Editore"s Note
Tilting at Windmills

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February 19, 2007
By: Kevin Drum

RED AND BLUE ECONOMIES....As longtime readers know, Democratic administrations routinely deliver better economic performance than Republican administrations. Among other things, they deliver lower inflation, lower unemployment, higher economic growth, better stock market growth, and higher median wage growth. This performance is remarkably robust and consistent, and holds up even if you lag the analysis by a few years to allow time for economic policies to have an effect.

It's also a bit odd, since as I'll readily concede, presidents have only a modest effect on the economy. But it's not a statistical fluke. There have now been enough years, enough administrations, and enough separate measurements since WWII to make these results something that can't just be shrugged off.

I have my own idea about what causes this difference (nickel version: broad policy preferences that favor the working and middle classes vs. policy preferences that favor economic elites), but that's just a guess. Over at Angry Bear, Cactus posits a different explanation: "Democrats tend to pursue policies that are less likely to run up the debt."

Maybe so. In any case, Cactus decided to see if he could give Republicans a break by comparing economic growth to monetary policy. After all, maybe Democrats were just the lucky recipients of expansionary Fed policy. Long story short, it turns out to be just the opposite: Democrats do well even in the face of generally unfavorable Fed policies. Conversely, Republicans generally get a lot of help on the monetary side but their performance sucks anyway.

And of all Republicans, which one sucks the most? Do you have to ask? It's the one "who has a penchant for under performing at everything." Click the link for more good, clean fun.

In comments, Frank di Libero produces even more fun:

This discussion has historical as well as statistical roots. FDR used the campaign slogan "Vote Democrat and live like a Republican."

....In trying to make better sense of the media's use of BLS' payroll survey results, I compared the data from 1921 on with working-age population data. (These data are highly correlated.) Taking the ratio of four-year growth estimates for each of these two series over the 21 administrations beginning with Harding, results in 9 out of the 10 Democratic administrations having a favorable growth ratio (i.e., greater than 1), compared with only 2 of the 11 Republican administrations.

His chart is on the right.

Kevin Drum 2:28 PM Permalink | Trackbacks | Comments (61)

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Comments

I'm an advocate for a whole new set of economic indicators. The usual marks (Dow Jones Industrials, S & P, unemployment numbers, housing starts, etc.) are all abstractions that don't mean a whole lot for most of us. I want to know how much topsoil is left in Iowa and Nebraska, and whether or not Johnny can pass his 5th grade math and reading exams. Those indicators speak to real economic health.

Posted by: global yokel on February 19, 2007 at 2:55 PM | PERMALINK

It doesn't suprise me at all. If the Dems were better at selling their success, they'd doom the Repugliscum forever.

Posted by: This Machine Kills Fascists on February 19, 2007 at 3:01 PM | PERMALINK

Honestly, I think that you and economists mostly miss the method by which Democratic Presidential eras differ from Republican Presidential eras in economic growth.

I think that economists have for far too long simply tried to abstract away from something crucial to the functioning of economies: the underlying societal mores that drive both the growth of economies, and the direction of that growth.

I think that a paradigm example of that difference is exhibited in the out-of-control increases that have gone to the executive class in America, and the rich more generally. If you ask the question, why are today's executives paid vastly more than their counterparts in the past, the answer has to be: because, in today's corporation and society, that is acceptable, and in, say, the nineteen 50s and 60s, it was not. Everything about that fundamental difference has to do with changes in the mores about what role teamwork and internal harmony has in the success of a company, and what is considered acceptable and what grotesque in terms of compensation.

I strongly suspect that similar changes in mores are both promoted and reflected in eras dominated either by Republicans or Democrats. The corporate culture, I believe, imports those values in those eras, achieving very different results.

Now, of course, there's virtually no way to quantify these causes and effects in terms an economist might be able to throw into a model. But that limitation of their science does NOT mean that they are neither real nor very substantial.

Posted by: frankly0 on February 19, 2007 at 3:01 PM | PERMALINK

As any engineer knows, the most innovative and creative workers are not the best marketeers.

Posted by: gregor on February 19, 2007 at 3:03 PM | PERMALINK

So someone was able to find a way to manipulate numbers so Carter did better with the economy than Reagan? Creative!

Posted by: Frank J. on February 19, 2007 at 3:04 PM | PERMALINK

Kevin, if you look at the statistics closely, you will see Republicans and Democrats alternate in having control of the Presidency. Good economic results usually occur several years after they take effect. So what I think is happening is Republicans put into effect some good economic policies, but then it doesn't take effect until several years later. By that time Democrats are in power demogoging how the economy isn't good enough but taking credit for the good effects of the previous Republican administration.

Posted by: Al on February 19, 2007 at 3:11 PM | PERMALINK

But Republicans deliver much MUCH MUCH higher deficits!!

Go, Al, spread that BS!

Posted by: Gore/Edwards 08 on February 19, 2007 at 3:15 PM | PERMALINK

So someone was able to find a way to manipulate numbers so Carter did better with the economy than Reagan? Creative!
Posted by: Frank J. on February 19, 2007 at 3:04 PM | PERMALINK

Carter did fantastic with the crappy economy Nixon (and 60 years or crappy petroleum-driven middle-east policy) handed to him.

Posted by: Extradite Rumsfeld on February 19, 2007 at 3:16 PM | PERMALINK

I never understood how Dems lost the economic debate. Recent Dem Presidents built stronger economies and lowered deficits but still are perceived as weak economically. Thought it bothered me a bit when Perot would trot out a chart or graph every time he was on the teevee, it would behoove Dems to start graphically showing some of these positive numbers of theirs a bit more.

Posted by: Fred on February 19, 2007 at 3:21 PM | PERMALINK

At first, I was surprised by this, but is it really that surprising? After all, the received wisdom is that when elections are about domestic issues, Democrats win, but when elections are about foreign-policy issues, Republicans win. It's almost like voters think, "if I want to be more prosperous, I vote Democratic, but if the safety of the nation is at stake, I want a Republican in power." Is some analogous analysis to these possible that looks at foreign-policy benchmarks rather than economic benchmarks?

Posted by: Huh on February 19, 2007 at 3:21 PM | PERMALINK

Democrats understand the most fundamental economic rule:

Money is like manure,

It doesn't do any good unles you spread it around.

Posted by: angryspittle on February 19, 2007 at 3:26 PM | PERMALINK

I love the way Al spells demogoging. The guy's a genius.

Posted by: republigog@demogogo,com on February 19, 2007 at 3:26 PM | PERMALINK

Al's post at 3:11 p.m. demonstrates the truly remarkable ability of the conservative mind to rationalize away anything.

It's really pretty simple. Just like I can't run up my credit cards and expect to be prosperous in the long term, governments can't borrow endlessly and expect to grow in the long-term. To expect otherwise is foolish.

Posted by: The Conservative Deflator on February 19, 2007 at 3:26 PM | PERMALINK

I think it bears investigation, but the explanations floating around over there don't make sense. From cactus' analytic structure, Reagan performed best among the Republicans, while doing the policies that he thinks were worst. Clinton performed very well for 'Democrats' while doing lots of non-Democratic Party things (free trade, welfare reform). Bush I looks bad even though he did many of the things that are thought to be 'good'. Bush II looks the very worst in 2000 and early 2001 which is BEFORE the bad policies were implemented.

So while there may be something interesting going on here, it isn't the thing that Democrats reflexively seem to want.

Posted by: Sebastian Holsclaw on February 19, 2007 at 3:28 PM | PERMALINK

I've always heard that economic policy takes from 8 to 12 years to actually affect the average taxpayer and that this delay allowed Democrats to take credit for the good economies that were actually brought about by the Republicans.
I'm no political or economic expert, but considering the speed at which the government usually operates, it always made sense to me.

Now, I've already been soundly chastised by a geneticist over a genetics argument, so are there any actual UNBIASED economists out there that can clarify this?

Posted by: Hunter on February 19, 2007 at 3:28 PM | PERMALINK

Part of it may be that under Democrats people are simply more relaxed.

Under Republicans you're on your own, you're shut out of everything unless you're already in the club.

Democratic policies focus on improving society, Republican policies focus on milking it.

Posted by: cld on February 19, 2007 at 3:28 PM | PERMALINK

I disagree with the premise that the American president has only a "presidents have only a modest effect on the economy". Maybe it's splitting hairs, but to propose a budget that represents a fifth of the economy that represents a quarter of global product seems to me vastly more prominent than 'modest'.

Even excepting those items for which the president has no control (entitlements, interest payments, basic spending levels), the president nonetheless seems able to swing absolute spending levels by 4% of GDP. He has even more control when factoring in the ways in which the money is spent for allocations that are already established.

It's a lot of power.

Posted by: Saam Barrager on February 19, 2007 at 3:29 PM | PERMALINK

Al,

"Kevin, if you look at the statistics closely, you will see Republicans and Democrats alternate in having control of the Presidency. Good economic results usually occur several years after they take effect."

Which explains GHW, doesn't it? BTW, this was the fifth post in a series. Dem Congresses also outperform Rep Congresses, and the zig zag doesn't seem to be there.

Frank J,

"So someone was able to find a way to manipulate numbers so Carter did better with the economy than Reagan? Creative!"

So, what would you consider to be a better measure of overall well-being than real (GDP less increase in the debt) per capita?

Posted by: cactus on February 19, 2007 at 3:30 PM | PERMALINK

Dems lost the economic debate because the conservatives shifted the focus to social issues. Economic growth and prosperity is now considered to be a function of "Hard work" while, "lazy, shiftless people on welfare" need gov't assistance. There's always a racial undertone to these economic issues that plays right into the hands of those who wish to exploit them for political gain.

Posted by: D. on February 19, 2007 at 3:30 PM | PERMALINK

Here's a more holistic reason -

Democrats are, on any given issue, far more interested in implementing effective policy than pushing a partisan agenda.

Republicans, on the other hand, have one basic strategy: cut taxes. Tax cuts are seen as the cure all to virtually every socioeconomic issue, even if taxes have already been cut. Bush has taken this approach to absurd levels, so it's no surprise that his performance has been particularly bad.

Posted by: keptsimple on February 19, 2007 at 3:31 PM | PERMALINK

I never understood how Dems lost the economic debate. Recent Dem Presidents built stronger economies and lowered deficits but still are perceived as weak economically.
Posted by: Fred on February 19, 2007 at 3:21 PM | PERMALINK

First, was the ongoing scam of "Carter Malaise" - the truth was, that our Economy was still reeling from the oil price shocks of the early 1970's and paying down the Vietnam war. He got the blame for this, and after Reagan took office, things took off so quickly, that it registered very strongly in peoples' minds as a correlation, which implied causation.

The other reason, in general, is that Republicans more directly hand out corporate welfare; which is perceived as being good for jobs. They are far more brazen about it than any Democratic example you could name.

In the mainstream media, it's not that widely understood that public investment generates wealth for everyone, where corporate welfare tends to benefit only a very few. Thus, it's really more of an argument of how one measures economic success. Do we measure it by average income? Infant mortality? Literacy rates? Or do we measure it by how much money corporations say they earned, or how fast the Dow Jones Tulip Bulb average shot up? Of course, the corporate-owned media will push their viewpoint over any others.

Posted by: Extradite Rumsfeld on February 19, 2007 at 3:31 PM | PERMALINK

so are there any actual UNBIASED economists out there that can clarify this?
Posted by: Hunter on February 19, 2007 at 3:28 PM | PERMALINK

Posted by: Extradite Rumsfeld on February 19, 2007 at 3:35 PM | PERMALINK

In the economy of fear, Republicans always come out ahead. Yay us!

Posted by: Kenji on February 19, 2007 at 3:39 PM | PERMALINK

I think an underappreciated factor in how Democratic and Republican presidents affect the economy more than you would expect based on simple fiscal and regulatory policies is...

...honesty, or the lack of it.

The FUD that permeates commerce during Republican rule corrodes confidence in the future and honest people respond by doing what only makes sense in that environment; they hunker down. Meanwhile the nation's least productive get busy and scam the hell of each other and everyone who sticks their head up. This has been especially true over the last 25 years.

Posted by: denniS on February 19, 2007 at 3:39 PM | PERMALINK

My hypothesis about why Democrats are better for the economy than Republicans is this-- Democrats pursue policies with the goals in mind of maximizing employment and raising wages as much as possible. Republicans pursue policies such as tax cuts and government spending on their interests groups and claim that, as side effects, this might eventually raise employment and wages.

The difference in mindsets is that the Democrats will change policies until they get the desired effect, while for Republicans, the means (tax cuts and military spending) are ends in and of themselves. They don't act any differently if their policies don't raise employment or wages.

Posted by: Constantine on February 19, 2007 at 3:44 PM | PERMALINK

I see that "keptsimple" beat me to the argument I was making.

Posted by: Constantine on February 19, 2007 at 3:47 PM | PERMALINK

Any number of studies show conclusively that Democrats are better for the stock market than are Republicans. That's for starters.

The market run-up of the past several months is considered very good by Republican standards.

By Democratic standards, it's rather modest.

On the basis of the historical record, we can surmise that had Gore won in 2000, the run-up of the past several months would have occurred several years ago and that the market today would be well ahead of its present comparatively rather modest figure.

But, of course, economic verities, including stock market ups and downs, are not why so many red state voters are casting ballots for Republicans, at least, until quite recently.

The Republicans win because they have a lock on the racist evangelical vote in the South and rural Midwest and portions of the West. If it weren't for this dixiecrat vote, the Republicans would be the minority party by far. Thus it is not the economy, stupid, so much as the inbred desire of certain folks to get rid of school desegregation, to limit Negro job opportunities and critically to get rid of the one-man, one-vote rule that resulted, among other things, in the election of a good many Negro sheriffs.

Posted by: johnston on February 19, 2007 at 3:55 PM | PERMALINK

Hunter,

"Now, I've already been soundly chastised by a geneticist over a genetics argument, so are there any actual UNBIASED economists out there that can clarify this?"

Nobody's going to call me unbiased after writing the post, but I'll answer anyway. Some policies take a long time to take an effect, some take a short time. But simply to assume that Republican policies begin to work only after they leave office doesn't explain GW Bush. Also, it doesn't explain why things might look good in the fifth through eighth year of the JFK/LBJ term, or the fifth through eighth year of the Clinton term, but not the 1st through 4th years of the Reagan term. (All three of these, years 5-8 of JF/LBJ, and Clinton, and years 1-4 of Reagan came the same number of years after a Republican had last been in office.)

To assume its all a function of lags, one has to explain why lags seem to operate differently depending on the party affiliation of the President.

Posted by: cactus on February 19, 2007 at 3:58 PM | PERMALINK

Sebastian Holsclaw,

"Reagan performed best among the Republicans, while doing the policies that he thinks were worst. Clinton performed very well for 'Democrats' while doing lots of non-Democratic Party things (free trade, welfare reform). Bush I looks bad even though he did many of the things that are thought to be 'good'. Bush II looks the very worst in 2000 and early 2001 which is BEFORE the bad policies were implemented."

Reagan had the most favorable monetary policy among Republicans, courtesy of the Fed.

Among Democrats, Clinton was second, after JFK/LBJ, but before Carter. Again, it seems to be more related to monetary policy.

Bush 1 had the least favorable monetary policy among all Republicans.

Bush 2 cut taxes immediately. We all remember the $300 checks. And in his first year, the bottom step of the IRS pyramid went from 15% to 10%, and at the top, there was a half a point decrease in that first year.

Posted by: cactus on February 19, 2007 at 4:03 PM | PERMALINK

The Republicans win because they have a lock on the racist evangelical vote in the South and rural Midwest and portions of the West. If it weren't for this dixiecrat vote, the Republicans would be the minority party by far.

Posted by: johnston on February 19, 2007 at 3:55 PM | PERMALINK

Or it could be looked at it this way:

The Democrats win because they have a lock on the blindly liberal vote in the North and large cities and portions of California. If it weren't for this socialistic vote, the Democrats would be the minority party by far.


Posted by: Hunter on February 19, 2007 at 4:13 PM | PERMALINK

The redistribution of a small bit of wealth from the richest to the poorest makes all of us wealthier.

Posted by: Brojo on February 19, 2007 at 4:16 PM | PERMALINK

A couple of minor things:

Others, through the years, have pointed out that Nixon's economic 'quick fix' was the price/wage freeze. This merely gave a temporary cure for the inflation occuring in the early 1970s. Of course, the dam burst under...Carter.

Conservatives sneeringly refer to "tax-and-spend liberals". One can also make a case about "borrow and spend conservatives". As unpopular as tax increases are, perhaps it's a more honest approach than rampant borrowing. Just ask any schmuck digging his/her way out of living off of credit cards.

Posted by: Tony on February 19, 2007 at 4:29 PM | PERMALINK

Are Dems better because they are pro-worker vs pro-owner, or is it because they are pro-market vs pro-business?

When Clinton was in power, the Justice Department was constantly going after Microsoft, and the tech sector was awesome. When W took over, we were told that going after Microsoft was bad for the economy, and the tech sector slowed down.

Posted by: reino on February 19, 2007 at 4:35 PM | PERMALINK

Poor Dumb Al, If what you say is true, Could you explain GHWB. He should have had a great economy being right behind the great Reagninsky.Nope, he had to raise taxes also.Thanks for playing though please try again.Smarter trolls please!!!

Posted by: john john on February 19, 2007 at 5:11 PM | PERMALINK

Hunter, voters in the North and large cities in Cal voted for Reagan TWICE. Clinton did get some southern states but he was from the South and so was his running mate.
The GOP is still running on George Wallace's southern strategy of law and order and less gov't "intervention." Both of these are plesantly phrased code words for segregationists attitudes.

Posted by: D. on February 19, 2007 at 5:20 PM | PERMALINK

. . . One can also make a case about "borrow and spend conservatives". As unpopular as tax increases are, perhaps it's a more honest approach than rampant borrowing. Just ask any schmuck digging his/her way out of living off of credit cards.
Posted by: Tony on February 19, 2007 at 4:29 PM | PERMALINK

It's absolutely a more honest approach.

The other thing about "borrow-n-spend" - is that it makes the spending far easier to get away with. The oversight isn't generally as tight, there are much more Wade Mitchells, Dusty Foggos, and Duke Cunninghams floating around when the money is "free money".

Borrow-n-spend can actually be a good thing; for example, home ownership would not be possible for most Americans to own a home. A small business owner can borrow money to build a business, which can then generate revenue to pay back the loan, and then some to generate wealth. These are simple arguments in favor of a Borrow-n-spend policy.

However, the Republicans do not have a borrow-n-spend policy. They have a borrow-n-steal policy. Other than "borrow-n-steal" - how would one honestly characterize the whole Duke Cunningham, MZM, Wade Mitchell, Dusty Foggo fiasco - and then the attempted sandbagging of the prosecution by firing Lam? This is organized crime of the highest order, elevated to an art form.

Posted by: Extradite Rumsfeld on February 19, 2007 at 5:22 PM | PERMALINK

Here's my attempt at an off the cuff answer:

Blue states are much more productive than red states, and enjoy a commensurate higher standard of living.

When the GOP is in charge, they reward their supporters by funneling more resources to less productive red states, thereby insuring that the over-all US econ will be weaker.

Posted by: Disputo on February 19, 2007 at 5:35 PM | PERMALINK

The other reason why democrats have a better economy is because they make sure they get the best product/service for the money spent. The republicans just steal our taxpayer dollars and hope to have the U.S. Treasury in their pockets before people who vote republican notice.

Posted by: Mazurka on February 19, 2007 at 5:47 PM | PERMALINK

This discussion has historical as well as statistical roots. FDR used the campaign slogan "Vote Democrat and live like a Republican." :-)

As another example of Kevin's post, in trying to make better sense of the media's use of BLS' payroll survey results, I compared the data from 1921 on with working-age population data. (These data are highly correlated.) Taking the ratio of four-year growth estimates for each of these two series over the 21 administrations beginning with Harding, results in 9 out of the 10 Democratic administrations having a favorable growth ratio (i.e., greater than 1), compared with only 2 of the 11 Republican administrations.

Posted by: Frank de Libero on February 19, 2007 at 6:26 PM | PERMALINK

Way back in the early '70s, I remember my father, who was raised a traditional anti-FDR Republican but later converted to extreme liberalism in reaction to Reagan, applied this analysis to his choice in presidential elections.

More than 30 years ago, it was already conventional wisdom among republicans that Democrats were good for the stock market, but bad because they got us into wars.

I still don't understand how the exact opposite belief became the conventional wisdom.

Posted by: Yellow Dog on February 19, 2007 at 6:26 PM | PERMALINK

Reagan had the most favorable monetary policy among Republicans, courtesy of the Fed.

Among Democrats, Clinton was second, after JFK/LBJ, but before Carter. Again, it seems to be more related to monetary policy.

Bush 1 had the least favorable monetary policy among all Republicans.

Bush 2 cut taxes immediately. We all remember the $300 checks. And in his first year, the bottom step of the IRS pyramid went from 15% to 10%, and at the top, there was a half a point decrease in that first year.

So are you arguing that Presidents are the defining factor, or is perhaps monetary policy the important of the issues you've looked at?

"Bush 2 cut taxes immediately." And his worst year from the perspective of your analysis still took place in 2000, and it was bad in 2001. Since then not so much.

Saying that monetary policy is the important factor isn't refuting my point that it isn't the party of the President that is the causitive factor. That is agreeing with me.

If you look at the data, say it is monetary policy and then say that Democrats did better with the monetary policy they had (because you don't like the way monetary policy under Bush II fails to fit the model--thus throwing out 1/7th of the model) you aren't engaging in good statistical analysis.

The exercise is interesting, but you haven't shown the cause if it is a real phenomenon. You are still treating Nixon as more similar to Reagan and Clinton as more similar to JFK. From the perspective of actual policies, that doesn't make sense.

Posted by: Sebastian Holsclaw on February 19, 2007 at 6:29 PM | PERMALINK

"When Clinton was in power, the Justice Department was constantly going after Microsoft, and the tech sector was awesome. When W took over, we were told that going after Microsoft was bad for the economy, and the tech sector slowed down."

This is a bit of historical revisionism. The tech bubble burst in the Spring of 2000. The presidential election of 2000 was in November.

Posted by: Sebastian Holsclaw on February 19, 2007 at 6:34 PM | PERMALINK

"When Clinton was in power, the Justice Department was constantly going after Microsoft, and the tech sector was awesome. When W took over, we were told that going after Microsoft was bad for the economy, and the tech sector slowed down"

In fact the Spring 2000 melt-down of the tech sector began in response to the adverse finding of fact in the very Microsoft case you mention.

Posted by: Sebastian Holsclaw on February 19, 2007 at 6:35 PM | PERMALINK

In fact the Spring 2000 melt-down of the tech sector began in response to the adverse finding of fact in the very Microsoft case you mention.
Posted by: Sebastian Holsclaw on February 19, 2007 at 6:35 PM | PERMALINK

I am sorry, but it's not Bill Clinton's fault Microsoft's Lawyers staged a phony demonstration in order to mislead the judge.

I tend to assign a much lower impact value of the Microsoft trial to the decline of tech stocks. First off, the sector was showing signs of popping in early 1999 - including massive outsourcing, layoffs, and dotcoms dropping like flies. Much of this was due to the ONE BILL that Clinton vetoed. It was 1996, and it opened up a huge set of loopholes that led to corporate fraud on a massive scale (the degree of which STILL is not widely admitted in the popular press). The feeding frenzy that resulted caused the bubble, and caused attrocities like Enron, (which whether you like it or not, Enron WAS a dotcom!) - and the subsequent collapse.

Microsoft didn't have much at all to do with it. There were a lot of hopeful dotcom investors that were counting on Microsoft to get taken down a notch - in hopes that the way would be cleared for innovators and startups to gain critical mass. The problem was, NONE of these small startups would have filled the market void left behind had Microsoft suddenly vanished. None of them were OS vendors of any potential at all. IBM was the only one, with OS/2, and that was already irrelevant. As was BeOS, and Novell. Not even Apple could have seriously addressed what business customers needed in 1996-2000. The impact of Microsoft v DoJ was purely psychological. All of those dotcom startups were going to collapse anyway, because none of them had viable business plans - not even Netscape.

Although I do agree that what Microsoft did was illegal, they run their company like gangsters, and that they have had a huge, detrimental impact on the entire tech industry, and it is clear to me that the Bush DoJ just dropped the ball in bad faith. But I don't blame the dotcom crash on Bush's DoJ. I blame it on 1994-1998 congressional Republicans, and SUCKER venture capitalists who had more money than sense.

Posted by: Extradite Rumsfeld on February 19, 2007 at 6:54 PM | PERMALINK

In a truly free society, what political party is occupying the White House would be irrelevant to private economic activity. In reality, the impact of presidents is still small, and generally confined to minimizing the negative. My sense is that any historic correlation between presidential political affiliation and economic or jobs growth is about as meaningful as the supposed prediction power of what conference wins the SuperBowl on year-ahead stock market performance.

Posted by: coyote on February 19, 2007 at 8:03 PM | PERMALINK

"But I don't blame the dotcom crash on Bush's DoJ."

Well that is unusually generous, since as I noted the crash (Microsoft related or not) happened in the Spring of 2000 and Bush was not elected until November.

Posted by: Sebastian Holsclaw on February 19, 2007 at 8:22 PM | PERMALINK

coyote: In a truly free society, what political party is occupying the White House would be irrelevant to private economic activity.

In fantasyland, fantasies come true, follows by definition. Meanwhile, back in reality, there is no Libertopia. Nor, for numerous practical reasons, would it be desireable.

But while we're on the subject, do you want to invest in my perpetual motion machine?

Posted by: alex on February 19, 2007 at 8:34 PM | PERMALINK

Sebastian Holsclaw,

"So are you arguing that Presidents are the defining factor, or is perhaps monetary policy the important of the issues you've looked at?"

The data appears to show that all else equal, Dems do better than Reps, and that all else equal, favorable monetary policy helps. Thus, between two Dems (or between two Reps), the one under whom the Fed provides more favorable policy will show better growth. But even though most of the Reps had more favorable monetary policy, all Reps in the sample underperformed all Dems.

Posted by: cactus on February 19, 2007 at 8:42 PM | PERMALINK

The greatest impact that the president has on the economy, is the power of Selective Enforcement of the Law. The Executive Branch is in charge of law enforcement. And the President can, in fact, execute his office in bad faith, giving certain individuals broad leeway in regards to complying with laws and regulations. This breaks the President's oath, and harms the economy, because it concentrates wealth, which reduces the broader flow of capital in the economy.

What's a better economy?
100 people exchanging 100 dollars worth of goods and services each?

Or 100 people producing the same amount of goods and services for 1 dollar each, while two of those people exchange 9902 dollars of goods and services?

They both look the same on paper, with regard to GDP-type measurements, or employment.

But in the second example, 98 out of 100 people are fucking miserable.

Now say that case #2 involved illegal activity on the part of the two exceptions - but that they were the ones who were entrusted to enforce the laws, and hence, were easily able to get away with breaking that law?

Posted by: Extradite Rumsfeld on February 19, 2007 at 8:54 PM | PERMALINK

"The data appears to show that all else equal, Dems do better than Reps, and that all else equal, favorable monetary policy helps. Thus, between two Dems (or between two Reps), the one under whom the Fed provides more favorable policy will show better growth. But even though most of the Reps had more favorable monetary policy, all Reps in the sample underperformed all Dems."

Sorry, it shows no such thing. In fact your data as presented is structured in such a way that it could not possibly show such a thing. If you use the data to show that Republicans suck at GDP growth, you find that monetary policy is not well correlated. You only get your conclusion by deciding ahead of time that the Republican/Democrat distinction is the deciding factor then breaking it out by the Republican/Democrat distinction. You have to shift back and forth beteen M1 and M2 to have anything like a coherent result. You can see this much more clearly if you don't break them out by party and then merely sort by M1 or M2.

You are seriously overinterpreting the data and the policy level determinations by which you lump people together make a mess of it.

Posted by: Sebastian Holsclaw on February 19, 2007 at 9:26 PM | PERMALINK

The two most interesting Republican presidents in this regard are Ike and Regan. Ike had an exceedingly crappy economic run, but his term is remembered as our post-war Golden Era. Obviously Economics isn't everything. It isn't even very much. By some metrics I've seen the best Republican performer -- Reagan -- bests only 1 Democrat -- Carter -- and not by much. Reagan began The End of the Republic, though. Republicans are now addicted to borrowing. They literally cannot borrow enough. We're screwed. Reagan's modest economic gains are extolled like the 2nd coming and his method, borrowing, is now Republican life blood. We're doomed.

Posted by: Jeffrey Davis on February 19, 2007 at 9:27 PM | PERMALINK

"In fact the Spring 2000 melt-down of the tech sector began in response to the adverse finding of fact in the very Microsoft case you mention."

Ha ha ha ha ha.

Ha ha ha.


Ha.

Posted by: jefff on February 19, 2007 at 9:42 PM | PERMALINK

This is further embellishment of established data
For example: stock markets do better with Democratic presidents and here is a similar discussion from 2004 showing the same result although less conclusively.

...and large cities and portions of California... Hunter at 4:13 PM

Nixon and Reagan were both Californians. Care to revise that?
...You are seriously overinterpreting the data...Sebastian Holsclaw

You are furiously spinning empirical data for your ideology and doing a poor job of it. Republican policy is tilted to supply side and trickle down. They have never worked and never will. Democratic policy is tilted to a rising tide lifts all boats. Works every time.

Presidents design and submit budgets; their policies are important for the economy.

Posted by: Mike on February 19, 2007 at 10:31 PM | PERMALINK

I recall reading that "red" states are net "takers" of federal largesse, compared with "blue" states that contribute more than they receive. This goes against the public face of conservatives, who say that government spending is evil.

I work at a state university, and am always amused, in a horrified way, by the snarling rhetoric of one of our leading "college republicans". She seems to be unaware that her education and employment with the university are entirely the result of public money. Indeed, were it not for "liberal" social policies, she would probably not have had the opportunity to be a graduate student in ag economics (although she may have had a shot at home economics).

When I first read about the "Democratic presidents make for a stronger economy" stats, it occurred to me that the wealthy should then favor Democratic administrations. The overall creation of wealth and value ought to be in their interests. The only reason I can think of for the association of wealth and the Republican party is that the wealthy do not really care about making more money, what they consider important is that *nobody else* makes more money!

Posted by: Daniel Kim on February 20, 2007 at 4:37 AM | PERMALINK

At least in the world as a whole, liberal attitudes are strongly correlated with economic advancement. In the 1990 World Values Survey, it "Traditional" societies (Traditional world-views are authoritarian and religious, with absolute values and are anti-divorce, anti-abortion, and are uber-patriotic) lagged economically behind societies that scored on the other end of this scale.

The other axis that correlated with economic advancement was "Survival" to "Self-expression." Self-Expression value holders emphasize environmental protection, and women's rights where Survival societies tend to be intolerant toward outgroups, materialistic, have high levels of faith in technology, and favor authoritarian governments.

In general, the Republicans tend to come out at the wrong end of each of these scales.

Posted by: McDruid on February 20, 2007 at 4:40 AM | PERMALINK

McDruid, I'd love to believe your study and the results of the World Values Survey, but my first thought was, "I thought Indonesia was the big economic explosion, along with China." I don't think you'd call either of these cultures particularly liberal.

Was the 1990 World Values Survey possibly tracking long term and/or SUSTAINABLE economic growth? Because that I might believe more readily.

Posted by: Cowboy Dave on February 20, 2007 at 10:20 AM | PERMALINK

Microsoft won its case. By winning, I mean that it was able to continue doing the same things it was doing without a substantial penalty, finding of fact or no.

Also, the Spring 2000 'meltdown' erased six months worth of growth. You can't compare it to the Bush economy, which consisted of several years of no growth.

Posted by: reino on February 20, 2007 at 1:10 PM | PERMALINK

Under democrats the economy does significantly better than under republicans. That is pretty solid. So why? I do not buy the argument that it is long and variable lags. Rather, I think the difference is in the impact of Keynesian policies as compared to supply side policies. Generally, democrats implement Keynesian type policies. This is based on the premise that you use deficits to give consumers extra income and they will go out and spend it. This generates strong corporate profits and strong markets that in turn lead to strong capital spending. Supply side policy, in contrast is based on the premise that you use deficits to give tax cuts to the wealthy, or the investor class, and they will investment their
extra income and this will generate capital spending that pulls the economy up.

So both are based on the premise that using deficits to give different groups extra income will lead to greater capital spending and a stronger economy. If you look at the record of what happens to capital spending you see that democratic or Keynesian stimulus is followed by very strong capital spending so this thesis seems to work. In contrast, supply side tax cuts are followed by weak capital spending so at best the supply side argument is unproven.

So why the difference? Look at the source of nonresidential capital spending. Some 82% stems from the corporate side of the economy while only 11% is accounted for by S corporations, partnerships, households, etc.. that are subject to the individual income tax code.
The remaining 7% is from nonprofit organizations.

Second look at why people or corporations invest.
It is because they think they can make a profit by
selling the output of the new capacity when it comes on stream not because they have money burning a hole in their pocket. this is clearly what Keynesian type policies assume about human nature why supply side policies assume they invest because they have investable fund. So which one seems more realistic?

Third, look at what has happened to savings. For a quarter of a century we have implemented supply side type policies on the premise that it would lead to greater savings and investments -- in a closed economy they are suppose to be equal. But again, look at the record. The major tax incentives we have implemented to encourage savings has been accompanied by a collapse in personal savings. It has to be the one of the greatest examples of a policy that completely failed that anyone can ever find.

So it seems pretty clear to me that the reason the economy does better under Democrats than under Republicans is that Keynesian policies clearly work while their is little or no evidence that supply side type policies have worked.

Posted by: spencer on February 20, 2007 at 2:35 PM | PERMALINK

"Also, the Spring 2000 'meltdown' erased six months worth of growth. You can't compare it to the Bush economy, which consisted of several years of no growth."

That is the Spring part of the meltdown. By November the NASDAQ was at 1st Quarter 1999 levels (18 months back). By 1st quarter 2001 (Bush only in 3 months) we were at 3rd quarter 1998 levels (30 months back).

Posted by: Sebastian Holsclaw on February 20, 2007 at 3:21 PM | PERMALINK

How does that compare with 1st quarter 2005 or 2006?

Posted by: reino on February 20, 2007 at 11:27 PM | PERMALINK

Cowboy Dave,
Actually, the study correlated these values with current economic status, not current or recent growth.

If you are looking at recent economic growth, I have a suspician that it may correlate positively with certain types of government policies.

Posted by: mcdruid on February 21, 2007 at 4:40 PM | PERMALINK




 

 

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