February 04, 2021
I came across an article on my NYT newsfeed which asked whether the economy has fared better under Democratic presidents or Republican presidents over the past century? They started saying the sensible answer might seem to be it is probably similar. After all, presidents have only limited control over the economy. Most of the millions of decisions every day are from consumers and business executives that shape economic growth, jobs, incomes, and stock prices. With the changing economics of a century, it seems logical that the economy would have performed similarly under Democrats and Republicans. What they found is that it has not. The economy has fared far better under Democrats and this gap is “startlingly large” (over 2% increase in growth).
Researchers have struggle to explain why there is a marked improvement under Democrats. The study did not even include Herbert Hoover who presided over the economic downturn of the Depression. Some suggest that while Republican presidents focus on tax cuts and incentives for the rich, Democrats instead focus on social programs and community infrastructure. While it is clear incentives for the rich do not trickle down to the poor, it is unclear whether incentives for the poor make any long-term difference in economic equality. While mere coincidence does play some role, it is highly unlikely to account for the entire gap, especially given its size, breadth, and duration.
The authors, Yaryna and Leonhardt, explored three plausible explanations. First, Republican presidents have been slow to respond to recessions and other crises. Second, Democratic presidents have been more pragmatic and willing to listen to the evidence about when the economy would benefit from deficit reduction and when it needs government support for infrastructure, scientific research, and education. Third, Republican presidents over the past 40 years have pursued one primary economic policy, tax cuts skewed toward the affluent that do not produce economic growth. Even with these possible explanations the research report ultimately concluded, “it appears to be a matter of luck.”
Thoughts: I am always amazed how the nations short-term economic gains seem to deflate over the long haul. The Gap we are experiencing is widening between the top 1% (earning over $531,000 per household per year) and the 40 million in poverty, or the 13.5 million unemployed. Some of the 1% have chosen to give large amounts of their wealth to world health and social causes. This comes as a gesture of hope and of concern. It reminds me of the movie, “Brewster’s Millions”, where a man found out how hard it was to spend $30 million in 30 days. Giving away a billion dollars might seem easier when it only leaves you with the other $120 billion. Economic inequality has been a recipe for disaster in other nations. Perhaps it is time for us to wake up. We need to pay attention to health. We need to follow the science. We need to do the work. Change is coming and it starts with you.