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Tuesday, Sept. 16, 2014

Robert J. Samuelson: Do Democrats do it better? Nope

By Robert J. Samuelson, Washington Post

Published: Mon, Aug. 25 8:05 p.m. MDT

 Former Presidents Jimmy Carter and Bill Clinton arrive at the Let Freedom Ring ceremony at the Lincoln Memorial in Washington, Wednesday, Aug. 28, 2013, to commemorate the 50th anniversary of the 1963 March on Washington for Jobs and Freedom. I

Former Presidents Jimmy Carter and Bill Clinton arrive at the Let Freedom Ring ceremony at the Lincoln Memorial in Washington, Wednesday, Aug. 28, 2013, to commemorate the 50th anniversary of the 1963 March on Washington for Jobs and Freedom. I

(Carolyn Kaster, Associated Press)

WASHINGTON — It's a Democratic campaign consultant's dream: a study from two respected academic economists concluding that, since the late 1940s, the economy has consistently performed better under Democratic presidents than Republican. The gap is huge. From 1949 to 2013 — a period when the White House was roughly split between parties — the economy grew at an average annual rate of 3.33 percent, but growth under Democratic presidents averaged 4.35 percent and under Republicans, 2.54 percent. Jobs, stocks and living standards all advanced faster under Democrats.

Not surprisingly, one of the report's authors is a well-known Democratic economist, Alan Blinder, a former vice chairman of the Federal Reserve now at Princeton; the other author, Mark Watson, also at Princeton, is a highly regarded scholar of economic statistics who describes himself as nonpartisan. More interesting, Blinder and Watson don't credit the Democratic advantage to superior policies.

"Democrats would no doubt like to attribute the large [Democratic-Republican] growth gap to macroeconomic policy choices, but the data do not support such a claim," they write. Most economists, they note, doubt presidents can control the economy.

So if presidents didn't do it, who or what did? Blinder and Watson march through economic studies. Their conclusion: About half of the Democrats' advantage reflected "good luck" — favorable outside events or trends. Three dominate.

Global "oil shocks" — steep increases in prices, which depressed economic growth — were the largest, because they hurt Republicans more than Democrats. They occurred in 1973 (Richard Nixon and Gerald Ford), 1979 (Jimmy Carter but affecting Ronald Reagan's first term) and 2008 (George W. Bush). Statistically, they explain slightly more than a quarter of the Democratic-Republican gap.

Productivity — efficiency — was the next largest contributor. But presidents can't magically raise productivity; it reflects too many forces: research, improved schools, better management, entrepreneurs. Although Bill Clinton benefited from an Internet boom, he didn't invent the Internet. Productivity gains occurred disproportionately under Democratic presidents and accounted for nearly a fifth of the gap, report Blinder and Watson.

War was the final factor. Military buildups for the Korean War and the war in Vietnam boosted growth in the Truman and Johnson presidencies. Since the late 1940s, inflation-adjusted defense spending rose 5.9 percent annually under Democrats and only 0.8 percent under Republicans. The buildups accounted for about an eighth of the Democratic advantage.

As for the rest of the gap, Blinder and Watson say it's a "mystery." Actually, the explanation is staring them in the face.

The parties have philosophical differences that affect the economy. To simplify slightly: Democrats focus more on jobs; Republicans more on inflation. What resulted was a cycle in which Democratic presidents tended to preside over expansions (usually worsening inflation) and Republicans suffered recessions (usually dampening inflation).

Students of the post-World War II economy know these cycles. The best examples include the 1960s Kennedy-Johnson boom, which lowered unemployment to 3.5 percent in 1969 and raised inflation (virtually nonexistent in 1960) to almost 6 percent. This was followed by two recessions in the Nixon-Ford years. Under Carter, the economy revived — but inflation spurted to 13 percent in 1980. Carter's inflation bred the devastating 1981-82 recession under Reagan. It pushed unemployment to 10.8 percent in late 1982 but ended double-digit inflation.

The implication is clear: If Republican presidents were saddled with most recessions, their growth and job creation records would naturally be worse. And that's what the Blinder-Watson study shows. Since the late 1940s, the economy has spent about 12 years in recession. But 10 of those 12 years occurred under Republican presidents; only two occurred under Democrats. On average, the economy spent slightly more than a year in recession for each Republican term and only three months for each Democratic term.

The Federal Reserve — influencing interest rates and credit conditions — was the main agent driving this cycle. The Fed may be "independent," but it doesn't ignore the prevailing political and intellectual climate. Its policies have been more permissive under Democratic presidents than Republican.

There's a larger lesson here. The Blinder-Watson study implies that the economy's performance during a president's term is a good test of the soundness of policies. Not so. There's often a long lag between the adoption of policies and their true effects.

Economic policies pleasurable in the present can be disastrous for the future — for example, the inflationary policies of the 1960s. Similarly, the policies that fed the economic booms of the 1990s and the early 2000s spawned overconfidence that fostered the financial crisis. The reverse also applies: Policies painful in the present can reap long-term dividends. The hurtful suppression of double-digit inflation in the 1980s is an obvious case.

It will be interesting to see whether this study is misrepresented for political gain, obscuring the harder task: finding policies acceptable in the present and beneficial for the future.

Robert J. Samuelson is a Washington Post columnist.

Recommended
1. Hutterite
American Fork, UT,
Aug. 25, 2014

Anybodys' mind changed here? Nope.

2. GaryO
Virginia Beach, VA,
Aug. 25, 2014

“Democrats focus more on jobs; Republicans more on inflation.”

Baloney.

Since when has that been true? . . . Certainly not since the Reagan administration set a precedent for irresponsibility that later served as a template for the policies of GW Bush (although GHW was a fairly competent President).

Focusing on inflation requires caring about the future. But that is something with which Reaganites DO NOT concern themselves. They are all about exploiting a situation for as much as it’s worth NOW to generate maximum profit to themselves and their cronies, with NO CONCERN for future generations.

“There's often a long lag between the adoption of policies and their true effects.”

That’s true. GW’s horrendous policies initiated at the beginning of his first term didn’t catch up to him until his second term. But Clinton was able to accelerate the effects of his excellent policies through the concerted effort of Al Gore to promote the internet as a business forum, thereby launching the dot com boom and funneling much needed revenue (from tax increases) into our nation’s coffers.

The Clinton administration made its own luck. And GW designed a lasting disaster.

3. Christopher B
Ogden, UT,
Aug. 25, 2014

Liberals may be unfamiliar with something called the labor participation rate.

It's infinitely more useful in evaluating the job market than unemployment rate.

The current labor participation rate is the worst it's been in over 30 years.

In other words, things are so bad people have simply stopped liking for work, this not being included in the "unemployment rate" and instead they just tell Barack to pay their bills with our money.

4. JoeBlow
Far East USA, SC,
Aug. 26, 2014

"Most economists, they note, doubt presidents can control the economy."

I would agree with that. There are many factors outside the control of the president.

So, why is it that those on the right attribute everything bad to Obama?

Yes, the deficit has ballooned under Obama. But if one is inclined to understand WHY, rather than just to assign partisan blame, they would realize that the same thing would have happened under McCain or Romney.

But in todays partisan world, that does not fit the narrative.

Gary O.

I have called out many on the right for their over-the-top completely partisan assessments.
You do the same from the left.

Neither are useful or accurate.

5. GaryO
Virginia Beach, VA,
Aug. 26, 2014

"Liberals may be unfamiliar with something called the labor participation rate. "

No, they're familiar with it. Moderates are familiar with it too.

And we are also familiar with the Republican policy of obstructing if possible any and all legislation supported by the Obama administration.

We are familiar with the fact that Obama's Jobs' Bill of 2011 would have put millions of Americans back to work building infrastructure and in support industries. It made perfect sense. Because of the law of supply and demand, building supplies were cheap, and we the people would have gotten a great deal. But the Republicans shot down that bill . . . Just to perpetuate unemployment in the vain hope that it would squash Obama's reelection bid.

Once again, Republicans harmed America and Americans for the sake of some short-term political goal they failed to achieve anyway.

Harming this nation has become routine for Republicans.

Are you familiar with that?