A really interesting and pithy post by James Hamilton this weekend at Econbrowser: Presidents and the economy.
The post discusses a new paper by Alan Blinder and Mark Watson: Presidents and the Economy: A Forensic Investigation. The paper tries to examine why average economic growth rates have been considerably higher in the post WWII era under Democratic presidents than under Republican ones.
It seems that the answer might just be “good luck”.
From Hamilton:
After documenting that the difference in economic performance between Republican and Democratic administrations is statistically significant and highly robust, Blinder and Watson go on to investigate what accounts for the difference. They find little statistical explanatory power in any differences in monetary or fiscal policy under Democrats compared with Republicans. Instead, one of the variables that they find did seem to play a role is oil price shocks. […]
Another factor that the authors find quite important is variation in total factor productivity. For example, the productivity gains associated with the move to big box retailers in the 1990s appear to be a key factor in the strong economic performance during the Clinton administration. […]
A third factor that the researchers identify as potentially important is consumer confidence. For whatever reason, consumers on average have had a brighter outlook on the economy when a Democrat was in the White House.
I suspect we’re going to see some pretty robust growth in GDP in the remainder of Obama’s 2nd term, although I do think we should start looking harder at other economic measures in assessing growth — especially total employment and real wages.