Among other reasons–like reclaiming America from “illegitimate” Obama and the like–Donald Trump is claiming he should be President because he is such a successful business person. That point, of course, is being called into question, considering his many screw-ups and shady dealings. But what about the broader point—the presumed superiority of Republicans in enhancing the economy? This should be called into question also.
The common viewpoint is that Republicans are good for business, which is good for the economy. Republican policies are expected to create a robust, healthy, growing economy. Meanwhile, the common view of Democratic policies is that they favor regulation and higher taxes which are bad for the economy. However, what do the data say?
As my colleague Ted Fuller points out, the economy has performed very well under Obama. The median household income increased by 5.2 percent in 2015, the biggest increase ever recorded. Under Obama, as Fuller points out, the stock market is now enjoying the second longest bull market (upturn) in history. On some measures, the economy did even better under President Bill Clinton. The S&P 500, the key stock market indicator, the S&P 500, more than tripled in value. By comparison, this index fell 40 percent under Republican President George W. Bush.
A recent book, “Bulls, Bears and the Ballot Box,” shows that over the last 80 years the U.S. economy has fared better under Democratic presidents than under Republican presidents. Some data:
Under Democrat presidents
- Personal income grew nearly six times more.
- Stock market returns were 18 times greater
- Business profits few over 16 percent more
On the other hand, the two times the economy collapsed (the Great Depression beginning in 1929 and the recent Great Recession) were during Republican administrations—Herbert Hoover and George W. Bush.
In a 2014 paper, two prominent economists looked at this issue going all the way back to World War II and concluded that the U.S. economy not only grows faster during Democratic versus Republican presidencies, It also produces more jobs, lowers the unemployment rates, generates higher corporate profits and investment, and creates higher stock market returns.
While the differences in performance are clear and significant, it is not always clear what causes these different results. The data do not reveal clear-cut reasons. There are many conjectures and hypotheses. Ted Fuller suggests that maybe it is because Democratic policies tend to put more money into the hands of the middle class, the working poor, and the poor, and these groups tend to spend most of their income, and the resulting circulation of money stimulates the economy. Republican policies, however, tend to put more money in the hands of the wealthy, who have so much money that they save large amounts of their income. Saving may be a good thing, but saving does not stimulate the economy like spending does.
Another recent book, “Unequal Democracy,” which looks at the last three decades concludes that income growth was about the same for all income groups if a Democrat was in the White House, but if a Republican was president, income growth was higher for higher income groups than for lower-income groups. This might explain why wealthy persons tend to vote for Republicans–and why non-wealthy people should not.