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Topic Title: 3 Reasons Why The Economy Has Done Better Under Democratic Presidents
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Created On: 30 December 2013 12:54 AM
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 30 December 2013 12:54 AM
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gregowinston

Posts: 1
Joined: 30 December 2013

Democratic presidents tend to preside over better economies than Republican ones, but that may be down to pure luck, according to a recent paper from Alan Blinder and Mark Watson at Princeton.

Since the end of World War II, the U.S economy has grown at an average real rate of 4.35% under Democratic presidents and only 2.54% under Republicans. So what gives?

"Democrats would no doubt like to attribute the large D-R growth gap to better macroeconomic policies, but the data do not support such a claim," they write. "It seems we must look instead to several variables that are mostly 'good luck.'"

Three factors can explain 46-62% of the growth gap, according to the paper. Here are the reasons (via James Hamilton):

Oil shocks. With the exception of Jimmy Carter, oil price shocks tend to dog Republican administrations more. The 1956-57 Suez Crisis, early-70s OPEC embargo, 1980 Iran-Iraq War, and the Iraqi invasion of Kuwait in 1990 all happened during Republican administrations.

Productivity. It's hard to say that a U.S. president is responsible here, but Democrats tend to see bigger gains in productivity. Bill Clinton, for example, enjoyed a big boost in U.S. productivity during the 1990s.

Consumer confidence. Consumers tend to have a rosier outlook on the U.S. economy in the first year a Democrat is in the White House. "Yet the superior growth record under Democrats is not forecastable by standard techniques, which means it cannot be attributed to superior initial conditions," they write. Chalk this one up to luck again, but it does come "tantalizingly close to a self-fulfilling prophecy in which consumers correctly expect the economy to do better under Democrats, then make that happen by purchasing more consumer durables."
 30 December 2013 04:31 PM
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bandrowski

Posts: 1
Joined: 30 December 2013

Very interesting Reasons...
 27 January 2014 09:36 AM
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hjeff045

Posts: 37
Joined: 02 December 2013

One thing I want to add is the president has to give the more job option to youth. It will definitely increase the economy.

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