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Presidential inflation beauty contest


Fair or not, U.S. presidents are often judged by the performance of the economy during their tenure—despite the fact that presidential policy, if it does have an impact, may have only a delayed impact. Worse, they may inherit the impact of the previous president’s policies. For example, Carter’s presidency is associated with high inflation even though his policies likely did nothing to instigate accelerating price increases. Similarly, historical views of Reagan’s presidency are no doubt positively affected by the decline in the rate of inflation during his term—even if that decline was caused by monetary rather than fiscal policy. Still, it’s fun to engage in armchair politics to compare economic outcomes across presidencies.

The graph plots the path of the all-items consumer price index for the past 10 presidents, from Kennedy to Obama. We normalize each path so the initial month has a value of 100, which allows us to quickly assess the total amount of inflation that occurred during a given term. Some paths are short, like Ford’s (which starts in August 1977), because only a portion of a single four-year term was served. Others are long, like Clinton’s (which starts in January 1993), because they include two full four-year terms.

The path for prices during Carter’s term is striking. In just one four-year term, prices accelerated 47.2%. In contrast, prices during Reagan’s eight years in office rose a total of 38.4%. The difference in these totals (47.2% and 38.4%) is substantial but not orders of magnitude different. The difference is, of course, the rate at which the increases occurred. During Carter’s term it was fast and furious, averaging 10% per year; during Reagan’s term it was slow and steady, averaging 4% per year.

How this graph was created: Using President Obama as our example, search for “CPI” and select the seasonally adjusted monthly series “Consumer Price Index for All Urban Consumers: All Items.” Change the units from “Index 1982-1984=100” to “Index (Scale value to 100 for chosen period).” Enter a day during the first month of Obama’s presidency (January 2009) as the observation date for which the series will be scaled to 100. Check the box “Display integer periods instead of dates (e.g. …,-1,0,1,…) with the value scaled to 100 at period 0.” Set the integer period range to start at 0 and end at the number of full months Obama has been president minus one (since month 1 of his presidency is represented on the scale as period 0). At this point, the graph will display the CPI during Obama’s time in office scaled to 100 during his first month. To add the remaining nine presidents, start by adding the CPI data series to the graph nine more times. For each of these additional series, adjust the settings as you did for Obama’s CPI but use the specific start dates and durations of each president’s time in office. Be sure to select each president’s first month in office as the data point to be scaled to 100; then set the integer period range to start at 0 and end at the number of full months each president was in office minus one.

Suggested Michael McCracken

View on FRED, series used in this post: CPIAUCSL


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