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I conducted analyses of four national economic variables, unemployment, growth, inflation, and budget deficit (or surplus), to determine whether Democratic or Republican presidents are associated with better national economic outcomes.

While the analyses parallel numerous efforts diaried by others in DK and elsewhere, I have tried here to be rigorous as well as to boil down the results into an easily viewed and comprehensible form.

Pass through the orange cloud to view the results.

The following set of graphs (Figure 1) illustrate the results of the analyses.  Modern Democratic presidents are associated with lower unemployment (upper left panel), higher economic growth (upper right panel), and lower budget deficits (or higher surpluses; lower right panel).  Modern Democratic and Republican presidents have had statistically indistinguishable inflation (lower left panel).  Details of the analyses follow.

economy boxplots
Figure 1.  Box plots of economic performance data, 1960-2011.  Data compiled from the 2012 Economic Report of the President, www.gpoaccess.gov/eop/index.html.

The analyses.

I assembled the data set (printed in full below) from the "2012 Economic Report of the President." The report is available online:

www.gpoaccess.gov/eop/index.html   (Tables B-42, B-4, B-63, B-79)

Six variables are in the data set:

YEAR (1960-2011)  I started the data in 1960, as a sort of general
beginning to the "modern" government/budget/economic era.

UNEMPL  Civilian unemployment rate, in percent.

GDPGR  GDP growth, as percent change, over previous year, in the real gross
domestic product.

INFLAT  Inflation, as percent change in special consumer price index, December to
December.

SURPLUS surplus (positive) or deficit (negative) in federal budget, as
percent of gross domestic product.

PARTY political party of president responsible for that budget year,
R=Republican, D=Democratic.

One of the most important things that a president does to influence the economy is prepare/propose/haggle/& eventually sign, a federal budget. The federal budget in the first year of a president's term is set by the president in the previous year, so I used one year as a time lag. For instance, Kennedy took office in January, 1961, but he had effectively no budgetary influence until the new federal fiscal year began in the following October. Thus, I assigned 1961 as a Republican year as well.

The idea for this data set came from Michael Kinsley, writing for the Los Angeles Times, in an opinion column published in August, 2004.  He took some of these variables and calculated the means of each variable within each party and compared them.  He did not account for the variability in the data nor did he attempt any valid statistical inferences.  For instance, just because the mean unemployment under Democratic presidents was smaller than that under Republican presidents does not mean that the result was unlikely to have happened under chance alone.

The graphs in Figure 1 above are "box plots" (sometimes called "box-and-whisker plots") for each variable, broken down by party.  In each box, the middle thick horizontal line is the median, the lower and upper ends of the box are the 25th and 75th percentiles, and the ends of the "whiskers" show the locations of the lowest and highest values in the data.  The displays are nice ways to display the centers as well as the variability (spread) of data sets (box-and-whisker plots were one of the many clever inventions of the pioneering statistician John Tukey).

The means (not the same as the medians) are not shown in Figure 1.

Here are the statistical analysis results in a nutshell:

Figure 1, upper left panel.  Democratic presidents have been associated with lower unemployment.  The difference in the unemployment distributions is statistically significant, that is, a difference this extreme is highly unlikely to have resulted by chance (two-sample Wilcoxon test, P=.01, two-sample t-test, P=.03).

Figure 1, upper right panel.  Democratic presidents have been associated with higher GDP growth than Republican presidents.  The difference is statistically significant (Wilcoxon P=.05, t-test P=.03).

Figure 4, lower left panel.  Democratic presidents have been associated with slightly lower median inflation and slightly higher mean inflation.  The differences, however, are not statistically significant (Wilcoxon P=.36, t-test P=.85).

Figure 1, lower right panel.  Democratic presidents have been associated with higher budget surpluses (or lower deficits).  The difference is statistically significant (Wilcoxon P<.01, t-test P=.03).

Each "P-value" reported above is the probability that the observed differences in the data between Republican and Democratic presidents would be as extreme if the R and D data were arising from identical distributions.  The t-test results assume that the underlying distributions of data are normal symmetric bell-shaped curves, while the Wilcoxon results make far less restrictive assumptions (but are not quite as powerful for detecting differences).

Interpretation.

We can begin to construct hypotheses about why US economic variables do better under progressive federal budgets as opposed to conservative budgets.  Progressive budgets tend to spread federal revenues among lower and middle income government employees, lower and middle income entitle-ees, and more numerous federal projects distributed more widely.  The federal revenues are thus spent in communities more locally, contributing to local economies.  Conservative budgets by contrast tend to concentrate revenues among rich cronies (defense contractors, for-profit health, for-profit education, etc.).  Most importantly, conservative budgets do not lower deficits.  Rather, conservatives have not been able resist the temptation to transfer federal revenues in various ways to their donor-clients, the investor class.   Federal revenues do little to aid US economic health when languishing in offshore accounts.

Prevailing economic theories frequently have the actual scientific status of untested hypotheses and are based on assumed but potentially unreliable models of how the world must work.  The economic assertions are handed down as received wisdom in economics textbooks.  The economic dogmas of right-wing politicians (and many college economics courses) in fact are failing empirically.  How many times have we heard "Governments don't create jobs"?  "Increased employment produces inflation"?  "Reduced government promotes growth of the private sector"?  

The data.

The data, which are updated in a new report every year, served well as the basis for an assignment in the college statistics course that I teach.  The data for the recent years in any given yearly report are usually preliminary and can change slightly in subsequent reports as the information becomes settled.

YEAR   UNEMPL  GDPGR  INFLAT  SURPLUS  PARTY  
1960       5.5        2.5        1.4        0.1        R
1961       6.7        2.3        0.7       -0.6        R
1962       5.5        6.1        1.3       -1.3        D
1963       5.7        4.4        1.6       -0.8        D
1964       5.2        5.8        1.0       -0.9        D
1965       4.5        6.4        1.9       -0.2        D
1966       3.8        6.5        3.5       -0.5        D
1967       3.8        2.5        3.0       -1.1        D
1968       3.6        4.8        4.7       -2.9        D
1969       3.5        3.1        6.2        0.3        D
1970       4.9        0.2        5.6       -0.3        R
1971       5.9        3.4        3.3       -2.1        R
1972       5.6        5.3        3.4       -2.0        R
1973       4.9        5.8        8.7       -1.1        R
1974       5.6       -0.6      12.3       -0.4        R
1975       8.5       -0.2        6.9       -3.4        R
1976       7.7        5.4        4.9       -4.2        R
1977       7.1        4.6        6.7       -2.7        R
1978       6.1        5.6        9.0       -2.7        D
1979       5.8        3.1      13.3       -1.6        D
1980       7.1       -0.3      12.5       -2.7        D
1981       7.6        2.5        8.9       -2.6        D
1982       9.7       -1.9        3.8       -4.0        R
1983       9.6        4.5        3.8       -6.0        R
1984       7.5        7.2        3.9       -4.8        R
1985       7.2        4.1        3.8       -5.1        R
1986       7.0        3.5        1.1       -5.0        R
1987       6.2        3.2        4.4       -3.2        R
1988       5.5        4.1        4.4       -3.1        R
1989       5.3        3.6        4.6       -2.8        R
1990       5.6        1.9        6.1       -3.9        R
1991       6.8       -0.2        3.1       -4.5        R
1992       7.5        3.4        2.9       -4.7        R
1993       6.9        2.9        2.7       -3.9        R
1994       6.1        4.1        2.7       -2.9        D
1995       5.6        2.5        2.5       -2.2        D
1996       5.4        3.7        3.3       -1.4        D
1997       4.9        4.5        1.7       -0.3        D
1998       4.5        4.4        1.6        0.8        D
1999       4.2        4.8        2.7        1.4        D
2000       4.0        4.1        3.4        2.4        D
2001       4.7        1.1        1.6        1.3        D
2002       5.8        1.8        2.4       -1.5        R
2003       6.0        2.5        1.9       -3.4        R
2004       5.5        3.5        3.3       -3.5        R
2005       5.1        3.1        3.4       -2.6        R
2006       4.6        2.7        2.5       -1.9        R
2007       4.6        1.9        4.1       -1.2        R
2008       5.8       -0.3        0.1       -3.2        R
2009       9.3       -3.5        2.7     -10.1        R
2010       9.6        3.0        1.5       -9.0        D
2011       8.9        1.7        3.0       -8.7        D

Originally posted to Dr of Chaos on Wed Oct 24, 2012 at 08:00 AM PDT.

Also republished by Community Spotlight, Systems Thinking, and In Support of Labor and Unions.

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Comment Preferences

  •  While neither is what I'd call good for the 99% (2+ / 0-)
    Recommended by:
    koNko, caul

    Democrats are obviously better.

  •  Not to be annoying (2+ / 0-)
    Recommended by:
    koNko, bmcphail

    Because this is great work, but since the data are a time series doesn't autocorrelation inflate the apparent power of the Wilcoxon tests?  It's been a decade or so since I've done this kind of business though

    This has been a golden age for confirmation bias. - David Brooks http://www.nytimes.com/2012/10/23/opinion/books-poll-addict-confesses.html

    by Mindful Nature on Wed Oct 24, 2012 at 08:30:04 AM PDT

  •  President Clinton Convention Speech (6+ / 0-)

    indicated all the same points.

    •  from 2004, I remember a similar analysis, (1+ / 0-)
      Recommended by:
      caul

      with graphs, looking at employment, stock market, GDP growth, I think inflation, under Democratic vs Republican presidencies.

      But it included party control of the House and of the Senate, as well. (Makes sense, e.g. if a President has no support in Congress, harder to enact his policies.) Wish I could find the link. I think he updated it for 2008, not sure. Mainly BLS, Treasury, and US Statistical Abstract data, as I recall.

  •  GDP growth, (1+ / 0-)
    Recommended by:
    caul

    Employment and inflation are real and significant indicators.  The "Surplus" is a meaningless bunch or drivel!  It is a resultant of the other objectives and should only result when there is too much aggregate demand.  Seen any of that in the last 20 Years?

  •  Not a fan of this kind of framing (0+ / 0-)

    I think we all recognize that a President only has so much control over a budget and an economy.  There's Congress, world events, and decisions and policy from previous governments that affect things.

    I think we also recognize that this sort of simplistic view of things ("Under President X this happened with the economy") gets far too much weight with the relatively uninformed public and perhaps also with those who should know better.

    This sort of analysis might be useful in trying to counterargue the people who take that simpler view, or who try to lie about or fudge the facts around it.  But I also hope that we are not drinking our own Kool-Aid on this.  It's bad enough that conservatives have gotten so gorged from their own Kool-Aid addiction without progressives going down the same path.

  •  I just called Bernie Sanders office. (1+ / 0-)
    Recommended by:
    caul

    (Even though I'm from Washington State. They're the only ones I can get a straight answer from.) We are facing 4 trillion in cuts if we face sequestration, 2 trillion if they make a deal, most of it affecting the middle to lower classes including a possible raising of the Medicare age to 67 if Obama gets his "Grand Bargain." The aide on the phone said there was no legislative way around this. So
    it looks like Democrats are no longer interested in spreading " federal revenues among...lower and middle entitile-ees,..." But are now pursuing Republican 1%policies.

    "...on the (catch a) human network. Cisco."

    by hoplite9 on Wed Oct 24, 2012 at 12:39:39 PM PDT

  •  PLEASE! Surplus is NOT a positive for the economy (2+ / 0-)
    Recommended by:
    Dinclusin, caul

    A government surplus will ONLY occur in the presence of either a trade surplus or a private sector deficit. The federal government surpluses from 1998 to 2001 occurred at the same time we were running huge trade deficits. Consequently, the US private sector went into massive debt. After the Bush tax cuts there were a few quarters of private sector saving, then massive debt again accumulating from 2004 to the crash. See graph.

    After the crash huge deficit spending again went into private sector surpluses, but by the time of the crash private debt was 500% GDP (almost double what it was going into the great depression).

    If progressives would understand a few things, we could have a real debate about the economy, but the current state of affairs is hawkishly wrong vs dovishly wrong. It's pathetic when everyone who's supposed to be on your side babbles incomprehensibly about such an important topic.

    Understand this:

    1) Federal Deficits drive private wealth.
    2)The national debt consists entirely of the government's exclusive obligation to accept dollars (and only dollars) to discharge tax liabilities. Look at a dollar bill, read what it says. That is the government's only guarantee. It also has a legal tender provision, but that for private debt and is really irrelevant to this argument.
    3)If you hold a US Treasury bond (like China) the government makes two guarantees. a) It will pay the promised interest in dollars (the same dollars it creates at will); and b) it will be redeemed for dollars, whereupon the government will accept those same dollars in payment of tax liabilities. So when China calls our debt, we give them dollars for the bonds, we stop paying them interest, they have huge pile of paper that guarantees them the right to extinguish their US Tax liabilities, and we have huge piles of iPads and flatscreen TV's. We should be scared of this? Are you insane? Are they? Is suicide a viable threat from an adversary?
    4)Every other use of the dollar in commerce is custom, legal tender laws notwithstanding.
    5)The government does not borrow money, it issues money, it creates it by spending it into existence, often taking a private asset in exchange. The government sells bonds to satisfy the private sector's desire to save in interest bearing instruments, the government imposes taxes to insure the value of monetary instruments and support interest rates in the private market. Wealth.

  •  Interesting (1+ / 0-)
    Recommended by:
    caul

    A big difficulty is counting when a president's influence on the economy starts. You assume October 1st (the beginning of the first fiscal year of a president). However, one could argue that George W. Bush's influence began much earlier because his stimulus plan took effect much before Oct. 1, 2001.  Also, does anticipation of economic policy affect economic behavior? Another question is whether changes in unemployment rates is a better measure for your purposes than the absolute unemployment rate.

  •  Nice work. But similarly (1+ / 0-)
    Recommended by:
    caul

    convincing data exists in mountainous quantities.  See the end of the diary here.

    Thanks for adding yet another quality analysis confirming this truth.

    The ...Bushies... don't make policies to deal with problems. ...It's all about how can we spin what's happening out there to do what we want to do. Krugman

    by mikepridmore on Wed Oct 24, 2012 at 04:26:30 PM PDT

  •  And yet teabag billionaires vote against them! (1+ / 0-)
    Recommended by:
    caul

    Despite the fact their companies flourish... but I guess how well their companies do is not as important as getting that tax cut!

    Rick Perry - the greatest scientist since Galileo!

    by Bobs Telecaster on Wed Oct 24, 2012 at 04:39:41 PM PDT

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