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Column: Trump claims the economy will do better if he's reelected. History says he's wrong

By Michael Hiltzik, Los Angeles Times on

Published in Business News

Until very recently, Donald Trump was fond of proclaiming that his reelection would be a boon to the U.S. economy and the stock market.

If Democrat Joe Biden were to be elected president, he told Maria Bartiromo of Fox Business Network, "this market's going to crash" and Biden would "tax this country into a depression like in 1929."

If this sounds like typical Trumpian bluster, it also feeds into the received wisdom that Republicans are pro-business and Democrats the opposite, and therefore the economy and markets do better under the the GOP.

As is often the case, the received wisdom is wrong. Both economic growth and stock market gains have been stronger under Democrats than Republicans, according to measurements dating back to Herbert Hoover.

For some reason, this fact escapes many political analysts when they ply their trade during presidential election years.

The empirical truth, "while hardly a secret, is not nearly as widely known as it should be," economists Alan S. Blinder and Mark W. Watson of Princeton wrote in 2016, in the most thorough analysis of the trends. "The U.S. economy performs much better when a Democrat is president than when a Republican is."

 

Blinder and Watson found that the Democratic-Republican gap was "nearly ubiquitous" - it remained detectable no matter how economic growth was defined, and was so "startlingly large" that it "strains credulity."

But there it is: Annualized growth in gross domestic product was 1.8 percentage points better under Democrats than Republicans over 16 complete presidential terms from Harry S Truman through Obama. That was a large enough time span for the difference to be statistically significant, Blinder and Watson judged.

The gap was reflected in more than GDP: "Democrats do better on almost every criterion," Blinder and Watson wrote. Business investment was greater under Democratic administrations, as was consumer spending.

Blinder and Watson couldn't quite put their fingers on all the reasons for the performance discrepancy. They noted that expansionary spending for the Korean War, which began under Democrat Truman and ended under Republican Eisenhower, explains part of the gap, but only a small portion.

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