Since World War II, the U.S. economy has grown on average nearly 2 percentage points faster under Democratic presidents than Republicans.
Two Princeton economists are out with a new study that seeks to explain why. Mostly, the answer seems to be good luck.
Alan Blinder, a veteran of the Bill Clinton Council of Economic Advisers, and Mark Watson, who has been at Princeton since 1995, conducted the study. It found that the average real GDP growth rate under Democratic presidents was 4.35%, a marked increase from a 2.54% growth under Republicans.
The two economists contribute the bulk of the “astoundingly large” difference to random chance. Specifically, they point to oil and productivity shocks as two of the major reasons for the difference, both of which look “a lot more like good luck” than differences in governance.
Here’s a breakdown of some of the reasons for the gulf in economic growth under Democratic and Republican presidents:
- Oil price shocks. They are responsible for between one-eighth and one-fourth of the gap between Republican and Democratic presidents, the economists conclude. By far, the largest oil price spike came under Republican George W. Bush, which is partly attributed to the policy decision of the Iraq War. Before that, luck was mostly to blame — specifically, the two big OPEC actions that drove up oil prices under Republican President Richard Nixon and Democrat Jimmy Carter.
- Productivity shocks. Democratic presidents, again, have been on the good end of sparks in productivity, or output per hour. This accounts for about another one-fourth of the economic difference. The authors don’t rule out a policy component, but they attribute it to mostly luck — while Democrats inherited relatively weak average GDP growth from Republicans, they also inherited stronger total factor productivity growth.
- Consumer confidence. Swings in consumer confidence account for about another one-fourth of the gap between Republicans and Democrats in the White House. The authors note that this seems like a “self-fulfilling prophecy” — “in which consumers correctly expect the economy to do better under Democrats, and then make that happen by purchasing more consumer durables.” But they add that “direct measures” showing increased optimism following a Democrat’s election to the presidency are difficult to find.
Contrary to conventional wisdom, the authors conclude that defence spending is not a major factor for the economic gap. Neither are other, cosmetic differences that the researchers looked into — like the height and age of presidents.
Taken together, the three above factors — oil price and productivity shocks and consumer confidence — account for between 46% and 62% of the economic performance gap between Republicans and Democrats. The rest is unexplained by the study.
Overall, Democrats account for the top four terms of average GDP growth in the post-World War II era. Ronald Reagan’s second term is the only Republican entry in the top five. President Barack Obama’s first term in office was the lowest of seven Democratic presidencies, ranking 14th of 16 terms overall.
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