Monday, December 2, 2013

Democratic Presidents have all the Luck, or are they better managers?

The facts don’t lie:
WaPo: More specifically, since 1947, the U.S. economy has grown at an average rate of 4.35 percent under Democratic presidents, and just 2.54 percent under Republicans. That's a big gap. So why does it persist? One possible explanation is that Democratic policies are better for economic growth. Another is that Republican policies are better for growth — but there's a time lag, so Democrats tend to benefit.
Researchers have decided after extensive analysis, that the Democrats have all the luck. Yet even the reason they gave for that seemed strained and contradictory. I’m going with the idea that Democrats manage the nation better because they believe in good efficient government, where Republicans play out their failed ideological fantasies:
Alternatively, perhaps Democrats just have better economic luck. That third theory is one favored by economists Alan Blinder and Mark Watson in their new working paper, “Presidents and the Economy: A Forensic Investigation” (pdf).

Productivity shocks. "As with oil shocks, we consider them as mainly reflecting luck," the authors write. "But, of course, we cannot rule out that they have a policy component as well." The authors don't give much credence to the idea that Democratic presidents inherit stronger economies. In fact, it's actually the opposite: "Democrats inherit growth rates of 1.8% from the final year of the previous term, while Republicans inherit a growth rate of 4.1%." Yet Democratic presidents have still done better, on average, in their first terms since 1947.

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