One Brain, and One Brain Only: Which is the Party of Prosperity, Again?

[elfs]

Normally, this is everything I read today that I found interesting, but today there's just one thing I want to show you: Presidential economics: Do parties matter?. It's a bukkake party of money shots:

• Democrats have a clear edge on GDP growth: 4.4% vs. 2.6%. Even if you start the clock with Truman in 1949 (eliminating the war boom and immediate postwar bust), the Dem advantage survives, with average growth of 4.5%. The partisan difference is widespread, too, not dependent on a few strong or weak readings.
• The comparative partisan performance on employment is similar to GDP growth. Under Democratic administration, employment has grown an average of 3.0% a year (2.9% if you start in 1949); under Republicans, 1.3%.
• With only few exceptions, Republican administrations have presided over increases in unemployment, and Democrats over declines. On average, the jobless rate has risen by 1.0 points under the GOP, and fallen by 1.9 points under Dems.
• The inflation pattern is more mixed than the growth-related numbers. On average, Democrats preside over a small increase in inflation, and Republicans over a small decrease.
• Though the picture so far is of the Republicans as the party of austerity and the Democrats as the party of stimulus, there's a surprise when it comes to changes in the federal deficit: Republicans are more liberal with the red ink than Dems. On average, a Republican in the White House has meant a shift of -1.9% of GDP in the government's budget balance (i.e., towards smaller surpluses or bigger deficits), while a Dem has meant a 1.5% improvement in the budget position (or 1.8%, if you start in 1949, thereby omitting the huge World War II deficit).
• The blue years have an edge on stock returns, with the S&P 500 rising an average of 4.7% a year in real terms (price only, excluding dividends, deflated by the CPI) under Democratic administrations, compared with 2.9% under Republicans. (Starting the clock in 1949 raises the Dem average to 6.9%.)
• Unlike the stock market, there's a clear partisan pattern to bond returns: Republicans are a lot more bond-friendly. Real total returns-price plus coupon, deflated by the CPI-averaged +4.2% a year under Republicans, vs. -2.1% under Democrats.
• Over the long sweep of history, the distribution of income in the U.S. became more equal from the early 1930s through the late 1960s, and has been growing more unequal ever since. But there are some partisan patterns to this story. On average, inequality has risen in Republican administrations, and fallen in Democratic ones.

The graphs accompanying the report are stark and immediate. Here's just one:


Paul Krugman has pointed out that it's very hard to point out any concrete policy steps taken by any administration that would cause these kinds of results. Yet ever since 1949 there's been a real and noteable difference in growth and employment patterns, one that clearly favors the Democrats over the Republicans.

Now there are strong counter-arguments: it could be that the economic trends picked the president, not the other way around. Still, it's striking to see that under Republican Administrations, the rich did well while the poor lost ground; under Democratic Administrations, both the poor and the rich did better, but for the rich the increase was not as statistically significant as it was for the poor.

Comments

[codeamazon.livejournal.com]

filed under "only Elf" : "It's a bukkake party of money shots:"

Hmph

[ideaphile.livejournal.com]

Didn't I just get done pointing out that it's somewhat dishonest to claim that all economic conditions can be blamed on just the presidential administration?

Surely it hasn't escaped your notice that the president doesn't even have much influence over the Federal budget. Every year, as long as I've been watching, the White House proposes a budget and the House leadership describes the proposal as "dead on arrival." It's almost like a game to these people.

The president's only hope for a substantial influence over the budget process is based on election results, and lasts only about a year. If the president can claim a mandate for the economic policies he advocated during his campaign, he can apply some leverage to Congress.

And we haven't had a president with that kind of leverage since Reagan. Bush Sr. didn't try. Clinton tried but his winning margin was slim and mostly the voters were suspicious of his economic plan, so he got reined in pretty much immediately. Dubya couldn't claim any kind of mandate for anything he wanted.

So what exactly is your theory to explain how any of these presidents deserve any credit OR blame for what happened to the economy during their terms in office?

. png

Re: Hmph

[qtplatypus.livejournal.com]

Thats the odd thing isn't it. There is a clear correlation between the party of the president and the finical well being of the country. Now as Elf pointed out (somewhat indirectly) correlation doesn't equal causality.

However the correlation exists even if there doesn't exist a satisfying theory as to how it comes about. But lets throw some purely speculative ones in there.

When people feel fiscally well off they vote for Democratic presidents.

The president and his administration's soft power has a greater impact then the direct influence over the budget.

Democratic administrations are better able to maximize the GDP impact of there spending regardless of how congress directs there budgets.