The evidence of the past 70 years shows that presidents barely affect the economy at all.
I was talking with a group of farmers on Tuesday, and one of them asked me how I thought the U.S. economy would fare under a Trump presidency. I responded that it’s very difficult to say how anything or anyone would fare under a Trump presidency, since he has stated fewer clear policy positions than any other candidate, and even those have changed from time to time.
A larger point (which I didn’t go into) is that we Americans usually consider the economy the No. 1 issue in presidential elections, and we tend to judge candidates for the world’s most important leadership job on how we think they’d affect the economy. Yet the evidence of the past 70 years shows that presidents barely affect the economy at all.
That statement sounds extreme, and surely, you’re thinking, it can’t be true. Okay, let’s see how the economy has performed under all of America’s post-World War II presidents. We find that it has done much better under Democrats than Republicans. The most recent and comprehensive study, by Princeton’s Alan Blinder and Mark Watson, finds that the economy’s annual growth averaged 4.35% under Democrats and 2.54% under Republicans—an “astoundingly large” difference, they report.
Aha, you may say, Blinder worked in the Clinton White House and has often taken liberal positions on economic issues; maybe he put his thumb on the scale in doing the research. But no, a range of other researchers over the past several years have observed the same effect, and the evidence in Blinder and Watson’s paper is overwhelming.
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So Democrats are better for the economy? Not necessarily. Even though the economy does better under Democratic presidents, it doesn’t follow that the president is the reason. In fact, Blinder and Watson conclude, “Democrats would no doubt like to attribute the large D-R [Democrat-Republican] growth gap to macroeconomic policy choices, but the data do not support such a claim.” Instead, they find, the difference arises mostly from “several variables that are mostly ‘good luck,’ with perhaps a touch of ‘good policy.’”
Other economists agree. Austan Goolsbee, former chairman of President Obama’s Council of Economic Advisers, has said, “I think the world vests too much power certainly in the president, probably in Washington in general, for its influence on the economy, because most all of the economy has nothing to do with the government.”
Bill Clinton liked to boast that America created far more jobs under Democratic presidents than under Republican ones, but even Democratic economists say no president deserves much credit (or blame) for changing job numbers.
Nonetheless, we voters will likely behave as usual, attributing the economy’s performance to the president and his party; voluminous research shows that the economy is a major factor in presidential election outcomes. And the candidates will certainly promise economic miracles; Trump, for example, says he’d be “the greatest jobs president that God ever created.” Let’s just take those promises for what they are: indicators, at best, of a candidate’s policy leanings, and very far from assurances of what a president would or could do.