Democrats Or Republicans Better For Economy?

Is A Republican President Really Better For The Economy?
December 13, 2007

In the December 11 article “Economists Say Recession Risk Is Climbing,” the Wall Street Journal talked about some of the findings from its latest survey of economists. When asked which presidential candidate would be best for the economy, only half of the 52 economists participating in the survey responded. The Journal reported that 35% of respondents chose Rudolph Giuliani, 19% chose John McCain, and 15% picked Mitt Romney as the candidate who would be best for the U.S. economy. Hillary Clinton was picked by 8% of economists participating in the poll, while 4% chose John Edwards. Ron Paul, Michael Bloomberg, and Alan Greenspan each got a write-in vote. Alan Greenspan?

I’m not surprised that the survey results showed economists felt a Republican White House would be best for the U.S. economy. I’ve always heard that the economy performs better under a Republican president. Even when I was an undergraduate student at the University of Illinois at Urbana-Champaign in the early nineties, some of my classmates said that it was a shame that President Clinton and the Democrats were reaping the benefits of economic policies instituted by President George H.W. Bush’s administration. So tonight, I’m going to explore the claim that Republican administrations are “best” for the U.S. economy.

I call to your attention a study done in December 2006 by Elliott Parker, Ph.D., who is a Professor of Economics at the University of Nevada-Reno. Using data from the U.S. Department of Commerce’s Bureau of Economic Analysis, Dr. Parker first compared the economic performance of Republican and Democratic presidencies from 1929 through the end of 2005. He found that the Real GDP Growth Rate (annual average) was 1.9% for Republican administrations and 5.1% for Democratic administrations during this time. Real GDP Growth Rate Per Capita was .7% for the Republicans and 3.8% for the Democrats. However, the professor pointed out that the years comprising the Great Depression and WWII should probably be excluded from the comparison. So economic performance from 1949 (end of Truman administration) to 2005 was compared, which showed Real GDP Growth Rate (annual average) under Republican administrations now stood at 2.9% and Democratic administrations at 4.2%. Real GDP Growth Rate Per Capita was 1.7% for the Republicans and 2.9% for the Democrats. These results prompted Dr. Parker to conclude that “the economy has grown significantly faster under Democratic administrations, and more than twice as fast in per-capita terms.”

The University of Nevada-Reno economics professor also uncovered the following while conducting the economic comparison between Republican and Democratic presidential administrations from 1949 to 2005:

• Unemployment Rate- Republicans 6.0%, Democrats 5.2%
• Change In Unemployment Rate- Republicans +0.3%, Democrats -0.4%
• Growth of Multifactor Productivity- Republicans 0.9%, Democrats 1.7%
• Corporate Profits (share of GDP)- Republicans 8.8%, Democrats 10.2%
• Real Value of Dow Jones Index- Republicans 4.3%, Democrats 5.4% (in logarithmic growth rates)- Republicans 2.8%, Democrats 4.4%
• Real Weekly Earnings- Republicans 0.3%, Democrats 1.0%
• CPI Inflation Rate- Republicans 3.8%, Democrats 3.8%

Regarding the question of statistical significance, Parker noted:

The differences in growth, unemployment, and the corporate profit share are all statistically significant, and support the argument that the economy may actually perform better under Democrats. The differences in weekly earnings, stock market growth, inflation, and multifactor productivity all favor the Democrats as well, but these differences are not statistically significant.

Addressing the claim heard back in my college days, Dr. Parker also tried to account for a lag effect. He said, “It is a reasonable argument that economic performance early in a new administration is likely to be the result of policies followed by the prior administration.” Therefore, he tested whether lagging the effect of the administration on growth might support the argument that the economy actually performed better under Republicans. The professor found that even with up to four years of lagged effects, there was no evidence that the economy performed better under Republicans.

Dr. Parker drew the following conclusions regarding the claim that Republican presidencies are “best” for the U.S. economy:

But we can reasonably conclude that these government statistics provide evidence that directly contradicts the argument that the economy does better on average under Republican administrations. With lagged effects and other causes considered, the difference may be insignificant, but the economy may actually perform worse under Republicans.

Are Democrats Or Republicans Better For The U.S. Economy?
September 10, 2008

Back on December 12, 2007, I wrote a post where I investigated the claim that Republican administrations are better for the U.S. economy than Democratic administrations. I referred to a study done in December 2006 by University of Nevado-Reno economics professor Elliott Parker, who compared the economic performance of Republican and Democratic presidencies from 1929 through the end of 2005 using data from the U.S. Department of Commerce’s Bureau of Economic Analysis. Dr. Parker concluded:

But we can reasonably conclude that these government statistics provide evidence that directly contradicts the argument that the economy does better on average under Republican administrations. With lagged effects and other causes considered, the difference may be insignificant, but the economy may actually perform worse under Republicans.

Just recently, I came across a New York Times piece written by Princeton economics/public affairs professor Alan S. Blinder. A former vice chairman of the Federal Reserve, Blinder wrote on August 31:

Many Americans know that there are characteristic policy differences between the two parties. But few are aware of two important facts about the post-World War II era, both of which are brilliantly delineated in a new book, Unequal Democracy, by Larry M. Bartels, a professor of political science at Princeton. Understanding them might help voters see what could be at stake, economically speaking, in November.

I call the first fact the Great Partisan Growth Divide. Simply put, the United States economy has grown faster, on average, under Democratic presidents than under Republicans.

The stark contrast between the whiz-bang Clinton years and the dreary Bush years is familiar because it is so recent. But while it is extreme, it is not atypical. Data for the whole period from 1948 to 2007, during which Republicans occupied the White House for 34 years and Democrats for 26, show average annual growth of real gross national product of 1.64 percent per capita under Republican presidents versus 2.78 percent under Democrats.

That 1.14-point difference, if maintained for eight years, would yield 9.33 percent more income per person, which is a lot more than almost anyone can expect from a tax cut.

Blinder then proceeded to point out another shortcoming of Republican economic leadership. He wrote:

The second big historical fact, which might be called the Great Partisan Inequality Divide, is the focus of Professor Bartels’ work.

It is well known that income inequality in the United States has been on the rise for about 30 years now- an unsettling development that has finally touched the public consciousness. But Professor Bartels unearths a stunning statistical regularity: Over the entire 60-year period, income inequality trended substantially upward under Republican presidents but slightly downward under Democrats, thus accounting for the widening income gaps over all. And the bad news for America’s poor is that Republicans have won five of the seven elections going back to 1980.

Blinder concluded:

The two Great Partisan Divides combine to suggest that, if history is a guide, an Obama victory in November would lead to faster economic growth with less inequality, while a McCain victory would lead to slower economic growth with more inequality. Which part of the Obama menu don’t you like?

Which leads me to ask, will the economy play along as history intends? As the British historian Peter Burke once said:

From time to time, historians need to be shocked.

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8 Comments to Democrats Or Republicans Better For Economy?

  1. The way I see it is:

    Republicans or Democrats, Presidential or Parliamentary system of government, the national government is responsible for at least two securities: 1) Security at the border and 2) financial security. Everything else is basically derivative of these two.

    The nation couldn’t care less what party is in power or who can do a better job. As long as they are somehow secure in their finances and can sleep better at night knowing their borders are safe, nobody gives a damn who does the job better.

  2. Doable Finance on April 14th, 2011
  3. Thanks for the comment Doable Finance

  4. Editor on April 15th, 2011
  5. [...] are we such up a fucked country, where every born, owes over $50,000, debt, at BIRTH?) link.. Democrats Or Republicans Better For Economy? | Survival And Prosperity Reply With [...]

  6. Gas - Page 19 on March 7th, 2012
  7. Now that we have fours years of Obama, we know the answer to Blinder’s conclusion and his slanted view… We don’t like any of Obama’s menu and he has made things worse.

  8. LG on August 29th, 2012
  9. LG, things are marginally better than they were in 2008. It is possible that things could have been much worse.

  10. Tony on October 3rd, 2012
  11. 31 months of straight economic growth after the worst depression since the 30′s. A continued concerted effort by the lock-step republicans and tpers to stall, derail, and prevent any of Obama’s policies from getting through. I think the real problem is the repubs and the media in their pocket.

  12. John Trester on October 14th, 2012
  13. Why do people not believe the facts in front of them and blame Obama for mistakes made for the 8 yrs. prior to his office? yes, the economy is better than when he took office, unemployment is down below 8 percent for the first time in many years. The deficit is not better, because he was forced to pump money into an economy that was failing while the rich got richer and the middle class disappeared. All to fund a war that was created in Iraq to line the pockets of Bush and Cheney thanks to their ties with Haliburton. The social inequality that existed with Bush in office is beginning to disappear thankfully due to Obama, and why anyone could think Romney was successful in buisness is beyond me more than Half of the buisnesses he purchased while at Bain Capitol failed only a few did very well which made up for all the other failures he had, not to mention the fact he was cutting thousands of Jobs to make those Prosper so again why do republicans believe he would create jobs and fix the economy by following the same methods he used at Bain Captiol. He would leave the Board members on staff cut half the subordinates get the stock price to increase thanks to laying off people and then sale the company just in time before it failed. In other words that would have meant for America give tax breaks to the rich, who of course wouldnt be greedy with their extra money they would buy insurance for their middle class employees not and create jobs with the extra money, not of course buy another home like Romney himself had done…. Would have driven the unemployment rate through the roof as the study and may I add unbiased facts indicated from well respected Professors who I am sure are much more intelligent than the average voter.

  14. Aaron Weeks on November 7th, 2012
  15. So middle class republicans vote to take away other peoples freedom to do with themselves what they please because they should be able to govern other people and tell them what they can and cant do . They vote to take away money from themselves and give it to the wealthy, all the while saying they don’t want taxes raised on them when they aren’t even in the tax bracket “above $250,000yr” that would be increased if they voted for the democrat and call Obama a socialist when he follows the same plan for healthcare as the person they are voting for aka Mitt Romeny. Making them uneducated,selfish “how dare anyone else believe something other than what I do”, hipocrites.

  16. Aaron Weeks on November 7th, 2012

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