Little impact from this election, but economy fares better with Democrats in White House

Democrats have led the three most prosperous periods since World War II whereas three Republicans and one Democrat have overseen the four least lucrative. Specifically, Democrats Bill Clinton, Lyndon Johnson, and John Kennedy, presided over the best economic eras -- ranking 1st, 2nd, and 3rd respectively. By contrast Republicans Dwight Eisenhower, George H. W. Bush, Richard Nixon and Democrat Harry Truman -- led the worst four -- ranking 10th, 9th, and 8th respectively (Truman's and Nixon's scores were tied).

These conclusions are based on the relative economic performance of these 11 presidents along the following six dimensions:

• Annual GDP growth
• Annual growth in real disposable income
• Annual growth in employment
• Annual change in unemployment rate
• Annual change in inflation rate
• Annual change in Federal budget surplus

Here's how these 11 presidents rank (with their average ranks on the six dimensions):

• 1. Bill Clinton (3.5)
• 2. Lyndon Johnson (3.8)
• 3. John Kennedy (4.2)
• 4. Ronald Reagan (4.5)
• 5. Gerald Ford (5.5)
• 6. Jimmy Carter (6.3)
• 7. George W. Bush (7.0)
• 8. Harry Truman (7.2)
• 8. Richard Nixon (7.2)
• 9. George H. W. Bush (8.2)
• 10. Dwight Eisenhower (8.3)

Based on this analysis, George W. Bush's economic performance is mixed. He is relatively strong in reducing the inflation and unemployment rates; whereas he is decidedly weaker in managing the Federal budget. While I don't want to muddy the waters of this analysis, my hunch is that inflation under the current president has been worse than reported. As Fed Chair Ben Bernanke recently commented, the inflation data are unreliable. And some believe that they don't seem to reflect the rising costs of health care, housing, and energy.

Click here for details on how the current president ranks in each of these six areas compared to the top and worst performers.

Comments by Democratic leaders and my conversations with Washington political experts suggest that not much economic policy change will occur in the next two years. It may be possible to raise the minimum wage; however other changes regarding boosting alternative-energy research, repealing tax breaks for oil companies, improving seaport screening, expanding college tuition assistance, boosting stem cell research and allowing the federal government to negotiate lower drug prices under Medicare may be casualties of more powerful forces.

Specifically, Bush's effort to salvage Iraq before his term expires and the desire of candidates for 2008 to win their respective party nominations and raise campaign cash will keep changes to a minimum. Moreover, Bush may choose to veto legislation -- such as alternative energy research and repealing oil industry tax breaks -- which undermines his supporters in the energy industry. The same logic may apply to drug companies who would resist efforts to curtail their profits and to Evangelicals who would object to funding stem cell research.

We'll have to wait until 2008 to see which party occupies the White House and hence whether the economy will continue to stagnate or revive. The election outcome suggests that many Americans based their votes on results rather than personal attacks. If you want to comment on this post, I challenge you to do so in that vein.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm, and a Professor of Management at Babson College.