OREGON STATE UNIVERSITY

Inflation study: Clinton may be "lowest paid" president ever

09/26/2000

CORVALLIS, Ore. --- Bill Clinton arguably is the lowest paid president in U.S. history. The average price of a movie is about 28 percent cheaper than it was in 1970.

And those gasoline prices you've been complaining about? Hey, they're darn near a bargain.

These perceptions may not be shared by the U.S. populace --- or most American journalists --- but that neatly makes a point that Oregon State University political scientist Robert Sahr thinks is too frequently overlooked. Comparing dollars yesterday and today is comparing apples with oranges.

"People tend to think in terms of what are called 'nominal' dollars," Sahr said. "When your grandfather says he used to work all day long for a quarter, it doesn't really compare to 25 cents in today's dollars. Taking into account the effects of inflatio n on the value of the dollar really makes a difference, though it can be a difficult concept to grasp."

Sahr created a web site on the value of the dollar that has become a resource for reporters, politicians, researchers and interested citizens from all over the country. The site includes a series of "inflation conversion factors" tables that show the relative worth of a buck from 1800 to 2010. A variety of graphs, charts and tables create comparisons of all kinds.

Want to be a millionaire? It's a lot easier than it used to be. Sahr's data shows that $1 million today is equivalent to about $750,000 in 1990, $500,000 in 1980, and $230,000 in 1970. If you had $50,000 in the bank at the beginning of the 20th century, it would like having a million dollars today.

Conversely, it would take $20 million in 2000 to equal the fortune of a millionaire in 1900. An expert on media and public policy, Sahr became interested in the value of a dollar after observing how many journalists would simplify complex issues by comparing dollar figures over time without adjusting for inflation.

Five years ago, the OSU associate professor of political science wrote an article for the Columbia Journalism Review suggesting that journalists should always consider the effects of inflation when reporting about dollar figures over time. In that articl e, he included a table of "conversion factors" to help journalists do just that.

He also began developing his web site, which now includes a number of tables of conversion factors, as well as numerous graphs that visually display many aspects of politics --- especially the national government budget --- and the economy over time, taki ng into account the effects of inflation.

"My goal," said Sahr, "is simply to get journalists to acknowledge the inflation factor when looking at dollars in their stories."

Whether he will reach that goal remains to be seen, Sahr admits, but his web site has created a great deal of interest, logging 5,000 or more visits a month. It frequently is used as a source of information in national surveys, stories and studies.

Sahr said the federal government's Census Bureau and Bureau of Labor Statistics have been collecting data for the Consumer Price Index (CPI) since the early 1900s so that people could determine changes in price levels over time. Data for the CPI is collec ted by the Census Bureau, which prices the numerous items in the CPI "market basket" each month. Estimates of the CPI from 1800 to 1912 also have been developed, he added, but are not based on actual data. Actual CPI figures began in 1913.

"The CPI is very important because it is used by businesses and by government in 'cost of living' adjustments, or COLAs, such as when Social Security benefits are adjusted each year to reflect cost of living changes," Sahr said.

Sahr updates his tables every year, so people using his web site can adjust past and present dollar figures to 2000 dollars, to the CPI, or to other years.

"One main difficulty in thinking about the effects of inflation over time is that the CPI 'base year' is usually some time in the past," Sahr pointed out. "The current 'base year' is the average of 1982-84. That's a long time ago and people have difficult y making valid comparisons of historical dollar values to today's prices."

These conversion factors suggest why Clinton appears to be the lowest paid president in history --- in terms of 2000 dollars. His $200,000 salary is, of course, worth $200,000 in today's dollars. But seemingly lesser salaries by previous presidents have b een worth a great deal more when inflation is factored in.

The $25,000 annual presidential salary that began with George Washington was worth an estimated $320,000 to $480,000 in today's dollars, though that dropped to about $240,000 for James Madison in 1814 following the War of 1812, and to about $260,000 --- b ecause of Civil War inflation --- for Abraham Lincoln in 1865. During most of U.S. history, however, presidential salaries had a great deal more "buying power" than Clinton's salary does today. In inflation-adjusted dollars, presidents from Grover Cleveland in the 1890s to Woodrow Wilson in 1917 all received the equi valent of $1 million or more in yearly pay.

Presidential pay may have peaked in about 1910, when William Howard Taft's $75,000 salary was worth a cool $1.5 million in today's dollars. Rutherford B. Hayes was the first president to receive the equivalent of $1 million - the value of his $50,000 sala ry in the late 1870s.

"It's amazing when you look at the numbers," Sahr said. "It still surprises me. Intuitively I know that $50,000 'way back when' was worth a lot more than it is today. But when you compare Taft's $1.5 million with Clinton's $200,000 - it's a startling cont rast."

The yearly pay of presidents has been $200,000 since 1969, but the inflation-adjusted value has dropped sharply, from the equivalent today of $930,000 for Richard Nixon in 1969, to $470,000 to Jimmy Carter in 1979, to $275,000 for George Bush in 1989.

Congress has recognized that the president's pay has fallen in inflation-adjusted terms. The president taking office on Jan. 20, 2001, will receive a yearly salary of $400,000.

Too often, however, differences in dollar figures aren't taken into account, Sahr said. There have been numerous stories about the rising cost of gasoline to consumers, and most of those stories compare current prices with those from the early 1980s, when there was an oil embargo. But those comparisons are invalid without adjusting for inflation, Sahr argues.

"In personal decisions, individuals appear to respond to short-term price changes regardless of inflation-adjusted value over long periods of time," Sahr said. "And sharp price changes may stimulate socially useful actions, such as buying more fuel-effici ent vehicles."

The national average cost for a gallon of gasoline in 1981 was $1.37, leading many reporters to say that today's prices far exceed the days of the oil embargo. But in 2000 dollars, a gallon of gas would have cost $2.59 in 1981.

So that buck-and-a-half or more you're paying at the pumps today still isn't bad in comparison.