[T]he provocative new paper by the economists Alan Blinder and Mark Watson that rigorously examines how the economy has performed under presidents since the 1940s.
The two looked at key macroeconomic variables averaged over 64 years (16 four-year terms), from Harry Truman to Barack Obama. [U]nder Democratic presidents the economy grew 4.35 percent and under Republicans 2.54 percent.
Under Democratic presidents, the economy also spent fewer quarters in recession; added more jobs and more hours worked; and posted larger declines in unemployment and higher corporate profits than under their Republican counterparts.
The American economy has grown faster — and scored higher on many other macroeconomic metrics — when the president of the United States is a Democrat rather than a Republican.
What explains these differences?
Democrat presidents don’t inherit better economies — to the contrary, they inherit worse ones, at least by the measure of G.D.P. growth. Control of Congress or the Federal Reserve fails to explain the gap. Same for budget and tax policy. That is, it’s not that Democrats juice the economy with deficit spending; the cyclically adjusted budget deficit is actually smaller under the Democrats.
Instead, the two economists find they can explain half of that 1.8 percent G.D.P. difference through differences in productivity growth, favorable oil shocks, more favorable international conditions and (slightly) more optimistic consumer confidence.
George W. Bush contributed to considerable conflict affecting oil supply chains; Mr. Obama has both drawn down that conflict and at least presided over extensive development of domestic energy production.
The fact that bad fiscal policy — sharp deficit reduction when the economy was still weak — has hurt the current recovery is knowable and important.
Finally it is glaringly obvious that complex, advanced economies need well-functioning federal governments that can accurately diagnose and prescribe; they need governments that can absorb factual information and respond to threats and opportunities.
Source: "Luck and a Little Mystery: The Economy Grows Faster Under Democratic Presidents" by Jared Bernstein -- NY Times -- AUG. 5, 2014
Conservatives take control.
- The tax system is revised to be less progressive, which reduces taxes on the wealthy. This reduces the governments ability to support programs for the middle and working classes, which directs middle and working class income towards necessities and away from consumption.
- Business regulation is revised to favor corporations and the wealthy. (This is often referred to as "deregulation" by conservatives.)
- Business ownership is consolidated so that fewer people own and control a growing share of the wealth. Monopolies and trusts control and manipulate prices, which diminishes the purchasing power of the middle and working classes.
- Big business uses campaign contributions to control the government.
- The result is an increase in the disparity of income, and a concentration of wealth at the top of the income scale.
- This gradually diminishes the purchasing power of the middle and working classes, which chokes growth in a consumer-driven economy.
- Warehouses fill up and factory production is reduced. This results in a over-abundance of workers, which decreases the power of labor unions to bargain on behalf of workers, wage reduction and unemployment. These factors result in a further decrease in consumption.
- The result is an economic downward spiral.
- The ultra-wealthy and captains of industry are vilified. Prosecutions follow.
- Popular religion turns towards respect for the downtrodden, which encourages donations to help the poor. (This, incidentally, is most congruous with the teachings of Jesus.)
In order to mask the lowered standard of living for the middle and working classes, corporations and their allied corporate owned banks extend credit. This credit fueled consumption creates a financial bubble that masks the diminished purchasing power of the middle and working classes and creates the illusion of wide-spread prosperity, until collateral is all mortgaged, fly-by-night credit schemes begin to evaporate, the bubble bursts.
The economy collapses.
Dissatisfaction returns control to progressives.
- The tax system is revised to be more progressive, which increases taxes on the wealthy. The government uses the increased revenue to support programs for the middle and working classes, which frees up middle and working class income so that it can be redirected towards consumption.
- Business regulation is revised to favor consumers over corporations, and labor over business. (This is often referred to as "over-regulation" by conservatives.)
- Business ownership is diversified so that ownership and control of the wealth is shared by more people. Monopolies and trusts are "busted" and competition drives down prices, which increases the purchasing power of the middle and working classes.
- The government uses regulating agencies to control big business.
- The result is a decrease in income disparity, as "the wealth is spread around" as President Obama famously suggested to "Joe the Plummer."
- This gradually increases the purchasing power of the middle and working classes, which returns a consumer-driven economy to growth.
- Warehouses are emptied and factory production is increased. This results in a shortage of workers, which increases the power of labor unions to bargain on behalf of workers, wage hikes and increased employment. These factors result in a further increase in consumption.
- The result is economic prosperity.
- The ultra-wealthy and captains of industry are deified. Admirations follows.
- Popular religion turns towards respect for those who prosper, which encourages donations to wealthy preachers.
Eventually the corporate controlled media takes advantage of prosperity inspired complacency to use various ruses to convince the middle and working classes to vote against their own self-interests. These ruses can be as superficial as reaction to social progress. Or they can be as significant as steering substantial amounts of middle class savings, through propaganda or coercion, into the stocks of the corporations, giving the middle class a vested interest in advocating for corporate friendly regulation.
Conservatives are returned to power, and the cycle begins again. |