December 4, 2013
BETTER LUCKY THAN GOOD:
Why Does Economy Grow More Under Democratic Presidents? (DAVID WESSEL, 12/03/13, WSJ)
Posted by Orrin Judd at December 4, 2013 6:23 PMProfessors Blinder and Watson identify three factors that stand out statistically in their attempt to explain why the economy does better with a Democratic presidents. Together they account for somewhere between one-half and two-thirds of the growth gap:- Oil price shocks explain between one-eighth and one-fourth of the Democrat-Republican difference in growth rates, and tend to occur when Republicans are in the White House. They don't blame President Richard Nixon for the first OPEC oil shock or President Jimmy Carter for the second, but suggest that George H.W. Bush's Gulf War and George W. Bush's Iraq war were policy decisions that affected oil prices.- Surges in productivity, or output per hour, account for about one-quarter of the gap. "As with oil shocks, we consider them as mainly reflecting luck," they say.- Swings in consumer confidence explain about a quarter of the Democrat-Republican gap between 1962 (when the University of Michigan's survey data begins) and 2013. This, they say, "comes tantalizingly close to a self-fulfilling prophecy in which consumers correctly expect the economy to do better, and make that happen by purchasing more consumer durables. But direct measures showing increasing optimism after Democrats are elected are hard to find."