Court rulings and tort actions can greatly affect the ability of business to function properly and create new jobs. There are uncontrollable variables, such as the weather, earthquakes, wars, and the trade and growth policies of other countries, which are outside the control of anything the president or Congress do, but can greatly affect U.S. economic growth. Once elected, the presidents and members of Congress often act very differently from their promises during the campaigns — most often taxing and spending more than they said they would, and almost always this is a mistake.
New presidents inherit the tax, spending, trade, and regulatory policies of their predecessors, and it takes a year or more for them to put their policies in place. Thus, the accompanying table provides a snapshot of economic legacies by showing the performance of the economy during the year that each administration departed. Under Reagan, the economy improved the most, and under Carter most measures declined.
When President Carter took over from President Ford, the economy was growing rapidly after a severe recession, but inflation was very high. Carter then appointed the hapless G. William Miller as Fed Chairman, who managed to give us record inflation (13.3 percent CPI) in 1979. The Carter economic team flailed about, changing policies every few months, which resulted in a recession in 1980 and set the stage for a major recession in 1982, as the new Fed Chairman (appointed by Carter near the end of his term) Paul Volcker ratcheted down monetary growth to wring inflation out of the economy.
President Reagan, upon taking office, backed Volcker’s “tight” monetary policies, and recommended massive tax cuts to get the economy moving. The Democrat‐controlled Congress failed to approve much of Reagan’s proposed spending growth rate reduction, but did back his military spending increase to about 6 percent of GDP. Once the Reagan tax cuts were put in place, the economy took off, resulting in an astounding 7.2 percent growth rate in 1984. Reagan was criticized for increasing the deficits in his first few years, but the fact is the nation has always used debt financing to fight wars. The Cold War was no exception, and his bet paid off.