Easy Money

I recently had a conversation with someone who’s a prominent academic in the field of economics, and although we were talking about a different subject altogether, before we parted I asked for his considered opinion about a study I saw from a decade ago: Is it true, I asked him, that the American economy fares significantly better under Democratic presidents than under Republican ones?

While he told me he only dealt with abstract economic theory and couldn’t really offer an opinion, the 2013 study by Princeton economics professors Alan Blinder and Mark Watson piqued my curiosity — and I wanted to get to the bottom of their conclusion: that for nearly a century now, the American economy has performed much better under Democratic administrations than under those of Republicans. They wrote that the gap is “startlingly large” and exists whether measured by gross domestic product (GDP), employment, real wages, productivity, or even stock market returns.

Measured by inflation-adjusted GDP gains, for nearly a century, the economy has grown at an annual average rate of 4.3 percent under Democratic presidents and 2.5 percent under Republican ones. From 1948 until today, about 70 million jobs have been created during the terms of Democratic presidents and 29 million during Republican presidential administrations. Between 1961 and 2020, the unemployment rate has been lower at the end of every Democrat’s tenure other than Carter’s; Reagan is the only GOP president for which that is true.

As for stock market returns, since 1945, the S&P 500 has averaged an annual gain of 11.2 percent with a Democrat in the White House, and a 6.9 percent gain under Republicans. On the list of highest S&P 500 returns during a president’s first year, Joe Biden surprisingly ranked first, with the next five highest figures also held by Democrats.