Republicans Versus Democrats: Which Party Delivers Greater Economic Well-Being?
September 19, 2012
The economic track record of America’s two main policy parties is a topic treated before on this blog in several different articles over the past four years. Given the emotional stakes associated with the question of which party outperforms the other, it is perhaps not surprising that this series of updates has generated some of the strongest traffic to visit Currency Thoughts. A different blog, Retirement and Other Fun Tales, has a new posting today on this same subject, citing my work such as this piece posted in January but also the empirical findings of several other analysts who have examined the matter. All of them corroborate the same unusual result that I discovered, and that is the fact during the past half-century from the standpoint of who occupied the White House at the time, the presumed party of business has been outperformed by the Democrats in delivering growth in real GDP, employment and share price appreciation. Inflation has also been lower at times of Democratic Party presidencies, and the dollar has shown greater resilience.
The party best equipped to oversee a strong economy is especially pertinent this year because the U.S. economy continues to struggle and given the fact that the Republican nominee, Mitt Romney, has been presented as a business turnaround artist. Business backgrounds have been poorly represented in the White House since the days of the founding fathers. The most legitimate examples are Hoover (mining), Truman (clothing store), Carter (peanut farmer), George H. W. Bush (oil), and his son George W. Bush (oil). The former president with the greatest success by far as a businessman was Herbert Hoover, who then went on to fail in handling the economy during the Great Depression. Just like there is no documented track record that Republican presidents produce sounder economies than chief executives who were Democrats, there has been no past correlation either between people with success as a private businessman using those learned skills subsequently to be nearly as successful as future presidents. The reason for this, I suspect, is the vastly different nature of decision-making in the private sector and the process of shared decision-making that occurs in the public sector. Being president requires a different skill set than running a large company well.
It has been hard for American voters to evaluate Romney as a businessman. His original career was in financial services as co-founder of an asset-management company with a consulting-based approach to private equity investing. He wasn’t a design and marketing genius like Steve Jobs, a manufacturing innovator like Henry Ford or Andrew Carnegie, a rags to riches tycoon like John D. Rockefeller, or a natural pitchman like Frank Purdue or Dave Thomas. Romney made his money in financial services, which sucked in a disproportionate share of corporate profits over the past 25 years and left a controversial trail of success tinged with culpability in the genesis of the Great Recession. After Bain, Romney took over the management of the Salt Lake City Olympics, which was in financial distress at the time he joined. Romney’s reputation as a business turnaround artist was solidified in that role, but there have been other Olympic Games organizers who proved even more successful. Peter Ueberroth ran the L.A. games of 1984 so well that he was named the 1984 Time Magazine Man of the Year.
Still there is the nagging truth that America is still not doing as well as one would hope — never mind that such is part of a trend shared with other developed economies. Nobody denies that fact, not Obama, not Bernanke, and certainly not opponents of their policies. Plus, a history exists of second term presidencies that were less successful in the second four years than in the first four. Over the past century, that list included Wilson, Roosevelt, Eisenhower, Reagan, Clinton, and Bush.
Copyright 2012, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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