Fortunly’s Annotated Guide to a Century of US GDP by Year

1920–1939: The Roaring Twenties and the Great Depression

The Great Depression was the worst economic period in American history. US real GDP growth by year took a nosedive, and the whole country was plunged into despair, with thousands of people losing their jobs and their fortunes.

It’s difficult to pin down one event as the cause of this severe economic activity downturn. Multiple factors coalesced and pushed the Western world into a state of chaos. 

1920–1928: The Roaring Twenties. The nation is experiencing economic growth as GDP grows by 42%, new construction almost doubles, and the stock market rises in value by 20.71% per year. Everyone, from reckless business magnates to dusty coal miners, is investing in stocks. GDP by year shows steady growth.

1929: October 24, known as Black Thursday, the Dow Jones Industrial Average drops by 11%. Investors panic and start selling their shares. By October 28, Black Monday, stocks have fallen an additional 12.82%, and Wall Street is in an uproar. The Dow will continue to fall over the next three years, shattering people’s trust in banks and the government. 

Many seek stability by pulling their money out of banks and the market and exchanging it for gold. Before 1933, there will be four major runs on US banks.

US economic growth, robust for most of the decade, begins to stall. National income inequality becomes apparent. The top 1% are earning 14.65% of the nation’s entire income, and despite the abundance of money, worker salaries don’t rise commensurate with corporate profits. There are more products than ever, yet there’s no one to buy them as corporate greed takes its toll on the economy.

1930: The GDP falls by 8.5%, and the Smoot-Hawley Tariff Act is passed. The Act, sponsored by Senator Reed Smoot and Representative Willis C. Hawley, increases tariffs on more than 20,000 imported goods. Planned as a way of protecting farmers from overseas competition, the Act causes other countries to raise tariffs on American exports, aggravating the problem it was intended to solve.

1931: US GDP by year falls another 6.4%. The Dust Bowl, the worst drought in the history of North America, obliterates crops, suffocates livestock, and causes pneumonia in children. Unsustainable farming practices exacerbate the natural disaster and cause crop production to plummet, further affecting the available natural resources.

1932: The GDP drops by 12.9%. President Herbert Hoover attempts to reduce the deficit and balance the federal budget by raising taxes. By raising income taxes on all income levels and boosting the top income tax to 63%, the plan backfires and people are left with even less spending power. The economy stagnates. 

1933: Unemployment rises to a historic 24,9%, and US real GDP by year drops by another 1.34%. Franklin D. Roosevelt replaces Hoover in the White House and immediately begins work on the New Deal, a series of financial reforms and public-work projects meant to help the country recover from the Great Depression.

With the help of his secretary of labor, Frances Perkins, they stabilize the banks by introducing the Emergency Banking Act, raise federal revenue by ending prohibition (Beer-Wine Revenue Act), stabilize the dollar by temporarily abandoning the gold standard, save farms and homes from foreclosure by providing loans (Emergency Farm Mortgage Act and Home Owners Refinancing Act), and provide more jobs by creating the Civilian Conservation Corps. 

The National Industrial Recovery Act is also signed into law. Besides adding more jobs, it limits the workday to eight hours, outlaws child labor, and establishes a national minimum wage.

Furthermore, the Glass-Steagall Act separates commercial and business investment banks in order to prevent commercial banks from making risky investments or making unsound loans. 

1934–1935: The GDP keeps rising as Roosevelt makes even more social and financial reforms to transform the economy. The Social Security Act is signed into law, providing retirement income for workers aged 65 and older. The Soil Conservation Act establishes the Soil Conservation Service and teaches farmers how to work the soil in a more sustainable manner in order to prevent it from eroding.

Unemployment drops further as 8.5 million workers are hired to build roads, buildings, and bridges. The National Labor Relations Act protects workers’ rights to organize and bargain as a group. It also puts limits on some management and work practices in the private sector.

The Supreme Court declares the National Industrial Recovery Act unconstitutional, but that doesn’t stop the New Deal from moving forward.

1936–1939: Heat and drought are becoming unbearable as temperatures rise above 120 degrees across great swathes of North America. GDP growth by year in the US slows down as Roosevelt raises taxes, but the third wave of the New Deal brings more changes to the table. 

Electricity is brought to rural areas across America, and the Farm Security Administration is formed in 1937 to combat poverty by providing loans to farmers. 

FDR signs the Wagner-Steagall Act to fund state-run projects that raise the quality of housing. In 1938, the Fair Labor Standards Act re-establishes minimum wage, employment standards, and overtime pay standards that were struck down with the National Industrial Recovery Act. 

In 1939, the Federal Security Agency launches to administer Roosevelt’s Social Security program, providing monetary benefits to workers’ families. The Dust Bowl ends and World War II begins. 

Sources

• Britannica
• History

1939–1945: World War II

World War II, although the deadliest conflict in human history, had a positive impact on the American economy. With an estimated 70,000,000 casualties worldwide and 419,400 from the US alone, the war profoundly affects the population and changes the face of the earth. 

However, this wide-reaching catastrophe transforms the American economy and pulls the country out of the Great Depression, as demonstrated by US GDP changes by year.

1939: World War II begins. There’s an immediate 8% bump in yearly GDP growth. America starts crafting war supplies for the Allied countries, producing about 41.4 billion rounds of ammunition over the course of the war. With Allied ammunition expenditures totaling $204.4 billion, more than half of all combat munition came from the US alone. America resists calls to enter what it sees as a European war.

1940: Real GDP growth is 8.46%. The government starts issuing war bonds to gather capital for war production. Roosevelt is selling steel, ships, weapons, and aircraft to Britain and France, but still shows no intention of entering the war. 

1941: Factories open all over the country and unemployment drops to 9.9%. The GDP grows to 17.7%, and the economy improves steadily, but then the unexpected happens — on December 7, Japan attacks Pearl Harbor. The US finally enters the war. 

1942: US GDP measured year by year keeps growing, with an 18.9% rise compared to 1941. Roosevelt establishes a war mobilization agency to push companies into manufacturing war goods instead of consumer goods, and auto companies start converting their efforts into war production. 

Civilian and military leaders enter the “feasibility dispute,” in which they argue about the extent to which the American economy should focus on military production. Donald Nelson, the director of the War Production Board, manages to convince the military to scale back demands that would put a strain on the economy.

1943: Annual US GDP growth rises by 17%. War-related production leaps from 2% of America’s gross national product to 40%. Massive migrations clog roads along rural-urban axes as people move to production-center locations. The unemployment rate hit an all-time low at 1.9%. The Allies slowly turn the tide in their favor. 

1944: War production reaches its peak, and GDP grows by 8%. The US dollar becomes a global currency as the Bretton Woods Agreement is signed by 44 allied nations, and the World Bank and the International Monetary Fund are established. 

Countries attending the Bretton Woods Conference agree to abandon the gold standard and redeem their currency for US dollars because America holds three-quarters of the world’s gold supply at the time. Other countries, thus, can stabilize their currencies by maintaining a fixed exchange rate between their currencies and the dollar during the war years.

1945: The US GDP rate, by this year, drops by 1%. Franklin D. Roosevelt dies and is replaced by his vice president, Harry Truman. The $2 billion (over $40 billion in today’s dollars) undertaking known as the Manhattan Project is finished, and America is now in possession of an atomic weapon.

Even though Hitler is defeated and the war in Europe is coming to an end, the Japanese refuse to surrender. The US drops atomic bombs on Hiroshima and Nagasaki, effectively crushing Japanese resistance and ending the war. America takes its place as one of the world’s dominant nations.

Sources

• Economic History Association
• Economic History Review
• Encyclopedia.com
• Second World War History
• The Balance

1947–1991: Containing Communism 

The Cold War was a very long period of political tension between America and the Soviet Union after World War II. While it led to a victory over communism, it affected the US GDP and led to great socio-economic consequences for America and the USSR. 

1947–1953: Tensions rise between the Soviets and the US. President Harry Truman introduces the Truman Doctrine, which is meant to limit the spread of communism. World War II is followed by a recession as government war-time expenditures are curtailed. The recession is exacerbated by Truman’s budget cuts. 

The GDP is generally unsteady, stabilizing only when the Korean War starts. The country is investing a lot of money in its nuclear arsenal, and the USSR responds by doing the same. 

1953–1962: The Korean War ends, resulting in a 0.6% 1954 drop in GDP by year in the US. Joseph Stalin dies, but the fear of communism doesn’t dissipate. Dwight D. Eisenhower is elected president, and his policies lead to a period of relative prosperity. He strengthens the Social Security program, increases the minimum wage, and builds the Interstate Highway System. 

Economic growth is interspersed with recessions, but the economy overall remains relatively stable. The year 1957 marks a turning point: the USSR launches Sputnik 1, the first artificial satellite, inaugurating the Space Race. In 1961, John F. Kennedy is elected president.    

1962–1979: Kennedy’s deficit spending ends the recession and the US deficit vs. GDP by year starts stabilizing. In 1962, the Cold War reaches its peak with the Cuban Missile Crisis. The discovery of USSR ballistic missiles on Cuban soil nearly pushes the two countries into a full-blown nuclear war, but the crisis is quickly averted. 

Kennedy spends only two years in office before he is assassinated, but the economy remains steady. He is succeeded by Lyndon B. Johnson, who introduces a federally funded medical insurance program, Medicare, that further boosts the economy. 

Even though Johnson is against it, the United States is worried about the spread of communism in Indo-China and about whether or not American military intervention in Vietnam could lead to war. The US gains the upper hand in the Space Race by landing a man on the moon in 1969. 

Richard Nixon takes office in 1969, and despite the relatively steady US GDP year-over-year, the rest of the decade is followed by economic turmoil that spawned long-lasting changes in America’s financial system. Between Nixon’s policies, the raging Vietnam War, and the Sino-Soviet split, the Cold War enters a detente phase as each country struggles with its own problems.  

1979–1985: America denounces the Soviet invasion of Afghanistan. The Federal Reserve Bank raises the prime rate to 20% in an attempt to stop inflation amid the rising tensions and economic strain of the post-Vietnam period. Jimmy Carter is president and GDP history shows a period of recession and general instability. 

Ronald Regan takes office in 1981 and immediately introduces new tax cuts to spur economic growth. The recession slowly ends as America begins aggressively investing in nuclear arms production. 

1985–1991: Tension start winding down again as Mikhail Gorbachev takes office and the USSR starts crumbling. Reagan and Gorbachev negotiate the Intermediate-Range Nuclear Forces Treaty (INF Treaty), in which both countries agree to eliminate large portions of their nuclear weapons. When it comes to US GDP by year, a graph shows that the economy is fairly steady. 

Reagan and Gorbachev meet for summits over several years, and in 1987, Reagan challenges Gorbachev to tear down the Berlin Wall. The wall falls in 1989. Gorbachev and the newly elected George H. W. Bush meet on Malta to further normalize relations and discuss the reunification of Germany. America is going through a recession. Meanwhile, the USSR dissolves, and in 1991 the Cold War ends.

Sources

• History.com
• Spartacus Educational

1970s: The Great Inflation and Abandoning the Gold Standard

The seventies were the worst decade for GDP growth by year since the Great Depression. The period from 1965–1982 is often referred to as the Great Inflation because of the economic turmoil it caused. 

Between unprecedented wage and price controls, energy shortages, and four recessions, the country barely has a chance to recover before the next disaster hits. This is also the decade when the US abandons the gold standard for good. 

1970–1971: The country is in a recession and Richard Nixon is the president. The GDP chart shows very slow progress, and the cost of the Vietnam War is devaluing the dollar. Nixon decides to fight inflation with wage-price controls and introduces a 90-day freeze to bypass America’s free-market economy. 

The move is the equivalent of fighting a fire with gasoline, and while it gives a temporary boost to the economy and manages to get Nixon reelected, it ends up contributing to one of the longest and most serious stagflation periods in American history. 

1972–1973: The US GDP chart, by year, shows that the economy in 1972 is still balanced. Nixon does two important things: ends the Vietnam War and manages to establish trade negotiations with China. However, his next moves put the whole country at risk.

In 1973, following unsuccessful Egyptian and Syrian attacks on Israel during the Yom Kippur War, the Organization of Petroleum Exporting Countries (OPEC) cuts oil production by 5% each month and imposes limits on oil deliveries to Israel’s allies.

From October 1973 to March 1974 the price of oil jumps from $2.90 to $11.65 per barrel. The oil crisis boosts inflation to 12.3%, by imposing increased costs on any business that transports raw materials or goods.

Nixon imposes a 10% surcharge on imports to lower the trade balance and protect domestic industries. He ends the gold standard and abolishes the Bretton Wood system. By divorcing the dollar from gold, Nixon causes the precious metal’s price to skyrocket and the dollar to plummet. Import prices increase and US economic growth by year slows to a crawl. 

Companies can’t raise their prices to remain profitable or lower them to increase demand. They can’t raise or lower wages. The only solution is to lay off workers. This increases unemployment, which in turn reduces consumer demand and further decelerates the plodding economy. 

1974–1977: Nixon resigns in 1974 due to his involvement in the Watergate scandal. Vice President Gerald Ford assumes the presidency, succeeded by Jimmy Carter. 

The Federal Reserve lowers interest rates and the US GDP growth rate by year becomes steady as the country slowly drags itself out of recession,only to plunge into the next one very soon.

1978–1982: The Iranian revolution leads to another energy crisis and, in 1979, oil prices triple. The Federal Reserve Bank raises interest rates to 20% in an attempt to stop inflation, but by the summer of 1980, inflation is nearly 14.5%.

President Carter signs the Money Control Act, meant to deregulate institutions that accept deposits and improve the control of monetary policy by the Federal Reserve Bank.

The Fed is now using a combination of high interest rates and slow reserve growth to fight inflation as the country enters another recession. It’s not until 1982 that it ends.

Sources 

• Encyclopedia.com
• Federal Reserve History
• The Balance

1980s–2000s: Reaganomics

The policies of President Ronald Reagan fundamentally changed the American economy. Historical GDP data shows some growth during his presidency, but the period was far from stable.

Reagan’s promises did manage to recuperate the economy, though not to the extent he and his supporters hoped for. Despite this, his economic ideas ended up shaping the last two decades of the twentieth century and have influenced the decisions of every president who came after him. 

1980–1984: Reagan is in charge. After a devastating period of slow growth and unemployment, economic experts are no longer supporting Keynesian theory, and politicians are pressing for an expansion of the money supply. 

In 1982, Reagan signs the Garn-St. Germain Depository Institutions Act, which allows banks to raise interest rates on savings deposits and reduce loan-to-value ratios. 

1984–1987: The current US GDP remains steady. Reagan lowers income taxes from 70% to 50% for the top tax bracket. Corporate taxes are also reduced — from 46% to 34% over the course of a few years. 

Throughout his presidency, Reagan institutes four new policies intended to further stabilize the country: 

1. Reduction of government spending
2. Reduction of marinal income taxes for businesses, individuals, and investors 
3. Reduction of regulations on business
4. Reduction of inflation by controlling the money supply 

Reagan believes that lower corporate taxes leave companies with more money, which they will use to hire more workers at higher wages. This is an example of the “trickle-down theory,” which hinges on the idea that the whole society benefits from the growth of big companies with plenty of resources. Rich Americans embrace the idea. For a while, the US nominal GDP is relatively stable. 

The stock market hits a new crisis on October 19, 1987, when the Dow Jones Industrial Average drops by 22.61%, the greatest one-day drop in history. This is because a new bill wants to eliminate the tax break for loans used to pay for corporate takeovers. The bill is Congress’s way of regulating the market, but Wall Street is afraid and investors sell their stocks. 

People fear another recession, so the Federal Reserve Bank pumps money into banks. After a short struggle, the market stabilizes.

There are more tax cuts in 1986 and 1987, but they aren’t very effective as tax rates are already reasonable.

1988–1991: Reagan reduces bank regulations and increases barriers to imports. Unemployment is at 5.3%, and the US annual GDP grows by 3.7% in 1989. 

George H.W. Bush takes office as the 1989 Savings and Loans crisis reaches its peak. Changing market conditions, Reagan’s deregulations, and corruption lead to instability in the S&L industry. Once the dust settles, a third of these institutions are gone. 

It is revealed that five US senators put pressure on the Federal Home Loan Banking Board to overlook suspicious activities. The senators are now being accused of improper conduct. 

Because of unsound real estate lending practices, the country ends up with an additional $160.1 billion in debt. Between 1986 and 1996, $132 billion of that debt is repaid by US taxpayers. 

In 1990, as a result of the crises, the country enters another recession. The GDP growth slows again. 

1992–1994: The country is climbing out of recession, and the US GDP by year 1992 is 3.5%. 

The Reagan-Bush campaign to create the North American Free Trade Agreement finally comes to fruition. Canada, the United States, and Mexico join together to help North America become a more competitive force in the global marketplace. 

George H.W. Bush, Mexican President Salinas, and Canadian Prime Minister Brian Mulroney sign the agreement. The economic alliance is at least in part a response to the Maastricht Treaty that will create the European Union. 

In 1993, Bill Clinton enters the Oval Office. His first law is the Omnibus Budget Reconciliation Act, also known as the Deficit Reduction Act. It created two new brackets for corporations that earn more than $10 million and cut down on the number of subsidies they get. Additionally, the Act proposed lowering spending by $255 billion over a five-year period.

1995–1997: The US nominal GDP during this period has a steady average growth of 3.63%, but the Fed has to raise interest rates to slow down inflation. The country is relatively stable under Clinton, and in 1996, he introduces another reform, modifying the Temporary Assistance for Needy Families Act with an addendum called the Personal Responsibility and Work Opportunity Reconciliation Act. 

This addition states that recipients of the program must get a job within two years of receiving assistance and that they can receive payments for a maximum of five years. The new program builds on Reagan’s conviction that welfare creates a cycle of poverty and that the government should provide jobs instead of money to families in need. 

1998–1999: The US GDP by year is still steady. The average GDP growth is 4.65%, but a crisis threatens to cause an imbalance when a hedge fund called Long-Term Capital Management almost goes bankrupt. 

Due to risky trade practices, this massive hedge fund loses almost all of its investors when its highly leveraged interests begin to fall apart. Since LTCM is a prominent hedge fund with a large number of investors, the Federal Reserve Bank of New York steps in to prevent complete failure. The Fed gets a number of institutions to contribute to a $3.65 billion bailout in exchange for 90% of the fund’s ownership.

In 1999, 1933’s Glass-Steagall Act is repealed. Its purpose is to bring together commercial banks and investment banks through financial holdings, but few banks use it because they don’t want additional supervision from the Fed. Banks that do become “too big to fail.”

Sources

• The Balance
• Trend Following

2000–2002: Dot-com Bubble 

While the US GDP was steady at the beginning of 2000, the dot-com speculative bubble impacted the economy in a way that soon became obvious. 

2000–2002: The bubble revolves around speculative investment in internet companies. The internet is becoming more popular, and investors are eager to put their money into any kind of tech operation, regardless of its business model and profitability prospects. 

From 1994 to 2000, there’s a period of extreme growth, followed by a bubble burst from 2000 to 2002 when the Nasdaq Composite stock market index crashes. By 2004, only 48% of tech companies manage to survive, and most operate at reduced capacity. More than 200,000 people lose their jobs in Silicon Valley alone.

Sources

• TED

2001-2014: 9/11 and the War on Terror

US GDP growth by 2001 languished at 1% due to 2000’s burst of the tech bubble. Soon enough, an even bigger disaster struck: the 9/11 terrorist attack. It marked the beginning of the Global War on Terror led by the US and pushed the country into a series of exhausting conflicts. 

2001: George W. Bush is the President when fundamentalist Islamic extremists execute a well-coordinated attack using passenger aircraft as weapons. Planes strike New York’s World Trade Center, causing the collapse of both towers. A third plane crashes into the Pentagon, the headquarters of the United States Defense Department. A fourth never reaches its intended target, later identified as the White House, because passengers intervene. 

On October 7, 2001, US and British forces launch the first airstrikes in Afghanistan. They aim at Al Qaeda and Taliban targets. By the end of the month, the ground war has begun, with Britain, Turkey, Germany, Italy, the Netherlands, France, and Poland committed to sending ground troops to Afghanistan.

2002: America vows to fight back against terrorism wherever it is found, sending 9,700 troops to Afghanistan by year’s end. War spending boosts GDP growth to 1.7%. 

2003–2005: At this point, the US GDP official data still shows growth. The George W. Bush administration continues to focus on Iraq as a sponsor of world terror. The world is skeptical as none of the 9/11 terrorists had ties to Iraq. 

In an effort to rally world support for a planned invasion of Iraq, Bush sends the most trusted man in the US government, Secretary of State Colin Powell, to the United Nations. 

Powell expounds a Bush administration claim later proved untrue: that US intelligence has determined Iraqi President Saddam Hussein is stockpiling weapons of mass destruction. Powell’s speech rallies sufficient support for Bush to form a coalition of countries in the US-led mission to invade Iraq and depose Hussein. 

War spending boosts GDP by 2.8% in 2003, 3.9% in 2004, and 3.5% in 2005. 

2006–2009: In January 2009, Barack Obama is inaugurated as the 44th president of the United States. As the war in Iraq winds down, attention shifts to Afghanistan. Troop levels rise from 20,000 in 2006 to 67,000 in 2009. Production of war materiel is insufficient to boost GDP growth.

2010: Troop levels reach 100,000 in Iraq after President Obama orders an additional 33,000 American troops into the conflict. On August 31, President Obama officially announces an end to combat in Iraq. GDP grows 2.7%.

2011: Osama bin Laden, the Taliban leader, is discovered and killed by US troops in Afghanistan. Obama announces a four-year plan to withdraw combat troops from Afghanistan. He withdraws 10,000 of the remaining 100,000 by the end of the year. 

2012–2014: The US continues withdrawing troops from Afghanistan. In December 2014, Obama announces the end of combat operations, though about 16,000 troops remain as advisors to Afghan forces fighting the Taliban, ISIS, and al-Qaeda. 

In January 2009, there are still 14,000 American troops in Afghanistan. Through 2014, the US debt to GDP ratio is 96.21% while the GDP stays relatively steady at 1.8% to 2.3%.

The War on Terror’s contributions to GDP are not solely through government spending as in prior wars.

The wars in Iraq and Afghanistan are outsourced to private companies that provide their own soldiers, armaments, and support teams. Most of these contractors have close ties to current and former government officials.

Over the course of the conflicts, the US spends at least $138 billion on contractors. In 2011, a report comes from the US Commission on Wartime Contracting, which claims fraud and waste among contractors have cost the government as much as $60 billion since 2001.

Despite the report, the US continues to use private contractors to run the war. 

Sources

• History.com
• Military Times
• The Intercept
• Washington Post

2007–2009: The Great Recession

The Great Recession, also called the “subprime mortgage crisis,” was a long-term economic downturn that led to one of the worst financial crises in the world in recent history. It had a devastating effect on the US nominal GDP. Investment, output, and consumption were exceptionally low during this period. 

The crisis left an impact on people and businesses all around America and the world, and while it lasted relatively short, it took much longer for the country to recover.

2001–2006: The housing market is booming. Real estate values are rising, interest rates are plummeting, and the American dream of becoming a homeowner is possible even for disadvantaged families. 

2007: The US annual GDP is still rising at the beginning of 2007, but the housing market starts slumping. On October 11, the Dow Jones reaches its historic high at 14,164.53 points. 

New Century Financial Corporation, a company that specializes in subprime mortgages, declares Chapter 11 bankruptcy as a result of the increasing number of borrowers defaulting on their mortgages. Since Federal Home Mortgage Corporation declared it would no longer buy risky subprime mortgages earlier in the year, New Century has no way to sell the mortgages it owns and no way to recoup its losses. 

Several other companies go under, and housing prices fall even further. Due to a surplus of new homes on the market, homeowners are faced with the fact that their homes are now valued at less than what they owe.

2008: Real GDP growth drops by 0.13%. In January, the Fed drops interest rates to 3% and lowers it almost to zero by the end of the year. President Bush signs the Economic Stimulus Act, which is meant to provide tax refunds to businesses and individuals.

On March 16, the veteran brokerage firm Bear Stearns collapses and its stocks are sold at an astoundingly low $2 per share. The same stocks were valued at $30 just the day before. On July 11, a ninth largest mortgage company in the US, IndyMack, collapses and its closure results in the loss of over 4,000 jobs.

Several “too big to fail” companies, like Citigroup, Chrysler, General Motors, and AIG, are nearing collapse. The government has to step in and provide enough funds for these businesses to remain afloat and keep their employees. 

Most of these funds are made possible by the Troubled Asset Relief Program (TARP), a law signed by President Bush and meant to provide $700 billion of taxpayer funds for the purchase of mortgage-backed securities and other assets from struggling financial institutions.

Quarterly GDP drops from $15.7 to $15.4 trillion and the Fed lowers interest rates to 0% for the first time in its history. 

2009: The GDP drops by 2.60%. The US government is forced to bail out Bank of America by paying $20 billion in bailout funds and $118 billion in guarantees for subprime mortgages. 

Obama takes office and immediately approves a $787 billion stimulus package, the American Recovery and Reinvestment Act, which includes tax cuts for citizens and money for schools, green energy, infrastructure restoration, and healthcare.

The Dow Jones Average is slashed in half, falling to 6,469.95 points and causing a financial catastrophe. The unemployment rate hits a near 10%, and housing foreclosures reach a record low. 

Sources

• National Bureau of Economic Research

2009–2017: Slow Recovery

While Obama’s presidency began in the aftermath of the 2008 financial crisis, his administration made several decisions that stabilized and revived the country’s economy. The country experienced average yearly GDP growth of 1.63% between the years 2009 and 2017.

2009–2012: Obama’s first executive order is to close the Guantanamo Bay military detention center within a year. He is met with strong opposition from Congress, and his Guantanamo Bay promise is never fulfilled. 

During his first year in office, Obama signed several major bills: the Lilly Ledbetter Fair Pay Act, the American Recovery and Reinvestment Act, and the Hate Crimes Prevention Act. The first is meant to address the wage gap between men and women, the second to provide jobs and ease the burden of the Great Recession, and the last to make it easier to effectively prosecute hate crimes.

2010–2012: The recession ended, technically, in 2009, but the effects are felt for years, both in the US and abroad. 

2010: In 2010, Obama signed the Dodd–Frank Wall Street Reform and Consumer Protection Act in an attempt to give the government more regulatory power over the financial industry. It was not until 2013 that the Dow climbed to a new historic high at 14,253 points, indicating that the country was finally back on its feet. 

US GDP growth by year 2010 is somewhat recovered and equals 2.7%. The Volcker Rule is imposed, restricting banks from engaging in speculative investments that could harm consumers. The Affordable Care Act, popularized under the name Obamacare, is signed into law. It is the biggest healthcare reform in the past 50 years. 

In addition, Obama redirects budget funds into space exploration and education. He signs a treaty with Russia in which both countries agree to reduce the number of nuclear arms. The military’s “don’t ask, don’t tell” policy is repealed. There is a two-year pay freeze for federal employees. 

In 2011, the US GDP, by year, graph shows a 1.5% increase. The Budget Control Act is signed into law. In an aberrant and isolated incident, there’s a debate about whether the federal debt ceiling should be raised.

2012: In 2012, GDP rose by 2.3%, and the Taxpayer Relief Act was signed into law. Low-income Americans get extended tax breaks while tax rates rise for top earners. 

2013–2014: In 2013, the GDP rose by 1.8%. After Obama’s re-election, he proposes immigration reforms, promotes a new act that is meant to prevent violence against women, and makes a plan to deal with the impending climate disaster. The bipartisan Student Loan Certainty Act was signed into law. It’s meant to help students deal with crippling college debt.

Obama also makes an agreement with the Republican Party to prevent a fiscal cliff disaster. Five tax increases and two spending cuts were due to take effect at the beginning of the year, and they would have contracted the economy by 1.3% and pushed the country back into recession. Most notably, public debt would rise from 69% of GDP in 2011 to 190% by 2035. 

Fortunately, the House of Representatives approved a Senate bill that averted the crisis at the very last minute. 

The US GDP is rising in small increments as Obama attempts to raise the minimum wage, make community college free, and introduce the Clear Power Plan, which is intended to reduce carbon dioxide emissions from power plants. Congress shuts his proposals down. 

The government entered sequestration both in 2013 and 2014 because the Democrats and the Republicans couldn’t agree on how to reduce deficit spending. Democrats want to keep taxing the rich and reduce military and defense spending, while Republicans want to cut Obamacare and social security budgets.

2015: The real US GDP growth rate by 2015 is up by 3%. The Trans-Pacific Partnership is signed by the US and eleven other countries that border the Pacific Ocean. The negotiations for this agreement have successfully concluded, and all that’s left is for each country’s legislature to review and sign the agreement individually. Before this happens, President Trump will pull away from the agreement in 2017. 

In the face of Iran’s efforts to develop a nuclear bomb, Obama signs the Joint Comprehensive Plan of Action together with the UK, France, China, Russia, and Germany. Iran agrees to limit nuclear weapons research. 

Sources

• AOL
• BBC
• Miller Center
• Time

2017–2019: The Trade Wars

With President Trump at the helm of the United States, the economy will be impacted by direct government action in the form of tax cuts and trade wars. Still, the most significant impact during this era will be the unforeseen global pandemic, which has had a major impact on the economy and has made it difficult for businesses and consumers to adjust.

Even though the tax cuts helped businesses and the wealthy, the national debt continued to rise to World War II levels even before the coronavirus pandemic struck. Meanwhile, trade wars increased the cost of imported products and harmed US net exports.

2016–2018: Donald Trump’s unexpected victory in the 2016 presidential election jolts the country awake and manages to further divide Republicans and Democrats. The US GDP growth by year remains steady despite the new president’s chaotic leadership. 

One of Trump’s first acts as president is to sign an executive order that eases the burden of Obamacare regulations. On January 21, millions came out to protest at women’s marches all over the country.

On January 25, 2017, Trump signed an executive order to build a wall along the Mexican-US border. In the future, Congress will shut down each and every one of its attempts to fund this project. Trump continues to push anti-immigration policies at every step between the wall, his attempts to repeal the DACA program, and several travel bans meant to prevent immigrants from entering the country.

On December 22, 2017, Trump signed the Tax Cuts and Jobs Act, which cuts corporate taxes from 35% to 21%. 

Trump’s campaign promise that annual GDP growth will exceed 4% to 6% once he takes office has not come true. Once in office, he did change his growth estimates to 2% and 3%, which is still considered healthy GDP growth. The US GDP in 2018 was 2.9%. 

2018–2020: True to his campaign promise of an “America first” economic policy, President Trump imposes trade tariffs on various imported goods to reduce the trade deficit and protect American interests. 

In January 2018, the first tariffs of 30% to 50% are imposed on washing machines and solar panels.

In March of the same year, tariffs are placed on steel (25%) and aluminum (10%) from most countries, including the European Union, Mexico, and Canada. 

Trading partners don’t look too kindly on these actions and impose retaliatory tariffs, sparking multiple trade disputes. Canada, Mexico, Argentina, and Australia manage to successfully negotiate and remove the aluminum and steel tariffs.

2020: In January, the Trump administration placed 16.8% tariffs on all goods imported into the United States.

In its budget and economic outlook for 2020 to 2030, the Congressional Budget Office (CBO) claims the imposed trade tariffs would negatively impact America’s GDP and reduce average real family income.

2018–Ongoing: Trump’s hostility to China precedes his administration. Even before the imposition of punitive tariffs, attempts are made to reach a deal with the Chinese and avert what is now known as the US-China Trade War. Both sides’ expectations are vastly different, and a compromise seems impossible.

The Trump administration’s tariffs on Chinese imports are the primary driver of the trade war, but there are other irritants, such as China’s restrictions on American exports of high-tech products and its alleged intellectual property theft.

The trade war escalates, with both countries imposing ever-higher tariffs on each other’s goods. The US places restrictions on Chinese investment in America and blacklists Chinese tech giant Huawei. The US sees a slowdown in economic growth, and Chinese companies are struggling to find alternative suppliers for the US products they used to import.

2018–2019: American farmers are immediately hit by the US-China trade war, so the government has to step in and provide financial aid amounting to $28 billion in two years.

Sources

• Congressional Budget Office
• Macrotrends
• NPR
• ProPublica

2019-2020: COVID-19 Pandemic Hits

Despite the ongoing trade war, the US GDP in 2019 recorded a healthy growth of 2.29%. But that was about to change drastically. 

The COVID-19 pandemic has caused widespread disruption in economic activity, with businesses shutting down and millions of Americans losing their jobs, affecting the US GDP growth. Still, in the face of these challenges, the country’s economy has shown surprising resilience.

On March 13, President Trump declared a US public health emergency.

On March 27, he signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) into law, providing $2.2 trillion in stimulus funding. In addition, the Federal Reserve Bank has taken aggressive actions to support the economy by cutting interest rates to near-zero levels and injecting billions of dollars into the economy via quantitative easing.

On December 27, the Consolidated Appropriations Act 2021 was signed into law, and it consisted of another $900 stimulus package and $1.4 trillion for the US federal budget for 2021. 

Despite the CARES act, the nation’s GDP declined by 8.9% in the second quarter of 2020, but these steps reduced the impact of the pandemic and led to a resurgence of US GDP growth in 2021. Despite this, the pandemic has caused significant damage to the US economy, and it will take time for the country to recover fully.

Here’s a look at some key ways COVID-19 has affected the US economy:

1. GDP growth: The pandemic caused such turmoil that the US GDP in 2020 fell to -3.4%, marking the biggest US annual drop since the 1946 demobilization when GDP fell to -11.6%. 
2. Unemployment: The pandemic has caused millions of Americans to lose their jobs. In January, the unemployment rate was 3.6%. In April, it rose to 14.7%, but it came down to 6.7% at the end of the year. 
3. Business shutdowns: Many businesses have been forced to shut down due to the pandemic, which has affected economic growth.
4. Consumer spending: The pandemic has caused a decrease in consumer spending as people worried about their finances and the future.
5. Stock market: The stock market crashed at the outset of COVID-19 because of ongoing concerns and broke an 11-year-long bullish run. It recovered after only 33 days and has remained mostly isolated from the economic issues brought on by the epidemic.

The pandemic had a big effect on the US economy, but the economy got back on its feet, and the US GDP in 2021 was 5.7%. The full extent of the pandemic’s impact on the US and the global economy is still unknown, but it will take time for the country to recover fully.

Sources

• Adelphi University
• Board of Governors of the Federal Reserve System
• National Conference of State Legislatures

2021-2023: COVID Aftermath

Today, there are still many uncertainties about the state of the US economy and the world at large. Economists and observers continually argue about whether the economy will go into recession and, if so, when. Instead of piling on another opinion, we will focus on presenting the data as it is.

2021: On March 11th, President Joe Biden introduces the $1.9 trillion America Rescue Plan Act (ARP) of 2021 in an effort to speed up the US recovery from the effects of the pandemic.

The Federal Reserve Bank of San Francisco (FRBSF) later calculated that the Act’s provisions increased inflation by 3%. Nonetheless, the FRBSF recognized that the Act effectively prevented deflation and reduced economic development.

This and other similar acts and other aggressive Federal Reserve Bank reactions aided the US economy’s recovery. US GDP growth in 2021 recorded a staggering 5.56% growth. The last time such growth was recorded was in 1984, with the US GDP growth rate reaching 7.24%.

On August 30, the US withdrew all its troops from Afghanistan, ending a 20-year-long operation but leaving around $7 billion worth of equipment in the hands of the Afghan National Security Forces, which collapsed almost immediately.

On November 15, the Infrastructure Investment and Jobs Act (IIJA) is signed, pumping another $1.2 trillion into the infrastructure and US economy. The Act’s aims are to revitalize the infrastructure, create additional jobs, expand labor protections, and address climate change.

2022: Until January 3, the stock market is strong and remains detached from the rest of the economy, but it then enteres its ongoing bearish run.

On February 24, Russian forces invade Ukraine, which worsenes the situation in the global market with added uncertainties and disruption to the flow and production of goods and services. The price of oil also spiked, which led to inflationary pressures on the US economy.

On March 16, President Biden pledges an additional $800 million in security to Ukraine, which brings the total committed aid to two billion since the start of the Biden Administration.

On April 28, the Bureau of Economic Analysis releases its first estimate of US GDP in 2022 for the first quarter, which showed a decrease of 1.4%. The 3rd revision by Bureau of Economic Analysis shows that the US GDP dropped to -1.6%.

On May 12, the number of US COVID-19-related deaths surpasses one million.

On the 23rd of the same month, President Biden launches Indo-Pacific Economic Framework for Prosperity (IPEF) with the intent to stimulate growth and trade between the members. It currently comprises 14 members, representing around 40% of the world’s GDP.

On August 16, the Inflation Reduction Act of 2022 (IRA) was signed to limit inflation, reduce spending, promote clean energy, and lower prescription drug prices.

The bill is a negotiation result of President Biden’s proposed Build Back Better Act, which is part of his Build Back Better Plan, with parts of it already being incorporated in IIJA and ARP acts. IRA incorporated some Build Back Better Act proposals but excluded all social safety net proposals.

The effects of the IRA act on inflation and the economy vary. Some believe it will reduce the US’s annual GDP by 0.1 and increase inflation further, while some believe it will have just the opposite effect.

On September 29, the Bureau of Economic Analysis announces its third estimate of the US annual GDP for the second quarter of 2022, which indicates an improvement compared to the Q1 estimate. However, it still predicts a 0.6 annual fall, prompting many economists and news outlets to allude to the economic recession. 

On October 27th, it was announced that the real GDP increased by 2.6% in Q3 2022, up from a 0.6% decrease the quarter before, with consumer spending and increase in exports offsetting a lower housing and inventory investments.

By the end of the year, US GDP rose by additional 2.9%, slightly slowing down in Q4 due to decreased consumer spending and a sharp, 26.7% decline in residential fixed investments.

2023: While there were widespread fears that the US is heading toward recession in 2023, the first quarter started with a 2% GDP growth, exceeding a 1.3% estimation and resisting a 5% interest rate set by the Federal Reserve.

The same trend continued by the end of Q2, with GDP once again exceeding expectations and growing by 2.4%, up from a 2% estimate, fueled by rising private domestic investment which dropped by 11.9% in Q1 but grew by 5.7% by June. The inflation gauge also dropped from 4.1% in Q1 to 2.6% in Q2, beating a 3.2% estimate. 

On October 7th, Hamas conducted a surprise attack on Israel, which then led to a siege of Gaza and the growing fears of a wider conflict in the Middle East as the prospect of peace between the two nations seems further and further away with each passing day.

A wider war could harshly impact the US economy due to rising oil prices and the increased geopolitical instability in an already shaky world, once again raising the alarms of a rising inflation and possible recession.

In Q3, however, the United States economy once again performed better than expected, as GDP rose by 4.9%, the fastest pace in nearly two years. Consumer spending rose by 4%, compared to just 0.8% in Q2, making consumers responsible for 66% of the entire GDP this quarter.

Sources 

• US Bureau of Economic Analysis
• Congress.gov
• Federal Reserve Bank of San Francisco
• Voice of America
• US Department of Defense

Bonus: GDP by Presidents

As if that weren’t enough, here’s just a little bit more GDP historical data goodness. The following table shows the state of the US GDP under different presidents and how each of them and their policies affected the GDP. 

Before we go any further, we need to warn you that the average growth in gross domestic product is not a good way to measure a president’s success. It can, however, give an interesting look at the economy during a certain time. Presidents inherit the state of the economy from their predecessors, and events beyond their control can impact the US GDP year by year. 

With that in mind, here’s the table: