No, Republicans Are Not Better for the Economy

Taking on one of the dumbest and most persistent myths.

Since we’re in debunking mode…

If there’s one thing everybody knows, it’s that Republicans are better at managing the economy than the Democrats.

In poll after poll, the majority of voters will consistently tell you that they trust the Republicans more than the Democrats to manage the US economy, and it’s been that way for as long as I can remember. People vote for Republicans because they claim to be “fiscally responsible” and they think that Republicans will be better for the economy than Democrats.

The thing is, it’s simply not true. Not only is it not true, but it turns out to be the opposite of true. And not just by a little—but by a lot.

We’ve known this for some time. I can recall reading an article at least fifteen or twenty years ago already in Forbes Magazine—not exactly a bastion of far left thought—which went over a mountain of statistics pointing this out. That article has stuck with me ever since. And in the intervening years, the divergence has become even more profound.

They key things to take away are:

1. By every possible measure of macroeconomic performance—including those that affect the working class—the economy does better under Democrats than under Republicans.

2. It’s been that way for nearly a hundred years.

3. The difference is not small—it’s quite large. So large, in fact, that economists are at a loss to explain it.

4. No matter how you skew the statistics—time lags, factoring out things like recessions, oil shocks, or other unexpected events, etc.—the result still stands. There is no way to statistically massage it away.

5. This divergence is the same for Canada, but not for European countries.

6. Even Republicans and conservative think tanks acknowledge this is true—they just don’t talk about it.

So why does everyone think that Republicans are better for the economy?

The Evidence

While I couldn’t find the original Forbes article I read years ago, here is a more recent one (emphasis mine):

Trump said out loud the same thing that Hillary Clinton has asserted—and top academics and journalists have confirmed. The same thing I’ve been compiling cold, hard government data on since 1980: By crucial metrics like GDP, job creation, business investment and avoiding recessions, the economy does a lot better with Democrats in the White House than with Republicans. Just one eye-opening example: Nine of the last 10 recessions have been under Republicans…

It is simply a fact that since World War II, Democratic presidents have seen 24.4 million more jobs created on their watch—an average of 78.6% more jobs created per year of Democratic administrations—than have Republican presidents. Ditto real GDP growth, 44% higher under Democratic presidents. On the flip side, unemployment has been 18% higher under GOP presidents.

Democratic nominee Hillary and former President Bill Clinton have touted this dynamic—though not enough, in my opinion—and the non-partisan Politifact has vetted their comments. Take Bill Clinton’s line at the 2012 Democratic Convention: “Since 1961, for 52 years now, the Republicans have held the White House 28 years, the Democrats 24…. In those 52 years, our private economy has produced 66 million private-sector jobs. So what's the jobs score? Republicans 24 million, Democrats 42 [million].”

The Politifact verdict—and remember that folks love nothing better than slapping Bill Clinton with Pinocchios—“We rate his claim True.” Powerfull stuff.

Trump Is Right About One Thing: 'The Economy Does Better Under The Democrats' (Forbes)

The author of the above article touts a Web site he created which lists the many statistics that confirm this divergence:

https://presidentialdata.org/

Speaking at the most recent Democratic convention, the former president laid down another astonishing statistic: “Since the end of the Cold War in 1989, America has created about 51 million new jobs. I swear I checked this three times. Even I couldn’t believe it. What’s the score? Democrats 50, Republicans one.”

You know that the media would like nothing more than to discredit this and call Clinton a liar. Even the slightest error would get this labelled as “mostly false” or even “pants on fire” by the ostensibly neutral fact checkers. Yet even they were unable to refute it:

Most GOP-devastating statistic in Bill Clinton's DNC speech confirmed by fact checker (Raw Story)

A Web site put up by Congressional Democrats lists several of the same points:

• Of the seven presidents with the highest annual economic growth rate, five are Democrats. Conversely, five of the seven presidents with the lowest economic growth rate are Republicans.

• Of the seven presidents with the highest annual rate of job creation, six are Democrats. On the flip side, six of the seven presidents with the lowest job creation are Republicans.

• Most recently, President Biden has overseen 5.7% real GDP growth, the highest annual economic growth rate since 1984, and the creation of 7.4 million jobs.

President Biden Continues the Trend of Strong Economic Growth and Job Creation Under Democratic Presidents (Joint Economic Committee)

In fact, during his first term, Trump was the first president since the Great Depression to preside over a net loss of American jobs. Yet, astoundingly, he was considered to be “better on the economy” and “more trusted” to manage it according to voter polls during the 2024 election. Now, in fairness, a lot of those losses were due to the pandemic. But that didn’t stop him from taking credit for other pandemic-related statistics (such as low border crossings), nor did it prevent Joe Biden from being blamed for other pandemic-related circumstances (such as high inflation).

It’s also notable that every unified Republican government (Presidency, House and Senate) has led to a financial crash:

Every “Unified Republican Government” Ever Has Led to a Financial Crash (The Reformed Broker)

But if you want even more economic facts, a detailed study was done by two highly respected Princeton economists, Alan Blinder and Mark Watson. The paper was published in the peer-reviewed journal The American Economic Review. In summary:

The US economy has performed better when the president of the United States is a Democrat rather than a Republican, almost regardless of how one measures performance…The superiority of economic performance under Democrats rather than Republicans is nearly ubiquitous: it holds almost regardless of how you define success. By many measures, the performance gap is startlingly large…

Here’s an article about the study in Murdoch-owned The Wall Street Journal—again, not exactly a bastion of left-wing economics or pro-Democrat sentiment (emphasis mine):

The U.S. economy has performed better since World War II when the president is a Democrat rather than a Republican, two prominent Princeton University economists conclude. The reasons, they say, involve more luck than successful policies.

Over the past 64 years and 16 presidential terms, the U.S. grew at an average rate of 4.35% when a Democrat was in the White House and at a 2.54% when a Republican was, a gap the economists call "astoundingly large."

A similar partisan growth gap is seen in Canada, but they found no statistically significant difference between economic growth records of left and right governments in the U.K., France or Germany.

https://www.wsj.com/articles/BL-WB-42134 (paywalled)

Notice how they spin it by attributing it to ‘luck’ rather than policy given their editorial slant¹. But note that they—even they—do not deny the fact!

Somewhat less editorialized is this article from The New York Times about the same Princeton University study (emphasis mine):

A president has only limited control over the economy. And yet there has been a stark pattern in the United States for nearly a century. The economy has grown significantly faster under Democratic presidents than Republican ones.

It’s true about almost any major indicator: gross domestic product, employment, incomes, productivity, even stock prices. It’s true if you examine only the precise period when a president is in office, or instead assume that a president’s policies affect the economy only after a lag and don’t start his economic clock until months after he takes office.

The gap “holds almost regardless of how you define success,” two economics professors at Princeton, Alan Blinder and Mark Watson, write. They describe it as “startlingly large.”

Since 1933, the economy has grown at an annual average rate of 4.6 percent under Democratic presidents and 2.4 percent under Republicans, according to a Times analysis. In more concrete terms: The average income of Americans would be more than double its current level if the economy had somehow grown at the Democratic rate for all of the past nine decades. If anything, that period (which is based on data availability) is too kind to Republicans, because it excludes the portion of the Great Depression that happened on Herbert Hoover’s watch.

Why Are Republican Presidents So Bad for the Economy? (Internet Archive)

You can read the original academic paper by Blinder and Watson yourself:

https://pubs.aeaweb.org/doi/pdfplus/10.1257/aer.20140913

And here’s a report from the Economic Policy Institute which references the same paper and makes the same case:

Economic performance is stronger when Democrats hold the White House (EPI)

So the real mystery here is not which political party is better for the economy. The evidence here is overwhelming: the economy does far, far better under Democrats than Republicans, and this is true for as far back as we have reliable data. Rather, the real mysteries are:

1. Why does the economy do so much better under Democratic administrations? Even partisan academics have to admit that presidents only have so much control over the economy. According to conventional wisdom, the difference between which party controls the White House should not be this large. And yet it is.

2. Why does everyone believe the exact opposite?

Why is this the case?

While the original paper is mostly silent on the issue, the New York Times article speculates as to why this might be the case. For my part, I think their conclusions are basically correct.

It’s actually quite simple: Democratic administrations simply follow the conventional economic wisdom. This may seem surprising, given that conservatives tout themselves as the experts when it comes to economic affairs. But conventional centrist economics has known since the writings of John Maynard Keynes during the Great Depression that governments need to spend countercyclically in order to stimulate the economy in a downturn. That is, Democrats are willing to do more in a bad economy than are Republicans. In addition, redistributive and pro-labor policies lead to a stronger economy, since consumers have more money to spend. This means a better economy, even for the wealthy, who own most of what that money gets spent on.

Meanwhile, for the last fifty years, Republicans have focused on tax cuts, spending cuts (except for the military) and deregulation to manage the economy. While both parties have presided over large deficits, deficits under Democrats have been caused largely by stimulating the economy in a downturn, with good results. Republican deficits, by contrast, have been caused primarily by slashing tax rates on the wealthiest Americans and big corporations. The results show in the statistics.

Republican economic wisdom holds that tax cuts for rich people will cause them to spend and invest more, stimulating the economy. But a paper by the prestigious London School of Economics determined that trickle-down economics simply does not work:

The new paper, by David Hope of the London School of Economics and Julian Limberg of King's College London, examines 18 developed countries — from Australia to the United States — over a 50-year period from 1965 to 2015. The study compared countries that passed tax cuts in a specific year, such as the U.S. in 1982 when President Ronald Reagan slashed taxes on the wealthy, with those that didn't, and then examined their economic outcomes.

Per capita gross domestic product and unemployment rates were nearly identical after five years in countries that slashed taxes on the rich and in those that didn't, the study found.

But the analysis discovered one major change: The incomes of the rich grew much faster in countries where tax rates were lowered. Instead of trickling down to the middle class, tax cuts for the rich may not accomplish much more than help the rich keep more of their riches and exacerbate income inequality, the research indicates.

50 years of tax cuts for the rich failed to trickle down, economics study says (CBS News)

So which party is truly “economically conservative?” It constantly baffles me when people say they vote for Republicans because they are somehow more “economically conservative.” In addition, they never define what that term actually means.

This may be why there isn’t such a stark a divergence between Conservative and Liberal (Labor) parties in Europe and elsewhere. Most political parties overseas are much closer to the center—and to conventional economic wisdom—than the Republicans in the United States, who are more likely to base their policies on the writings of F.A. Hayek or Ayn Rand than on Keynes. Right-wing parties in the Americas tend to subscribe to a radical form of extreme libertarianism far outside mainstream economic thought, as the photo above illustrates (can anyone imagine the Prime Minister or Chancellor of Germany posing for a photo like this?).

There is no parallel for this in Europe where politicians are much more moderate and the wealthy have far less influence over politics and society than here. Republican leaders in the US have bought into the idea that we need to “balance the budget” and run government “like a business,” except that doesn’t work—government is not like a business, and the national debt is not like household debt.

In an important post, Blair Fix takes a look at partisan politics and the rise of extreme plutocracy in the United States. As with the studies above, he marshals a tremendous amount of evidence and statistics to back up his conclusions. He finds that Republican control of the legislature at every level of government is associated with increasing plutocracy and falling fortunes for the lower and middle classes everywhere. It’s a must-read:

On this partisan front, the historical backdrop is that for forty years, Republicans have been playing a political shell game. As Jay Michaelson puts it, Republicans “appear populist … but act plutocrat”. What’s disorienting is that this shell game has worked. Although Republicans have historically governed for the benefit of the rich, they have recently rebranded themselves (successfully, it seems) as the party of the working class.

Partisan Politics and the Road to Plutocracy (Economics from the Top Down)

So, not only is economic performance worse under Republicans, but the economy becomes more unequal, too. So why do people continue voting for them? Despite all of the evidence, polls consistently show that voters trust Republicans more than Democrats when it comes to the economy. Why is that?

As Fix notes in his post, Democratic control of legislatures weakens the drift toward plutocracy, but does not reverse it. This is key, and part of the problem with Democratic messaging and policies. We should—and must—do better.

Why don’t more people know this?

In a fascinating post, historian Heather Cox Richardson attributes the false belief that Republicans are better at managing the economy all the way back to the nineteenth century and the aftermath of the Civil War. Definitely read the whole post:

Part of Americans’ sour mood about the economy stems from the poor coverage all the good economic news has received. Part of it is that rising prices are more immediately obvious than the wage gains that have outpaced them. But a large part of it is the historic habit of thinking that Republicans manage the economy better than Democrats do.

That myth began immediately after the Civil War when Democrats demanded the government renege on the generous terms under which it had floated bonds during the war. When the Treasury put those bonds on the market, they were a risky proposition, but with the United States secure after the war, calculations changed, and Democrats charged that investors had gotten too good a deal…

October 11, 2024

But I find this hard to swallow. People still believe this myth because of events way back in the late 1800s? Really??? And surely the Great Depression under a Republican administration and the recovery under a Democratic one should have put that myth to rest, permanently.

No, I think the real reason is much simpler.

Business people and the wealthy tend to vote Republican, and since the average Joe assumes business leaders know that they’re doing, they think that voting for a Republican is “pro-business.” The “little guy”—who knows next to nothing about business, politics or economics—sees business people as economically hypercompetent, so he trusts them to run the nation’s economy despite all the evidence to the contrary. “The bosses vote for Republicans, so they must be good for business,” is the extent of his thinking.

It’s really as simple as that in my opinion.

But there’s a difference between being pro-business and being pro-market. Business people in the US are uniquely willing to trade a less functional economy for greater gains to themselves. This causes greater inequality—which is bad for business—but they don’t care. As long as they can get a larger share of a smaller economy, they will prefer this to a rising tide lifting all boats. The American wealth class has always despised labor and harbored antipathy toward the poors, and will gladly sacrifice economic prosperity to punish them, even at a loss to themselves. By contrast, the wealthy class in Europe does not have the same level of sociopathy, so they have no inherent problem with redistribution or government spending, and they invest more in human capital. Being pro-business in the US simply means being for plutocracy and looting, and not for economic growth or financial success.

Part of it is also due to anti-communist hysteria, I think. The Democrats are constantly depicted as “communists,” in the media, and low information voters eat it up. Even if that were true, then communists are apparently better at running the capitalist economy based on the data.

In other words, it’s all just marketing. Republicans market themselves as “pro business and “fiscally responsible,” just like banks are for “prudent lending,” oil companies are for “environmental stewardship,” fast food companies are for “healthy lifestyles,” and “your call is very important to us.” It’s just marketing. As Fix finds in his post above, voting for Republicans is highly correlated with a restrictive media diet consisting almost exclusively of Fox News and Facebook (i.e. the ‘Foxbook diet’).

Finally, the fact that the vast majority of people believe the exact opposite of what is objectively true based on the facts is a microcosm for pretty much everything wrong with American political discourse these days. And seemingly no amount of facts will change anyone’s mind. As always, the mind control ray will determine reality in the twenty-first century United States.

So, no, Republicans are not better for the economy. And they never have been. The next time someone tells you that, they are simply mistaken, or perhaps delusional. And the upcoming economic performance we’re about to experience will make this contrast even more stark.

P.S.: I was prompted to write this after seeing this headline: Trump Team Is Pivoting to No Pain, No Gain as Economic Message (Reddit, original article paywalled). As the top comment reads:

Tariffs. Wait, no. Ok yes. Now some. None on you though. Million percent on dairy! Taking a baseball bat to various federal agencies while blind folded. You’re fired. Wait, come back. No yes fired. Write what you did in the last 5 days. No don’t. Look! Gulf of America!

None of this looks like competence.

In fact, some people have even been speculating that Trump and Musk may be intentionally trying to crash the economy, and while that speculation may be way out on a limb (due to Hanlon’s razor), here is a rundown of the theory:

ADDENDUM: The day after I posted this: Stocks slide as Trump warns of US economy 'transition' (BBC). When will the myth about Republicans knowing how to manage the economy finally die off?

1. What the paper actually says: “Some, maybe all, of these might be considered blends of good policy and good luck. But our empirical analysis does not attribute any of the partisan growth gap to fiscal or monetary policy.” Given that the divergence is nearly fifty percent when it comes to GDP, that's some remarkable luck, indeed. If only the Democrats had that kind of luck with elections.