The Sad History of Trusting the GOP on the Economy
The bad news just keeps coming for Democrats. A new NBC/Wall Street Journal poll gives the GOP a record 9-point edge in the generic Congressional ballot for November. Meanwhile, an ABC News/Washington Post survey shows that as President Obama's approval ratings continue to slide, support for his management of the economy and the deficit are lower still. More disturbing still, for the first time since 2002, Americans trust Republicans more (43% to 39%) than Democrats to direct the economy.
Should those trends continue through the midterms elections, the results would be catastrophic not just for the Democratic Party, but for the United States as a whole. Because as the historical record shows, when it comes to employment, GDP growth, personal income, stock market performance, budget deficits and virtually any other indicator of the health of American capitalism, the economy almost always does better under Democrats.
To be sure, George W. Bush provided the perfect bookend to era of modern Republican economic management ushered by Herbert Hoover. The verdict on President Bush's reign of ruin was pronounced even before Barack Obama took the oath of office. January 9, 2009, the Republican-friendly Wall Street Journal summed it up with an article titled simply, "Bush on Jobs: the Worst Track Record on Record." (The Journal's interactive table quantifies his comparative failure.) Just days after the Washington Post documented that George W. Bush presided over the worst eight-year economic performance in the modern American presidency, the New York Times on January 24 featured an analysis ("Economic Setbacks That Define the Bush Years") comparing presidential performance going back to Eisenhower. As the Times showed, George W. Bush, the first MBA president, was a historic failure when it came to expanding GDP, producing jobs and fueling stock market growth.
But it was the release of a Census Bureau report in September ("Income, Poverty, and Health Insurance Coverage in the United States: 2008") which in 67 pages laid bare the economic devastation and human toll during the Bush presidency. As The Atlantic ("Closing The Book On The Bush Legacy") rightly noted, "It's not a record many Republicans are likely to point to with pride":
On every major measurement, the Census Bureau report shows that the country lost ground during Bush's two terms. While Bush was in office, the median household income declined, poverty increased, childhood poverty increased even more, and the number of Americans without health insurance spiked. By contrast, the country's condition improved on each of those measures during Bill Clinton's two terms, often substantially.
This table (via The Reaction) provides a horrifying snapshot of the scope of the national calamity under George W. Bush:
The extent of the failure by Jeb's brother was particularly glaring when it came to employment and job creation. The dismal 3 million jobs created under President Bush didn't merely pale in comparison to the 23 million produced during Bill Clinton's tenure. As the reliably Republican Wall Street Journal summed up its interactive table on the subject, "Bush on Jobs: The Worst Track Record on Record." In September 2009, the Congressional Joint Economic Committee charted Bush's job creation disaster, the worst since Hoover:
Sadly for the Republican message machine, the GOP's pitiful record on the economy isn't limited to Bush 43. History shows that from GDP growth and job creation to managing the national debt and producing gains for investors, it is the Democratic Party which is the friend of Wall Street and Main Street alike.
As the New York Times detailed in January, across almost every indicator (article here, charts here), Democrats outperformed their Republican counterparts:
For the investor class so fond of perpetuating the myth of Republicans' superior economic stewardship, the collapse of the stock marketing during the Bush recession must be particularly galling. The Standard & Poor's 500 spiraled down at annual rate of 5.6% during Bush's time in the Oval Office, a disaster even worse than Richard Nixon's abysmal 4.0% yearly decline. (Only Herbert Hoover's cataclysmic 31% plunge makes Bush look good in comparison.)
As it turns out, as the New York Times also showed in October 2008, the Democratic Party "has been better for American pocketbooks and capitalism as a whole." To make its case, the New York Times asked readers to imagine having put their money where its mouth is. Contrary to Republican mythology, Americans fare better - much, much better - under Democratic administrations:
As of Friday, a $10,000 investment in the S.& P. stock market index would have grown to $11,733 if invested under Republican presidents only, although that would be $51,211 if we exclude Herbert Hoover's presidency during the Great Depression. Invested under Democratic presidents only, $10,000 would have grown to $300,671 at a compound rate of 8.9 percent over nearly 40 years.
As the broader record shows, the best path to prosperity is to elect Democratic presidents.
The superior performance of Democratic presidents covers virtually the entire spectrum of economic indicators. As Elliott Parker of the University of Nevada, Reno detailed in a 2006 paper, since 1949 Democratic administrations have done better than Republican ones when it comes to unemployment (5.2% to 6.0%), job creation (-.0.4% decrease in unemployment, compared to 0.3% increase), GDP growth rate (4.2% to 2.9%), and even corporate profits as a share of GDP. And to be sure, he found the Dow benefits from Democrats in the White House.
There's no shortage of studies to show that stock market returns are higher under Democratic leadership. (As it turns out, Wall Street's performance is also better when Democrats control Congress.) In 2000, Pedro Santa-Clara and Rossen Valkanov of UCLA's Anderson School of Business concluded that "that the average excess return in the stock market is higher under Democratic than Republican presidents - a difference of 9 percent per year for the value-weighted portfolio and 16 percent for the equal-weighted portfolio." As the New York Times noted of UCLA study in 2003:
"It's not even close. The stock market does far better under Democrats...
...Professors Santa-Clara and Valkanov look at the excess market return - the difference between a broad index of stock prices (basically the Standard & Poor's 500-stock index) and the three-month Treasury bill rate - between 1927 and 1998. The excess return measures how attractive stock investments are compared with completely safe investments like short-term T-bills.
Using this measure, they find that during those 72 years the stock market returned about 11 percent more a year under Democratic presidents and 2 percent more under Republicans - a striking difference."
In 2002, Slate similarly concluded that "Democrats, it turns out, are much better for the stock market than Republicans":
Slate ran the numbers and found that since 1900, Democratic presidents have produced a 12.3 percent annual total return on the S&P 500, but Republicans only an 8 percent return. In 2000, the Stock Trader's Almanac, which slices and dices Wall Street performance figures like baseball stats, came up with nearly the same numbers (13.4 percent versus 8.1 percent) by measuring Dow price appreciation. (Most of the 20th century's bear markets, incidentally, have been Republican bear markets: the Crash of '29, the early '70s oil shock, the '87 correction, and the current stall occurred under GOP presidents.)
According to almanac editor Jeffrey Hirsch, the presidential party figures are among the most significant he's found. If the stock market were random, we'd expect such a result only one-quarter of the time. "I don't know why people are convinced Republicans are good for the stock market," Hirsch says.
Why? Because Republicans and their water carriers continue - with great success - to perpetuate the myth that the regulation-free policies of the GOP that so benefit them personally somehow help the American people overall. Given that the national debt tripled under Ronald Reagan and doubled again under George W. Bush, it's no wonder Dick Cheney famously declared:
"Reagan proved deficits don't matter."
Not, apparently, until a Democrat is in the White House.
With the economy plagued by persistent unemployment and sluggish growth, voters inevitably will punish Democrats in November. Until then, conservatives will accuse Barack Obama of being a "socialist", a "communist" or worse. But everyone would well to remember the words of Harry Truman, as true today as when he uttered them generations ago:
"If you want to live like a Republican, vote Democratic."