Saturday, September 06, 2008

A Historical Perspective on the Economy

Sorry that the posts have been so political lately. But, when in Rome, right?

Scott McKnight linked to a very interesting article that looks historically (since WW2) at how the economy has done under Republicans vs Democrats. What would you guess the results are?

The article rates the parties on two categories: 1) average annual gross national product (i.e. what percentage more does the average person make after a year) and the second is 2) a look at the effect on income inequality (i.e. the rich get richer and the poor get poorer).

The stark contrast between the whiz-bang Clinton years and the dreary Bush years is familiar because it is so recent. But while it is extreme, it is not atypical. Data for the whole period from 1948 to 2007, during which Republicans occupied the White House for 34 years and Democrats for 26, show average annual growth of real gross national product of 1.64 percent per capita under Republican presidents versus 2.78 percent under Democrats.

That 1.14-point difference, if maintained for eight years, would yield 9.33 percent more income per person, which is a lot more than almost anyone can expect from a tax cut.

Pretty significant.

It is well known that income inequality in the United States has been on the rise for about 30 years now — an unsettling development that has finally touched the public consciousness. But Professor Bartels unearths a stunning statistical regularity: Over the entire 60-year period, income inequality trended substantially upward under Republican presidents but slightly downward under Democrats, thus accounting for the widening income gaps over all. And the bad news for America’s poor is that Republicans have won five of the seven elections going back to 1980.

Thus, it seems from the evidence that the economy sees greater health and fruit when a Democrat is in office than when a Republican is.

Here is where I want to go with this: I have a friend who anytime we talk about the thriving economy under Clinton and the struggling economy under Bush, he attributes Clinton's success to Regan's work and Bush's failure to Clinton. He, of course, is extremely Republican. This study seems to refute that thinking, doesn't it? I mean a patters on "misattribution" could not continue for 70 years, could it?



Chip Burkitt said...

It's a big step from statistical correlation to causation. Without further evidence the research you cited remains merely intriguing. For example, since Congress arguably plays a greater role in economic policy than does the President, which party had majorities in Congress? How did the economy fare under Republican-controlled vs. Democrat-controlled Congresses?

Nick said...

It's a big step from statistical correlation to causation.

True. But is it a bigger step to see a 60 or 70 year pattern and claim no causation and attribute it all to chance?

I agree, though, that it would be interesting to see more info regarding congress and what not. The book that this info/study is from may provide more of that.

Chip Burkitt said...

60 years is a short time in politics. Only 11 Presidents have served during that time. One must ask what the probability is that dividing the 11 Presidents into two groups using any criteria other than political party would likewise produce statistical correlation that might lead one to suspect causation.

Nick said...

Ehh...I'm not sure Chip. The part that really convinces me is the second part of the study that deals with the disparity between rich and poor, which seems to be exactly what one would expect based on the Republicans trickle down philosophy. The accuracy of the second study gives credence to the first in my mind.