(Bloomberg Opinion) — The US economy did not quite manage 3% annual economic growth during Joe Biden’s four years as president. Real (that is, inflation-adjusted) gross domestic product grew an annualized 2.8% from his first to last quarter in office, according to data released last week by the US Bureau of Economic Analysis, and the average of real GDP and real gross domestic income — which some economists believe does a better job of capturing the timing of economic fluctuations — grew 2.7%.
Still, this was easily the best performance since Bill Clinton’s presidency, and Biden’s margin over the previous three presidents is so big that future GDP and GDI revisions (of which there will be many) are unlikely to change that.
Economic growth as captured by real GDP and GDI is of course not the only valid measure of economic performance. But it’s the simplest, most comprehensive one available on a timely basis. During his first term, President Donald Trump and his backers made a huge deal of GDP growth, trumpeting solid single-quarter numbers as evidence of economic miracles. It was in reaction to such claims that I started doing these comparisons of growth over the course of a presidency, calculated using the compound annual growth rate formula. If you’re going to talk about GDP growth, I thought, at least use the right measure.
There remained questions about which period to use. I’ve generally gone with the first quarter in office to the last, even though when all goes well (that is, there’s no resignation or assassination), a president departs quite early in that last quarter. Economic policies take effect with long and variable lags, and for that reason I even toyed with measuring from the second quarter in office to the quarter after leaving.
This year, though, the mere prospect of President Trump’s tariff increases drove big GDP changes in the first quarter. The rush of imports to beat the tariffs turned what would have otherwise been a quarter of solid growth into one in which GDP and the average of GDP and GDI both contracted at a 0.2% annualized rate. (Imports don’t actually reduce economic growth, but in GDP accounting a sudden rise in imports does depress the quarterly growth number.) Measure from the quarter before Biden took office to the quarter before he left, and the economy’s performance during his presidency does beat the 3% threshold, with GDP growth of 3.2% annually and average GDP-GDI growth of 3.1%.
The final quarters of Trump’s presidency were also affected by an economic event largely outside of his control — a once-in-a-century (we hope) global pandemic. I’ve already addressed that in the past, but just for the record: Measuring from Trump’s first quarter in office to the last quarter of 2019, GDP growth was an annualized 2.9% and GDP-GDI growth 2.8%, roughly similar to the performance under Biden.
The Biden years, of course, will not be remembered as an economic Eden, for one simple reason: inflation. The consumer price index rose at a 5% annual rate from Biden’s first month in office to his last, compared with 1.9% during Trump’s first term. All the GDP numbers here are adjusted for inflation, but price increases hit different parts of the population differently, plus most people just really dislike inflation.
As a result, whenever I wrote about the pretty-solid performance of other economic indicators during Biden’s time in office, I heard from readers who said I was out of touch. Fine, but with inflation the economic phenomenon that you least need access to official data to be aware of, isn’t it helpful to understand what’s happening with GDP, employment and the like?
Also possibly helpful to know is that Biden’s term reinforces a long-standing pattern of the US economy growing faster during Democratic presidencies than Republican ones. This has been subjected to repeated analysis, with no one offering a truly satisfactory explanation. It has also coexisted in recent years with a pattern of states run by Republicans growing faster than states run by Democrats. Maybe it doesn’t mean much. Still, I think it does mean that — even before Trump started rattling the economy with his tariff policies — the safest bet was that growth would slow during his second term.
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This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Justin Fox is a Bloomberg Opinion columnist covering business, economics and other topics involving charts. A former editorial director of the Harvard Business Review, he is author of “The Myth of the Rational Market.”
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