Watching Will Ferrell reprise his impersonation of former President George W. Bush on Saturday Night Live, one is reminded of the first law of Political Economy. His portrayal showed the formal President essentially saying “I know history says I was an awful President, but don’t I look pretty good now, compared to President Trump?” Bush was blamed for the 2008 market collapse, but that was unfair.
The first law of political economy is that presidents too get much credit for a good economy and too much blame for a bad economy. True, Bush left office with the economy in a terrible downward spiral, but that spiral was triggered by mortgage-backed securities, which were “invented” during the Clinton Administration, as well as the Clinton efforts to maximize home ownership. Yet, Clinton left office when the economy was booming, and the Federal government was enjoying a budget surplus.
President Obama took office when the economy was in free-fall. His stimulus package was pitifully insufficient, but the economy still improved, albeit slowly. However, when he left office, unemployment had fallen from 10% to only 4.4%. President Trump has now taken credit for turning around an economy that was already turned around.
The U.S. economy is a large, complex operation, and economic cycles don’t reflect nor care about four-year Presidential terms. Giving a President, any President, credit or blame is tricky, so don’t do it!