As the 2016 election cycle heats up, the key question at stake for most Americans is economic growth and jobs. The debate, then, will center around what to do with the fragile recovery that overwhelmingly benefits the rich; the stagnation of middle class incomes; and unemployment — which, particularly for young people of color, remains dispiritingly high.
The right likes to argue that these conditions mark a clear failure of progressive policies, and in particular of the Obama administration. In the process, they reject policies that have, however imperfect, unequivocally strengthened the economy over the past seven years, such as the stimulus packages that came in response to the economic crisis.
Meanwhile, while conservatives often claim that their policies are good for the middle class, systematic studies by economists, political scientists and sociologists suggest these claims are overblown.
- Economic Growth
At the heart of the question is economic growth: Which party is better at delivering it?
While economic growth alone is not sufficient for middle class and working class income growth, it is certainly necessary. The most systematic investigation of how parties affect economic growth was performed by economists Alan Blinder and Mark Watson. Their results are unequivocal:
“The U.S. economy has performed better when the President of the United States is a Democrat rather than a Republican, almost regardless of how one measures performance. For many measures, including real GDP growth (on which we concentrate), the performance gap is both large and statistically significant.”
The chart below shows the gaps in various indicators between Republican and Democratic presidents. Democratic presidents average 4.35 percent GDP growth, compared with 2.54 percent under Republicans. Democrats also presided over a lower unemployment rate, higher stock market returns, higher corporate profits, higher compensation growth and higher productivity increases. These results remain even after various controls are applied. Though the authors want to chalk these results up to luck, I have outlined a few reasons to suspect other factors may be at work.
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- Inequality
The middle and working class have increasingly fallen behind as the richest Americans have seized a larger share of income and wealth. So while economic growth is certainly important, how it’s distributed is important as well.
In a 2004 paper and a further analysis earlier this year, esteemed political scientist Larry Bartels has demonstrated that income growth is faster and more equal under Democratic presidents. He cites differences in policies like the minimum wage driving this gap. As he notes, the real value of the minimum wage increased 16 cents a year under Democrats, but decreased by 6 cents a year under Republicans.
The chart below suggests this effect is driven by both market conditioning (see the gap in pre-tax income at the bottom) and redistribution (the post-tax gaps across the board).
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Bartels’ analysis is strengthened by a recent study from political scientists Elizabeth Rigby and Megan Hatch, who identify three major policies that states can pursue to slow growing inequality: higher taxes on the wealthy, lower taxes on the poor, and labor market policies that benefit workers (minimum wages, lack of right to work). They find that if states had adopted more liberal policies, the increase in inequality (as measured by the Gini Coefficient) would have been 60 percent smaller — and the share going to the top 1 percent would have been cut in half.
At the state level, political scientists Anne Case and Timothy Besley find that Democrats boost spending and taxes, particularly in the areas of worker’s compensation and family assistance. Studies of the Medicaid expansion have overwhelmingly shown that Republican control of government is among the most important factors in predicting whether a state will expand Medicaid. Given the positive economic and social benefits of the Medicaid expansion, this illustrates how conservative ideology can hamper good governance.
- Unemployment
Possibly the most important question for Americans is jobs, and a study by political scientist Douglas Hibbs finds that “the unemployment rate was driven downward by Democratic and Labor administrations and upward by Republican and Conservative governments.” A recent study by political scientists Bryan Dettrey and Harvey D. Palmer finds that
“economic growth under Republican presidents has a stronger effect on stimulating stock market performance, while economic growth under Democratic presidents has a stronger effect on reducing unemployment.” (see chart)
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More recently, political scientists Christopher Witko and Nathan Kelly discovered that when economic growth is low, liberal and conservative governments perform similarly with regard to unemployment. However, when growth increases, Democrats do a better job turning that growth into lower unemployment. Further, in another study, they find that state-level outcomes have played an increasingly important role in shifting the income distribution, meaning that these effects are even more meaningful.
This piece originally appeared on Salon.