The Economy and Politics

Many Americans feel like they are victims of a slow-moving disaster

–David Brooks, NY Times, Feb 16, 2016

Political guru, James Carville, said this about presidential politics: “It’s the economy, stupid!” The party in power claims credit when the economy is doing well, and gets blamed when it sucks. Many, and maybe most voters believe the president’s policies significantly affect the economy.

They are wrong, but that doesn’t stop them from voting for the man or woman they think will either keep the good times rolling or bring them back. So, while Carville’s take is politically shrewd, the reality is that research of extended periods of history shows that economic growth during Republican administrations is virtually indistinguishable from that of Democrats.

In a 2013 paper, Professors Alan S. Blinder and Mark W. Watson of Princeton University investigated the difference in average annual real GDP growth under Republican and Democrat presidents. Since 1947, the economy grew an average of 1.81% more per year when the president was a Democrat. But, the performance gap narrowed considerably when extending the study back to 1856, the first year in which Republicans and Democrats competed against each other in presidential politics.

Averaging out the entire period, eliminating the outliers-the four year presidential terms with the highest and lowest growth from both parties, the average GDP growth under Republican presidents becomes 3.53% vs. 3.52% for Democrats, not enough to worry about.

Blinder and Watson concluded that the differences in economic performance under the two parties were largely due to factors that “look a lot more like luck than good policy.

This reality should be interesting to anyone who is tired of the political circus the nation has been subjected to this year. The Elliott Wave forecast is that whoever is elected will preside over a historic collapse in stock prices and the economy. Bob Prechter suggests that, “Now, more than ever, you should vote for the person you hope will take the blame for those events.”

Makes it easy to pick your poison, doesn’t it?

Cheers,

Rod

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