Tag Archives: recession

Democratic Presidents Are Better For The Economy

Democratic Presidents
 
Ronald Reagan created 14 million jobs in a record 70 month stretch of uninterrupted job growth, reduced the annual deficit he inherited by a trillion dollars in six years and nearly tripled the stock market. Believable? Sure, but it’s not true. That was actually Barack Obama.

Like most Democratic Presidents, the economy performed much better under him than his Republican predecessor. While comparing one period of time to another or one president to another can be problematic, it’s clear that Democratic Presidents are better for the economy; however, there are certainly caveats.

The President generally gets too much credit for economic success and too much blame for failure for much of it has to do with congressional and fed policy. It’s certainly difficult to draw a direct line from a president’s fiscal policy positions to economic cycles. Additionally, sometimes the fiscal policy of a previous administration bleeds into the next one meaning that a recession happening when one president was in office could be the result of the policy of the prior administration. Still, Democratic Presidents have had much better performing economies than their Republican counterparts.
 

Democratic Presidents

From 1961 to 2012, Republicans held the White House 28 years and Democrats 24 years. In those 52 years, our private economy has produced 66 million private-sector jobs. Republicans created 24 million jobs while Democrats created 42 million jobs.

This does not even include government jobs which would make the discrepancy greater, so the fact Democrats finished so far ahead despite taking government jobs off the table makes it a more impressive accomplishment. It’s even more impressive when you consider the U.S. working-age population actually grew slightly faster under Republican presidents meaning Democrats didn’t benefit from population growth.
 
Adam Hartung noted in 2012:

Personal disposable income has grown nearly 6 times more than under Republican presidents

Gross Domestic Product (GDP) has grown 7 times more than under presidents

Corporate profits have grown over 16% more per year than under Republican presidents (they actually declined under Republicans by an average of 4.53%/year).

Average annual compound return on the stock market has been 18 times greater than under Republican presidents (If you invested $100k for 40 years of Republican administrations you had $126k at the end, if you invested $100k for 40 years of Democrat administrations you had $3.9M at the end).

Republican presidents added 2.5 times more to the national debt than Democratic presidents

The two times the economy steered into the ditch (Great Depression and Great Recession) were during Republican, laissez faire administrations.

 
In addition to the last point, we can add that of the 49 quarters in recession since 1947 (post World War II), eight occurred under Democrats, while 41 occurred under Republicans.
 
According to Princeton University economists Alan Blinder and Mark Watson in 2014:

The U.S. economy not only grows faster, according to real GDP and other measures, during Democratic versus Republican presidencies, it also produces more jobs, lowers the unemployment rate, generates higher corporate profits and investment, and turns in higher stock market returns. Indeed, it outperforms under almost all standard macroeconomic metrics.

 
Finally, our current president agrees with this premise as he told Wolf Blitzer in 2004:

“I’ve been around for a long time and it just seems that the economy does better under the Democrats than the Republicans.”

Who are we to disagree?

Here Are The Facts On Unemployment Benefits

What's the skinny on unemployment benefits?
What’s the skinny on unemployment benefits?

What Are They?

Payments made by the government and other authorized bodies to unemployed people. The benefits themselves are very modest, averaging just $300 a week. However, only about 40% of the long term unemployed collect benefits.
 

How Long Do They Last?

State unemployment benefits are 26 weeks. Extensions have passed Congress 11 times since 2008 and led to a series of eligibility tiers. In the hardest hit states, they were extended to 99 weeks, but eventually cut back to 73 weeks.
 

Who Is Affected?

Since 2008, more than 24 million Americans have relied on long-term unemployment insurance. 1.3 million people will be affected by the extension of unemployment benefits. 1.9 million more will run out of state funded benefits in the first half of 2014 or approximately 72,000 Americans will lose benefits each week during the first half of 2014, based on Department of Labor data. 600,000 people have received long term unemployment benefits in the past 5 years. As the year goes on, the consequences the benefits for 3.6 million Americans will expire.
 

How Much Do They Cost?

The annual cost is approximately 25 billion dollars. The current 3 month extension of unemployment benefits being discussed in Congress now would cost approximately 6 billion dollars. States currently owe the federal treasury 38 billion.
 

How Bad Was It? How Bad Is It Now?

The unemployment rate has dropped from a high of 10% to 6.7%, but unemployment for 2.6% of the entire labor force has been long term (27 weeks or longer) discouraging many would be job seekers. The average time an unemployed worker is jobless is 35 weeks, and 37% of the unemployed have been jobless for 6 months or longer. This has discouraged many workers which has caused the labor force participation rate (the number of people who are either employed or are actively looking for work) to be at its lowest point in over 30 years.
 
Discouraged workers constitute one group of inactive work-seekers. These are persons who, while willing and able to engage in a job, are not seeking work or have ceased to seek work because they believe there are no suitable available jobs. This rate stands at 13.1 percent of the American work force, which is actually down from 14.4 percent a year earlier. Despite the economic progress made since 2008, there are still more than 1 million fewer jobs than there were before the recession began, and more than 4 million Americans have been out of work for six months or longer.
 

How Hard Is It To Get A Job?

A job vacancy is defined as a post, either newly created, unoccupied or about to become vacant, which the employer actively seeks to fill with a suitable candidate from outside the enterprise (including any further necessary steps) immediately or in the near future. An occupied post is a post within an organization to which an employee has been assigned. The job vacancy rate measures the percentage of vacant posts compared with the total number of occupied and unoccupied posts. The job vacancy rate is 2% with three employees per open position. It’s no picnic out there.
 

What Is Likely To Happen

It’s estimated that failing to extend unemployment benefits would cost 240,000 jobs in 2014. Additionally, the Congressional Budget Office and JP Morgan estimate that failure to extend benefits would lower GDP by .2 to .4 percentage points. The Federal Reserve announced in December it will begin to draw down its quantitative easing program by $10 billion a month starting in January, citing a stronger job market. Reducing the asset purchase program (currently 85 billion dollars per month) is posited to have an even greater effect than the extension of unemployment benefits.