As Bill Clinton is fond of reminding us all, it is a well-established fact that, on average, the U.S. economy grows faster when a Democrat is president. Is it because liberals have better ideas or because they just have better fortune?
According to a new paper by Princeton Professors Mark Watson and Alan Blinder (himself a Clinton administration veteran), it's mostly about luck.
Since 1947, real gross domestic product has grown 4.35 percent per year under Democratic presidents and just 2.54 percent under Republicans. Even Jimmy Carter, whose presidency lives on in the public's imagination as an economic failure, averaged about the same growth rate as Ronald Reagan.
But it's hard to trace the relative success of Democratic presidents to their actions in office. After running the data and ruling out potential explanations such as fiscal policy, the Federal Reserve, or Congress, Watson and Blinder zero in three factors that, according to their math, manage to explain 46 to 64 percent of the differences.* Those factors are:
- Sharp rises in oil prices. Oil shocks almost always precede recessions (whether they directly cause them is another discussion). And presidents don't really control the oil market. Even though Blinder and Watson suggest that the decision to go to war might effect it (oil spiked under both Bushes, who of course both invaded Iraq) I find that even a bit tenuous. Crude prices began skyrocketing the moment Saddam invaded Kuwait. And while the 2003 invasion obviously influenced the oil market, the big boom really came years later, likely thanks in large part to growth in the developing world.
- Major increases in business productivity. These kinds of gains are usually the result of long-gestating technological advances that have little to do with short term policy. Exhibit A: the Internet boom under Clinton.
- Consumer confidence. For whatever reason, it tends to be higher under Democratic presidents. But is that because Democrats are good at managing the economy and inspiring confidence? Or because the economy just happens to heat up under Democrats? Who knows.
According to the paper, the rest of the variation between Democratic and Republican presidents is pretty much a mystery.
It's worth offering a common sense argument about why the Democratic advantage might just be a quirk of history. In the end, there just hasn't been a ton of consistency in the ways presidents from each party govern. Eisenhower increased the minimum wage and poured money into that giant public works program known as the interstate highway system. Kennedy cut taxes to fight off a recession. Nixon implemented wage controls to fight inflation, expanded the regulatory state (hello EPA) and raised taxes. Jimmy Carter deregulated major industries. George H.W. Bush raised taxes and signed major environmental regulation into law.
In other words, Democrats don't always govern like "Democrats," and Republicans don't always govern like "Republicans." It's hard to think up a story that explains why we've had a better economic run under one party than the other. And, without a story, we're left with luck.
*Wonkblog's Brad Plumer has a nice, more in depth rundown of the study's details.