The well regarded Liscio report is now blogging.
They did a very nice job analyzing the various economic and market results under all of the Presidents since FDR.
Of course, it is arguable as to how much impact any President has on the economy in general.
However, I think we can all agree that certain presidents who made major policy changes — think Roosevelt and Reagan — had major impacts on the economy. Other Presidents — like Clinton and Bush — also had a major impact through their actions and inactions.
The entire piece is worth a look . . .
GDP by Party
CPI by Party
Source:
Presidential economics: Do parties matter?
July 07, 2008
http://tlrii.typepad.com/theliscioreport/2008/07/presidential-ec.html
BR –
I think that the President’s party is far overemphasized, since for day to day operations, we have to pass laws through the House, the Senate, and then the President. So I think to be fair, we can only look at periods where it’s D,D,D or R,R,R, respectively. Since those periods are rare (I believe), we get a vanilla mixture (DDR or RRD), and therefore it doesn’t matter much. However, I think the high probability of DDD in the upcoming elections is probably not good (not to say the recent RRR was any better, though)
Just my two cents…
HCF
If Party A elects a President who says we can continue our oil addiction forever and get a free lunch and a pony, and the Party B elects a President who says we need, as a nation and economy, to get off our oil addiction, and both Parties implement these contrasting visions via policies and lack thereof, then the answer to your question is yes.
Somehow I think it’s the lobbyist who doles out the contributions who most determines public policy in the US of A. Want something done? Go to the side of the aisle who will listen.
In the words of saloon/brothel owner Al Swearingen of HBO’s “Deadwood”, “Who gets paid?”
Gotta filter inflation out of those GDP numbers for it to mean anything.
I think this underestimates the difference between economic performance under democrats and republicans because it includes the early Roosevelt years. Those years were the worst of any covered and arguably more the responsibility of the preceding Republican administrations. Of course, once one opens that door, there are endless ways to nudge the data in whichever direction is desired.
At a minimum though, I’d love to see the chart with about a one-year lag. For example, the early 2001 decline is clearly more Clinton’s responsibility than Bush’s.
And yes, I don’t see the president or his party making that much difference, but except for Roosevelt I/II, the blue is concentrated at the top and the pink at the bottom.
real gdp growth in the first four years under FDR averaged 9%. The only 4 year period history that is better than this is 1940-44.
Jessica you are making the common error of attributing the Hoover years to FDR.
From my very own crack research dept. (referring to the point I brought up above):
There are only 5 periods post WWII when House, Senate, and Presidency were controlled by a single party:
DDD in 1949-1953
DDD in 1961-1969
DDD in 1979-1981
DDD in 1993-1995
RRR in 2003-2007
Incidentally the post WWII recessions have been in
’53-’54
’57-’58
’73-’75
’80-’82
’90-’91
’01-’03
’08-?? (my call, not ‘official’)
With the exception of the ’90-’91, it seems every recession follows 4-8 years after the start of a DDD/RRR reign.
My theory is that the really wacky fiscal and social policies get put in when one party is fully in control, and since it takes half a decade to a decade for the effects to seep in, we’re never far from trouble after one party is in control.
So maybe grid-lock IS good… Both parties are too busy fighting each other to drive us off the cliff…
HCF
The stock market has done slightly better under presidents who are Democrats than has been the case with Republicans.
However, when the House, Senate and the White House are all controlled by the Dems, I don’t think that financial history provides reason for optimism.
Angry Bear did this analysis over a year ago. They went farther into depth with poverty rates, employment, normalizing results for year (election year or not) and congress.
To do this work and give no shout out to Angry Bear is a piss poor way of joining the economics blogs.
~~~
BR: You are being a bit too harsh — these guys do all their own research, build their own databases, and create their own charts.
There was no need to shout out to everyone else who ever did this sort of analysis before — the list goes far beyond AB.
One of them better deal with crap like this.
Toxic CDOs Given Up for Dead Coming to Life With Pension Funds
By Jody Shenn
July 8 (Bloomberg) — CDOs are back.
Collateralized debt obligations that helped drive banks to $400 billion of writedowns and credit losses are finding buyers under a different name: Re-Remics.
Goldman Sachs Group Inc., JPMorgan Chase & Co. and at least six other firms are repackaging unwanted mortgage bonds as sales of CDOs composed of asset-backed securities fall to less than $1 billion this year from $227 billion in 2007 because of the global credit crunch. Re-Remics contain parts that are structured to guard against higher losses on underlying loans than most CDOs, allowing holders to sell or retain other sections at lower prices that can translate to potential yields of more than 20 percent.
“It’s just the reincarnation of the CDO,” said Paul Colonna, who manages more than $100 billion as chief investment officer for fixed income at GE Asset Management in Stamford, Connecticut. “The mechanics are the same, but you’re getting in at a much different level of valuation.”
GE Asset Management has considered buying the debt, Colonna said. The General Electric Co. unit may also have Re-Remics made out of bonds it owns if disposing of the riskier pieces boosts the securities’ overall value.
Re-Remic stands for “resecuritizations of real estate mortgage investment conduits,” the formal name of mortgage bonds. Sales of the securities may help revive the market for new home-loan debt, according to Bernard Maas, an analyst in New York at credit-rating firm DBRS Ltd.
http://www.bloomberg.com/apps/news?pid=20601109&
It would take some time for presidents to make policy changes and for those changes to have an impact. So this evaluation would need to account for this lag time, not necessarily their years in office.
As long as we have continual campaigns with a year long primary, the lobbyists will control the debate and parties mean little with regard to public policy. That is why the R’s shifted to the collection of special interest wackos (anti-abortion, christianists, gun lovers, etc.). Before someone takes issue with my use of the word wacko, my definition of a wacko issomeone that votes solely on a candidates position on social issues. $800 billion in Iraq borrowed from China, no problem, he’s against abortion, as an example. The same holds true of the greenies that blindly vote Democratic. The end result is that no party develops cognent public policy and we end up with the present Bush vacuum, where nothing is being addrfessed except his legacy.
I’m reluctant to read much into these “superficial” numbers. (I use “superficial” in the literal sense but don’t intend to belittle the numbers, as they should perhaps provide the start of any analysis.) I’d be more inclined to drill down (like HCF and/or Angry Bear…and maybe farther) to properly understand the following for each period:
(a) “economic cross-currents” (e.g., disease, dust bowl, war mobilization, demobilization, etc?)
(b) the balance of power in Congress (and possibly in state and local governments)
(c) the major policies promoted (i.e., was the whole country “moving right” like it was during the 90’s, so that “Dem” was quite like “Republican” of earlier eras?)
Since I question what we can conclude from these numbers, I hope this thread doesn’t trigger emotional responses.
At the very least, the period of time for comparison should be offset. The economy of the first six months a President takes office probably has more to do with the former President’s policies than the new President’s policies. A President’s effect, be it large or small, lasts months or perhaps years into the term of the next President. Gathering up stats for the days he actually sat in the oval office seems to muddle things.
What’s always notable about these performance analyses is that no matter how they twist the data and rejigger the starting and ending points the Republican presidents and congresses never do as well as the Democrats.
Doesn’t this relate directly back to the causality thing just discussed? Isn’t it far more likely that the party of the president elected is more likely as a result of the previous economy than the the economy is the result of the president currently in office? Therefore the economy under a party is more a result of the state of the economy just prior to being elected (i.e. Roosevelt, the “change” candidate, inherited a poor economy and therefore there would be great gains in GDP throughout the course of his presidency as the economy improved from its trough). Or as a liberal cynic might say, Democrats keep having to clean up the mess that the Republicans made and the American people can’t seem to stop voting for Republicans to mess it up again, all because they have a grudge on some some insignificant social issue (that’s supposed to be funny, so no one get in a huff)!
Hey Barry,
Why aren’t you also parsing out the pre-1983 CPI data from the bogus inflation numbers we have now? And remember it has been mostly republican with the cooked books!
~~~
BR: This was quick pointer to a new and based on their prior research, a worthy blog.
I don’y have the bandwidth and tine to fisk every data point that comes down the pike!
Walker,
Thanks for the attribution. This was explored in depth, and comments and objectins so far had been included in the series.
Barry,
What happened to my comment and links? If you want a full analysis, I or cactus can supply myiad charts and real numbers.
~~~
BR: I don’t see any others on this post — you had 3 comments today — all 3 are still up.
By all means, we love analysis, charts and real numbers !
Lag time (1 year, 2year), business cycles, inflation, congressional impacts, fed policy, cherry picking, cause/effect arguments, only policy matters, head winds and tail winds of data sets, employment, and population to employment ratios, political winds, etc. we got it.
Lag time (.5,1 or 2 years), business cycle, economic head winds and tail winds, congressional composition and tone, cherry picking years in data sets, employment, crisis and cross currents, lag for when tax cuts implemented, etc.
Um, if you want to say something, just post an excerpt and a link- not an essay, please.
~~~
BR: — forget that dolt — he’s been unpublished and banned as a spammer
I think it is silly to say that presidents don’t have an immediate effect on the economy. OK, they still have the previous budget, but they are the ones who can immediately put new people into those federal departments to determine the real spending of money, and can decide which laws they are going to focus on or enforce at all. It doesn’t take a law to deregulate, it just takes an administration deciding they will no longer be trying to enforce a particular regulation anymore. And Greenspan showed how happy the Fed could be with quick changes in policy.
Look at TR, a few months in and he is going after monopolies, dealing with strikes, moving new people into federal departments, and so on. How long did it take for Bush II to alter tax rates (retroactively!), shift money between projects (no more for birth control overseas, but now more to religious organizations), and so on.
Hell, just look at the financial effect of dropping the ball on 9/11/01. who knows what the economy would have been like if they had continued the anti-terrorism focus instead of trying to sell Star Wars II against “rogue” nations?
Of course a president has dramatic effect on an economy, even if they don’t have nearly the precise control they pretend to have.
I’ve wondered before reading thru this thread if corporate figure heads ever make decisions in a way to send disruptive waves at the party they dislike? Or visa-versa. Kinda like support the team. There I go again, assuming this is a game and not a concert.
Many people have commented that we cannot take these numbers as if they were in a vacuum.
Perhaps if we first put all the politicians in a vacuum……
Actually heard an interesting analysis of why the more affluent should pay higher tax rates. The idea was when they have to pay much higher rates on income, they avoid taking it and plow the money back into their companies for expansion and r and d thus really benifitng the country. Interesting no?
I’d be interested in seeing how the money supply data, interest rates and thus the influence the Fed is able to exert on those outcomes using those factors
Fun with Excel when no Red Sox game is on at night:
In reference to my two posts above, I crunched some data in regards to economic prosperity and party control of House, Senate, Presidency, respectively. From 1946-2008 (63 years) here is the breakdown of the three parts of the legislative process:
DDD = 19 years
DDR = 22
DRR = 6
RDR = 2
RRD = 8
RRR = 6
0 cases of DRD and RDD
Using the breakdown above, I looked up yearly CPI and unemployment from the BLS page (we can debate the veracity, of course) and created my own misery index (CPI inflation + unemployment). Then I plotted average misery index of each regime concurrently, and with 1, 4, and 8 year lags. I reckon concurrent would measure psychological effects, 1 year would measure some monetary effects, while 4 and 8 years would measure longer term fiscal effects under the respective regimes.
Interesting conclusions:
1) The most common two cases are DDD and DDR and both produce the same average after 1 and 8 years (9.87%/9.91% and 9.91%/9.92%). DDD is better for 4 years lag (8.63% vs. 10.56%)
2) Worst is DDR for concurrent, 1, and 8 years (DDR is worst for 4 year lag).
3) For the long term, the best combo is RRD (6.23% for 8 yr. out vs. ~10% for other combos). The calculation for RRR is ~7%, but based on only two points in the late 40’s. The other 4 RRR occurrences are too recent to be counted for “long-term” and I suspect they won’t be good!
4) Republican presidents (RDR, RRR) seems to yield the greatest concurrent effect (People need to be happy to vote Republican or are they happy that a Republican got elected?). This seems to wear off after a few years (TBD, based on the coming data in the next few years)
So my conclusion (assuming causality), since the House and Senate are likely Democratic next year, it doesn’t matter if Obama or McCain wins. For long term, vote out the Dems in Congress, but keep Republicans out of the White House.
Of course, even I take these results with a grain of salt =) It’s just an interesting bit of fun. I just wish I could post the graph I made here!
DL,
“The stock market has done slightly better under presidents who are Democrats than has been the case with Republicans.”
From Barron’s Mag (2000):
Of course, the S&P 500 is down since 2000.
.
Jessica,
“For example, the early 2001 decline is clearly more Clinton’s responsibility than Bush’s.”
Only in Bizarro World.
.
I’m only old enough to closely have followed politics Carter on, but it seems to me that R presidencies take more power than they constitutionally are allotted, making their weighting heavier than D. Under their watch, the government gets defanged through funding cuts, closed-door industry committees and when all else fails, hiring hacks based on a True Believer measure. In those circumstances it matters less what the congress does because they aren’t the ones who actually execute the policy. They can make rules all day, but it won’t impact anything if the administration and government staff refuses to acknowledge it.
>Toxic CDOs Given Up for Dead Coming to Life With Pension Funds
Saying you can collateralize some things and not others seems a little weird. There is nothing special about mortgages beyond them being the scandal de jour. With transparency and enforced regulations who cares what institutions decide to invest in. If they sold the pool for .20 on the dollar, wouldn’t you think it a good deal? There is a price point where even the nastiest pool would still be an investment. If these institutions are not smart enough to figure out what they’re buying this late in the game, then they deserve what they get.
Barry, are those GDP numbers nominal or real?
Also, is there a reason we’re looking at GDP and not per-capita GDP?
It seems to me that the really interesting number in GDP-land as far as the average person is concerned should be per-capita real GDP and the rest are more or less meaningless.
The historian in me sees GDP growth more as a function of one-time world-historical forces than just economics.
FDR-Truman-Kennedy-Johnson starts to look like a post-WW2 sequence where all you need to know is that the US was the only fully-functioning developed economy in the world; everyone else was clearing rubble and rebuilding (yet I freely scratch my head about why the 8 year Eisenhower economy is an anomaly).
Nixon to Bush 43 you’ve basically got two phases of (re)globalization as the old developed European and Asian economies came back fully online in the 70’s and new developing economies rose in the 90’s.
The apparent economic correlations to Democratic blue and Republican red look more like accidents of history and the seismic shifts in basic political preferences than any deeper reflection of economic policy. It would take a lot of heavy lifting to work up an analysis that could suggest that Obama politico-economic policy in 2008-12 could hope to approach, let alone match, Truman’s GDP growth in 1949-53.
It is less actually parsing policy than it is measuring performance with many indicators.
BR,
Cactus will pull the info together this weekend. Many thanks.
‘Per-capita GDP’ is an average, and therefore suffers from all the failings and limitations of averages, which makes it the meaningless metric.
~~~
BR: Nonsense.
Per capita — measures whether you are growing beyond population growth.
This wouldn’t be necessary if inflation was honestly measured . . .
The usual question is whether presidential tendencies influence the economy, but let’s consider instead whether people respond to certain economic conditions by voting democrat or republican.
When a time of prosperity gives rise to excess and decadence, as it inevitably must, voters turn conservative in response, while the same excess and decadence simultaneously turns boom to bust.
Obversely, a time of hardship shores up family values, work ethics and responsible behavior, while also evoking voter compassion for the many who suffer–these two effects lead to boom time and liberal policitians taking office, respectively.
Just a theory, food for thought.
Barry, this looks pretty much like a WWII economy, then postwar, then post coldwar.
I love you man, but I’m starting to feel you are cheeleading for the DEMS. As a Republican, I feel a bit insulted by your Dem leaning tendencies. Has Bush and the Reps done nothing right? Does that make sense to you?
Hope you don’t jump the shark in this election cycle.
Hope I don’t get banned.
Cheers,
Ken
“BR: Nonsense.”
Nonsense my ass.
“Per capita — measures whether you are growing beyond population growth.”
I know what per capita is. By definition:
“It is usually used in the field of statistics to indicate the AVERAGE per person for any given concern”
~~
Per-capita is calculated in the very same manner as an average. If you and Buffett are in the same room, the per-capita income for the room, as well as the average income in the room, is $32 billion, give or take.
It’s just as meaningless as the average.
.
Just the facts
Commentary: Democratic presidencies aren’t always bad for stocks
By Mark Hulbert, MarketWatch
Last update: 7:05 p.m. EDT July 10, 2008
ANNANDALE, Va. (MarketWatch) — Here is today’s investment pop quiz: Does the stock market perform better during Democratic or Republican presidencies?
The answers provided by almost everyone of whom I ask this question are almost unanimous: The stock market does better under Republican presidents.
They’re wrong.
Consider the data compiled by Ned Davis Research, an institutional research firm. In a communication to his clients Thursday morning, Davis reported that the Dow Jones Industrial Average (INDU) produced an annualized return of 7.21% during Democratic presidents, in contrast to an average of 3.6% during Republican presidents — or almost precisely half as much, in other words.
Davis hastened to add that he is a political independent, and I should add that during my lifetime I have voted more often for Libertarian presidential candidates than for candidates of either of the major parties. So please don’t accuse Davis of biasing his results, or my choosing to write a column on his research, for partisan political reasons.
To be sure, inflation is also higher on average during Democratic presidencies, so on an inflation-adjusted basis there is a smaller difference between the stock market’s average returns during presidencies of the two parties. But the Democratic Party still comes out ahead: 2.5% annualized during Democratic presidencies, versus 1.7% during Republican presidencies.
When I mentioned Davis’ results to several people on Thursday, the not-infrequent reaction was anger. This baffles me.
For example, just because the stock market has performed better during Democratic presidencies doesn’t automatically mean that Democrats deserve the credit for that outperformance. The stock market is a discounting mechanism, after all, and you might be inclined to argue that some of the relatively poor performance in the latter portion of Republican presidencies has been caused by the anticipation of a Democratic victory in the subsequent election.
Some are making this argument right now, for example, claiming that the stock market’s poor returns in recent weeks have been caused in no small part by Sen. Barack Obama being ahead in the polls.
By the same token, furthermore, you might be inclined to argue that some of the credit for the stock market’s relatively good performance during Democratic presidencies really was caused by anticipation of a Republican victory in the subsequent elections.
You are entirely free to make such arguments, of course, and place any other interpretation you wish on the facts.
But facts remain facts even when you don’t like them.
Party affiliation would matter if their economic policies remained constant over time.
As late as 1996 Republicans seemed to believe in strong dollar and balanced budget policies to the extent that they wanted to make balanced budgets a constitutional amendment. Since they took power it seems that there principals are now reversed and they believe in borrow and spend and financing through deficit spending as well as the unrestrained creation of new money… soft dollars.