[From Rick Marken (2004.08.13.1313)]
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···
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I'm posting a brief article by Michael Kinsley, who is currently the editor
of the LA Times Op/Ed page. Apparently Kinsley likes to spend his spare
time the way I do, looking at data. In this case, Kinsley uses data from the
President's Economic Report to see how well the economy does under
Democratic vs Republican administrations.
What Kinsley finds seems to contradict the truism that Republicans are
better for the economy than Democrats. Of course, that depends on what one
considers a "better" economy to be. But in terms of standard measures like
growth, unemployment and inflation, the economy has done better (higher
growth, lower unemployment, lower inflation) under Democrats than under
Republicans. Several years ago there was another article that showed that
even the stock market fared better under Democrats than under Republicans,
even when the Hoover administration was eliminated.
These kinds of observations make me wonder where these economic "truisms"
come from. They certainly don't seem to come from looking at the data. When
you look at the data you find that, contrary to other truisms, investment
does not actually lead to growth, high taxes do not actually suppress growth
and the Fed funds rate has virtually no effect on growth. So where do these
truisms come from?
At least the basic truisms of psychology are based on observation. The idea
that stimulus causes responses is based on observations such as the patellar
and other reflexes; the idea that behavior is strengthened by rewards
(reinforcements) is based on the observed tendency for animals to repeat
rewarded behaviors (the basis of animal training). PCT doesn't deny the
observations; it simply denies the _explanations_ of the observations. But
in economics it seems that, in many cases, we have explanations for
observations that don't actually exist.
Best
Rick
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Democrats vs. the GOP: Do the Math
Michael Kinsley
COMMENTARY
You know how sometimes, when it's really, really hot, you get this urge to
crank up the old spreadsheet, download a bunch of numbers from the Web and
start crunching away like there's no next fiscal year?
Me neither. But I did spend a bit of the past week watching the Democratic
convention on TV, and I needed something to exercise my mind while that was
going on. Convention season is the one time every four years when we pretend
that political parties matter. In general, we have accepted the reality that
campaigns for national office have become entrepreneurial, united more by
shared political consultants than by old-fashioned parties.
So I thought I'd see if there was a difference between the parties that
transcended the differences between the candidates. Is one of them, for
example, a better steward of the economy? One year won't tell you much, or
even one administration. But surely differences will emerge over half a
century or so, if they exist.
With that thought, I headed for the Web. Specifically, I went to the charts
attached to the President's Economic Report, released in February. There, I
downloaded like a madman and then distilled the mess into a few key stats.
The figures I'm using are from 43 years, 1960 through 2002. I didn't choose
the years in order to skew the results; these are the years that were
available for the categories I wanted to include.
The results are pretty interesting. Maybe presidents have little power over
the economy. And we know that they must fight with Congress over the budget.
Still, elections are based on the premise that who you vote for does matter.
So let's at least entertain that assumption for a few minutes.
It turns out that Democratic presidents have a much better record than
Republicans. They win in a head-to-head comparison in almost every category.
Real growth averaged 4.09% in Democratic years, 2.75% in Republican years.
Unemployment was 6.44%, on average, under Republican presidents, and 5.33%
under Democrats. The federal government spent more under Republicans than
Democrats (20.87% of GDP, compared with 19.58%), and that remains true even
if you exclude defense (13.76% for the Democrats, 14.97% for the
Republicans).
What else? Inflation was lower under Democratic presidents (3.81% on
average, compared with 4.85%). And annual deficits took more than twice as
much of GDP under Republicans than Democrats (2.74% of GDP versus 1.21%).
Republicans won by a nose on government revenue (i.e., taxes), taking 18.12%
of GDP, compared with 18.39%. That, of course, is why they lost on the size
of the deficit.
Personal income per capita was also a bit higher in Republican years
($16,061 in year- 2000 dollars) than in Democratic ones ($15,565). But that
is because more of the Republican years came later, when the country was
more prosperous already.
There will be many objections to all this, some of them valid. For example,
a president can't fairly be held responsible for the economy from the day he
takes office. So let's give them all a year. That is, let's allocate each
year to the party that controlled the White House the year before. Guess
what? The numbers change, but the bottom-line tally is exactly the same:
higher growth, lower unemployment, lower government spending, lower
inflation and so on under the Democrats. Lower taxes under the Republicans.
But maybe we are taking too long a view. The Republican Party considers
itself born again in 1981, when Ronald Reagan became president. That's when
Republicans got serious about cutting taxes, reducing the size of government
and making the country prosperous. Allegedly. But doing all the same
calculations for the years 1982 through 2002, and giving each president's
policies a year to take effect, changes only one result: The Democrats pull
ahead of the Republicans on per capita personal income.
As they say in the brokerage ads, past results are no guarantee of future
performance.
--
Richard S. Marken
MindReadings.com
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