Warren Harding experienced a sharp economic downturn in the early days of his presidency in the early 1920s. About seven years later, Herbert Hoover likewise experienced a downturn, his being more infamous.
Hoover’s decline was bad, and continued worsening, leading to the election of Franklin Delano Roosevelt as President of the United States in 1932. Once in office, FDR embarked on a sweeping and ambitious agenda designed to bring the country out of the Great Depression. Economic pain continued for quite some time—for the rest of the decade, actually—but it eventually abated.
So goes a synopsis of the Great Depression, and one can find many similarities to the recent Great Recession.
A synopsis of the recent recession might go like this: George W. Bush encountered recession upon taking office in 2001. About seven years later, another downturn ensued, this one deep, ultimately leading to the election of Barack Obama as President of the United States in 2008. Obama embarked on an ambitious policy swing, and five-plus years later, signs of economic trouble remain.
The two downturns, with their obvious differences, still follow a similar path.
First, both started out as normal, cyclical recessions. These happen about every seven years on average. The 1929 crash was preceded by a depression in 1920-1921, and there were signs in 1928 that trouble was brewing. In 2008, the collapse came about seven years after the last recession, 2000-2002 roughly, which was deepened by a terrorist attack on 11 September 2001. So, again, a downturn—correction, if you will—of some sort was due in both cases.
Second, policies largely outside of the power of the sitting president at the inception of each crisis have been widely blamed for worsening or even causing the respective downturns. In the case of Hoover, different historians and economists find fault with easy monetary policy prior to the 1929 crash, and tight money after, as causing and/or deepening the crisis. Likewise, an artificially inflated housing market that took decades to develop and tightening monetary signals as the economy declined have been blamed for the Great Recession. Neither made monetary policy, obviously, and most of the machinery leading to the housing bubble was already in place when Bush took office in 2001.
Third, both Hoover and Bush arguably had poor initial reactions. Hoover embarked on what we would call a stimulus spending regime (perhaps accurately described as “New Deal light”), worked to prop up wages, and eventually signed into law a damaging tariff. Aggressive spending had little effect while propping up wages had the unintended consequence of costing some workers their jobs, and the tariff caused a trade war and subsequent price increases. Bush oversaw the Trouble Asset Relief Program (TARP) and selective bailouts, setting a poor precedent moving forward with regard to spending and sending mixed signals to financial markets. Each president exacerbated his existing problems.
Fourth, in each case, Democratic “savior” candidates emerged and were elected president. FDR promised a new deal and noted that the people had “nothing to fear but fear itself” while Obama promised “hope and change.”
Fifth are the results: Both FDR and Obama oversaw active policy agendas. FDR enacted the New Deal (or Deals, actually), labor-friendly laws, and new entitlement programs. Obama signed into law a stimulus package and a sweeping health care reform, among others.
As for the results, despite FDR’s aggressive and ambitious policies, unemployment remained over 10% for most of the remainder of the decade. And under President Obama, unemployment remains uncomfortably high and growth less than robust. Only time will tell how the Obama presidency rates historically, but by economic standards, FDR’s was not a success.