The Myth Busting Economist by Larry Malone

Are Republican Presidents Better for the Economy?

Now that we’ve entered the post-election weeks of November, it’s time to bust an oft-cited myth about presidents and the economy. The title of this column says it all—there’s a widely held belief that Republican presidents produce better results for the American economy than Democrats.

So let’s test this claim with a close look at the last 50 years. We go all the way back to 1974, and the Presidential Administration of Gerald Ford. During the 50 years from then until now, Republicans occupied the Oval Office for 27 years, and Democrats for 23. The Republicans, and the total years of their presidencies were: Ford (3), Reagan (8), Bush I (4), Bush II (8), and Trump (4). The Democrats were Carter (4), Clinton (8), Obama (8) and Biden (3, to date).

The granddaddy of all indicators of economic performance is whether the United States economy is growing or shrinking. A recession means negative economic growth, measured by a decline in the Gross Domestic Product. In the past 50 years there were eight recessions in the U.S., occurring over a total of 81 months, or six years and nine months. This means the American economy was in a recession 13.5 percent of that time. Republican presidents were in office for 68 months of recession compared to 13 months for Democrats. So, if one measure of performance is recession, Democratic presidents handily beat Republicans for growing the economy over the past 50 years.

A closer look at some major indicators of economic performance further debunks the myth of Republican presidential superiority on the Performance American Economy.

The average yearly growth rate of the GDP was 2.4 percent for Republican presidents, compared to 3 percent for Democrats. The edge goes to the Democratic presidents.

The average unemployment rate was higher for Republican presidents at 6.3 percent, compared to 6 percent for Democrats. Democratic presidents enjoyed another slight edge in having a lower average yearly inflation rate of 3.8 percent compared to 4.1 percent for Republicans.

The differences are sharper, and larger, in other key economic indicators. It was much cheaper, by a wide margin, to borrow money for houses, education loans, snowmobiles, motorcycles, and cars under the leadership of Democratic presidents over the 50 years. The Federal Funds Rate, which is the interest rate the Federal Reserve charges banks to borrow money, averaged 5.7 percent during Republican administrations and just 3.8 percent during Democratic administrations.

As I’ve noted in a previous myth busting column, there are a lot of weighty political claims when it comes to federal government spending, borrowing to spend, and the National Debt. The differences between Republican and Democratic presidencies over the last 50 years are especially striking when it comes to government borrowing and spending. Democrats added an average of 7.3 percent per year to the National Debt, but Republican presidents topped that by a wide margin in growing the National Debt by an average of 10.4 percent per year.

It also turns out, contrary to popular myth, that Republican presidents are the big spenders when it comes to the federal budget of the United States. Federal expenditures grew 8.7 percent, in an average year for Republican presidents, and just 4.2 percent for Democrats. That’s quite a difference, with the growth rate in federal spending for Republican presidents outpacing Democrats by more than 2:1.

We finish up this episode by taking down one of the biggest myths of all when it comes to the economic performance of presidents. Namely, a lot of folks believe that the eight years of Ronald Reagan’s presidency set the Gold Standard for national economic performance. To the contrary, the record of results make Reagan the worst president on economic performance over our 50 year comparison period.

A quick rundown on the averages for our major economic indicators over his eight year presidency crushes the Reagan myth. The average unemployment rate was 7.5 percent. The average Federal Funds rate was 9.6 percent. That’s why my first 30 year mortgage interest rate was 9.9 percent. GDP did manage to grow at an average annual rate of 3.5 percent during Reagan’s time in office, but inflation increased at an annual rate of 4.7 percent. And people think that post COVID inflation has been bad.

Even more problematic for the Reagan economic legacy was his record on federal debt and spending. During the Reagan Administration the National Debt increased an average of 14.2 percent per year, largely due to a 7.7 percent average increase in federal government spending each year. POOF…there goes the myth of Reagan as the Champion of Small Government.

Stay tuned for more myth busting next time.

Larry Malone is professor emeritus of economics at Hartwick College.