Is a Republican or Democrat Better for U.S. Economic Growth?  

Around the Lamppost, many the past few weeks have been debating many of the topics that have been raised in the Presidential debates between McCain and Obama and in the Vice Presidential debate between Biden and Palin. One topic has been economic growth given the high price of gas, higher rates of reported unemployment and the foreclosure debacle in 2008 as well as bailout plan approved by the Congress last week. Growing up, our parents always asked us to decide on a President this way: “Look at your wallet – are you better off?” Now, we do know that Presidents only affect fiscal policy (tax rates) and that the Federal Reserve Bank, which is not influenced by the Legislative branch of government, affects monetary policy (interest rates). However, one can influence tha actions of the other. For example, if a President raises taxes, the intention is to fund a shortfall in programs or to create programs and jobs for the well-being of the Nation. OK. However, when taxes are raised, taxpayers and business owners, especially small business owners, have less money to grow their businesses; they can’t purchase equipment, they can’t hire more people (create jobs), they don’t go out to restaurants as much, they don’t travel, etc. Now, to protect jobs, the GDP and a general malaise (recession), the Fed lowers interest rates. Why? Because lowering interest rates makes you less money in a savings or checking account. The Fed is enticing people to spend. And with lower interest rates, there is the hope that credit becomes more available, that the price of goods remains low or controllable, that there are more affordable home values, etc. You see the balance needed to run a functional and productive economy. Power in the hands of one party, group or person is not beneficial. The Founding Fathers realized this in 1776 and thus decided that the Presidency requires a check and balance of its own: the Congress.

But, what happens when the Party enjoying majority rule in both the House of Representatives and the Senate is the same Party that the President is affiliated with? Are we doomed? Or is there better economic growth because the other Party cannot stall the other?. We decided to investigate.

Currently, the Democrats control both the House and the Senate. However, the Democrats do not have a 2/3’s majority in either the House or the Senate. This is important because the Congress can override a Presidential veto by a two-thirds majority for a bill to become a law without the President’s signature. Without a clear majority, any vetoed bill will probably fail to become law unless the President reverses course and decides to sign the bill into law.

Econommic Growth From Ford to GW Bush

President	Party	Left	Economy	Unemployment	Inflation	House	Senate
Ford	Rep	1977	4.6%	7.1%	6.7%	Dem	Dem
Carter	Dem	1981	2.5%	7.6%	8.9%	Dem	Dem
Reagan	Rep	1989	3.5%	5.3%	4.6%	Dem	Rep
GHW Bush	Rep	1993	2.7%	6.9%	2.7%	Dem	Dem
Clinton	Dem	2001	0.8%	4.7%	1.6%	Rep	Rep
GW Bush	Rep	2006*	3.3%	4.6%	2.5%	Rep	Rep

* available data only through 2006 although Presidency extends to January 20, 2009.

Economic Growth Conclusions:

Highest Growth Rate occurred during the Ford Presidency – Republican President, Democrats controlled both House and Senate

Lowest Growth Rate occurred during the Clinton Adminstration – Democrat President, Republican controlled House and Senate

Best Overall Growth occurs when the President is NOT the same party as the House and Senate – i.e., Ford 4.6%, Reagan 3.5%, GHW Bush 2.7%, exception is George W. Bush who experienced 3.3% growth with a Republican controlled House and Senate

Unemployment Rate Conclusions:

Highest unemployment rate – Carter @ 7.6%

Lowest Unemployment Rate – GW Bush @ 4.6%

3 Republicans Presidents presided over 3 of 4 highest unemployment rates

Inflation Rate Conclusions:

Highest inflaton rate – Carter @ 8.9%

Lowest inflaton rate – Clinton @ 1.6%

 

 

Parties Controlling Congress – From Ford to G.W. Bush

Gerald Ford – Aug, 1974 – Jan, 1977

• 1975 – 77: Senate and House = Democrats

Jimmy Carter – Jan, 1977 – Jan, 1981

• 1977-79: Senate and House = Democrats
• 1979-81: Senate and House = Democrats

Ronald Reagan – Jan, 1981 – Jan, 1989

• 1981 – 83: House = Democrats, Senate = Republicans
• 1983 – 85: House = Democrats, Senate = Republicans
• 1985 – 87: House = Democrats, Senate = Republicans
• 1987 – 89: Senate and House = Democrats

George H.W. Bush – Jan, 1989 – Jan, 1993

• 1989 – 91: Senate and House = Democrats
• 1991 – 93: Senate and House = Democrats

Bill Clinton – Jan, 1993 – Jan, 2001

• 1993 – 95: Senate and House = Democrats
• 1995 – 97: Senate and House = Republicans
• 1997 – 99: Senate and House = Republicans
• 1999 – 2001: Senate and House = Republicans

George W. Bush – Jan, 2001 – Jan, 2009

• 2001 – 03: House = Republicans and Senate controlled by Democrats for 18 days, then Republicans for 6 months, then Democrats for 5 months, then finally Republicans again for about 2 months
• 2003 – 05: Senate and House = Republicans
• 2005 – 07: Senate and House = Republicans
• 2007 – 09: House = Democrats, Senate = Democrats even though they share the same amount of seats with Republicans (49)