The Ratings Game

Eakinomics: The Ratings Game

(Full disclosure: I am writing this simply to silence the raging voices in my head.) Campaign season 2022 has barely commenced and I have already heard waaaaaaay too many ads and speeches praising and condemning candidates, officeholders, and parties on their handling of the economy. You know the drill. “Most jobs created in the first year in office.” “Worst inflation in four decades.” And on, and on, and on.

The arguments are maddening because there is not a single statistic that can fully capture the performance of the economy, and the entire “ratings game” exercise invites cherry picking the data. To demonstrate this, consider the data presented in the table below. It shows some fairly standard indicators of economic performance during the first year each president was in office: jobs created, inflation rate, average unemployment rate, misery index (sum of inflation and unemployment rates), productivity growth, and overall growth in real gross domestic product (GDP).

To make rating easier, for each indicator the best performance by a president is highlighted in green, while the worst is highlighted in red.

Now you might ask yourself, “Self, what did I learn from this?” I would suggest three main lessons. The first is to be very wary of cherry picking the data. Looking across the rows, every president except Bush has at least one best and at least one worst, and Bush only narrowly escaped on GDP growth. So, if you want to praise or damn the president, just move to the correct column.

Second, a lot of the data is driven by the cyclical state of the economy. Bush and Obama entered with slowing economies characterized by anemic GDP growth, job losses, and rising unemployment rates. Biden entered an economy recovering from a deep recession and growing at a very rapid pace (6.5 percent in the first quarter of 2021). He simply went for the ride with good jobs and growth. Trump entered office in mid-to-late cycle. The implication for the ratings game is that presidents are just as subject to the vagaries of fate as the rest of us.

Finally, since the outcomes can be cherry picked and shaped by the environment, one should rate presidents (and others) by what they did, and not what happened. Eakinomics, for example, believes that the American Rescue Plan’s $1.9 trillion stimulus in a rapidly growing economy was a major policy error that contributed to the high inflation experienced in 2021. I rate congressional Democrats and President Biden very low for their decision to enact it.

Thanks for listening. I feel a lot better.