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THOMPSON: Why Democrats are better for the economy

February 15, 2021 - 12:00 PM

 


OPINION


There’s a Democrat in America’s White House. You know what that means...slower economic growth...lower Gross Domestic Product (GDP)...fewer jobs. Oh, woe is me!

Yeah...none of that is true. In fact, it hasn’t been true for the past 14 presidents...that’s when the U.S. started keeping comparable economic statistics. That’s seven Democrats and seven Republicans in the White House...in an 87-year span...and in virtually every measurable area Democratic presidents are better for the economy than Republicans.

Actually, Republicans even get a bit of a break and would fare worse in this comparison if the disastrous years of Herbert Hoover - who won in a landslide in 1928 - were included. Almost everything you’ve heard from Republican politicians for decades about how much better their policies are for the economy...simply isn’t true. Of course, Republicans have lied about this for decades...imagine?

No, this isn’t something I dreamed. Last week, late one night I read a scholarly paper presented by two economics professors at Princeton University, Alan Blinder and Mark Watson. The facts are irrefutable...the economy grows faster when a Democrat is in the White House.

I had to read the paper - which is about as dry as any statically-rich economics paper can get - twice just to be sure I understood. Of course, presidents - Republican or Democrat - have only limited control over the economy...even though both parties are famous for claiming credit for growth, jobs and more over the years. The truth is...millions of decisions are made by businesses large and small that determine the economy more than most governmental policies.

That said, facts and probability strain any chances of pure coincidence that the economy is better under the previous seven Democratic presidents...and worse under the previous seven Republican presidents.

Again, it’s not just that GDP is better under Democrat presidents, but so are incomes,  employment, productivity, and yes, even stock market performance.

A recent analysis of economies under presidents since 1932 by The New York Times, reports an annual average growth rate of 4.6 percent under Democratic presidents and 2.4 percent under Republicans. The bottom line: Americans’ average incomes would have been more than double its current level if economies under Republicans had kept pace with Democrats.

The statistics considered another way are just as astonishing...the six fastest growing economies were under Democratic presidents...the four slowest growth economies...were under Republican administrations.

In terms of cause and effect, a couple of traditional factors can be dismissed easily...control of Congress, for example, doesn’t counter this presidential effect. Also, while Republicans always talk about Democratic deficit spending...it is an illusion at best...an outright lie at worst. Not only have Democratic administrations not overspent and left Republicans administrations with a clean-up on aisle three...Republicans actually spent more than Democrats in each of the last four decades.

There are some other facts...let’s call them truths. Republicans have for nearly 90 years pushed strict ideology...leaving the economy hostage to tax cuts and deregulation. Democrats are more flexible - pragmatic - and are open to what spurs the economy.

British Economist John Maynard Keynes influenced Democrats with this argument...total spending determines overall economic activity, and inadequate aggregate demand leads to longer periods of high unemployment. Thus, when businesses and households reduce spending dramatically, Keynesians say, government should spend.

Of course, Republicans shudder...it’s antithetical to their philosophy. But when you look at how presidents respond to economic crises...it is Democrats who carry the day by moving quickly...stepping in to support the economy during hard times by infusions of cash to consumers.

Republicans simply don’t move fast enough or strongly enough...and the economic recovery is slower and longer. Examples...Hoover after the 1929 stock market crash; and both Bush presidents moved too little too late in the 1990-91 recession and the 2007-2009 financial crisis.

And while the COVID-19 pandemic would have hurt the economy regardless of who was in the White House...Trump’s general incompetence and failure to spend money and actually govern...made matters worse.

Trump’s record tax cut...with 87 percent accruing to corporations and wealthy Americans in 2017...left the economy virtually unchanged except making the rich...richer.

In the coming month, President Biden and Democrats will push through the $1.9 Trillion COVID19 Relief Bill...over Republican objections. Later this year - all other things equal - the economy will be stronger. It has worked that way for nearly 90 years...and we’ll likely see lower unemployment, stronger GDP, rising incomes and stronger stock markets later this year.

Why is this important to Canadians? Foreign trade is responsible for about 45 percent of Canada’s GDP and the United States is by far the largest trade partner...at about 75 percent.
Canada’s economy generally tracks the U.S. economy.

I’ll re-visit this topic in another column later this year...and let’s see if what has been a fact - that the economy does better with a Democrat in The White House - continues under President Biden.

— Don Thompson, an American awaiting Canadian citizenship, lives in Vernon and in Florida. In a career that spans more than 40 years, Don has been a working journalist, a speechwriter and the CEO of an advertising and public relations firm. A passionate and compassionate man, he loves the written word as much as fine dinners with great wines.


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