Presidents, Parties, and the Business Cycle, 1949-2009

Article excerpt

A small body of research since the 1970s has reported that Democratic presidents have compiled better economic records than their Republican counterparts in the post-World War II era (Alesina and Rosenthal 1995; Barrels 2008; Hibbs 1977, 1987). Barrels' 2008 book Unequal Democracy has understandably been the most prominent of these works. In a seeming tour de force in political economy, Barrels finds that under Democratic presidents U.S. gross national product (GNP) and family incomes have grown faster, unemployment has been lower, and economic inequality has fallen, while the opposite and less favorable outcomes have characterized Republican administrations (Chapter 2). If correct, these results pose a conundrum for theories of retrospective voting by rational voters in presidential elections: if the economy has performed better under Democratic presidents, why have Republicans won nine of the 15 U.S. presidential elections since 1952? Barrels' provocative and disturbing response is that Republicans have fared so well because structural factors and failures by American voters to behave rationally have produced "partisan biases" that permit Republican presidential candidates to escape accountability for their party's relatively poor record of economic management (Chapter 4).

More recently, however, Campbell (2011) has vigorously challenged the finding that Democratic presidents have overseen better economic performances than Republicans. Taking particular exception to Bartels' work, Campbell has argued that every new Republican administration in the years from 1948 to 2005 (the period of his and Bartels' studies) had to contend with a recession left to it by the preceding Democratic administration, while each new Democratic administration in that period inherited a healthy, growing economy from its Republican predecessor. He also claims that previous studies have failed to control adequately for the considerable inertia of the U.S. economy, with economic performance in a year depending heavily on economic performance in the period leading into that year. Once these factors are properly controlled for, Campbell contends that "party differences in economic performance are shown to be the effects of economic conditions inherited from the previous president and not the consequence of real policy differences" between the parties (Campbell 2011, 1). If so, Bartels' conundrum disappears: Republicans have succeeded in presidential elections because they have managed the economy at least as well as the Democrats.

We agree with Campbell that studies of the relationship between the president's party and economic performance must control for the portion of the business cycle that is, or may well be, outside the president's control, but we have reservations about Bartels' and especially Campbell's methods for doing so. We therefore analyze the impact of presidential partisanship on economic output, income, and unemployment while controlling for the phase of economic activity with new methods and measures.

The next section explores the Bartels-Campbell controversy in more detail. It also discusses some difficulties that arise when attempting to identify the impact of presidents on the economy while simultaneously controlling statistically for the portion of the business cycle that presidents cannot be expected to influence. The following section presents our preferred methods and the penultimate section provides our results, which generally confirm the findings of Bartels and others that economic output and its growth were higher, and unemployment lower, under Democratic administrations. The final section analyzes the implications of these findings and suggests alternative hypotheses for the Democrats' difficulties in presidential elections.

Controlling for the Business Cycle

Barrels' (2008) principal finding was that annual growth in the real incomes of most American families was significantly higher under Democratic presidents than during Republican administrations between 1948 and 2005. …