Here’s a fact you may have heard trotted out every fours years or so: Since the end of World War II, the U.S. economy has done dramatically better under Democratic presidents than Republican ones. From the first quarter of 1947, the start of Harry Truman's elected term, through the first quarter of 2013, GDP has grown on average 4.35 percent when the White House is under Democratic control and 2.54 percent when the GOP is in charge — a statistically significant difference of 1.8 percent.
“The U.S. economy not only grows faster, according to real GDP and other measures, during Democratic versus Republican presidencies, it also produces more jobs, lowers the unemployment rate, generates higher corporate profits and investment, and turns in higher stock market returns,” Princeton economists Alan Blinder and Mark Watson write in a research paper released last month. “Indeed, it outperforms under almost all standard macroeconomic metrics.”
Blinder and Watson call the gap between Democrat and Republican Commanders in Chief “startlingly large,” especially given how little real control presidents have over the economy. So Blinder and Watson set out to find out why this large partisan performance gap exists. For instance, is the gap more about the party in charge of Congress versus the party in charge of the White House, or maybe an initial set of favorable economic conditions already in place when a Democratic president takes office? The economists, in their exhaustive, 65-page paper, find those seemingly reasonable explanations don’t fit the data. Fiscal and monetary shocks also, shockingly, aren't significant players.
Blinder and Watson finally zoom in on four factors which account for about half of the 1.8 percent gap: oil shocks, or disruptions in the oil market; productivity shocks; international growth shocks, or global growth trends the U.S. happily rode along on; and shocks to consumer expectations about the future. "The first three of these,” the authors write, “look a lot more like good luck than good policy." As for the fourth, while Blinder and Watson do find that Democratic presidents benefit from more favorable consumer expectations, whether this is directly attributable to macroeconomic policy is difficult to say.
What about the other half of the partisan performance gap? The authors confess it's a mystery, and they invite other economists to pick up where they left off.
Blinder and Watson also go out of their way to stress there's not much that either side of the partisan divide can crow about from their findings: "Democrats would no doubt like to attribute the large Democratic-Republican growth gap to macroeconomic policy choices, but the data do not support such a claim ... It seems we must look instead to several variables that are mostly 'good luck,' with perhaps a touch of 'good policy.'"
We like to think presidents have an enormous amount of control over the U.S. economy, and are quick to blame them when things aren't going well. If nothing else, Blinder and Watson show that's not entirely fair. And on the flip side, they also show it's not fair when presidents take the credit when things are going well, a practice all too common, whether Democrat or Republican.
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