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July 07, 2008


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Barry Ritholtz

Nicely done!


I'm glad to see you've added a blog... Barry Ritholtz has mentioned LR several times, including the news of the blog.

I've always said that the Republicans did just fine with the economy. It was just the amount of money they had to borrow to do it that worried me.


Unfortunately this analysis fails to consider two critical factors.

#1 when a president is elected, it takes time to pass laws to change policies.

#2 once laws are passed, it takes time to implement new policies and then for those policies to affect GDP. Companies make spending decisions years ahead, not days ahead. And tax rates are never changed in the first year of an administration, at least for that particular year.

Think about these two things, both noted by the author:

#1 "Republicans tend to preside over recessions early in their terms, with growth accelerating as time passes"

#2 "Democrats tend to preside over earlier accelerations followed by slowdowns as the term matures"

It appears, not surprisingly, that GDP benefits under Democrats at the beginning of their terms from policies passed by previous Republican administrations. It also appears that GDP suffers under Republicans at the beginning of their terms from policies passed by previous Democratic administrations.

This analysis is shortsighted. Certainly neither party is perfect (and definitely not the current administration), but policies passed by Republican administrations have historically been dramatically more stimulative than those passed under the Democrats. This analysis attempts to explain away Economics 101 and unfortunately did not consider some major critical factors.

On a side note, I would encourage any of you to read Milton Friedman's book Capitalism and Freedom. It is a fantastic read and although not an easy read, provides some very compelling arguments for free market capitalism.


From Dani Rodrik's blog, dated March 31st 08. Dovetails with this info.



I would suggest Angry Bear, having spent several months fielding question and criticism from all sorts.

David Merkel

I think you need to factor in the general slowing of GDP due to a maturing economy, and a hyperactive Federal Reserve that helped create the great moderation.

Other influences include the degree of ability to produce in the post-WWII period and the willingness of neo-mercantilist nations to subsidize exports and fund the US current account deficit.

It also could be useful to segment on unified and divided governments -- gridlock often produces the best of times, while unified governments tend to injure the US economy.

Richard Suitor

Roosevelt-Truman is miscolored in the employment graph, and that mistake carries into one of the remarks on that graph. It does not appear to have affected the averages.

Liscio Blog: Thank you Richard for pointing out our error. It has been corrected.

Peter G.

SP's comment is right on target. This whole piece is fundamentally misguided.

The president doesn't even have much influence over the Federal budget. Every year, as long as I've been watching, the White House proposes a budget and the House leadership describes the proposal as "dead on arrival." It's almost like a game to these people.

The president's only hope for a substantial influence over the budget process is based on election results, and lasts only about a year. If the president can claim a mandate for the economic policies he advocated during his campaign, he can apply some leverage to Congress. Many presidential elections don't focus so strongly on specific economic policies, and many fail to produce any kind of mandate.

Whatever budgetary influence the president has doesn't begin to be felt in the economy until almost two years into his term (because the budgeting process is so time-consuming, the White House has limited influence over the budget that takes effect the October after the new president takes office)-- which means whatever happens early in a president's term needs to be credited to (or blamed on) his predecessor.

Bottom line, this whole piece is basically useless. Start over and do it more honestly, and let's see how it works out. I haven't done the math myself, but I suspect it's going to show that the two parties aren't so easily distinguished.

. png


Interesting data but the entire analysis succumbs to a basic statistical pitfall: correlation is not causation. Indeed, professors must constantly repeat this mantra because of analysis like yours.

This isn't to say that pouring over such correlations isn't interesting, but we certainly cannot make any correct inferences from the data you present.


The comments by SP, Peter G., and Matt are well-phrased but unfortunately misguided. a few points on this:

(1) Correlation may not be causation, but numerous pieces of correlative evidence can help point out potential causes. They aren't the same thing, but there is a link, or else inductive evidence would be worthless.

(2) It's ludicrous to suggest that the President has minimal control over the budget, and reflects a poor understanding of the inner workings of modern US governance. Yes, Congress is officially responsible for budgeting. However, a significant quantity (possibly most) of the information available to congressional committees comes from executive agency requests and testimony. Furthermore, informal lines of communication grant the president substantial influence over the law (and budget) making process.

(3) The standard "lag-time" argument is also short-sited, given that a number of these presidents were in office for two terms - Regan, Nixon, Clinton, Bush 43, and Johnson to name a few. a 6-8 year presidency is more than enough time, particularly given the popularity of Nixon and Regan and LBJs political skills, to enact sufficient law to make these numbers reliable.

(4) Deficit numbers are a matter of direct causation based on republican vs. democrat administrations - the fact is that most democratic social programs are allocated based on existing revenues or are largely self-funded (e.g. Social Security) and difficult to change. Republicans tend to spend money on military endeavors (at least since Nixon) comparatively - the number one item in discretionary spending. Deficits go up because of tax cuts and increased spending programs - classic Reganomics - often into unproductive or short-term productive sectors (e.g. military contracts). Democratic measures tend to be in civilian investment and/or in "safety net" provisions that minimize flux and redistribute income downward to income groups with a higher marginal propensity to consume and marginal utility of each dollar earned.

(5) Otto's link to Dani Rodrik's blog is useful - especially given Redrik's reputation as a balanced and well-thought-out, careful economist. Here's the link again: http://rodrik.typepad.com/dani_rodriks_weblog/2008/03/american-politi.html. Note that this data supports my contention about income redistribution trends - which also matches with party platforms, common sense about the parties tendencies, and numerous other studies in modern economics.

(6) Lastly, it might be worth mentioning that many classic neoliberal economists - Friedman included - adopted a much softer, more nuanced stance and recanted on a number of views after the 1980s. The Chicago school was too extreme, and many of those economists have realized they were making simplistic assumptions about human psychology and behavior - and that the models didn't always apply to current economic circumstances.

(7) Having said all this - if inflation hits 10% or above... elect a republican.


It's fair to raise the question of how Democratic administrations benefitted from the policies of Republican ones (and, additionally, I think this data set is still too small), but as a counter, it should be noted that these results run true even for successive Republican and Democratic administrations. And if this were merely a factor of Democrats benefitting from strong Republican policies, you'd expect to see a weaker Johnson Administration and a far stronger Bush 41 Administration—yet these numbers stay stratified along a partisan axis.

Correlation does not equal causation and laws do take time to have an effect, but merely rejecting the data for these reasons would be foolish. I don't know the answer for why the data would line up as it does. The consistency of these various measures should at least give one pause to consider what actions of Democratic and Republican Administrations might lead to these results. The knee-jerk dismissals above don't even begin to address the issue. If they did, the data would look very different.


Unlike many commenters on blogs, political scientists do not (as a general rule) start with their conclusions and then go out and look for evidence in the world that supports their views. Bartels didn't just make up a theory sitting on his couch and then find data to support it. He did research,research,research. Here is another paper that makes similar arguments and provides corroborating evidence. Conservatives can try and argue around this one too. http://polsci.colorado.edu/COURSES/PSCI_7108/data/Adler%20and%20Leblang%20paper.pdf


What we is undeniable from this information is that most Americans enjoy better economic outcomes under Democratic administrations. And of course, that means that most Republicans will have to ask Arthur Laffer (or the Tooth Fairy) to explain to them how to ignore the facts so they can clamor for more tax cuts.


Although the authors punt on rating economic performance, I think that a voter has to ask himself how he makes his money: wages or interest?

If wages, the Democratic performance wins on jobs, growth, and reduction in income disparity.

If interest, the Republican performance wins on inflation, bond performance and increase in income disparity.

If you subscribe to the theory that low deficits reduce interest rates, Democratic policies again favor wage-earners over interest-earners.

Of course, I'd posit that more than 90% of all voters make more in wages than in interest, so most Republican voters are voting against their personal economic interests.


We need to make a significant correction to the inflation reported during Bush 43. The Bush CPI no longer includes food or energy costs, which were included in earlier inflation calculations. I believe that you would have an inflation at least double what is currently reported.
Some historians may point out that the CPI has been adjusted many times over the years; however, given the current times, omitting the escalating prices of food and energy serious miscalculations. Besides Carter never took those out!

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