Does the Economy Really Perform Better Under Democratic Presidents?

Responding to the failures of Enron and Worldcom within six months of each other, failures that didn’t spook the markets much at all, President George W. Bush zestily signed into law Sarbanes-Oxley (legislation that most certainly did spook the markets), thus criminalizing failure in an economy that had long derived its dynamism from – you guessed it – a lack of barriers to the decline of corporations no longer meeting or leading the needs of customers.

Even though government spending is the ultimate tax on growth (this is not a comment on deficits, which both sides needlessly waste time on when the other Party is in power), Bush was seemingly allergic to vetoes of enormous government-spending bills, he reversed the Reagan-Clinton emphasis on a strong, stable dollar that had been such a major driver of economic vitality in the ‘80s and ‘90s, plus when banks and investment banks began to go belly-up in 2008 (arguably symptoms of the Bush Treasury’s confusion about dollar-price stability), the rhetorically “free market” Bush claimed the markets weren’t working on the way to bailouts that logically caused the “financial crisis,” as opposed to staving off market mayhem.

Bush’s unsuccessful presidency always comes to mind every four years, and when Republicans and Democrats claim the economy does much better when their party controls the White House. It’s a discussion that elevates neither side, and not because policy doesn’t matter. The reality is that good and bad individuals with good and bad ideas occupy the White House, after which part of the success or failure of individuals has much to do with how cooperative (or rather crucially, uncooperative) Congress is toward the president in office. Bush can be given a little leniency here with the latter in mind.

While his awful dollar policy was all his, Sarbanes-Oxley was passed near unanimously in the House and Senate. Considering TARP, the bank bailout bill that morphed into so much more, many more Democrats voted for it than Republicans.

This is important in consideration of the economic portion of Barack Obama’s presidency that followed Bush’s. The economy had limping qualities much of the time. However, looming large in the weakness of the Obama economy were the bailouts signed into law by George W. Bush, but that were overwhelmingly supported by Democrats in Congress.

Obama had his own errors for sure, including the passage of the misnamed Affordable Care Act (Obamacare), but the stock market did pretty well as his presidency wore on. Was this Democratic policy? Arguably no. Lest readers forget, the legislative portion of Obama’s presidency (2009-2017) largely ended in 2010 after the electorate, presumably chastened by Obama’s lefty lurch (after running a centrist campaign), handed control of Congress back to the Republicans. In 2014, the GOP took control of the Senate too.

Obama’s presidency is useful to think about when making comparisons between Ronald Reagan and Bill Clinton. Using the charitably worthless measurement that is Gross Domestic Product (GDP), the Reagan economy averaged annual growth of 3.5%, while Clinton was near 4%. The stock market soared under both too, but more under Clinton. Ok, so both GDP and the stock market favor Clinton and the Democrats? Not so fast.

It’s easily forgotten that Clinton, like Obama, lost Congress in the mid-term elections, and after tax increases in concert with an attempt to nationalize healthcare. Clinton later admitted regret about the tax hikes (maybe explaining Obama’s decision to extend Bush’s tax cuts), plus famously proclaimed subsequent to the GOP’s taking of Congress that “the era of big government is over.” As Democratic historian Richard Reeves observed about Clinton’s presidency, it was Reagan’s third term.

With Republicans in control of Congress while Clinton was in the White House, welfare reform was signed into law, a capital gains tax cut was passed, after which divided government invariably keeps a lid on major legislation meant to expand government. It’s worth adding that to Clinton’s everlasting credit, he replaced weak-dollar Treasury secretary Lloyd Bentsen with Robert Rubin. This was a big deal.

Still, it’s useful to consider a Clinton presidency that in so many ways mimicked Reagan’s in the eyes of Democrats, all the while considering the role of GOP’s takeover of Congress in Clinton’s makeover. What if Reagan had similarly enjoyed a GOP congressional majority?

It’s worth asking mainly because in judging the individual in the White House, you can’t judge them solely on their actions. What about the Congress in opposition or supporting them? Democrats like Clinton and Obama plainly prospered more than they otherwise would have thanks to Republicans in majority opposition.

Pivoting to Donald Trump, stocks and the economy generally did well during his presidency with a mix of good (de-regulation, exiting of the Paris Accord, ok tax cuts) and bad (tariffs) decisions, only for stocks and the economy to plummet in March of 2020. Think the lockdowns following political panic over the coronavirus. It was then that Trump went against type and supported freedom, economy, and logic-trampling government control. The economic collapse under Trump towards the end of his presidency obviously compromises the numbers leading up to March of 2020, at which point Trump and Republicans are awful at economic policy? Not so fast once again. Without excusing Trump’s mindless actions for even a second, let’s never forget that Democrats supported this hideous lurch from sanity exponentially more than allegedly virus-denying Republicans.

This is important in consideration of the Biden presidency that followed. While Democratic governors were only too happy to oversee lockdowns in the states they ran, and while mouthbreathing Republican governors locked down late while “unlocking” early to the disdainful horror of double-masked Dems, the total discredit of lockdowns in GOP-led states set the stage for eventually all U.S. states ending what was so inhumane, unhealthy, and inimical to growth. Yet it’s “Biden’s” economic growth now?

Hopefully readers see the point. Prosperity under Democratic presidents was so often aided by the GOP’s more routine embrace of limited government and freedom, while horrendous errors by GOP presidents (2008 bailouts, 2020 lockdowns) were embraced much more by Democrats than Republicans. Which means it’s overwhelming fallacy for Democrats to claim a “clear” relationship between their policies and growth.

At the same time, Republicans should be looking inward too. As evidenced by the not-infrequent economic success of Democratic presidents, there’s a case to be made that the GOP does the most for freedom and for growth when they’re out of the White House, and aggressively restraining the Democrats from being – yes – Democrats.

Author

  • John Tamny

    John Tamny is a popular speaker and author in the U.S. and around the world. His speech topics include "Government Barriers to Economic Growth," "Why Washington and Wall Street are Better Off Living Apart," and more.

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