Are Democrats really better for
Hillary Clinton has repeatedly claimed in recent months that the US economy does much better when a Democrat is in the White House. Coming from the presumptive Democratic presidential nominee, that probably sounds like political spin. But the truth is that she is absolutely right.
The president, no doubt, is but one of many factors shaping the economy, and some presidents have certainly been luckier than others. But that doesn’t mean that Clinton’s claim is only “half true,” as asserted by some media fact-checkers (including the Pulitzer Prize-winning PolitiFact). The difference in economic performance under Republican presidents substantial, with the above the threshold significance.
Princeton University economists Alan Blinder and Mark Watson confirm this Democratic dividend in a recent study. Their starting point is the observation that in the post-World War II period (from Harry Truman to Barack Obama), annual GDP growth has averaged 4.3% during Democratic administrations, compared to 2.5% under Republicans. If one goes back further, to include Herbert Hoover and Franklin D. Roosevelt, the disparity is even larger. The results are similar even if one assigns responsibility for the first three months – or the first few quarters – of a Democratic and is consistent and disparities clearly
for statistical president’s term to his predecessor.
But there is more. Over the 256 quarters in the 16 post-war presidential terms, the US economy was in recession for an average of 1.1 quarters during Democratic presidencies and 4.6 quarters during the Republican terms. The odds that such a large difference is the result of mere chance are no more than one in 100.
And the trend is not restricted to GDP. Since 1945, the unemployment rate fell by 0.8 percentage points under Democrats, on average, and rose by 1.1 percentage points under Republicans – a remarkable difference of 1.9 percentage points.
The structural budget deficit has also been smaller under Democratic presidents (1.5% of potential GDP) than when Republicans have been in office (2.2%), though this has not stopped Republicans from criticising Democrats for excessive spending. Even returns on the S&P 500 have been substantially higher under Democrats – 8.4% versus 2.7%. (This differential is not as significant statistically, however, because equity prices are so volatile.)
The likelihood that luck alone could have produced such large and consistent differences in economic performance is extremely low – a point that can be illustrated even without fancy econometrics. Take the recession record. If the chances of a recession starting during a Democratic or a Republican president’s term were equal, the odds of four successive recessions beginning under Republicans would be 16 to one – the same as getting “heads” on four