NYT -- why does the U.S. economy do better under Democratic Presidents?

[Ogre Mage]

The economy has grown significantly faster under Democratic presidents than Republican ones.

It’s true about almost any major indicator: gross domestic product, employment, incomes, productivity, even stock prices. It’s true if you examine only the precise period when a president is in office, or instead assume that a president’s policies affect the economy only after a lag and don’t start his economic clock until months after he takes office. The gap “holds almost regardless of how you define success,” two economics professors at Princeton, Alan Blinder and Mark Watson, write. They describe it as “startlingly large.”

One broad possibility with a good amount of supporting evidence: Democrats have been more willing to heed economic and historical lessons about what policies actually strengthen the economy, while Republicans have often clung to theories that they want to believe — like the supposedly magical power of tax cuts and deregulation. Democrats, in short, have been more pragmatic.

https://www.nytimes.com/2021/02/02/opinion/sunday/democrats-economy.html

[Benjamin Frank]

Republicans are better than Democrats at two things:
1.Mythmaking, especially about their party
2.Revisionist history

People can argue with me on this because it doesn't necessarily fit the timeline presented in the Leonhardt quote, but I think a good deal of what is going on here is this:

One of the most frequent issues in economics in regards to public policy is the example most frequently shown by economists of overfishing, this is an example of something where it is 'good for one, but bad for all.'

If one person overfishes, they benefit themselves but it's no big deal as long as everybody else obeys the rules. However, because every fisher has the same incentive to overfish and the same belief that they are the only one engaging in overfishing, they all overfish and soon deplete the fish stock.

We clearly see this in public policy with things in business like global warming and other pollution, exploitive trade practices, tax policy... If few businesses engage in these practices, it benefits them and, adds to GDP at least, when many businesses do it, it ends up as a net negative for society as a whole.

Corporate propaganda emphasizes the benefits to individual companies engaging in these practices which validates the Republican 'low regulation' argument, but Democrats are better for the economy and society as a whole because government is needed to reign in these corporate excesses, which, while good for one business are bad for the nation as a whole.

If that's too long, the pithy line is: what's good for General Motors isn't necessarily good for America.

[Holy Unifying Centrist]

Pretty BS to put Trump in #14... every major country had terrible economic growth in 2020 thanks to COVID

[RI]

Republican presidents tend to be elected during good economic conditions while Democratic presidents tend to be elected during bad economic conditions. The latter has much better growth potential while the former has far higher downside risk.

[Benjamin Frank]

President Clinton commented on this during his speech at the Democratic convention in 2012.

You can dismiss Clinton as being partisan or have other problems with him, but his undergraduate degree is in economics and he had many of the smartest economic minds in his administration.

Now, folks, in Tampa a few days ago, we heard a lot of talk — (laughter) — all about how the president and the Democrats don’t really believe in free enterprise and individual initiative, how we want everybody to be dependent on the government, how bad we are for the economy.

This Republican narrative — this alternative universe — (laughter, applause) — says that every one of us in this room who amounts to anything, we’re all completely self-made. One of the greatest chairmen the Democratic Party ever had, Bob Strauss — (cheers, applause) — used to say that ever politician wants every voter to believe he was born in a log cabin he built himself. (Laughter, applause.) But, as Strauss then admitted, it ain’t so. (Laughter.)

We Democrats — we think the country works better with a strong middle class, with real opportunities for poor folks to work their way into it — (cheers, applause) — with a relentless focus on the future, with business and government actually working together to promote growth and broadly share prosperity. You see, we believe that “we’re all in this together” is a far better philosophy than “you’re on your own.” (Cheers, applause.) It is.

So who’s right? (Cheers.) Well, since 1961, for 52 years now, the Republicans have held the White House 28 years, the Democrats, 24. In those 52 years, our private economy has produced 66 million private sector jobs.

So what’s the job score? Republicans, 24 million; Democrats, 42 (million). (Cheers, applause.)

Now, there’s — (cheers, applause) — there’s a reason for this. It turns out that advancing equal opportunity and economic empowerment is both morally right and good economics. (Cheers, applause.) Why? Because poverty, discrimination and ignorance restrict growth. (Cheers, applause.) When you stifle human potential, when you don’t invest in new ideas, it doesn’t just cut off the people who are affected; it hurts us all. (Cheers, applause.) We know that investments in education and infrastructure and scientific and technological research increase growth. They increase good jobs, and they create new wealth for all the rest of us. (Cheers, applause.)

[Benjamin Frank]

Republican presidents tend to be elected during good economic conditions while Democratic presidents tend to be elected during bad economic conditions. The latter has much better growth potential while the former has far higher downside risk.

That's not actually really correct.  Reagan and W. Bush were both elected during recessions or downturns in economic growth.  Reagan during stagflation and W. Bush right around the time the 'dot.com' bubble burst.

I also dispute that it's necessarily the case that good economic times have to have far higher downside risk.  Long run growth can create its own self sustaining conditions.  It might be the case that it's only Republican deregulation that makes long run growth so risky.

I.E Republicans favor a 'casino economy.'

[mikhaela]

Gingrich economy >>>>>>>>>>>>>>>>>>>>>>>>> Pelosi economy.

[Benjamin Frank]

Gingrich economy >>>>>>>>>>>>>>>>>>>>>>>>> Pelosi economy.

Thanks President Clinton!

[mikhaela]

Gingrich economy >>>>>>>>>>>>>>>>>>>>>>>>> Pelosi economy.

Thanks President Clinton!

The first two years of Clinton's economy were not nearly as good as the other six.

[Benjamin Frank]

Gingrich economy >>>>>>>>>>>>>>>>>>>>>>>>> Pelosi economy.

Thanks President Clinton!

The first two years of Clinton's economy were not nearly as good as the other six.

Every Republican voted against the deficit cutting Clinton Administration budget of 1993 which led to lower long term interest rates which led, in part, to the good economy.  The Republicans had nothing to do with the good economy from 1995-2000.

[Del Tachi]

Republican presidents tend to be elected during good economic conditions while Democratic presidents tend to be elected during bad economic conditions. The latter has much better growth potential while the former has far higher downside risk.

That's not actually really correct.  Reagan and W. Bush were both elected during recessions or downturns in economic growth.  Reagan during stagflation and W. Bush right around the time the 'dot.com' bubble burst.

And indeed, Reagan's economic performance is better than any post-1968 president except Clinton.

[Del Tachi]

Gingrich economy >>>>>>>>>>>>>>>>>>>>>>>>> Pelosi economy.

Thanks President Clinton!

It is apparently the case that the economy (or at least the stock market) grows faster when Republicans control at least one house of Congress, regardless of which party is in the White House.

  

[Alcibiades]

Gingrich economy >>>>>>>>>>>>>>>>>>>>>>>>> Pelosi economy.

Thanks President Clinton!

It is apparently the case that the economy (or at least the stock market) grows faster when Republicans control at least one house of Congress, regardless of which party is in the White House.

  

I mean, the extent to which stock market growth is reflective of a strong economy for actual people is debatable. It’s not exactly surprising, considering what policy they like, that the stock market feels more confident when the GOP is legislating.

[Benjamin Frank]

Republican presidents tend to be elected during good economic conditions while Democratic presidents tend to be elected during bad economic conditions. The latter has much better growth potential while the former has far higher downside risk.

That's not actually really correct.  Reagan and W. Bush were both elected during recessions or downturns in economic growth.  Reagan during stagflation and W. Bush right around the time the 'dot.com' bubble burst.

And indeed, Reagan's economic performance is better than any post-1968 president except Clinton.

Interesting graph.  The economy performed better under nearly every President from 1960-2000 than it did under Eisenhower, and both Bush 43 and Obama were negatively impacted by the Great Recession.  Yet, from 1953-1960 the United States was, more or less, the only totally viable economy due to the impact of World War II on Europe and Japan (obviously they had recovered to some extent and increasingly, but generally weren't able to compete with the United States as an exporting nation, though West Germany especially I believe exported a good deal to the rest of Europe.)

Although some of the relatively mediocre GDP growth under Eisenhower can likely be attributed to his obsession with government budget balancing, relative to every President who succeeded him, I suspect a good deal has to go down to the general weakness in the economy in most of the rest of the world which negatively impacted on their ability to buy American exports. For all of those who argue for protectionism and tariffs, I would use this as exhibit A of the benefits of free trading with nations that are also performing well economically.

Eisenhower himself certainly seemed to recognize this:
"World trade supports a significant segment of American industry and agriculture. It provides employment for four and one-half million American workers. It helps supply our ever increasing demand for raw materials. It provides the opportunity for American free enterprise to develop on a worldwide scale. It strengthens our friends and increases their desire to be friends. World trade helps to lay the groundwork for peace by making all free nations of the world stronger and more self-reliant."
https://www.ontheissues.org/celeb/Dwight_Eisenhower_Free_Trade.htm

If QAnon supporters had any brains, their saying would be "when we grow one, we grow all."

[pbrower2a]

The economy has grown significantly faster under Democratic presidents than Republican ones.

It’s true about almost any major indicator: gross domestic product, employment, incomes, productivity, even stock prices. It’s true if you examine only the precise period when a president is in office, or instead assume that a president’s policies affect the economy only after a lag and don’t start his economic clock until months after he takes office. The gap “holds almost regardless of how you define success,” two economics professors at Princeton, Alan Blinder and Mark Watson, write. They describe it as “startlingly large.”

One broad possibility with a good amount of supporting evidence: Democrats have been more willing to heed economic and historical lessons about what policies actually strengthen the economy, while Republicans have often clung to theories that they want to believe — like the supposedly magical power of tax cuts and deregulation. Democrats, in short, have been more pragmatic.

https://www.nytimes.com/2021/02/02/opinion/sunday/democrats-economy.html

In practice, the Republican Party is still the "Greedy Old Plutocrats", and is so for just about any subculture, about every subculture believes that the what it want  is the social optimum no matter what others believe. An economy that dedicates itself to profit with the very rich keeping what they can grab is exactly what the Greedy Old Plutocrats want. If they could get away with it they would have an economy in which profit is the sole measure of economic virtue, no matter how dehumanizing it might be to everyone else.

OK, that is a Marxist stereotype, but it is safe to assume that the plutocrats, urban landlords, corporate farmers, and corporate executives generally have little empathy for working people.

It could be that Republicans tend to promote speculative bubbles better (for a time) at driving up paper profits while creating few jobs. Speculative booms (as the arch-conservative Friedrich Hayek put it) devour capital while creating practically nothing of value. Paper profits conceal the damage, and when the boom comes to its end (when something is so overpriced that it has few potential buyers)... down goes the overall economy. Democratic policies on taxes may do better in encouraging investment in plant and equipment that really create jobs as well as the goodies that come from such jobs.     

[Benjamin Frank]

A strange analysis given that both averages comprise so few instances, and that widely varying comparisons are possible depending on arbitrary decisions regarding how to bound the time period.

I'm not sure that strong growth during the Roosevelt or Johnson/Kennedy administrations has much in common with strong growth during the Clinton administration, for instance. Or, for that matter, that strong growth during the Clinton administration should be more important to someone comparing the two parties than middling growth during the Obama administration.

Except the article itself actually mentions that, Democrats are more pragmatic and tailor their response to the economic circumstances, while Republicans are rigidly ideological either doing nothing with fiscal policy (Austrian School) or by claiming that cutting taxes is the solution to every problem (trickle down.)

[Benjamin Frank]

Except the article itself actually mentions that, Democrats are more pragmatic and tailor their response to the economic circumstances, while Republicans are rigidly ideological either doing nothing with fiscal policy (Austrian School) or by claiming that cutting taxes is the solution to every problem (trickle down.)

I'm a little confused about why you're pointing to the article's tendentious interpretation of a sloppy and simplistic analysis to assuage my concerns about the usefulness of the underlying data.

I won't claim to understand all of the econometric techniques used in the original paper, but I'm statistically literate enough to question the validity of running this analysis when the data-generating process that involves only a small number of cases, none of which co-occur, and that is mostly explainable in terms of other factors.

Sanity check: Plot the trend for any of these indicators since WWII, nominal or real, per capital or aggregate, monthly or annual, and ask yourself how much remains to be explained by transfers of power.

The article makes much of how the gap holds for a wide variety of economic metrics but that's largely because so many of them are a highly correlated. And a large portion of the partisan difference is accounted for by a single president, FDR, who presided over much higher economic growth than any other in the same time period.

The first answer that the article provides is the best one: "I have shown the data to multiple economists in recent weeks, and most say they are not sure how to explain it, at least not fully. [...] Part of the answer surely involves coincidence."

The research that inspired this coverage is a bit bolder, but no more consistent with your account: "The Democratic edge stems mainly from more benign oil shocks, superior total factor productivity (TFP) performance, a more favorable international environment, and perhaps more optimistic consumer expectations about the near-term future.”

Neither of those answers sound much like the one that the article goes on to provide, almost entirely based on speculation and polemics oriented totally around policy choices made within the past three decades.

Mu guess is you're just butt hurt by the study and its conclusions because you're a Republican.  There are multiple other studies that show that such notions as 'tax cuts pay for themselves' is a lie, and that increasing income and wealth inequality, which Republican policies promote, is an impediment to economic growth.  

So, this isn't just one study on its own, it is triangulated by multiple studies.  Right wing economic propaganda and false assumptions aside, that Republican economic policies are bad for most people at both the micro and macro level is well demonstrated.

When I have more time in the next couple days, I will post links to some of those studies.  Thomas Piketty's book is obviously a major resource on this though.

Of course, there can be excesses from Democratic policies: taxes get too high, too many regulations and red tape, however, Republican policies tend to be inherently bad for an economy.  The only confusion, as I've explained elsewhere with Reaganomics, is that Republican policies can be a case of 'short term gain for long term pain.'

I.E the tax cuts and deregulation provide a short term boost for an economy while the harm from either increasing inequality or government spending cuts or inflationary pressures/asset bubbles are a few years down the road, as is the harm from increased pollution and the like.

[Benjamin Frank]

That's a lot of words to say absolutely nothing in defense of the data and arguments featured here. Supply-side economics didn't even come into vogue until halfway through the study period.

This, is in fact, one of the flaws of this analysis: The economic policy of any given president will tend to have more in common with that of his immediate predecessor and successor, even if of the opposite party, than it will with that of a president from the same party who serves many decades later.

None of this is to suggest that there is no meaningful difference between the parties at a given moment in time. It's just an acknowledgement that the largest changes in economic life take place over decades. We don't reinvent the economy with each new presidency.

There were fairly dramatic shifts from Hoover to FDR, from Eisenhower to Kennedy, from Carter to Reagan and from W.Bush to Obama.  Even Reagan/Bush to Clinton had fairly dramatic changes.

The most consistent was probably Nixon to Carter.  Bush to Clinton was a fairly smooth transition, much more so than would have been recognized by the rhetoric of the time, but Bush was somewhere in between Reagan and Clinton on regulations and on taxes/deficits.

What is most apparent looking at the Presidents is how ideological virtually all the Republican Presidents have been versus how pragmatic on economics virtually all the Democrats were/are.  That is one of the points brought out in the article.

While it is true that trickle down economics did not come into vogue until the Reagan Administration, Republicans prior to that: Hoover and Eisenhower were rigid budget balancers.   It is true that Hoover did not actually balance the budget and produced large deficits, but his intent was to balance the budget and he did not run deficits anywhere near large enough to deal with the Great Depression as a consequence.  (Of course, the Gold Standard was a problem here as well in regards to monetary policy.) So, the Republican economic orthodoxy was different at that time: balanced budgets vs. the trickle down tax cuts of Reagan, W. Bush and (somewhat) Trump, but it was still an ideologically based orthodoxy.

Even the revisionist history that Reagan was a 'pragmatist' is only true in the relative sense: he was a pragmatist relative to George W Bush and Donald Trump.  Most in his administration were hard line right wing ideologues, people like his Attorneys General (William French Smith, Edwin Meese),  Donald Regan (Treasury Secretary), Raymond Donovan (Labor Secretary) and Jim Watt (Interior Secretary) (Commerce Secretary Malcolm Baldridge, Chief of Staff James Baker and possibly OMB Director David Stockman were more pragmatic.)  Had the Reagan Administration been pragmatic as a whole, it would have been a useful correction to the excesses of the Keynesian era from 1933-1980.  Instead they were largely ideologues who took a chainsaw to taxes and regulations.

FDR especially, Kennedy and even Clinton all had the attitude of 'lets try all sorts of things and see what works' which is a far more pragmatic approach.  LBJ had the same approach with the Great Society Programs, but to a less positive outcome.  

Also, in regards to Eisenhower being part of the Keynesian era.  He is regarded as part of that era, and for the most part his economic policies were not a problem.  However, he was a deficit hawk when dealing with the  1959-1960 recession and, as I mentioned here above, GDP growth was very slow in the 1950s in the United States given that the U.S was the only real economic power in the world at that time.  Some of that was almost certainly due to a lack of viable trading partners, but Eisenhower could also almost certainly have juiced his own economic growth numbers with deficit spending, as Reagan, W. Bush and Trump all did.  I think however, it is in many ways to Eisenhower's credit, that he did not do so.

[HisGrace]

The thing with this is follow up studies trying to link this success statistically to any particular policies of the Democrats failed to find any correlation.

It should also be noted party does not=policy, as alluded to in the "Gingrich economy" comment. Clinton did have a small tax increase on the wealthy but aside from that largely continued Reagan era economic policy. So his success can't really be used to discredit the Republicans economic ideas. This is the president who gave us welfare reform and NAFTA.

Republican presidents tend to be elected during good economic conditions while Democratic presidents tend to be elected during bad economic conditions. The latter has much better growth potential while the former has far higher downside risk.

Also a good point.

[Benjamin Frank]

The thing with this is follow up studies trying to link this success statistically to any particular policies of the Democrats failed to find any correlation.

It should also be noted party does not=policy, as alluded to in the "Gingrich economy" comment. Clinton did have a small tax increase on the wealthy but aside from that largely continued Reagan era economic policy. So his success can't really be used to discredit the Republicans economic ideas. This is the president who gave us welfare reform and NAFTA.

Republican presidents tend to be elected during good economic conditions while Democratic presidents tend to be elected during bad economic conditions. The latter has much better growth potential while the former has far higher downside risk.

Also a good point.

Clinton had $500 billion in deficit reduction over 5 years (or 10 years, I forget) in his 1993 budget, the same as George H W Bush did.  This was a pretty significant change from the Reagan years.

Ultimately the length of time didn't matter as the reduction in long term interest rates caused by the two rounds of deficit cutting led to a large increase in private sector investment which led to much higher revenue to the treasury than anybody expected.

Both H W Bush's deficit reduction and Clinton's deficit reduction were necessitated by the excesses of tax cuts and military spending increases under the Reagan Administration.  It is simply wrong to argue that the economic policies under Reagan and under H W Bush and Clinton weren't different.  To get back to the original article, Reagan was motivated by ideology whereas H.W Bush and Clinton were pragmatists.

I agree that though Clinton and H.W Bush went after each other pretty hard in the 1992 election that their economic views weren't all that different.

[Spark]

Republican presidents tend to be elected during good economic conditions while Democratic presidents tend to be elected during bad economic conditions. The latter has much better growth potential while the former has far higher downside risk.

[AtorBoltox]

Republican presidents tend to be elected during good economic conditions while Democratic presidents tend to be elected during bad economic conditions. The latter has much better growth potential while the former has far higher downside risk.

This only serves to bolster the point

[The Right Honourable Martin Brian Mulroney PC CC GOQ]

As others have noted, Democrats have more appeal when people are struggling to make ends meet, while Republicans do better when other things like immigration and foreign policy are on the forefront. There are exceptions like Reagan 1980, but it's an exception. But economies have a way of rebounding when they're down, so Democrats on balance leave the economy better than they found it -- in part because of chance, but in part because Democrats are more likely to supercharge growth through Kenyesian stimulus policies. So Democratic presidents deserve some credit, but it's also in part because of how the political cycle tends to swing.

But now I'll be mean to the Republicans. In recent years they've abandoned even the semblance of sensible economics in favour of this absolutely neolithic "guverment bad, spending bad, smol goverment make big economy ooga booga" nonsense. It stems from Reagan's economic policies, which might have made sense given the unique economic struggles of the time, but it's gone off the rails since. HW saw that contractionary policies were needed, raised taxes, and was punished for it. Since then, it's always been tax cuts with the Republicans including when it made absolutely no sense, like the Trump tax cuts. These aren't sensible conservatives like Dewey and Rockefeller, they've just accepted this economic fundamentalism that leaves the country worse off when crises hit. When governments are unable to respond to economic crises, the crises get worse. If the GOP actually had the balls to go to a completely laissez-faire approach, then fine, just leave government intervention out of it. But they've adopted a mantra of endless spending and lower taxes which clearly is a bad combination.

There's also the fact that a lot of cuts under Republicans have been to the internal operations of government and not necessarily to program spending. Fareed Zakaria has a good take on this. More sensible conservative governments like Merkel's CDU, which did pursue quite sweeping austerity during the start of their term - although in the last decade or so, in part because of their coalition with the social democrats, they've moved to the left. However, one thing they kept strong was the German Public Service. So when a crisis like COVID strikes, they have the tools in place to mount a swift and effective response.

But American agencies are horribly underfunded and completely unsuited to respond to crises. Democrats are pretty good when it comes to keeping these things intact, but Republicans gut government left and right. So when a crisis like COVID, or the 2008 recession, or Katrina struck, Republican administrations were awful at mounting an effective response because of their own disbelief in government. Ironically, this means the per-dollar effectiveness of Republican spending is much lower, and economies suffer.