out of four coin-flips. particularly likely, yet it is happened in the last 35 years.
If one were to go back ten business cycles assuming an equal chance of a recession starting under a Democratic or a Republican president, the odds become even longer. There is only a 100-to-one chance that nine out of the last ten recessions would have begun under Republican presidents. Yet they did, as confirmed by the NBER Business Cycle Dating Committee.
An even more startling fact emerges from a review of the last eight times an incumbent from one party was succeeded by a president from the other party. In the four transitions when a Republican took office, GDP growth slowed; in the other four transitions, when a Democrat moved in, the That is exactly
not what growth rate went up. That is as unlikely as getting heads on eight coin tosses in a row – a one-in-256 shot.
Democrats thus have not succeeded by luck alone. (In fact, Blinder and Watson also observe that the US economy performs better when Democrats control Congress or have appointed the Federal Reserve chair, though the main determinant remains the party of the president.) So what accounts for the partisan performance gap?
Blinder and Watson suggest that five factors – oil shocks, productivity growth, defense spending, foreign economic growth, and consumer confidence – may together explain 56% of the growth gap. But it is impossible to know the extent to which these factors were influenced by the US president’s policies. We know even less about the factors responsible for the other 44% of the performance gap.
In assessing Clinton’s statements on this topic, the fact-checkers make much of the finding by Blinder and Watson that, contrary to widespread assumptions, fiscal and monetary policies are not more “progrowth” or expansionary under Democrats than under Republican presidents, and therefore cannot explain the performance differential. But presidents make many policy decisions – concerning energy, antitrust, regulation, trade, labour, and foreign policy, to name a few – beyond how much fiscal and monetary stimulus to pursue. There is no way to test econometrically this myriad of policies.
It is this uncertainty that has driven the fact-checkers to rate Clinton’s statements as half-true. But she never attempted to pinpoint particular policies to explain the performance gap. All she said was that the US economy does better under Democratic presidents. That is 100% true.