Election 2008

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Can Lessons from Past Presidents Help Obama Save the Economy?

November 11, 2008 07:58 AM
by Isabel Cowles
A look at the economic legacies of modern administrations and how they may influence President-elect Barack Obama’s financial policies

Presidential Economic Legacies: From Jimmy Carter to George W. Bush

A new era has dawned in American politics, and with it a likely shift in economic policy. In the last three decades, both Democratic and Republican leaders have been blamed and lauded for their impact on the American economy. FindingDulcinea examines the policies of Jimmy Carter, Ronald Reagan, George H.W. Bush, Bill Clinton and George W. Bush to determine what lessons President-elect Obama may take from previous administrations.

President Jimmy Carter (1977–81)

During President Carter’s administration, OPEC’s oil embargo caused oil prices to quadruple. The spike in energy costs helped create the only period of peacetime inflation in American history.

During the race, Ariz. Sen. McCain drew parallels between an Obama and the Carter administration. McCain accused Ill. Sen. Obama of following Carter’s strategy of imposing higher taxes to discourage excessive energy use stating, “If [Obama’s] plan sounds familiar, it's because that was President Jimmy Carter’s big idea too.” The Republican candidate quipped, “I’m all for recycling—but it’s better applied to paper and plastic than to the failed policies of the 1970s.”

President Ronald Reagan (1981–89)

Although the American economy was in dire straits when President Reagan took office, inflation was drastically lowered within the first year of his administration with the help of Paul Volcker, then Chairman of the Federal Reserve. The President instituted what the press dubbed “Reaganomics,” which included tax cuts, domestic spending restraints and a rollback of government regulation.

Despite distinctions in their tax policy, President-elect Obama has expressed admiration for President Reagan. In an interview with the Reno-Gazette Journal, Obama remarked, “Ronald Reagan changed the trajectory of America … he just tapped into what people were already feeling, which was, we want clarity; we want optimism.”

President George H.W. Bush: (1989-93)

George Herbert Walker Bush followed Reagan’s example of keeping taxes low—as evinced by his famous campaign statement, “Read my lips: No new taxes.” But supply side economics began to fail under Bush, prompting some to refute the idea that cutting taxes always increases economic growth.

Ultimately, Bush did raise taxes, in an attempt to buoy sinking finances, but the measures were largely ineffective and the economy continued to falter. Bush’s lackluster campaign for re-election was overshadowed by Arkansas Gov. Bill Clinton’s effective slogan: “It’s the economy, stupid.”

President Bill Clinton (1993-2001)

Like President Reagan, Clinton entered the White House in the midst of an economic slump and based his financial agenda on limiting domestic spending while investing in American workers through education, science and research.

The rise of the Internet spurred growth during the Clinton era. Many have questioned his aid programs, howeverincluding his encouragement of broad-scale lending by Fannie Mae and Freddie Mac, arguing that those initiatives gave rise to predatory lending.

President George W. Bush (2001–2009)

George W. Bush also faced a somber economic situation when he entered the White House; he has based his economic policy on “lower income taxes for all, with the greatest help for those most in need.”

Despite the hopefulness of his proposal, President Bush will be leaving office in the midst of a significant financial crisis. Throughout his campaign, Sen. McCain aimed to distance himself from Bush’s economic policy: associating McCain with George Bush was one of Obama’s primary tactics for competing with the GOP candidate.

President-elect Barack Obama: (2009–)

Like Reagan, Clinton and George W. Bush, Obama will take office during a projected economic downturn. Senator Obama focused his campaign on dealing with the dire economic situation, which he called, “the most serious financial crisis since the Great Depression.”

As Obama prepares to take office, Americans will likely see two forces at work: Democrats pushing Obama’s economic agenda in an attempt to keep the economy from worsening before he takes office, coupled by the constraints inherent within a severe economic recession.

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