apparently didn't mean it last time?

And does he think I'm dumb enough to believe he can massively expand government with big tax increases on big business and that I wont realize that they will pass those increases on to all of us in higher costs...INFLATION. It's still a tax increase to me no matter how he extracts it, by direct tax or an indirect inflation tax.

And the democratic congress that is pumping out HUGE deficits and not even discussing a balanced budget is the Answer?

So much meaningless rhetoric of fiscal responsibility from people so determined NOT to be responsible AFTER the election. Where is Obama's balanced budget bill, why did he NEVER have one? Where is Obama's tax cut bill? Why did he never have one?

I'm getting old, too old to believe the BS that others pretend they believe but know is not true.

[DrYRHead]

Clinton did what Obama is wanting to do, yet the economy fared quite well under Clinton. Thus, making the rich pay their share of taxes, may force them to be more fiscaly resposible.

[Oregon Ivy]

We lost a lot more than money and jobs to the Shrub Administration. We lost international respect and power. Personal rights and freedoms. We lost fair and untampered elections. National pride. Our unity. Our moral compass, by imprisoning American citizens without representation and condoning torture.

Bush should be prosecuted for his crimes, but sadly, we'll be giving him a huge pension, free health care... just like Wall Street.

His legacy of destruction will take generations to rebuild. Probably just in time for an amnesiac American public to elect another Republican president.

[rmreddicks]

Carter was forced to pay for the war against Vietnam. I'd be hard pressed to know what others might consider his other failings. Johnson enabled a surtax but it wasn't enough to pay the bill. Nixon gave the bill to whomever came next. Back then a billion a month was big dough. We'll see what happens in the near future. We'll pay for this war against the Iraqis one way or another.

[Yermammy]

I saw you on the News Hour on PBS tonight! Man you're good. I don't think your going to be making any friends in the FAT CAT category! Barack needs YOU for SECRETARY OF THE TREASURY! You are the common man's hero.

Thank you Mr. Dean. Your are a good man.
A very rare phenomenon nowadays. Godspeed.

[ReasonIsMyReligion]

Excellent.

But while not all factors are under the President's control, true, many of them ARE indirectly affected. e.g. Money spent on Iraq Nam is NOT available for other purposes that might have more stimulus effect. Or simply buy some of the 40 million uninsured some health care.

And the authors didn't even touch the income and wealth disparity -- now gimoungous.
http://www.lcurve.org/

When the top 1% control 25% of the wealth, something is wrong with the game.

[DuganS1]

Most these indicators are more of a timing issue than anything. It's also important to note that Presidential policies have little influence over these indicators for the most part. On the timing issue, for example, there was only 4% unemployment in 2000, which by chance happened to be Clinton's last year as President. In contrast, a recession started in the US on almost the exact same day Bush became President. If Clinton's second term happened to end in early 2002 and Bush's term in October 2007, then the statistics would tell a very different story. Clinton also happened to be president leading up to 2000 when a massive amount of money was put into the economy and financial system because of the Y2K scare. If Bush was elected in 98 vice 00, he would have bee the beneficially of that. For Presidential influence, there are many many factors that determine what happens in the economy, plus we can't forget that Republicans controlled congress for six of Clinton's eight years which helped keep government spending down.

[strangelet]

And if monkeys happened to fly out of your butt, that would be a remarkable news story, but irrelevant to the election.

BTW, the Republicans controlled Congress for six of Bush's eight years, and the national debt increased by almost 5 TRILLION dollars -- that's double, bubbie.

[Stephen308]

Wrong, the Democrats have controlled congress for the last two years and they are spending even MORE! Lets give credit where credit is due. I'm sure Pelosi and Reid are proud of their record as massive deficit creators.

[TheIndependenceParty]

I was alive in 1980, ... had a great job and have never since made the same money I did that year. Reagan and his acolytes are demented and narcissistic in their entirety. They are ideologues who believe a fallacy, ... like Scientology on a social level. Some have, ... most do not. Believe, ... and receive. Otherwise, go back to your production line and shut up. Oh, ... and at that time, I was a Republican.

I quickly learned to vote my interests. Perhaps this year will be different than the last 28.

[tuttlemsm]

"Productivity increased by 21.9 percent in the Bush years"

And even this point can't be translated into anything that John McCain could sell as an economic boon. It just means American workers are working even harder than before for the economic raw deal they're presently getting.

[ReasonIsMyReligion]

Then why didn't wages and income go up 21.9 percent?

[tuttlemsm]

That's my point.

[army193]

What are you talking about...The President with McCain vote took this nation to War in Iraq...When was this paid for?