Democratic Presidents and Their Impact on the U.S. Economy

From Woodrow Wilson to Barack Obama

Democratic Presidents Carter, Clinton and Obama
••• Photo by Michael Reynolds-Pool/Getty Images

Since World War I, there have been eight Democratic presidents. Democrats are known to prefer government spending over tax cuts, especially for the wealthy, as a way to boost the economy. The exception is for defense, where Democrats are considered weaker than Republicans. They don't worry as much about balancing the budget as Republicans do. But these eight presidents did not all follow these stereotypes.

Here is an analysis of these eight presidents and their major economic achievements. You’ll be able to see how much they followed the economic policies of their party. Most of them responded with expansionary fiscal policy to pull the country out of a recession or depression. Many also had to increase defense spending on wars. 

The chart below outlines the change in real gross domestic product during each of the president's terms (highlighted in gray), according to the U.S. Bureau of Economic Analysis.

Here's an analysis of the 10 Democratic presidents since World War I, their economic policies, and how much they followed their party's policies.

Woodrow Wilson (1913-1921)

Wilson signed the Federal Reserve Act in 1913, establishing the nation's central bank. He added a central board to balance the bankers’ regional structure. Congress wanted the Fed to have 12 regional banks to represent America's diverse regions. The compromise means that people are confused as to who owns the Fed.

Wilson signed the Underwood-Simmons Act in 1913. It reduced tariffs on manufactured goods and raw materials. This lowered costs for consumers. To compensate for the loss in revenue, it also created a graduated federal income tax. Most workers at that time made too little to get hit with the tax. The reduction in tariffs did not immediately reduce the cost of imports. World War I broke out the following year, reducing European production.

In 1914, Wilson instructed Congress to create the Clayton Anti-Trust Act. It expanded on the Sherman Act to limit monopolies' power. It established the Federal Trade Commission, which enforces these laws.

Germany sank the British ocean liner Lusitania in 1915. Wilson warned any further attacks would cause the United States to enter World War I

Wilson declared war on April 6, 1917, after Germany attacked U.S. merchant ships.

In 1916, Wilson signed three acts while gearing up for the war. First, the Adamson Act created the eight-hour workday for railroad workers. Wilson wanted to avoid a strike by the railroad unions while the country was gearing up for World War I. That set the standard for Ford Motor Company to do the same 10 years later. The Federal Farm Loan Act set up government loans to farmers to develop and expand their farms. He also signed the Keating-Owen Act. It banned articles produced by child labor from being sold in interstate commerce. The Supreme Court declared it unconstitutional two years later. 

Germany surrendered in 1918. Wilson brokered the Treaty of Versailles in 1919, which called for the establishment of the League of Nations. The Republicans in Congress defeated it. He received a Nobel Prize for his efforts to promote peace.

Wilson vetoed the Volstead Act, which enforced the 18th Amendment prohibiting alcohol in 1919. He advocated for the 19th Amendment giving women the right to vote in 1920.

President Wilson was the second-largest contributor to the debt percentage-wise. He added $21 billion, which was a 727% increase over the $2.9 billion debt of his predecessor. That was because of World War I. During his presidency, the Second Liberty Bond Act gave Congress the right to adopt the national debt ceiling

Franklin D. Roosevelt (1933-1945)

Franklin Roosevelt was sworn in at the height of the Great Depression. He had won the election by promising a New Deal to end it. He introduced Keynesian economic theory, which said government spending would end a recession.

President Herbert Hoover had practiced laissez-faire economics and done little to intervene. He believed a free market would bounce back on its own. Instead, the economy shrank more than 10% and unemployment rose to 25%. The effects of the Great Depression are still manifest today.

FDR rallied Americans around government spending. He created 42 new agencies to safeguard investments, create jobs, and allow unionization. They included Social Security, the Securities and Exchange Commission, and the Federal Deposit Insurance Corporation. He also passed the U.S. minimum wage and child labor laws.

The stock market crash of 1929 turned investors away from stocks and toward gold. As the price of gold rose, people redeemed their dollars for it because the United States adhered to the gold standard. The Federal Reserve raised interest rates to defend the dollar's value. Banks began failing. 

FDR ordered Americans to turn in their gold coins to banks in exchange for dollars. He closed banks to stop foreign speculators from depleting America's gold deposits. Ten days later, banks reopened after depositing all their gold with the Federal Reserve.

In 1934, FDR took the United States off the gold standard. The dollar fell by 60%. The government could then print enough money to boost growth since dollars were no longer tied to gold. 

The New Deal stopped the Depression by 1936. But then FDR decided to cut spending to balance the budget. As a result, the Depression returned in 1938.

The timeline of the Great Depression shows how the nation suffered during the years 1929 to 1938.

In 1939, Hitler invaded Poland. FDR started gearing up to enter the war. He began the draft in 1940. In 1941, Japan attacked Pearl Harbor. FDR increased the defense budget, adding $209 billion to the debt to pay for World War II. By 1945, Roosevelt had added $236 billion to the debt, a 1,048% increase over the $23 billion debt at the end of Hoover's last budget, fiscal year 1933. Percentage-wise, he added the most U.S. debt by a president.

Harry Truman (1945-1953)

Harry Truman took America from isolationism to global leadership. He took office on April 12, 1945, because FDR died. Germany surrendered on May 8. Japan surrendered on Aug. 14, 1945, ending World War II. 

Many felt Truman forced Japan's surrender when he dropped atom bombs on Hiroshima on August 6 and Nagasaki on August 9. Others felt the bombing was unnecessary since Japan was ready to surrender. The Air Force had bombed Tokyo and most other major industrial cities. The Navy had blockaded Japan's imports of oil and other vital materials. Truman's Chief of Staff, William Leahy, wrote, "By the beginning of September, Japan was almost completely defeated through a practically complete sea and air blockade." But Truman felt the atom bomb was absolutely necessary.

Truman supported the formation of the United Nations in 1945 and the North Atlantic Treaty Organization in 1949.

In 1947, he outlined The Truman Doctrine to contain the threat of communism. He pledged the United States to assist any democracy attacked by authoritarian forces. The Doctrine shifted U.S. foreign policy from isolationist to the global policeman. 

He vetoed the Taft-Hartley Act of 1947, which would have weakened unions. It also required union leaders to swear they were not communists. It allowed the president to stop strikes if they endangered national safety.

In 1947, Truman supported Secretary of State George Marshall's plan to rebuild Europe. The Marshall Plan pledged $12 billion in food, machinery, and foreign direct investment. That's $143 billion in today's dollars.

The 1947 National Security Act consolidated the Army and Navy into the Defense Department. It created the Air Force, the National Security Council, and the CIA. 

In 1948, Truman airlifted food and fuel in West Berlin after the Soviets blockaded the city between June 24, 1948, and May 12, 1949. He recognized the country of Israel after it declared statehood in May 1948. He said it was a matter of justice for the Jewish people.

Truman outlined the Fair Deal on January 5, 1949. It called for national health insurance and raising the minimum wage. It also proposed the Fair Employment Practices Act to make illegal any religious and racial discrimination in hiring. Congress rejected national health insurance but passed the rest of the Fair Deal.

In 1950, Truman added a cost of living adjustment to Social Security payments.

North Korea invaded South Korea in June 1950. General MacArthur led the U.N. forces that pushed North Korea back to the 38th parallel. That border held when the ceasefire was negotiated in 1953.

Truman decided not to run for a third term, even though he could have. The Twenty-Second Amendment of 1950 limited presidents to two terms but did not apply to him.

The Immigration and Nationality Act of 1952 continued quotas for immigrants based upon country of origin. It allowed Asians to immigrate after the War. It prioritized family reunification and desired skills. Truman vetoed the Act because it had lower quotas for Asians, which he felt was discriminatory. But the Act passed anyway.

Truman added $7 billion, a 3 percent increase from the $259 billion debt at the end of FDR’s last budget, FY 1945.

John F. Kennedy (1961-1963)

John F. Kennedy directed federal agencies to accelerate their budgeted spending to end the 1960 recession. He created a food stamp program and expanded the United States Employment Service. He increased the minimum wage, improved Social Security benefits, and passed an urban renewal package. JFK asked the Federal Reserve to keep interest rates low by using its open market operations to buy U.S. Treasury notes.

In December 1962, JFK proposed additional education and research spending. He suggested cutting the income tax rate from 91 percent to 65 percent. He endorsed deficit spending until businesses began hiring again.

Kennedy's primary military concern was preventing the expansion of communism.

 In February 1961, he authorized the Bay of Pigs invasion to overthrow the communist leader Fidel Castro. In June 1961, he met with Soviet leader Nikita Khrushchev, who threatened to cut off U.S. access to Berlin. JFK increased military spending by adding intercontinental ballistic missile forces. On August 13, 1961, the Soviets erected the Berlin Wall.

In October 1962, Kennedy blockaded Cuba after finding out that the Soviets were building nuclear missile sites. The U.S.S.R. removed the sites. In 1963, JFK increased U.S. military advisers in Vietnam to more than 16,000. That gave U.S. support to the November 1963 military coup.

On October 24, 1963, Kennedy signed the Maternal and Child Health and Mental Retardation Planning Amendment to the Social Security Act. It provides funding to states to improve their programs. On October 31, 1963, he signed the Mental Retardation Facilities and Community Mental Health Centers Construction Act. It funded community mental health centers to provide better care than mental hospitals. But there were consequences to this deinstitutionalization.  

Kennedy added $23 billion to the national debt, an 8 percent increase from the $289 billion debt at the end of Eisenhower's last budget, FY 1961. His deficit spending ended the recession and contributed to an expansion that lasted until 1970. 

Kennedy was one of the four presidents who donated his salary.

Lyndon B. Johnson (1963-1969)

Lyndon Johnson was sworn in on November 22, 1963, two hours after John F. Kennedy was assassinated. After completing the final year of JFK's term, he was elected in 1964 with 61 percent of the votes. This electoral mandate allowed him to expand the federal government's role and avoid any recessions. The Fed used contractionary monetary policy to cool growth and prevent inflation.

LBJ created Medicare, Medicaid, and urban renewal initiatives. He championed equal rights for all to vote, ride buses, and go to school. LBJ escalated the Vietnam War but could not win it.

LBJ declared a War on Poverty to push through passage of Kennedy's tax cut and civil rights bill. For young African Americans, the unemployment rate was 25 percent. The number of children on welfare had doubled between 1950 and 1960 to 2.4 million. 

In 1964, LBJ created the Great Society. It changed the definition of the American Dream from one of opportunity to one that guaranteed well-being.

It increased spending on education and health care. Medicare covered hospitalization for seniors and Medicaid provided health care for those living below the poverty level. It created the National Endowment for the Arts, Public Broadcasting Services, and drivers’ education. LBJ created new programs to address crime and delinquency, as well as beautification and conservation. The Department of Housing and Urban Development built public housing and redeveloped slums. 

In 1965, LBJ sent 100,000 combat troops to Vietnam. By 1968, he increased the defense budget to support 500,000 troops. The increased government spending added $42 billion, or 13 percent, to the national debt

Jimmy Carter (1977-1981)

Jimmy Carter's presidency was overshadowed by the stagflation created by Richard Nixon. Stagflation combines economic contraction with double-digit inflation. Carter worked hard to combat the continuing economic woes of inflation and unemployment. He added 9.3 million jobs, the fourth-largest among all presidents. But, it wasn't enough to combat the effects of double-digit inflation and the Fed's misguided efforts to end it.

Carter created the Department of Education and bolstered Social Security. He established a national energy policy that deregulated oil prices to spur domestic production. He also deregulated the trucking and airlines industries. He expanded the national park system.

In 2002, he received the Nobel Peace Prize for his work in the 1978 Camp David Accord. He established full diplomatic relations with China and negotiated the SALT II nuclear limitation treaty with the Soviets.

On November 4, 1979, Iranian students took 66 Americans hostage at the U.S. Embassy in Tehran. Although Carter's administration negotiated a release in December 1981, it was too late to save Carter's presidency. 

Bill Clinton (1993-2000)

Bill Clinton is the most admired president of the past 25 years. His economic policies fostered a decade of prosperity. He added 18.6 million new jobs, more than any other president. Home ownership was 67.7 percent, the highest rate ever recorded. The poverty rate dropped to 11.8 percent.

He signed the North American Free Trade Agreement. NAFTA boosted growth by eliminating tariffs between the United States, Canada, and Mexico. 

Clinton created a $63 billion budget surplus, which subtracted from the debt.

He did this with the Omnibus Budget Reconciliation Act of 1993. It raised taxes on the wealthy. He also cut spending by reforming welfare.

Clinton did not achieve health care reform. But he did get the Health Insurance Portability and Accountability Act and Children’s Health Insurance Program passed. HIPAA permits workers to keep their company-sponsored health insurance plan after being laid off. CHIP subsidizes health insurance for children in families that earn too much to qualify for Medicaid. 

Barack Obama (2009-2017)

Barack Obama entered office during the 2008 financial crisis. He fought it with the American Recovery and Reinvestment Act. This economic stimulus package added $787 billion to the debt by cutting taxes, extending unemployment benefits, and funding public works projects.

He bailed out the U.S. auto industry on March 30, 2009. That saved 1 million jobs and forced the companies to become more fuel efficient.

On October 9, 2009, Obama won the Nobel Peace Prize for his work in international diplomacy. 

On March 23, 2010, Obama signed the Affordable Care Act. It required everyone to have health insurance or pay a tax. That provided a steady stream of premiums from enough healthy people to pay for the millions of people with pre-existing conditions who were no longer denied insurance. Obamacare expanded Medicaid. That allowed more people to get preventive care instead of using hospital emergency rooms as their primary care physicians. As a result, it slowed the rise of health care costs.

In July 2010, the Dodd-Frank Wall Street Reform Act improved regulation of eight areas that led to the financial crisis. The Consumer Financial Protection Agency reduced harmful practices of credit cards and mortgages. The Financial Stability Oversight Council regulated hedge funds and banks that became too big to fail. The "Volcker Rule" banned banks from risking losses with their depositors' money. Dodd-Frank directed the SEC and the Commodity Futures Trading Commission to regulate derivatives.

His administration continued battling the Tea Party Republicans after they gained Congressional majority in the 2010 mid-term elections. In December 2010, the Obama tax cuts added $858 billion to the debt in two years.

On May 1, 2011, Navy SEALs eliminated Osama bin Laden, the leader of the 9/11 attacks. Later that year, Obama ended the Iraq War. Three years later, he sent troops back under renewed threats from the Islamic State. The turmoil in the Middle East has its roots in the Sunni-Shiite split between two factions of Islam.

In 2014, Obama wound down the war in Afghanistan. Ending the wars in Iraq and Afghanistan should have reduced annual military spending. Instead, it became the largest discretionary budget item and one of the leading causes of the budget deficit and national debt. At over $800 billion, it was higher than during the Bush Administration. The War on Terror costs added about $2.1 trillion to the U.S. debt, as of the FY 2019 budget. 

In 2015, Obama brokered a nuclear peace agreement with Iran. Later that year, Obama's team negotiated the Trans-Pacific Partnership. He launched the Transatlantic Trade and Investment Partnership between the United States and the European Union

On December 12, 2015, Obama finalized the International Climate Agreement to stop climate change. It reduced carbon emissions and increased carbon trading

Obama announced carbon reduction regulations in 2014. He enacted the Clean Power Plan in 2015. It should reduce carbon dioxide emissions by 32 percent from 2005 levels by 2030. It does this by setting carbon reduction goals for the nation's power plants. 

Obama was the third-largest jobs creator if you count the 16 million people put to work from the depths of the recession in December 2009 to the end of his term. 

Obama increased the national debt by $8.588 trillion, a 74 percent increase from the end of George W. Bush’s last budget, FY 2009.  Federal income was down, thanks to lower tax receipts from the 2008 financial crisis. The Patient Protection and Affordable Care Act was designed to reduce the debt by $143 billion over 10 years. But these savings didn't show up until later years. 

Related Articles

Article Sources

  1. Federal Reserve History. “Federal Reserve Act Signed by President Wilson.” Accessed Sept. 8, 2020.

  2. U.S. International Trade Administration. "The Creation of the U.S. Tariff Commission," Page 88. Accessed Sept. 8, 2020.

  3. “Clayton Act.” Sept. 8, 2020.

  4. Library of Congress. “Eight Hour Day (1916): Topics in Chronicling America.” Accessed Sept. 8. 2020.

  5. Farm Credit Administration. “History of FCA.” Accessed Sept. 8, 2020.

  6. VCU Libraries. “The American Era of Child Labor.” Accessed Sept. 8, 2020.

  7. The White House. “Woodrow Wilson.” Accessed Sept. 8, 2020.

  8. The U.S. National Archives and Records Administration. “The Volstead Act.” Accessed Sept. 8, 2020.

  9. Federal Reserve History. “Roosevelt’s Gold Program.” Accessed Sept. 8, 2020.  

  10. National Park Service. “Harry S. Truman’s Decision to Use the Atomic Bomb.” Accessed Sept. 8. 2020.

  11. Doug Long. “Hiroshima: Was It Necessary?” Accessed Sept. 8, 2020.

  12. Office of the Historian. “The Truman Doctrine, 1947.” Accessed Sept. 8, 2020.

  13. Hofstra University. “How the Taft-Hartley Act Hindered Unions.” Accessed Sept. 8, 2020.

  14. Office of the Historian. “National Security Act of 1947.” Accessed Sept. 8, 2020.

  15. Office of the Historian. “The Berlin Airlift, 1948-1949.” Accessed Sept. 8, 2020.