Presidents and the Economy: D’s>R’s?

August 5th, 2014 at 9:00 am

Over at the Upshot.

Read the piece, but the general finding has been widely known by those who plumb the data: on average, the economy, as measured by many macro and financial indicators, does better under D presidents. The paper I review in the piece, by Alan Blinder and Mark Watson, goes further than earlier work in examining why. As you’ll see, the factors they identify look more like luck than “skill,” though who knows? Untangling such things over presidential terms, with so many moving parts, goes well beyond both the data and our statistical techniques.

Extra bonus for OTEers: here’s a point I liked that got cut:

One bit of evidence for this “who knows?” position comes out of B&W’s own work. Even putting aside the question of whether D’s deserve credit, based on the paper’s findings you might think that a forecaster guessing about future GDP growth would generate more accurate predictions by simply adding the president’s party to her equation. Alas, she would not. The D-R gap is a cumulative result that holds over the last six decades but that signal isn’t strong enough in real time to improve your estimates about next year.


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5 comments in reply to "Presidents and the Economy: D’s>R’s?"

  1. smith says:

    Ok, I haven’t read anything other than this entry, but the first thing to come to mind is the economy bleeds across terms, most famously Hoover and Bush II, but also Andrew Jackson destroyed the National Bank and the economy, and Van Buren reaped the reward, though of the same party. Across parties, Clinton benefited from Bush I prudence, Nixon suffered Johnson’s Vietnam inflation, Carter is Dem who set the bar so low, by comparison Reagan looked ok. Yes Carter had bad luck too, but his policy compounded the economic challenge faced a la Hoover. Johnson messed up the go-go 60s (go-go an expression unrelated to dancers). The worst performances were Reagan and Bush II, which coincided with reduced taxes on the rich, rising inequality, and poor job creation. The deepest recessions since the Great Depression were the highlights of their terms. That skews everything. One could make the case without Carter’s inflation fiasco, no Reagan or Bush II, liberalism is not discredited and the conservative movement is kept in check.

    • smith says:

      The point should be no party has a monopoly on stupidity. Witness Obama’s struggle to understand the need to debunk the Republican’s ploy to focus on the deficit to defeat more stimulus, the need to provide relief for homeowners despite agitation drummed up to say that would reward financial recklessness, the need to defeat permanent Bush tax cuts which heightened inequality and shortchanged federal spending, the need to strengthen social security and raise revenue by lifting maximum income taxed vs. cutting benefits, the need to raise corporate tax rates while closing loopholes instead of lowering them, the need to promote the immigration of future citizens with basic labor rights instead of temporary workers forced to undercut wages as a condition of entry. These are all concessions to conservative policy that are the result decisions made by Obama based on politics, strategy, and a misunderstanding of economics.

      This is why Obama faces a divided nation, a slow recovery, a difficult midterm election, a questionable legacy that seems anything but transformational if Republicans retake control. Bush II may have set the bar very low, except when it comes to implementing policy (tax cuts, regime change, deregulation). Obama has yet to match that record, Romneycare and FrankDodd notwithstanding.

      The whole question of who is in office during rising GDP has bizarre aspect which recalls Sen. Dole’s answer in the 1976 VP debate concerning responsibility for war.

      A good statistical analyst would laugh at the attempt.

  2. James Edwards says:

    It could so easily be the other way around. The nation turns to Dems when they need hope and Reps when they feel greedy. It’s easy to have good numbers if you’re always starting in a hole.

  3. ColoComment says:

    As noted, it is far too simplistic to assign 100% responsibility for economic matters to the party holding the presidency. You must also recognize the party(ies) holding the House & Senate. For example, what would Clinton’s second term have looked like without Gingrich’s Republican House? What would Bush 43’s second term have looked like if the Democrats had not taken Congress in 2006?

  4. wkj says:

    Jared: If you haven’t seen it, you should look up Mike Kanell’s book “Presimetrics: What the Facts Tell Us About How Presidents Measure Up On The Issues We Care About”. It includes interesting text and graphs on a range of issues.

    Kanell also has a blog with the same title.