Around the 2000 election, people where mentioning that the markets prefer Bush because, traditionally, Republicans have been better for the economy.
So, I tried to find out data to see *how * much better they are, in terms of GDP growth and unemployment. I used data from here, and here. I focused on the period from the 1950’s to today, i.e. the post-WWII period.
I was surprised to find that, in fact, Democrats had a much better record of GDP growth and an even better record on unemployment.
This is what I found in 2000. I kept updating the results over the past four years, and the pattern remains.
See below:
Percent change in unemployment rate during a president's term:
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Eisenhower: 56 (R)
Eisenhower: 57 (R)
Kennedy-Johnson: -24 (D)
Johnson: -32 (D)
Nixon: 53 (R)
Nixon-Ford: 50 (R)
Carter: -8 (D)
Reagan: 1 (R)
Reagan: -27 (R)
Bush: 40 (R)
Clinton: -27 (D)
Clinton: -28 (D)
Bush Jr: 56 (R)
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Republican Average: 36%
Democratic Average: -24%
Percent increase in real GDP during a president's term:
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Eisenhower: 12 | (R)
Eisenhower: 8 | (R)
Kennedy-Johnson: | 22 (D)
Johnson: | 22 (D)
Nixon: 14 (R)
Nixon-Ford: 9 | (R)
Carter: 13| (D)
Reagan: 13| (R)
Reagan: | 16 (R)
Bush: 9 | (R)
Clinton: 14 (D)
Clinton: | 17 (D)
Bush Jr: 9 | (R)
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Average: 14%
Republican Average: 11%
Democratic Average: 18%
I also checked to see the composition of the House and Senate during these years, to see if they might have had some effect, but it seems that during most of the above period the Democrats were the majority by a comfortable margin, especially in the House, and have only recently lost the majority, and not by much.
So, it seems the composition of the House and Senate doesn’t explain (correlate with) the change in unemployment or GDP growth. There seems to be a much higher correlation with the party affiliation of the President.
The first conclusion one might make is that “Republicans are bad for the economy”, but the situation may not be as simple as that.
What other explanations of the above data can you find?
It has been said that the President doesn’t have much of an effect on the economy, but the data suggest that, on the contrary, who is in office correlates well with how the economy is doing, so the President must have a bigger effect than people believe.
One explanation of the data could be that it was a random occurrence, and the Democrats were just “lucky” to be President during all the good periods. You can never dismiss this, but for this to happen for the past 50 years, and with both unemployment and GDP growth, the probability of this occuring by chance is very small. (Unless the Democrats are very “cunning” and through sheer genius manage to get elected only during good periods)
To me, the unemployment figures are impressive. There is an almost ping-pong effect where the increase in unemployment rate goes from positive for Republican presidents to negative for Democratic presidents. I find it hard to come up with a plausible explanation that doesn’t conclude that Democrats are better for the economy.
Anyway, any thoughts on what the above data might mean or how it can be explained?
