Evening Must-Read: Alan Blinder and Mark Watson: Presidents and the U.S. Economy: An Econometric Exploration

Alan Blinder and Mark Watson: Presidents and the U.S. Economy: An Econometric Exploration “The U.S. economy has grown faster—-and scored higher on many other macroeconomic metrics…

…when the President of the United States is a Democrat rather than a Republican. For many measures, including real GDP growth (on which we concentrate), the performance gap is both large and statistically significant, despite the fact that postwar history includes only 16 complete presidential terms. This paper asks why. The answer is not found in technical time series matters (such as differential trends or mean reversion), nor in systematically more expansionary monetary or fiscal policy under Democrats. Rather, it appears that the Democratic edge stems mainly from more benign oil shocks, superior TFP performance, a more favorable international environment, and perhaps more optimistic consumer expectations about the near- term future. Many other potential explanations are examined but fail to explain the partisan growth gap.”

Alan Blinder teams up with Mark Watson to try to figure out why the economy has grown faster by 1.8%/year under Democratic than under Republican presidents. Alas, they do not get very far–which is not surprising, given that there haven’t been that many presidents. I want to say that the Nixon made his own bad luck for Nixon-Ford by focusing overwhelmingly on his reelection rather than on good economic policy from day one, and that both Coolidge-Hoover and George W. Bush were ideologically hobbled and unable to even think of responding properly to the financial bubbles of their terms. But there is just no way to sort this out statistically.