Friday, December 6, 2013

New Study Proves: U.S. Economy Fares Better Under Democratic Presidents

We saw today the news that, "November Jobs Report: U.S. Creates 203,000 Jobs, Unemployment Rate Down To 7%," and while many of us have seen the data for years, knowing that the stock market always does better under Democratic presidents than GOP presidents, we end up wondering all the while why Wall Street usually contributes to the party that takes away their earnings (although money is made when the markets fluctuate, and not when they are stable - commissions, you know.)

Laurin Suiter's article in, "New Study Proves: U.S. Economy Fares Better Under Democratic Presidents," is the frosting on the financial cake:

"President Harry S. Truman famously observed that 'If you want to live like a Republican, vote Democratic!'  But just how much truth is there to this popular maxim? Economists Alan Blinder and Mark Watson of Princeton University put it to the test in their new study "Presidents and the Economy: A Forensic Investigation." Their research reveals that patterns tending to favor Democratic presidents can be linked to specific economic barometers: Consumer confidence, oil shocks, and productivity shocks. However, the bulk of their findings attributes the overall success of White House Democrats to 'random fluctuations.' Or as they put it in layman’s terms, 'luck'.

"Given that the study covers the years from 1947 — two years into Truman’s succession of FDR — through the present year under Barack Obama, that is one amazing 66-year lucky streak. 'Luck' in this case may really be just a way of them saying 'We have no idea, and we’re hoping you don’t either.' So let’s break down what they do more or less firmly conclude, and then examine that 'luck' just a little deeper.

"Their first conclusion regarding comparative economic performance is related to 'oil shocks'. This is defined as sharp increases in crude oil prices, which dampen growth and inhibit consumer spending. There are not only definitive partisan differences in rates of growth due to these shocks, but that specific policies may very well be at play.

"Both President Bushes invaded Iraq, causing an enormous spike in global crude oil prices. In fact, those two spikes far exceeded the jumps fueled by OPEC under Presidents Nixon and Carter in the 1970s. A possible interpretation here is that if you invest in oil futures, you will generally do well with a Republican in charge, but if you’re a consumer and an ordinary working American, you will generally benefit with a Democrat at the top.

"The next area they examined was productivity shock. Again, there is a concrete link between Democratic administrations and increases in productivity. Manufacturing rose sharply under Presidents Kennedy and Johnson, but fell to the floor under President Reagan. Here, Blinder and Watson are murkier with establishing cause and effect with policies and performance, falling back on 'luck' as their way out. Republican partisans often scapegoat unions and a host of regulatory ills for the reasons manufacturing declined in the ’70s. This ignores important factors like the rise of popular cheap imports (mostly via Japan and the burgeoning east Asian markets), inflation at home, rising interest rates for borrowing, and a lag time in adapting to the growing service economy.

"Democrats often attribute the growth under JFK and LBJ to sound domestic spending and tax policies, buttressed by solid pro-labor and balanced trade policies which produced a strong workforce — giving rise to a large, vibrant middle class earning livable wages. A happy byproduct of these policies is high consumer confidence — which is the last area the study probes.

"Blinder and Watson note that nearly every time, the first year of Democratic administrations brings a spike in consumer confidence. They are at a loss for any clear explanation, claiming “Much of the D-R growth gap in the United States comes from business fixed investment and spending on consumer durables, and it comes mostly in the first year of a presidential term. Yet the superior growth record under Democrats is not forecastable by standard techniques, which means it cannot be attributed to superior initial conditions.” Perhaps it is time to question, at the very least, those “standard techniques,” or at most, revise them. All they can offer from hiding behind their forecast models is the theory that maybe the election of a Democratic president itself is what boosts confidence. Looking at the same data they did about partisan performance, perhaps this is not a bad theory. Truman’s dictum has legs.

"In the end, they find that these three factors can only explain 46-62% of the Democratic-Republican performance gap. Never mind the uncertainty expressed within that range, let alone attributing luck for everything beyond it. Predictably, Republicans, tea-flavored and otherwise, will not like the general conclusions reached by this study, regardless of luck’s highly unlikely influence. When Democrats get credit in any capacity, that is automatically bad, wrong, and colored pink with socialism. They will even go so far as to attribute the better Democratic performances to a delay in Republican policies taking effect, and a likewise lagging when drops occur under Republicans.

"A quick perusal of the above graph shows that great games of presidential leap frog can be played by would-be Republican apologists, with random and inconsistent stretches. If Reagan’s economic policies were so far-reaching as to explain the growth under Bill Clinton, then why isn’t the growth during Reagan’s second term attributable to Jimmy Carter? Leap frog here requires leaps in logic.

"A valid conclusion is that presidential actions are limited in how they affect the macro-economy, but when they do, it tends toward a much shorter lag time — anywhere from several fiscal quarters to two or three years. Yes, sometimes there is overlap, as a president’s last year or two in office can positively or adversely affect his successor’s first term. We experienced an adverse example firsthand when President Obama took office, inheriting the worst recession in seven decades.

"Outside the limitations of presidential influence, Blinder and Watson can only conclude that luck explains the myriad and unknowable variables. In truth, there is fertile ground for economists to explore, with unexamined concrete reasons for the differences in performance. They dismiss congressional influence outright, but that ignores the significant power of Congress to authorize job-related legislation, such as infrastructure rebuilding, or tax incentives to keep jobs from being outsourced. Congress also hammers out budgets, compromising with presidents on their fiscal vision.

"Balanced budgets, such as those delivered by President Clinton during his tenure, calmed bond markets concerned with excessive borrowing and debt. That had a positive ripple effect on the economy, as it rode the ’90s tech bubble. So even with limits on how the President or Congress can influence the economy, dismissing the unknown as 'luck' just seems too easy, and not a bit disingenuous for two economists from a prestigious university. It is not elementary, Blinder and Watson, but it deserves more than just an academic shrug of your shoulders."

And for those who are skeptical of the claim that the financial markets do better under Democratic administrations, "Stocks Return More With Democrat in White House: BGOV Barometer," a short article by Bob Drummond at tells the whole story:

"While Republicans promote themselves as the friendliest party for Wall Street, stock investors do better when Democrats occupy the White House. From a dollars- and-cents standpoint, it’s not even close.

"The BGOV Barometer shows that, over the five decades since John F. Kennedy was inaugurated, $1,000 invested in a hypothetical fund that tracks the Standard & Poor’s 500 Index (SPX) only when Democrats are in the White House would have been worth $10,920 at the close of trading yesterday.

"That’s more than nine times the dollar return an investor would have realized from following a similar strategy during Republican administrations. A $1,000 stake invested in a fund that followed the S&P 500 under Republican presidents, starting with Richard Nixon, would have grown to $2,087 on the day George W. Bush left office.

"'The market does tend to do better under Democrats than under Republicans,' Sam Stovall, chief investment strategist at S&P Equity Research in New York, said in a telephone interview. 'Is it because Republicans mishandled the economy, or inherited a weak economy? I’ll leave that to others.'

"Some of the difference may stem from the fact that every Republican president since at least the end of World War II has faced a recession during his first term in office, Stovall said. Nine of 11 recessions that began since 1945 -- and seven of eight since Kennedy ran for president in 1960 --started with Republicans in the Oval Office.

"Wall Street Republicans

"Democratic administrations also may be more likely to spend money on government programs that stimulate the economy, Stovall said.
"'I dare say that most people on Wall Street are Republicans,' Stovall said. 'But it appears the bread is buttered on the Democratic side.'

"The S&P 500 yesterday hit its highest intra-day level since June 2008 and closed at 1,362.21, the highest since last April 29. The benchmark index is up 8.3 percent so far in 2012, the biggest year-to-date gain at this point since 1991.

"Since Kennedy took office, the Democratic S&P fund logged a 992 percent gain, versus 109 percent growth for the opposition party, even though Democrats occupied the White House for 23 years over the period, compared with 28 years of Republican presidential leadership.

"The annualized return for 23 years of Democratic administrations is 11 percent, or four times the 2.7 percent annualized return during 28 years of Republican presidencies.

"Democratic Edge

"Investing $1,000 in funds that mirror the Dow Jones Industrial Average under the same conditions, Democratic investors would have had $7,550, versus $2,716 under Republicans.

"The Democratic edge is so large that the party comes out ahead even without counting Bill Clinton (the Democrat with the biggest S&P 500 gain) and George W. Bush (the Republican with the worst market record). A hypothetical $1,000 investment under Democrats excluding Clinton was worth $3,539 versus $3,296 invested under Republicans except Bush.

"Adding Dwight Eisenhower to the Republican column doesn’t overcome the Democratic advantage, either: $1,000 invested in the S&P 500 in January 1953 would have been worth $4,796 after 36 years under Republican chief executives -- still less than half the $10,920 nest egg accumulated in 23 years under Democrats."


While noting that, "...Nine of 11 recessions that began since 1945 -- and seven of eight since Kennedy ran for president in 1960 --started with Republicans in the Oval Office," the S&P analyst flails away at a cause by noting that "Democratic administrations also may be more likely to spend money on government programs that stimulate the economy."


Having been associated with a Wall Street company for many years, with the exception of a few elections I noticed the firm contributing larger sums to the GOP candidates than Democratic hopefuls - much to the detriment of the company's earnings.

Stupidity isn't just a hallmark of Conservative Sheeplets.

Republican presidents, legislators, propagandists, and their Conservative benefactors do just the opposite of what would work for the interests of investors: they take money away from the economy to line the pockets of said benefactors.

Isn't it time to make that a crime?


“A Conservative Government is an organized hypocrisy.”

Benjamin Disraeli.


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