The economy does better when a Democrat is president, here's why

Yahoo Finance

The U.S. economy grows notably faster and scores higher on a number of other marks when the president is a Democrat rather than Republican, according to new research from Princeton economists Alan Blinder and Mark Watson. Professor Blinder discusses the findings with us in the video above.

First, the facts: According to the analysis, there was an average of 1.8% better annual GDP growth (a difference Blinder notes was "large and persistent") when a Democrat was president . There were also fewer quarters of the economy in recession, more jobs added and hours worked, larger declines in unemployment and higher corporate profits.

Blinder explains that their main work went back as far as quarterly data on the national economy goes, which is the Truman Administration in the 1940s (though they also had some "not as trustworthy data" going back to 1870s, which they didn't put as much stock in).

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"Democrats did better on oil prices, which you could say is probably mostly luck, but may have to do also with foreign policy," Blinder explains. He also found Democrats also did better on performance of economic productivity, which has to do with technology and industrial organization. And Democrats did better when it came to how other economies were doing, especially in Europe, which again Blinder notes might be attributed to luck.

Those were the main factors, but they looked at many others.

Jared Bernstein, an economist and Democrat who served as chief economist to Vice President Joe Biden, argues in the New York Times that Democratic presidents can’t legitimately take credit for these factors. He says productivity, oil shocks and better global conditions are best filed under “luck.”

Blinder doesn't say explicitly whether he agrees or disagrees noting that, "in a political sense it doesn't matter," because the voting looks as though it "doesn't matter if you're lucky or good, you get credit" if things are going well, while when "bad things happen, even if wasn't your fault, you get blamed."

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Interestingly, Blinder and Watson found the better economic performance with a Democrat in the Oval Office was not due to fiscal policy (e.g. deficit spending) or expansionary monetary policy. In fact, "you just don't get anywhere explaining the differences" with macroeconomic policy. Blinder says if anything, monetary policy favored Republicans over Democrats. He does add that policy decisions could play a role in the factors of oil prices and productivity, though they are not the kind of policy you associate as the standard tools a president has in governing the economy.

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