Comparing Presidents: Real GDP per capita Growth Rates and Changes in the Tax Burden

by cactus

Comparing Presidents: Real GDP per capita Growth Rates and Changes in the Tax Burden
In last week’s exciting episode I posted this graph:

A few quick comments… this is actually a correction – I screwed up the graph the last time by not following the same convention with Nixon and Ford that I did with the rest of the Preznits – namely, if a dude was in the Oval Office for more than half a year, he got attributed the year. I guess its Tricky Dicky to mess up the fact that Nixon resigned in August of ’74, and so should get “credit” for ’74.

BTW… the data for the graph comes from line 10 of the BEA’s National Income and Product Accounts Table 7.1 and the processing is shown in this google spreadsheet. The annualized change in the real GDP per capita is computed from the last full year before a President took office to his last full year in office.

While the BEA data begins in 1929, Hoover was left off the graph because I’ve been informed a zillion times that the Great Depression started under FDR, so it would be unfair to show Hoover considering that the effects of FDR’s perfidy worked their way backward in time producing a monster negative growth rate from 1929 to 1932. And speaking of FDR, for his term only the period through 1938 was used because I’ve been informed a zillion times a zillion times that the economy only started humming when the Germans saved us by bombing Pearl Harbor. I figured 1938, being in the middle of a recession (and prior to the war, Lend Lease, and even the Destroyers for Bases agreement) did a sufficient job of avoiding the effect of the war.

Unfortunately, the data refuses to show the truth, namely that superior Republican economic policies produced superior economic growth. But you know what, this ain’t about Democrats and Republicans – this is about the policies they followed. And to Republicans (and Libertarians, for that matter), “policy” means a number of things, but out of the top five, numbers one, two, three, four and five all seem to be “cutting taxes.” So let’s cut to the chase and focus on taxes that people pay. On second thought, make that everything that people pay the gubmint, because some Presidents cough cough Reagan cough enjoyed cutting taxes and simultaneously raising “user fees” and other revenue generation devices that somehow aren’t viewed as taxes by the tax-cutting crowd today.

The graph below shows current federal receipts (line 1 from the BEA’s NIPA table 3.1) divided by everybody’s personal income (line 1 from the BEA’s NIPA table 2.1), sorted from top to bottom.

Now an interesting coincidence emerges… there are twelve Presidents represented in the two graphs. Five increased the amount the gubmint collected in taxes (in graph 2). All five are among the six that produced the fastest increases in real GDP per capita (in graph 1). The only tax cutter in the top half of performers also happens to the be the second smallest tax cutter in the sample.

The next graph combines the two previous one:

Anyway, none of this is definitive, but as I keep stating, looking at the data in a straightforward manner makes it very, very hard to see how one can argue that lower taxes = faster growth. I will look at this a bit more in depth in the coming weeks. Also… I hope to have time to extend this a bit further and look at what Obama has done during the Great Recession, not to mention commenting on Greg Mankiw’s recent piece in the Times.
by cactus