Economic Growth Rates, The President’s Party and the Party that Controls Congress
by Mike Kimel
Economic Growth Rates, The President’s Party and the Party that Controls Congress
Cross-posted at the Presimetrics blog.
This post looks at economic growth rates by President and party. However, it also looks at how that growth rate is affected by which party controls Congress. (This is a topic covered in a lot of depth in Presimetrics, my upcoming book written with Michael Kanell.
In this post, economic growth is measured as the annualized change in real GDP per capita, which was obtained from the Bureau of Economic Analysis’ National Income and Product Accounts Table 7.1. Growth rates are measured from the year before a President (or Congress) took office – call that the baseline real GDP per capita for any given President – to its last year in office. The analogy we use in the book is that of a sprinter; times are measured from when the starter’s pistol goes off (which is right before the sprinters start running) to right before they stop running all out (when they cross the finish line).
The BEA is the agency in charge of computing GDP, and the data goes back to 1929. The post will use all the available data with one exception – when many people are confronted with the fact that the data shows insanely fast growth during the FDR years the first reaction is denial as this isn’t exactly what pundits (not to say many authors) tell you happened during his term. Those who bother checking data move on to a second reaction, which is to insist that the rapid growth was due entirely to World War II. As a result, this post only includes FDR’s term until 1938, far enough before the start of World War II that the war shouldn’t be an issue.
So here’s what it looks like, color coded by the President’s party (red = Republican, blue = Democrat):
Despite what Glenn Beck and other media figures believe and tell us, even using only the six worst consecutive years of the FDR administration still leaves FDR at the top of the heap. Additionally, Democratic administrations tend to come out ahead of Republican administrations. Two notable exceptions are Truman and Obama, but for the latter only one year of data is available at this time. Bear in mind that FDR also had negative growth in his first year in office too, so there’s room for that to change. To a large extent, that depends on policies, and future post will examine policies that affect growth.
But for now, consider something different. For some Democratic Presidents, both houses of Congress were under control of the Democratic party for every year the President was in office. However, the Republican Party was in control for some or most years for other Democratic Presidents. The next graph shows growth rates for Democratic Presidents only, but is color coded by whether the Congress was under Democrat control for the entire time the President was in office (blue) or not (red).
Graph 2
Leaving aside the Obama administration, for which there is only a single year’s worth of data, the graph shows that, in general, Democratic Presidents who enjoyed a Democratic Congress every single year of their terms tended to produce faster economic growth than Democratic Presidents who faced Republican-controlled Congresses for part of their term.
What about Republican Presidents? Well, we can divide Republican Presidents into three groups: those who faced mostly split Congresses (throughout most of Reagan’s term, Republicans controlled the Senate and Democrats controlled the House of Representatives), those who faced all or mostly Democratic-controlled Congresses, and those who faced mostly Republican-controlled Congresses. The next graph shows the growth rates turned in by Republican Presidents color coded by who controlled Congress (Red = All/mostly Democrats, Blue = All/mostly Republicans, Gray = Mostly Mixed).
The best performance by a Republican President came under Ronald Reagan… who faced a mixed Congress until 1987, and Democratic controlled Congress in 1987 and 1988. Even among the remaining Republican presidents, it does not appear that having a Republican controlled Congress leads to faster economic growth. Hoover was the only President to enjoy a Republican controlled Congress during his entire term, and he produced (by far) the worst results of all Presidents. GW faced a Republican controlled Congress during most of his years in office, and growth during GW’s term was below the average growth for Republican Presidents who had to deal mostly or exclusively with Democratically controlled Congresses.
To summarize – among Presidents from 1929 to the present, Democrats produced faster economic growth than Republicans with quite a margin to spare. Additionally, both Democrats and Republicans in the Oval Office were more likely to produce faster economic growth the greater the percentage of years in their term that the Democrats controlled Congress.
I’m going to try to explain what accounts for these differences in future posts.
—
OK. This bit is not cross posted with Presimetrics – its special to Angry Bear, so to speak. Call it a bit of editorializing. None of this is rocket science. It all falls out of organizing the data the way politicians and voters would expect the data to be organized, and is apparent from a set of graphs. Presimetrics, the book I co-authored, which is coming out in August does a lot of this. And it does it for a lot of series, from abortions to crime to the national debt. Often Presidents who performed well on one issue tended to follow similar policies to other Presidents who did well on that issue. Likewise, Presidents who did poorly also often shared policies with others who did poorly.
And it’s pretty apparent from this graph that the policies followed on one side of the aisle aren’t performing as advertized. That doesn’t mean the other side of the aisle knows what it’s doing, merely that whatever mistakes it makes are small by comparison. Or one can take the Megan McArdle route, which is to insist that even though politicians have insisted on splitting themselves into these two groups, the process by which a politician happens to get a D or R after his or her name is completely random, so any patterns we observe are coincidental.
Interesting. I wonder how the budget deficit compares. I seem to recall Reagan running up quite a debt, Clinton leaving us with a surplus, and W digging us into a hole again. I don’t think whether someone is a Dem or Rep is random, but the messages they send sure are. Republicans are about as fiscally responsible as a sixteen year old who just got their license and their parents’ credit card. Yet, where are the Democrats pointing out the fact that it is Democrats balancing the budget, not Republicans?
I think a very interesting issue is Carter. It is widely agreed that the economy performed terribly under Carter. It is clear that this view is not due to real GDP growth rates. My jerking left knee is inclined to argue that the only crumb of evidence in support of Republicans is the tiny increase in growth rates Carter to Reagan. Miniscule on the graphs, but Republicans are not quantitative, hell they aren’t reality based.
However, I think it is more complicated. When Carter was president there was a huge increase in labor supply with boomers and their moms joining the labor force. The same is true for Nixon and Ford, but not Reagan. Now partly this means that graphs of GDP divided by the working age population will make Carter, Nixon, and Ford look worse and Truman and Eisenhower look better (it also might bring FDR out of the stratosphere as there was a baby bust in the 30s). Oh nooo ! more graphs, or are they in the book ?
But my interest is that this flooding of the labor market caused real wage stagnation. That’s what the data say. A huge increase in employment comes at a cost — to get jobs the hords of young adults, and many of their mothers who had left the labor force to care for them, had to accept low real wages.
These were also periods of high inflation. People hate inflation. They act as if it is synonymous with declining real wages. I think this conviction is largely due to a coincidence that inflation was high when the growth of the labor force was high. It isn’t exactly a coincidence — a flood of new workers causes a high non inflation accelerating rate of unemployment which can cause accelerating inflation if the Fed uses a rule of thumb.
In any case, the view that the Carter years were a disaster was strong during the Carter years and there must be a reason people felt that way.
Ginx,
We look at tax revenues, spending, surpluses & deficits, and changes in the national debt (not precisely the same thing as a surplus or deficit) in the book. On the issue of fiscal responsibility…
1. Rep presidents were fiscally responsible… until Ford.
2. We make the point that when the less fiscally responsible folks deride the more fiscally responsible folks as fiscally irresponsible (which is what has happened since Ford), and it sticks, eventually you end up with a President from the otherwise fiscally responsible group deciding that there’s no point in being fiscally responsible. I think we are seeing that with Obama, whose policies have resembled nothing more than GW’s so far. (The only exception so far being the push for a very watered down health care law.)
RW,
Jobs are covered in the book. We have a chapter looking at jobs, wages, bennies, etc. And inflation had an interesting effect given Carter’s stupid, stupid nominal wage freeze in the public sector plus his call for a wage freeze in the private sector. (Long story short – there really was a big decline in real wages under Carter, with a lot of job creation. Carter was a disaster on economic issues… relative to the other Dem Presidents. On most economic issues, he comes out more or less with Reagan, and way ahead of the other Rep presidents.)
We do not go back to FDR…. the official data on jobs starts in the late 40s. There are extrapolations that go back farther but since they count a huge number of people who collect paychecks for putting 40 hours a week building physical infrastructure as being unemployed (e.g., everyone who worked for the WPA), we figured that data was the definition of unreliable. Good enough for Amity Shlaes and assorted “think” tanks, but we weren’t about to touch it.
You’ve brought up a point we don’t talk about much in the book… and should have. The transition from Carter to Reagan is the one thing that the entire supply side mythos was built on. Maybe if there’s a second edition we could hammer into that a bit more.
Mike,
We have been around this bend many times, but I wanted to ask a new question that came about a week or so when you hosted a rather illogical guest poster. (And for the newbie’s, I restate that I assume from the start all your data is 100% correct).
For you to compare the Presidents there are a number of assumptions that have to be made. I have tackled some of them before, but I don’t think I have this one.
For any meaningful comparison of Presidential economic performance to be valid the economy in which they operated has to be the same. In otherwords the economy faced by Truman has to be equivelent to the one faced by Eisenhower as the one faced by Reagan and the one faced by Bush Jr, etc.
I don’t see how you can make that equivelence. The US economy in 1935, 1965, 1975, and 1995 are fudamentally differnet as was its interaction with the World economy.
Without that equivelence all you have is a nice table that lays out GDP growth during Presidential terms, but nothing that you can make the leap that you can compare, say Bush Sr with Truman and say Bush Sr did better.
Thoughts?
Islam will change
Mike,
A second thread. This more geared to just plain what we know about economics. One thing I have learned over the years here is that economics is much closer in rigor to Astrology than Astronomy. Even in hidsight, with all the data, its impossible to know what a ‘better’ choice would have been.
To my question. Assume, for the purposes of the argument, that by Nov 2012 the US ecoonomy has basically flatlined, GDP growth has been non-existant, and we are still at 10% unemployment. At that point how would you catorize Obama’s performance? Would it be Great, good, mediocre, bad, horrible? Why?
To be a little blunter, Obama could make every correct move in the economic book and still get to that end-state (max performed a horrible economic condition). Or he could make every wrong move and still arrive there (min performed a rebounding economy). In hindsight how would we know? The voters voting him out is not an economic answer to the question.
From what I understand about economics you can’t answer this question. Since you can’t answer this question how can you meaningly compare Presidents? Economics can’t tell if the President did a great job in bad circumstances, a mediocre job in great circumstances, of just muddle through in an average economy.
And all this with the background assumption that the President is the ONLY factor in determining GDP growth (which I reject out of hand).
Thoughts?
Islam will change
buffpilot says the economy is different in different years, and that you can’t compare presidents in different years, because the economy is different. (Correct me if I misunderstand you.)
My brother-in-law lives in Texas, I live in Massachusetts. The GFC has not been as bad there
as it was here, or at least so I keep reading in the news. Housing prices did not rise as much
there, and jobs did not contract as much. He should be doing better than I am. But he’s a substance
abuser, who has never had a job in his 50 years of life, and I have graduated from college and
graduate school both. I’m doing ok, and he’s in jail.
The point is not that he is confronted with a good or a bad economy compared to me. His
philosophical viewpoint keeps him from making good decisions, whereas mine allows me to
make good decisions. In that sense the philosophical viewpoint of Democrats is comparable
with that of Republicans. Philosophy, whether economics or epistemology, gives one a framework
to solve problems – badly or well, depending on the philosophy.
Bill,
I really don’t understand your reply. I will just point to you last point: “…gives one a framework to solve problems – badly or well,..”
My first point – you cannot tell if the Presidents solved the problems badly or well from the data collected (my first thread).
After re-reading your post, you still didn’t address my point. The economies ARE different AND you/your brother-in-law do not have control over the economy of Massachusetts or Texas. The implied assumption in all of this is that the President DOES have full control over economy (or at least order-of-magnitude greater control than all other economic effects combined). If he doesn’t you once again don’t have any bases of comparison – again point two. Your BIL doesn’t look like he even has control over himself let alone anything else.
BTW, I’m not saying this makes the Rs better. I’m just saying this analysis doesn’t say the Ds are better either.
And since WWI (one) it has been D Presidents who have taken the US into every major War we fought except the War of Terror. (WW I, WWII, Korea, Vietnam). Thus with an 0.8 correlation I should always vote R to avoid massive loss of US lives and treasure due to war. Which is a much better correlation than what your seeing….and far more important than a half point difference in GDP.
I’m sorry for your Brother-in-law (and sister).
Islam will change
Despite what Glenn Beck and other media figures believe and tell us, even using only the six worst consecutive years of the FDR administration still leaves FDR at the top of the heap.
FDR is number one in unemployment. He also presided the longest as president over the country with GDP lower than it was in a year prior to his presidency. Most of his first two terms he had GDP below what it was in 1929.
Sorry, my reply was rushed, as I was running to a meeting.
The analogy with my brother-in-law was obscure.
The economies of Texas and Mass. are different, and we don’t
have control over them. But we do have control over how we
react to those economies, and how we let the regional economy
affect our personal economies. I guess that was the point.
In any administration, the economy is in some state, the party
in power observes the state, and makes some decisions based on
the state and ideology. The quality of the decisions, the
quality of the implementation, and some luck, govern the
outcome. I think we are not judging the decisions or the
implementation, but the observations and the ideology.
I’d also like to know what “equivalent” means in your
question. Maybe a better word is “comparable”.
Finally, I wonder if educational testing is relevant here as
an analogy. Teachers hate high stakes testing. They say
that you can’t compare two classes, because they are made
up of different sets of children, with different backgrounds
and different families and parents. But we still test classes
to find out which teachers are doing a good job. The graphs
in presimetrics are a form of test, in that they are observations
of some sampled data. Why is testing of possibly inequivalent
children valid but testing of possibly inequivalent economies
invalid?
Bill,
I stand with equivalent as I think comparable is even less comparable than equivalent. 🙂
Your entire first 4 paragraphs basically makes my points. Thanks. That’s why you both can’t compare two different Presidencies (especially over the amount of time and economic changes involved) with the metrics presented.
As for your teacher analogy, it also proves my points and a teacher has far, far more control over his/her classroom than the President has over the US economy. And I agree with the teachers about not comparing two different sets of classrooms. What I can test though is the rate of change. Give the test in Sept and again at the end of school year and you might have a metric you could judge teachers with.
The comparison we are asked to make is between teachers and their classes in the Irish part of New York City in 1925, with rural Indiana in 1955, with Atlanta in 1965, and Los Angeles today. All with the same test….and even in this case the teachers have more control than the President does!
You might have missed an earlier discussion about the 1920 economic downturn, but Mike and company basically stated that the actions of the Fed had more effect on GDP growth than such things as the influenza epidemic, the chaos that existed throughout eastern Europe at the time, and the general chaos in world trade and European economies. I thought that idea was ludicrous on its face. YMMV
Basically what I have always stated is that the US Gov, let alone the President, has no where near the control over the economy as some here think they do. If it did, under Obama we should already be back to Bush Jr levels of GDP growth and unemployment….
And modern economics, assuming this and some of the linked sites to the right are representative of the state of knowledge in the field, is practically guesswork on what works. Like I’ve said Astology vs. Astronomy. (and that’s without all the politics)
We have a 1 dimensional analysis that says I feel like the Dems do better on the economy and feelings are what counts…
Islam will change
Cardiff,
Just shut up and be one of the Sheeple, you can’t be pointing such things, because it scares the childern. What the hell is the matter with you…Fall in line Soldier!
buff
Your criticisms to all this simply remove you from ever being able to comment on anything economic. You seem to believe we dont know enough about economics nor are conditions ever held constant so judgement of various economic prescriptions is impossible. Whether they come from a president or economists, they should all be ignored. Regarding arguments about taxation, all one can say about lower taxes in some bracket is they give someone a higher NOMINAL take home pay. Whether they are made better off is impossible to determine in your view. You are essentially arguing either do nothing or do whatever you want, we’ll never KNOW the difference.
Your saying we dont know whats good or whats “better” and there is no way to evaluate what ideas led to our misguided feelings of good or better.
Do you really want to take this stand?
You’re doing all this to simply try and discredit a book that simply suggests that we do better, economically, when democrats are president. A set of metrics are chosen, ones that most have agreed are reflective of some degree of economic “progress”, “performance” or “success”, and these metrics are evaluated at different times when people of differing philosophy are in charge.
Are there things which the person in charge cant control? Sure. What about the things they can control?
One of the arguments that conservatives have made since Reagan is that higher taxes (on the rich most pointedly) will ALWAYS lead to lower growth. AND they make this claim as if its a PROVEN FACT, an immutable law! If you cant look at the numbers through history and see the fallacy of a direct relationship between economic growth and tax rates on those making over $500,000 a year you are either blind or willfully ignorant.
SO while you want Mike to refrain from jumping to too many conclusions about his data, why dont you refrain from arguing that NONE OF IT MATTERS. Or at least if thats your position, dont comment on economic topics because you have nothing to add except “nyuh uh, noooo!”
Buff,
A few things. First, I don’t operate with a “background assumption that the President is the ONLY factor in determining GDP growth”.
This post shows that Congress matters. Its a smaller effect than the President, but it seems to be there.
Second… we cannot run controlled experiments. One sorrowful day, Truman became President. Nobody else did. You do the best you can to control for differences but they never disappear completely… even if you do run controlled experiments.
For instance, take a triple blind experiment on the efficacy of a drug. There’s no guarantee that the people in one of your groups aren’t all sneaking in some substance on the side that invalidates the whole test.
Now, in this case, I’m doing the best I can without being able to run controlled experiments. I’m looking at the all the data I can. I’m pointing out that even leaving out one or another observation, the results don’t change.
But in the end, we’re left with a situation where somehow just about every time, conditions end up worse when a Rep is in office than when a Dem is in office. And at some point its policy, competence, or one heck of a coincidence. But now, with this post, you have to add to the coincidence – not only do Dem Presidents do better, but both Dems and Reps do better when the Congress is in Dem hands. So its a bigger coincidence.
Now, if you choose to subscribe to the “God gets pissed off at us when we vote on Republicans” that’s your call. All I can do is find data and post graphs in the most explanatory way I can.
aaron/cantab/cardiff & jimi,
The unemployment bit was mentioned in the post. I noted that there isn’t official data going back that far, and as I’ve noted time and again, the extrapolations going backward aren’t reliable.
Here’s a simple example. I think we can all agree that a few million got paychecks from the WPA and the CCC in the 1930s. Now, consider the CCC. The CCC camps were under the supervision of the Army. And the unemployment rolls only look at members of the civilian noninstitutional population that are jobless. Put another way, the CCC enrollees, as they were refered to in those days, were not part of what people today would call the labor force. Knock them out of the picture, and of course the unemployment rate looks higher. But that’s OK. I’ve pointed that out before and you repeat what you repeat anyway.
“ Most of his first two terms he had GDP below what it was in 1929.”
I’m guessing that in your world, oncologists are, by definition, much worse doctors than plastic surgeons.
Greg,
I don’t think I once mentioned taxes. And you never once addressed any of my issues. So what are you talking about?????
Islam will change
Mike,
I have never, ever once said your data was not correct. What I have always said is your data has no logical connection with the statement that Dems do economically better than Reps while in office (or the other way).
And you once again think you have quantified something with Congress. Ok then, what was the GDP effect on the Bush Jr Presidency during 2007-2008 of the Dem Congress? Or the GDP effect on the Clinton Presidency during 1994-2000? How much was the President how much was Congress?
The equivelent is saying that the Commander at Omaha beach did much worse than the one at Utah on D-Day because he lost a lot more troops and didn’t take as much ground. Would you buy that? But that is exactly what you selling.
You keep making apples to submarine comparisons and then leaping to a conclusion not supported by facts. (BTW, I bet my greatest complaint about your book is it not being partisan enough. You will lower sales by not throwing more red meet at the left).
As for God getting pissed off at us. Its been Dems who have gotten us into all 4 of the largest, most destructive wars in the past 100 years. So I would say he’s mighty pissed off at Dems.
Your guys are the ones with PhDs in Econ. Do you understand the concept of random walk? So why can’y you answer my rather simple questions?
Islam will change
Cardiff,
“If you buy the 1-year-lag theory, something even more interesting pops out of the data. In looking at the trend over the last year of each term (the right-most column in the previous table), we see that every time an administration changed from Democrat to Republican, the trend was negative. That is, the Democrat left a decelerating economy for the Republican. Every single time: Truman to Eisenhower, LBJ to Nixon, Carter to Reagan, and Clinton to Bush 43.
Conversely, every time an administration changed from Republican to Democrat, the trend was positive. That is, the Republican left an accelerating economy for the Democrat. Every single time: Eisenhower to JFK, Ford to Carter, and Bush 41 to Clinton.”http://www.americanthinker.com/2008/09/presidents_and_the_economy.htmlThe last time Cactus responded to this article, his response was simply…”It’s wrong.” The “It’s wrong,” could be a “It’s wrong because I need it to be wrong,” but I will give him the benefit of the doubt. Obviously, if we look over the last year of Bush II, the data will clearly show that he left Obama a decelerating economy, so that bucks the trend. Someone name the policy that republicans and Bush II did that caused it, and I’ll give them a Doggy Treat, but no one can, nor will they, because the trail leads back to Democrats…but I digress. That is the exact reason why these post’s are not indepth enough, and why we are never gonna be able to use Presidential party to make solid judgements about the future of the economy.
Mike,
C’mon……This is all getting ridiculous!
Are you expecting us to believe that in your heart, you believe that the modern Democratic progressive agenda with a tax structure similar to 60 years ago will lead to economic prosperity, more economic freedom, and ultimately produce greater Real GDP growth per capita?
Puuuuuleeeeze!
You don’t believe it… so why are trying to make everyone else believe it?
For Christ sake….listen to what your saying….your saying, “The data shows that Economic performance is better because a Democrat controls the Executive Branch, Economic performace is better because Democrats have the majority in Congress…therefore Democrat policies produce better economic performance.”
That logic alone, should be sending red-flags up in everybody’s mind. The modern Democratic policies clearly want to take the country in the direction of Europe at best, and I’m a firm believer that they would rather go much further with the Statism.
buff,
“The equivelent is saying that the Commander at Omaha beach did much worse than the one at Utah on D-Day because he lost a lot more troops and didn’t take as much ground. Would you buy that? But that is exactly what you selling. “
No. Because I’m not reaching conclusions based on one showing. I’m looking at all the examples available. So to use your analogy, I am saying that June of of ’44 was better for American commanders than for German commanders.
I understand the concept of a random walk. I also understand that at some point, you have to decide what is a coincidence and what isn’t. But if you set your bar high enough, you’ll never even admit that basic sanitation reduces the incidence of disease. After all, it could be that every observation Florence Nightingale ever made was a coincidence too.
Jimi,
Umm….. there was no logic anywhere. This is not philosophy, this is data. And I didn’t exactly stretch it and torture it – I graphed rates of change. What falls out of this very simple process is what falls out. And it shows that the two biggest government guys in the sample produced the fastest growth. Arguably the third biggest government guy came in third. And those also happened to be administrations that enjoyed Democratic control of congress during their entire term in office.
You can replicate the results yourself… its actually fairly easy, and I told you where the data comes from and how to do it. I cannot see any other way to interpret the data. Which leaves either a big mistake on my part (once again – feel free to check), the data being is wrong somehow, a massive coincidence, or you being wrong.
But in the end, where we are is this… I graphed the data, and pointed out what the graphs made obvious. You on the other hand tell me that you don’t believe the results and that I cannot possibly believe them either. With all due respect, I think the data trumps both your opinion and what you seem to believe my opinion is as well.
cantab/cardiff/aron,
This decelerating thing… don’t your remember I even wrote a post showing that was wrong? (To quickly recap – four presidents in our sample inherited a recession that was ongoing when they were elected (if they were elected)and when they took office – FDR, JFK, Ford, and now Obama. And consider the size of the ones inherited by FDR and Obama. Perhaps you notice something about this grouping?
How many times do we have to cover the same canard? Just because you changed your handle doesn’t mean the rest of us forget.
Mike,
What falls out of this very simple process is what falls out
And once again, drawing conclusions as steep as “the data shows that Democratics produce a stronger economy,” can’t be drawn.
The Democratic party has controlled congress, and the Presidency two fold of the time of Republicans, but the Real GDP growth has done nothing but grow larger and larger. You want to draw the conclusions from the data, that just because in one time or another the GDP growth was steeper during a Democratic Presidency or Democratic Congress that somehow a particular policy was the cause, even though you can’t point to them. Not to much mention, what the proper lagging should be, and then only in term of percentage change…What about external effects? September 11th was reall good for Bush’s numbers…weren’t they?
Really?…That is absolutely crazy!
What is it the government does that produces wealth? What companies does the government own that provided all the innovation? Why isn’t there a clear trend in the numbers for raiseing or lower taxes?
I have all the data in spreadsheets, and I play around with it from time to time. The data is clearly not wrong. If you want to sell books based a theory…Fine..Great! But somehow there is definite evidence that the Democratic agenda produces better performance, even though there has been no clear purity between the parties on economic policy…………
Hey…you can eat that up all you want…. but I’m all filled up over here!
buff, iirc, this started a few years back with right-wingers claiming conservatives and Republicans were better for the economy. They were the responsible ones, the grownups, or so the theorizing went. Or maybe it was that liberals and Democrats loved to “tax and spend”; I forget.
But in any event, that is the context of this discussion. If this is really what you think, then you’ve also got to believe that there is absolutely no evidence that lowering taxes on the wealthy or increasing the minimum wage, etc hurts the economy either. Iow, you can’t simultaneously maintain that there is no connection between liberal or Democratic policies and the economy while simultaneously saying that conservative or Republican policies are prescriptions for a healthy economy by whatever metric you care to choose.
So which one of those are you willing to give up? Are you now going to concede that raising the minimun wage will not have any deleterious effects on the economy?
SoV, you are doing what Mike did. Answer his points!
Mike, I am waiting for your future commentary re: policies that worked.
Also, don’t get upset with Buff’s comments. His are pussy cat lite compared to what is possible when others even more knowledgable about what actually happened start replying.
The Heritage Foundation was started in 73 the right’s propaganda operation was functional by 76.
Jimi,
For every September 11th on one side, there was a Great Depression inherited on the other. But September 11th is an odd one to bring up. Aren’t Republicans always going on about how if it wasn’t for World War 2, FDR would have kept the economy mired in recession? Aren’t wars supposed to be good for the economy? Didn’t September 11 lead to a war?
“ that somehow a particular policy was the cause, even though you can’t point to them. “
Umm…. maybe pointing out what happened and what the causes were is a bit much for a single blog post? I’ve pointed out some of the causes in the past… and I’m going to do it again. But for what its worth, it took me and a co-author a big part of a book to get it all across.
“But somehow there is definite evidence that the Democratic agenda produces better performance, even though there has been no clear purity between the parties on economic policy………… “
Exactly. I’ve had that post before, and I’m going to do it again very soon. There’s a reason Truman’s performance is awful. Or that Reagan did better than other Republicans. Not every Democrat followed “Democrat policies” as well as others.
Jimi,
Why do you keep saying I don’t address a point I keep addressing. To quote me, the last time you brought that up (http://www.angrybearblog.com/2010/04/economic-views-thought-brought-about-by.html) – entirely cut and pasted:
Jimi,
As you describe it, either I’m an a-hole or you’re coming awfully close to slander. So let’s see what my response was. And btw… it wasn’t Heritage, it was a website called the American Thinker you were quoting. My response (http://www.angrybearblog.com/2009/12/comparing-presidents-real-gdp-per_14.html#comments) was this (cut and paste):
—
I had some posts (and I’ll try to redo ’em at some point, they relate to a chapter I started working on for my second book in which I lay out the information in far more detail than in this response) looking at the Fed’s behavior in the six months leading up to a Presidential election, and there seems to be a bias. (There’s some economic literature that looks at this as well.) Consider three consecutive elections in the Greenspan years… there was a monster increase in real M1 per capita leading up to the election in 1992 (intended to boost the economy which a cynic might think was intended to make the Republican incumbent look good) and monster decreases in 1996 and 2000 (intended to kill the economy which a cynic might interpret as intended to make the Democratic incumbent or the candidate associated with the Democratic incumbent look bad). But the ramifications of that manipulation continued past the election. (Think recession of 2001 – what exactly do you think is the textbook example of happens when the Fed strangles the money supply following a stock market crash.)
But even so, the “Thinker” is wrong. This is also a post I’ve had before, and will redo at some point (maybe in the coming weeks – its actually on my current to-do list so you won’t wait long). I don’t have the time to go over his fallacies, but I can point you to data from the BEA that is a lot closer to right. This file (http://www.bea.gov/national/xls/gdpchg.xls) shows the % change from year to year in real GDP and nominal GDP. Forget the nominal and focus on the inflation adjusted (i.e., real).
If the Thinker were correct, than leaving out the first year of Democratic administration that follows a Republican administration should lead to average growth in their term decreasing.
And yet…
1. The second worst year in FDR’s term was his first year in office. Thinker fails.
2. The single slowest year in JFK’s term was his first year in office. Thinker fails.
3. Carter… the Thinker’s rule kind of works. Not entirely, but OK.
4. Clinton. He had two years with growth in real GDP of less than 3%. 93 was one of those two years. Thinker fail.
Except for Carter, each of those Dems would see his av growth rate increase leaving out his first year.
The converse also doesn’t quite work:
1. The third best (out of eight) years in Ike’s term was his first
2. Nixon’s first year was his third worst… out of 6. So about par.
3. Kind of OK for Reagan – 81 was his second worst year, after 82.
4. Bush… Thinker gets a win on this one.
So among Reps following Dems, the Thinker is about half right. Among Dems following Reps, he’s easily wrong.
—
And you refer […]
CoRev,
We’ve been through them. We’ll be through them again. By now you should know what the first graph I will bring up in the follow up post will be because you’ve seen it before about four times, as I recall. But as is my practice, where I go from there later in that post will differ because every time I do it I try to do it better and I think I tend to get better at showing the graph.
As to what those more knowledgeable than Buff will say… here’s my guess:
1. they will ignore it or
2. they will say it is all mere coincidence
There isn’t much left because of the approach. What is new here in what I and a few others are doing is that we’re keeping it extremely simple. I have the statistical tools to do something more complicated – I was paid for many years to build extremely complicated statistical algorithms. But then you get into a he said she said over minutae. The graphs are very simple and there is no arguing about points that would be considered esoteric in an advanced graduate econometrics course.
Mike,
And yet, you still haven’t addressed any of my two question. You have a nice graph. I can, without hesitation, say that average GDP growth was higher during Democratic Presidents vs. Repulicans. That is exactly what the graph shows.
But you can’t then make the huge leap and say Dem Presidents are better for the economy than Rep Presidents. There are so many assumptions, most of them false on face value, in that second statement that will make you a laughing stock.
And what’s hilarious is you don’t even realize all explicit and implied assumptions you have made to get to that second statement.
So try again to address my two questions instead of hand waving them away. These are the easy ones…
Islam will change
I read a lot of repetition in objections that merely ignore what is presented, or take it beyond the scope of a single post. I read little use of the data by some objecting, but merely saying the data is fine.
I believe kharris had an eloquent statement on the point Mike established, which then objectors continue to ignore. Saying the dominant theme of the presentation is something other what Mike presents is misdirection. Insisting on a particular policy as causation and also insisting on complexity don’t go together.
What is destroyed is the original premise that Republicans are good stewards of the ‘economy’. Of course, lately for the wealthy, a mighty fine job they must think they have done. It does matter for whom the economy is shared though…but that expands the topic.
SoV,
So exactly what policies are have been pursued by Dem Presidents and quantify their effect on the US GDP?
Policies can be used by anyone. My point with Mike and my exchange about doubling the IRS enforcement divisions budget. A policy that works can be used by either side without reguard to party.
BTW, you keep assumming I’m saying that Rs are better. I’m not. I’m saying that Presidents don’t have anywhere close to that kind of influence on the economy that you are contending (and have made zero correlation) and what influence they have is drowned by all the other actors.
The idea, espoused by Mike (cactus) earlier, that the influenza epidemic had less effect on US and World GDP than Fed actions during the 1920 recession is ludicrous. But to make the connection your wanting us to have it not only has to be less but has to be order-of-magnitude less. What’s funny is you keep ducking these obvious questions because you want to believe!
“you can’t simultaneously maintain that there is no connection between liberal or Democratic policies and the economy while simultaneously saying that conservative or Republican policies are prescriptions for a healthy economy by whatever metric you care to choose. “
100% correct. I don’t. What I’m saying is: “I maintain that there is no/weak connection between liberal or Democratic policies and the economy while simultaneously there is no/weak connection between conservative or Republican policies and the economy.”
Mike’s data and everything he’s said agree’s with me. Or tehre is this:
Mike,
Then why can’t you answer either of my rather simple questions?
Islam will change
rdan,
I read a lot of repetition in objections that merely ignore what is presented, or take it beyond the scope of a single post. I read little use of the data by some objecting, but merely saying the data is fine.
To be fair you do let mike post basically the same column again and again with its minor alterations and shortcomings in showing how that the data was caused by any pariticular policy.
But you haven’t finished answering my questions – do you also admit that by this line of reasoning there is no evidence that raising taxes on the top five percent harms the economy, for example? Do you admit that there is no evidence that increasing the minimum wage harms the economy?
If you wish to apply this sort of argument, you can’t apply it cafeteria style. So if you continue to remain silent on this, I will naturally assume that you concede that yes, there is no evidence that raising taxes or the minimum wage or a whole slew of other policy prescriptives is a bad thing. Good to see that you’re on the right side on this one.
Rdan,
I have seen ALL the data. I have done data analysis professionally for over 15 years now. Mike has put together a great amount of data and presented it well. he has lined up a great and pretty line of grapes, apples, submarines, lunar landers, pencils, rubber gaskets. Then makes the jump and says that he’s really comparing all apples.
I know the old analogy is something to the effect,” you can beleive something is true, even when false, if your job depends on it.”
So rdan, given my question on Obama, how will we know if he did a good job in 2012?
I’m saying that by everything you guys have presented over the years there is no way of telling. You might say GDP growth over the Obama Presidency is -3% (my hypothetical). You can’t say he did a bad job (he might have done it all right and prevented another great depression). You can’t say he did a great job either (he might have done it all wrong and gutted a 3% GDP growth rate).
You have no way of knowing. NONE.
And that assumes a huge amount of control of the US economy by the President as an initial assumption (without which the entire premise is moot).
And now like the last thread with the guest poster I took apart, you guys duck and weave around what I would think would be a couple simple questions to answer.
And you think my questions are tough?
Islam will change
SoV,
“..do you also admit that by this line of reasoning there is no evidence that raising taxes on the top five percent harms the economy, for example? “
Probaly not, to some point.(you can go overboard on everything) But you won’t touch the top 5% without a wealth tax. Just going after income usually seems to fall on people who are trying to get rich vs. the actual rich. The USG is not going to get Bill Gates wealth when he dies…
“Do you admit that there is no evidence that increasing the minimum wage harms the economy? “
I see no problem with raising the minimum wage either, my kid needs a raise. 🙂 (Seriously, pump up the minimum wage to inflation adjusted LBJ levels, no complaints from me. I see the problem as this would be an inflation issue. But we are getting off topic here)
My point, is I see nothing in the data presented, nor elsewhere, that you can make the claim that Mike is making that the President has that much effect on the economy. He is stating that I should vote D for Pres becuase of his historical GDP data. I don’t doubt the data. I don’t see any connection between the data and the statement that D Presidents do better for the economy. And I see absolutely nothing to make the jump that Presidents have that much control over the economy. They just don’t. Yet the fundamental assumption of this is that Presidents are the dominant (i.e. order of magnitude greater than all other effects) determinant in US economic performance.
Look at Ford’s %. Eyeballing it looks like about 1.7% GDP growth. Without the 1973 oil shock, what would it have been? 1.0% or 2.0% or 2.7% According to Mike the effect of the Oil shock has to be minimal (under 0.2% or less) since Ford had full control over the economy. Do you beleive that?
And there are other assumptions just as egregious.
That’s my entire point of the hypothetical Obama performance. Uing all of modern economic theory would Obama be considered great or a failure?
You really can’t tell. Now the voters I bet will throw him out of office if we still have 10% unemployment in Nov 2012, but that would still not answer my question. I don’t think economic theory is developed enough to answer that question.
In the last exchange with a guest poster he admitted that in his understanding we could have had greater GDP growth under Clinton if he had run a deficit. So did Clinton under-perform the economy? If so by how much? And would we say he was better at the economy than say Ford? Why? Heck, if you beleive Mike’s premese you almost have to think Clinton should have gotten to LBJ levels as a minimum. And I liked Clinton (and voted for him).
And I repeat this doesn’t prove that R are better for the economy, nor am I claiming this.
Islam will change
My point, is I see nothing in the data presented, nor elsewhere, that you can make the claim that Mike is making that the President has that much effect on the economy. He is stating that I should vote D for Pres becuase of his historical GDP data. I don’t doubt the data.
This is emphatically not true. Again, for the nth time: this whole discussion started with the claim that Republican administrations were better for the economy that Democratic ones, ditto for Congress. The evidence presented so far amply rebuts that. I really don’t understand your dogged insistence of something that just ain’t so . . . particularly since you agree that the evidence does do what everybody else says it does.
sparty,
I admit I often start from more or less the same base, but I usually wander off in different directions. For instance, the first graph in this post was one I’ve used before. But graphs 2 and 3 were new to this post. I keep trying to find new ways to answer the same objections.
Now, the fact that I haven’t fully convinced everyone yet, and that I haven’t managed to explain everything to my own satisfaction yet, tells me I still have to keep going and do better.
ScentOfViolets,
I don’t see how the data rebuts anything. Both Bush and Obama inherited recessions that hurt their administrations overall economic performance. In the face of recession Bush cut taxes and Obama has not raised them yet. On the flip side president Clinton inherited an expanding economy and used this fact as an opportunity to raise taxes. Now the end result is this situation created an opportunity to get causality wrong since not cutting or keeping taxes flat becomes associated with weak economic growth and increasing taxes is associated with a strong economy, even those tax policy was set by the strength of the economy and not visa versa.
The problem with Mike’s analysis is that it draws the careless reader to draw the wrong conclusion. And sometimes this matters. It mattered when Hoover raised taxes and turned a recession into the great depression. It mattered when FDR raised taxes and drove unemployment back to 18 to 19 percent. On the other hand I can’t think of anytime when a tax cut hurt the economy.
buff,
You’re starting to jimify.
I believe one of your questions is whether we will know if Obama is doing a good job.
And as I’ve stated before multiple times, from the moment Obama took office he owned it. That does not mean he controls everything, but it does mean the buck stops on his desk. Nobody else controls the resources he controls, he campaigned for the position, so its his job to make things better. Again, that doesn’t make him omnipotent, but then none of the other Presidents were omnipotent either. So what?
Second, based on what I’ve posted on the blog, you cannot say if Obama is doing well or poorly, merely whether he produced more or less of an improvement than other presidents. Sure, conditions differ…. but they always differ. Always. To put it bluntly, conditions Obama inherited are much more benign than those inherited by FDR, and much less benign than those inherited by GW. But if he produces only GW quality growth, I’ll be very disappointed. And I’ll be shocked if he produces FDR quality growth, but I’d love to see it.
Now… I’m trying to move beyond where we got in the book and produce a more objective measure of performance. (We took a shot at that in the appendix of the book, but I hope to improve on that.) That will take awhile.
And the fact that things are different… yes, they’re different. And we’ll get to similarities in the next post I put up on the subject.
Mike,
I don’t think you have answered the objections. I don’t think you can. Look at FDRs numbers, they generally look great. Yet, our parents and grand parents call this period the depression. They tell us things were horrible. So how can things both be horrible like our parents and grand parents say and at the same time be great as depicted in your bar charts.
Go back and read the older discussions (as well as what’s already been posted here); this is false, provably so.
Ha!…If you think that this response to that article debunks it….then you fail.
Don’t get me wrong,…I respect the work you have done on this topic, just disagree with the conclusions, and you can’t quite seem to put it all together for it to be definite.
Rdan,
Wait a minute! In two years when the numbers are so bad, and we go back and start comparing Democrats and Republicans, it is going to shift the bias back to Republicans…and you will say what?
Well your gonna say Bush handed it to him..It’s all Bush’s fault…even though the same analysis is going to show Republicans are stronger for the economy, and especially so if we leave out FDR.
And BTW, this comment “Insisting on a particular policy as causation and also insisting on complexity don’t go together.” Well, drawing conclusions on straight up data with only a filter of determining whether the data was produced over a Republican or a Democratic time period doesn’t go together either…But does seem to bother anybody because ItSOkWhENiTsAdEmOcRaT.
Mike,
Buff is way to civil to be Jimified, and if I were Buff I would be insulted…you should apologize. Nobody has the specialized talent it takes to drag the !^&#%A!$ deep into mud like I do.
On the other hand…if you continue with this work..I promise you that if you can really prove the conclusion that Democrats and Democratic policies produce better economic performance…I will formally support your work.
buff,
I see only one question… maybe I missed the other. But OK, here’s what I can answer:
“To my question. Assume, for the purposes of the argument, that by Nov 2012 the US ecoonomy has basically flatlined, GDP growth has been non-existant, and we are still at 10% unemployment. At that point how would you catorize Obama’s performance? Would it be Great, good, mediocre, bad, horrible? Why? “
If it is as you described, horrible. The situation faced by FDR in 33 was worse than the situation faced by Obama in 2009. Whether Obama is doing things right or not (and I think its mixed at best), the point is – has he made things better? He campaigned for the right to call the shots. He doesn’t get to complain later.
Jimi,
Yes, Obama inherited a crummy economy. But its his job to make it better. The lousiest economy in the last 100 years was inherited by FDR. He produced the fastest growth. So a crummy economy is not an excuse. Who around here is making an excuse for Obama?
Jimi,
Its a step by step process. Its taken me a while to prove that what I was told about Reps producing faster growth was not born out. I’ve had a couple post on policy, and a bit of a theory in the book. Little by little I’m getting closer to explaining what is going on. But you cannot expect me to a) see what is happening and b) explain it all perfectly all at once.
If I remember correctly from grad school, Modigliani and Miller was originally a lengthy paper. Over a long period (I think it took 15 years) the paper was distilled and rewritten and republished…. and eventually they got something distilled down to the key nugget. Now, those are two Nobel laureates. I’m a hobbyist with a day job. Give me time.
And btw, if I can prove that my current conjecture is wrong, I’ll publish that too.
Mike,
That is a round about look at what my point is. Here is another factor that comes into play. When you got a big down fall it’s gonna be eaier to get a quickier up tick.
The point to Rdan was, becareful about these loose conclusions, because the overall premise that Democrats produce better performance could easily be shifted to the Republicans.
Mike,
Reps producing faster growth was not born out
You haven’t proven that…you may be on the track to doing so…but you aren’t there yet, and my position is that I’m not even close to being convinced that you can get there whether it is Democratics or Republicans. I surely don’t expect you to be able to put the entire picture together in these types of posts. If that was your impression of my position, then I misled you. As I have said before…I have all the data you typically use in spreadsheets, and even with the little knowledge I have of the American economic system and history…I know what a Steep mountain it is to climb…because make no mistake I would like this debate to get sorted out more than anybody.
It really is nobel work, and the type of work that can put to bed all the partisanship. It will definetly be interesting to see how indepth you can get. I will be especially hard on you, you have earned that right 🙂 May the force be with you!
Jimi,
If civility was big here I would not have to keep coming up with new user names.
ScentOfViolets,
Go back and read the older discussions
Been there and have done that.
Buff:
You would be better to ask if the data distribution is normal or not.
Sparty,
We’ve discussed unemployment during the FDR years. To summarize… nobody has any idea what unemployment was before 1948. I haven’t been able to find the details for how the folks who produced the pre-1948 estimates did it, but my bet is that the estimates of the unemployment rate produced for the pre-1948 periods are far more exaggerated for the FDR years than for other pre-1948 years.
Here’s a simple example. Say in 1932 in a town with ten people 14 and up in the civilian non-institutional population, 7 have jobs and 3 do not. The unemployment rate is 30%. Now, create an alphabet soup of programs, which hires 2 of the unemployed people to build roads. You’d think the unemployment rate would drop to one in ten, right? Nope.
If they are hired by the CCC, which is run by the Army, the unemployment rate drops to one in eight, not one in ten, since the folks enrolled in the CCC, by virtue of being under military control, are no longer part of the civilian non-institutional population which means they’re not technically part of the labor force. (You may remember when the Reagan admin floated a trial balloon to lower the unemployment rate by shifting the military figures into the labor force.) And when the entire population (men, women and children) of the US is about 150 million and several million of those are getting a pay check from the alphabet soup, you can have humongous distortions.
And then there’s the discouraged worker issue – not counting them is a relatively recent innovation.
And there is one more thing that should give you some idea how crazy the figures are. From 1933 to 1940, five of the years saw increases in real GDP of over 8% a year. Since FDR left office, I believe 8% real was only pulled off, in 1950. The only way I can see the economy producing 8% real growth with a 20% unemployment rate is if the tin foil hat guys are right and there are space aliens giving us advanced technology in exchange for eating the more delectable of our children.
Jimi,
“When you got a big down fall it’s gonna be eaier to get a quickier up tick. “
And yet, for the past eight years, we’ve been hearing that the GW years were subpar because he inherited a recession. And Ford should have been one of the fastest growing Presidents by that standard. And if you assume it took too long to benefit Ford, then Carter should have done much better than JFK. Only one observation fits that theory.
Jimi,
You are correct that its not Dems v. Reps that explains what is going on. But its a starting point. Its the policies that are to some extent followed by most Dems and the policies that are to some degree followed by most Reps that matter.
I’m OK with criticism.
aaron/cantab/whoever/sparty,
Listen. As I noted in another thread, on offline discussions among the AB posters, for a while you had two defenders: Bruce Webb and I. Everyone else wanted you banned. You only got banned once you pissed off Webb as I simply don’t care enough to fight to keep you here.
The reason everyone else wanted you banned was not because you disagree… this post has several of our regular disagreers, so to speak, all of whom have been here disagreeing for years. Nobody has ever proposed banning Buff, as one example. And its not because he’s bribing us (though Buff, the first of the month was the other day – where’s my envelope?). The reason is that he doesn’t every so often simply lose it and start calling those who disagree with him morons.
Now, I keep approaching the problem again and again in slightly different ways because I’m trying to advance my thinking to get across the point. And Buff’s argument back changes a little at a time as well as he’s trying to do the same. And my guess is that if Buff ever sees the light, he’ll change his opinion. And if I ever see his light, I’ll change mine.
Now, let me tell you why I said I thought you should stay on when everyone else wanted you gone. See, arguing with those who disagree generally takes work and thought. Sometimes its nice to have someone around who inadvertently feeds you the slowest, fattest softballs in town.
It usually only takes a couple comments to identify who you are when you take on an identity. Think things through a bit more carefully, don’t keep feeding me slow, fat softballs (read responses), and maybe the next time when someone is moderating the comments they aren’t going to pick up the fact that its you.
Only when you lose your civility in a snit, a habit you forget you have.
Rdan,
Only when you lose your civility in a snit, a habit you forget you have.
Give it a rest. Everyone, even the liberals know that you block my accounts because I don’t let you bully me over political issues. Remember when you jumped into my posts and edited the content under my name without my permission. This seem like an overly aggressive thing that Bruce would do. This is why I think you and bruce are the same person.
Anyways I’m not banned. You just erase my posts and user names.
Just for fun I think i’m going to make you ban God & Jesus from this website.
Mike,
I beat you on the general thesis of your book. I did this by using expert opinion.
As far as names go, what you said is not true. Each and every time someone called me a name and given that I don allow myself to be pushed around I treated them properly. When you say I started calling people names this is just not true.
On rdan and Bruce have you talked to both on the phone? Did they sound the same?
Mike,
Didn’t you get the envelope? I was sure my under-assistant accountant sent it. Well he was a hippy, so maybe I can just tenderize him up a little and serve him for the next Great RWC party were we decide who at Goldmen we want to replace Berneke in a few years. Getting people to stay bought is always a problem….
🙂
Islam will change
To the author: correlation does not prove causation. Econ 101. Life is never simple, neither are markets, neither are people and how they interact with each other.
Consider this: ice cream cone consumption is positively correlated with drowning deaths. Should we then conclude that ice cream cones cause drowning?
But to your premise: you leave it implied that democratic administrations result in better economic output. Really, this amount of naivet’e is amusing. Explain to me in words how higher taxes result in higher economic output. But no… all you can do is point to a correlation that YOU DO NOT UNDERSTAND.
Does anyone out there honestly believe that, say, Clinton had anything, I repeat, anything, to do with the dotcom boom of the 90s?
It is an interesting correlation. But again, correlation does not prove causation. And author… I repeat, all you are doing with this article is pointing to a correlation that YOU DO NOT UNDERSTAND.
Is there any chance that you could update the Real GDP per Capita chart now that you have more data for Obama. I would be curious to see how the economy has done overall and how it did after the initial crisis.
You can find a more updated graph on the same thing here- http://politicsthatwork.com/graphs/gdp-growth-by-party