On Friday, the New York Times provided a jaw-dropping analysis of the dismal state of the economy under George W. Bush. Just days after the Washington Post documented that Bush presided over the worst eight-year economic performance in the modern American presidency, the Times charted his historic failure in expanding GDP, producing jobs and fueling stock market growth. As it turns out, Bush is just the latest Republican to confirm the maxim that Wall Street and the economy overall almost always do better under Democratic presidents.
During his administration, the country grew at the slowest overall pace of any recent president, whether measured in gross domestic product or employment. The last president to preside while the stock market did worse was Herbert Hoover...
...President Bush's administration was marked by a recession that began two months after he took office and another downturn in his final year of office. In the end, the economy during his term added enough jobs to employ only 14 percent of the added number of working-age Americans, the lowest proportion of any postwar administration. Employment grew at a compound annual rate of only 0.3 percent, half the 0.6 percent rate that his father had recorded in what had previously been the worst post-World War II performance.
For the investor class so fond of perpetuating the myth of Republicans' superior economic stewardship, the collapse of the stock marketing during the Bush recession must be particularly galling. The Standard & Poor's 500 spiraled down at annual rate of 5.6% during Bush's time in the Oval Office, a disaster even worse than Richard Nixon's abysmal 4.0% yearly decline. (Only Herbert Hoover's cataclysmic 31% plunge makes Bush look good in comparison.)
As it turns out, as the New York Times also showed in October, the Democratic Party "has been better for American pocketbooks and capitalism as a whole."
To make its case, the New York Times asked readers to imagine having put their money where its mouth is. Contrary to Republican mythology, Americans fare better - much, much better - under Democratic administrations:
As of Friday, a $10,000 investment in the S.& P. stock market index would have grown to $11,733 if invested under Republican presidents only, although that would be $51,211 if we exclude Herbert Hoover's presidency during the Great Depression. Invested under Democratic presidents only, $10,000 would have grown to $300,671 at a compound rate of 8.9 percent over nearly 40 years.
As the broader record shows, the best path to prosperity is to elect Democratic presidents.
The superior performance of Democratic presidents covers virtually the entire spectrum of economic indicators. As Elliott Parker of the University of Nevada, Reno detailed in a 2006 paper, since 1949 Democratic administrations have done better than Republican ones when it comes to unemployment (5.2% to 6.0%), job creation (-.0.4% decrease in unemployment, compared to 0.3% increase), GDP growth rate (4.2% to 2.9%), and even corporate profits as a share of GDP. And to be sure, he found the Dow benefits from Democrats in the White House.
There's no shortage of studies to show that stock market returns are higher under Democratic leadership. (As it turns out, Wall Street's performance is also better when Democrats control Congress.) In 2000, Pedro Santa-Clara and Rossen Valkanov of UCLA's Anderson School of Business concluded that "that the average excess return in the stock market is higher under Democratic than Republican presidents - a difference of 9 percent per year for the value-weighted portfolio and 16 percent for the equal-weighted portfolio." As the New York Times noted of UCLA study in 2003:
"It's not even close. The stock market does far better under Democrats...
...Professors Santa-Clara and Valkanov look at the excess market return - the difference between a broad index of stock prices (basically the Standard & Poor's 500-stock index) and the three-month Treasury bill rate - between 1927 and 1998. The excess return measures how attractive stock investments are compared with completely safe investments like short-term T-bills.
Using this measure, they find that during those 72 years the stock market returned about 11 percent more a year under Democratic presidents and 2 percent more under Republicans - a striking difference."
In 2002, Slate similarly concluded that "Democrats, it turns out, are much better for the stock market than Republicans":
Slate ran the numbers and found that since 1900, Democratic presidents have produced a 12.3 percent annual total return on the S&P 500, but Republicans only an 8 percent return. In 2000, the Stock Trader's Almanac, which slices and dices Wall Street performance figures like baseball stats, came up with nearly the same numbers (13.4 percent versus 8.1 percent) by measuring Dow price appreciation. (Most of the 20th century's bear markets, incidentally, have been Republican bear markets: the Crash of '29, the early '70s oil shock, the '87 correction, and the current stall occurred under GOP presidents.)
According to almanac editor Jeffrey Hirsch, the presidential party figures are among the most significant he's found. If the stock market were random, we'd expect such a result only one-quarter of the time. "I don't know why people are convinced Republicans are good for the stock market," Hirsch says.
Why? Because Republican water carriers like Larry Kudlow and Donald Luskin continue - with great success - to perpetuate the myth that the regulation-free policies of the GOP that so benefit them personally somehow help the American people overall. (In an example of legendarily bad timing, McCain adviser Luskin took to the pages of the Washington Post the day before the September Wall Street implosion to defend Phil Gramm's assessment of the economy, calling America "a nation of exaggerators.")
In defense of his bungled economic management, President Bush on his way out the door boasted of "52 months of uninterrupted job growth," an unimpressive performance which in any event now seems like a distant memory (Even more comical, the National Republican Congressional Committee apparently still believes "Thanks to Republican economic policies, the U.S. economy is robust and job creation is strong.")
As George W. Bush exits the stage and Barack Obama takes it, it is worth remembering the words of Harry Truman, as true today as when he uttered them generations ago:
"If you want to live like a Republican, vote Democratic."
(This piece is crossposted at Perrspectives.)