There's A Reason Why Republican Presidents Generally Leave Bad Economies

"Three Dollar Bill" by Nancy Ohanian

In an appeal to her supporters yesterday, Ilhan Omar minced no words: "The American people deserve an economy that works for everyone, not just those at the top, wealthy corporations, and special interests. The reality is that business profits and the cost-of-living have soared while wages have remained stagnant. The federal minimum wage in America hasn't risen in over a decade, meaning workers have had to fend for themselves in a rigged system that has only exacerbated wealth inequality and left millions unprotected and vulnerable-- often right on the brink of poverty. Now that Democrats have taken back control of the Senate and the White House, we must put power in the hands of the people-- and that starts with putting people over profits.We can take the first step to addressing this ongoing crisis by raising the minimum wage to $15 per hour."

Like any good progressive, Ilhan is defining "the economy" on how it impacts the lives of the people in the country. She and her colleagues want to see the economy as an engine for equity and for social change. That's very different from the way conservatives define the economy, which is completely about maintaining a fiscal and social status quo. Polar opposites. Or, as former Florida Congressman Alan Grayson summed it up: "Republicans believe that the business of America is business. Democrats believe that the business of America is people."

Yesterday, NY Times columnist David Leonhardt went right to the core of partisan politics: Why Are Republican Presidents So Bad for the Economy? "How dare he," a conservative might murmmer or, depending on the surroundings, shriek. Here's how he dare: "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." Leonhardt is thinking like Ilhan, not like... one pick any of them at random... since Hugh Brown sent me this lovely portrait, pick Texas reactionary Louie Gohmert, this fella:

"Louie bin Laden" by Hugh Brown

Since 1933, the economy has grown at an annual average rate of 4.6 percent under Democratic presidents and 2.4 percent under Republicans, according to a Times analysis. In more concrete terms: The average income of Americans would be more than double its current level if the economy had somehow grown at the Democratic rate for all of the past nine decades. If anything, that period (which is based on data availability) is too kind to Republicans, because it excludes the portion of the Great Depression that happened on Herbert Hoover’s watch.

The six presidents who have presided over the fastest job growth have all been Democrats, as you can see above. The four presidents who have presided over the slowest growth have all been Republicans.

The big question, of course, is why. And there are not easy answers.

Congressional control is not the answer. The pattern holds regardless of which party is running Congress. Deficit spending also doesn’t explain the gap: It is not the case that Democrats juice the economy by spending money and then leave Republicans to clean up the mess. Over the last four decades, in fact, Republican presidents have run up larger deficits than Democrats.

That leaves 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.

When Franklin D. Roosevelt first ran for president, in 1932, he did not have a fully coherent economic plan. He sometimes argued that reducing the deficit was the key to ending the Depression. Above all, though, he called for “bold, persistent experimentation.” As he explained: “Take a method and try it: If it fails, admit it frankly and try another. But above all, try something.”

Over time, he and his advisers came to champion the ideas of John Maynard Keynes. In an economic downturn, when companies and households are caught in a vicious cycle of spending reductions, the government needs to step in. The Keynesian approach has shaped Democratic economic policy ever since.

It has made Democratic presidents much more aggressive in responding to crises than Republicans. Not only was Hoover passive in the face of the Depression, but the first George Bush was slow to fight the 1990-91 recession, and the second George Bush was slow to begin fighting the 2007-9 financial crisis. Mr. Obama and now President Biden, when faced with an economic crisis, have been much bolder.

Michael Strain, an economist at the American Enterprise Institute, a conservative think tank, told me that he believed the overall partisan pattern was mostly coincidence. But, he said, “It is certainly a defensible posture that in periods of economic distress Democrats are more concerned about jobs than Republicans.”

The past year has offered another case study. Mr. Trump repeatedly downplayed the coronavirus pandemic, and the country suffered. The economy would have experienced a downturn no matter who was president, but his scattered response aggravated the pandemic and the recession. In some other countries, life is much closer to normal. In the United States, Mr. Trump became the first president since Hoover to preside over a decline in employment.

The pragmatism gap isn’t only about recessions, either. Democrats have also been more aggressive about making job-creating investments-- in medical research and clean energy, for example-- that the private sector does not make when left to its own devices. Occasionally, a Democratic president has even been willing to go against type in order to encourage growth. Mr. Clinton, persuaded that deficit reduction could bring down interest rates and accelerate growth, scrapped some early spending plans and raised taxes. Interest rates fell, and the economy boomed.

Some past Republican presidents took a similarly pragmatic approach. Despite being conservative, both Eisenhower and Nixon were nonetheless comfortable using government to help the economy when needed. The elder George Bush signed a tax increase that contributed to the deficit reduction that, in turn, fueled the 1990s boom.

For the most part, however, Republican economic policy since 1980 has revolved around a single policy: large tax cuts, tilted heavily toward the affluent. There are situations in which tax cuts can lift economic growth, but they typically involve countries with very high tax rates. The United States has had fairly low tax rates for decades.

The evidence now overwhelmingly suggests that recent tax cuts have had only a modest effect on the economy. G.D.P. grew at virtually the same rate after the 2017 Trump tax cut as before it. If anything, the Clinton tax increase of 1993 has a better claim on starting a boom than any tax cut since.

One possibility is that the two parties are both responding to the interest groups that support and finance them, suggested Ms. Wanamaker, who worked in the White House Council of Economic Advisers during the Trump administration. But the Democratic-leaning groups (like labor unions and civil-rights organizations) may favor policies that lift broad-based economic growth, while Republican-leaning groups (like the wealthy) favor policies that mostly shift income toward themselves.

These explanations are almost certainly not complete. Much of the partisan gap remains mysterious. At the end of their academic paper on it, Mr. Blinder, a former Federal Reserve vice chairman and Clinton administration official, and Mr. Watson encourage other economists to study the issue.

But if the causes are not fully clear, the pattern is. The American economy has performed much better under Democratic administrations than Republican ones, over both the last few decades and the last century. And as Ms. Wanamaker said, “Administrations do certainly have the ability to affect economic outcomes.”