Economy Grows Faster under Democratic Presidents…and Corporations Make more Profits

Friday, August 08, 2014
Average annual GDP growth by president

From better economic growth to higher corporate profits, America thrives more under Democratic presidents than Republican ones, according to a new study.

 

Economists Alan Blinder and Mark Watson at Princeton University examined the U.S. gross domestic product (GDP) and other important economic indicators from the 1940s to now. They concluded that the country has been better off, economically speaking, with Democrats in the White House.

 

They reached this conclusion after determining that the combined years of having Democrats in the Oval Office resulted in average annual GDP of 4.35%.  Under GOP presidents, growth was only 2.54% annually. “It is clear at a glance that GDP growth rises when Democrats get elected and falls when Republicans do,” the report said.

 

Blinder and Watson also pointed out in their paper that under Democratic presidents, there were fewer quarters of recession, more job creation, better unemployment figures and more earnings for big business.

 

“The corporate profit share of gross domestic income was also higher under Democrats: by 5.6% versus 4.7%,” the report said. “Though business votes Republican, it prospers more under Democrats.”

 

Oh, and those deficits that Republicans like to rail about? “The structural federal budget deficit has been, on average, smaller under Democratic presidents (1.5% of potential GDP) than under Republican presidents (2.2% of potential GDP), although the difference is far from statistically significant,” the report said.

 

However, even some prominent Democrats aren’t putting too much stock in the report’s findings. Jared Bernstein, who was formerly Vice President Joe Biden’s economic advisor, wrote in The New York Times: “But as difficult as this may be in such partisan times, I wouldn’t push any of this too far. In fact, in a career of data analysis—in which I’ve made thousands of tables and graphs plotting changes over time—I cannot recall one that compared presidential terms. That’s because they are swamped by the business cycle—the booms and busts that are far more obvious and dramatic movers of the economy.”

 

Be that as it may, previous studies have shown that, over the last 50 years, the stock market has also performed better under Democratic presidents.

-Noel Brinkerhoff, Steve Straehley

 

To Learn More:

Presidents and the U.S. Economy: An Econometric Exploration (by Alan S. Blinder and Mark W. Watson, Princeton University) (pdf)

Luck and a Little Mystery: The Economy Grows Faster Under Democratic Presidents (by Jared Bernstein, New York Times)

Stock Market Does Better with Democratic Presidents (by David Wallechinsky, AllGov)

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