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You might have heard: Joe Biden is shaping up as the next Jimmy Carter.
As a Democratic president in the 1970s, Carter had to deal with surging inflation, as Biden does now. Carter also faced an energy crisis, triggered abroad, much as Biden is now trying to tackle soaring gasoline prices caused by Russia’s invasion of Ukraine. Carter famously claimed the nation faced a “crisis in confidence,” which is arguably the case under Biden, too, given that consumer confidence, by some measures, is at the lowest levels on record.
Republicans, of course, hope there’s one more similarity between Jimmy Carter and Joe Biden. Carter was a one-term president who lost his 1980 reelection bid in a landslide victory for Ronald Reagan. Republicans controlled the White House for the next 12 years. It’s not yet clear if Biden will run for reelection in 2024, but Democrats do seem teed up for a drubbing in this year’s midterm elections.
As part of the Yahoo Finance Bidenomics Report Card, we compare Biden’s performance on the economy with past presidents, going back to Carter. We follow six economic indicators, with data provided by Moody’s Analytics, and compare Biden with his predecessors at the same point in their presidencies. So we have the data in hand to directly compare the Biden and Carter economies in the 17th month of each president’s term.
For now, it's a tie, with the Biden economy doing better on three metrics and the Carter economy doing better on the other three. Many Americans remember the Carter years as a gloomy era characterized by high inflation. But that didn’t really happen until late in Carter’s presidency, including a seven-month recession that began in January 1980. During Carter’s first couple of years in the late '70s, the economy was actually doing well.
The economy was strong during Biden’s first year as well, partly because of lucky timing. Biden came into office in 2021 as the recovery from the COVID recession was just kicking into gear, and COVID vaccines were finally allowing parts of the economy to slowly return to normal. There was also an extraordinary amount of fiscal and monetary stimulus that shortened the recession and accelerated the recovery.
The five charts below show how the two presidents compare on growth in total employment and manufacturing employment, plus GDP growth, the stock market’s performance and average hourly earnings. (Click the arrows in the upper left corner to move through the charts.)
Biden has the edge on total job gains, and in fact he leads all presidents on that metric, because of the rapid post-COVID recovery. Carter is second among the eight presidents, indicating the strength of the economy early in his career. We do not adjust this measure for population growth, which makes the job gains early in Carter's presidency even more impressive.
Carter wins on job gains in manufacturing, with Biden second among all presidents. That reflects the larger share of the workforce employed in manufacturing jobs in the 1970s. Manufacturing work has gradually declined on a share basis since then, as the U.S. economy has shifted toward services.
Biden has a slight edge over Carter on GDP growth, which we do adjust for population growth. Again, Biden and Carter are one and two among the eight presidents, another reflection of the strong economies they both oversaw early in their terms.
Both are middling when it comes to the performance of the S&P 500 stock index. Biden ranks 4th, Carter 6th. Barack Obama had the best performance on stocks at the 17-month mark, again, largely because of timing. Obama came into office near the end of a stock-market wipeout, with stocks bottoming out and starting a record tear in Obama’s second month. Biden ranked second on stock-market returns until last December, when stocks were peaking and about to enter the bear market they’re still in.
Biden ranks worst in average hourly earnings, while Carter ranks second-best. Our Bidenomics Report Card doesn’t measure inflation directly, but we adjust earnings for inflation, to measure the “real” income gains that determine Americans’ purchasing power. Inflation has eroded income gains under Biden, which is why he comes in last. Strong real income gains under Carter were yet another measure of a solid economy back then.
As for inflation itself, it was 7.4% during Jimmy Carter’s 17th month, while it’s 8.6% at the same point in Biden’s presidency. Advantage Carter, yielding our 3-3 tie.
The direction of the economy is something that matters a lot, and of course we don’t know where it’s headed for the rest of Biden’s presidency. But the direction of the economy clearly explains why Carter lost overwhelmingly in 1980, and why many Americans think of his term as a failed presidency.
The Carter economy stayed strong until his third year of office, when growth began to slip and inflation started to skyrocket. Inflation peaked at 14.6% in April 1980, and GDP declined in the second and third quarter of that year. Layoffs mounted and the economy lost jobs from March through July. Things improved slightly by the time of the election that November, but not nearly enough to make a difference. There is literally no worse time for a president to encounter a recession than six months before he asks voters to reelect him.
Under Biden, Americans clearly feel things are getting worse, not better, and the data supports that. Inflation has been consistently worsening for the last year, and gas prices, now nearly $5 a gallon, are at the highest levels ever, unadjusted for inflation. GDP growth is slowing after a muscular 5.7% gain in 2021. Job growth is still strong, but the Federal Reserve’s aggressive interest rate hikes mean to rein that in too, as a way of cooling the economy and taming inflation.
None of this, however, means Biden is destined to endure the same fate as Carter and end his presidency trying to explain away a recession. The Fed’s inflation-fighting plan could work, slowing the economy just enough to bring prices down while keeping growth going. A meaningful drop in inflation ought to cheer consumers. Biden still has two years before he or a successor needs to convince voters they should stick with the Democratic economic plan and give Dems another four years in the White House. It's quite possible, during that time, there could be some resolution in the Russia-Ukraine war, the single-biggest way to bring oil and gasoline prices down. Maybe way down.
Even if there’s a recession, it could be brief enough to take the steam out of the economy, break inflation and leave the country looking pretty good by 2024. We can tell that by looking not at the Carter presidency but at that of his successor, Ronald Reagan, who was trying to lead the nation through yet another recession in his 17th month, in June 1982.
Of the eight presidents in our report card, Reagan ranked last in GDP growth and stock market returns at that point in his presidency, and not much better in the other categories. But the Fed managed to ratchet inflation down and the recession ended in Reagan’s 23rd month. A powerful recovery ensued, and Reagan won reelection in 1984 by an even bigger margin than he beat Carter by in 1980. That’s the bull case for Biden.