By Hugh Griffin-Banerjee and Miranda Park
This is the second article in a series of three which examines the relative economic performance of Republican and Democratic administrations in the 40 years from 1977 through 2017. If you haven’t already done so, start with the first article, which compares management of the federal debt—a contest the underdog Democrats won, and not by a small margin.
In this article, we determine which party has been the better steward of economic growth during the same four decades. There are a lot of ways to gauge economic growth, but most are arguable or complicated or both. (See our Notes below.) For the purpose of this comparison, we’ve chosen yet another simple, agnostic, and numeric yardstick: relative stock market performance during each party’s administrations.
The three major American market indices are the Dow Jones Industrial Average, the Standard and Poor 500 Index, and the Russell 2000 Index. The markets tend to move together, thus any one would be a fair measure, but, to misquote Goldilocks, “The Dow is too small, and the Russell 2000 is too big, but the S&P 500 is just right.”
Forthwith, the incoming and outgoing S&P 500 indices by Republican and Democratic administration were as follows:
|President||Party||In Office||S&P Open||S&P Close||Change|
|George HW Bush||GOP||1989-93||294.00||441.70||50.2%|
|George W Bush||GOP||2001-09||1,305.75||805.22||-61.7%|
On average, the S&P 500 index increased by 32.9% during the last three Republican administrations. In comparison, the average S&P 500 index increased by 137.4% during the last three Democratic administrations.
Using the S&P 500 as a benchmark, the last three Democratic administrations beat the last three Republican administrations––by a factor of more than four!
The next time someone tells you that the Republicans are better stewards of the economy than the Democrats, ask, “By what measure?” Better yet, simply respond, “Bollocks!” Then walk away.
Update, March, 2021: From February 1, 2017 to February 1, 2021, the S&P 500 Index increased from 2329.91 to 3,714.24, or 54.9%, which raised the Republican average to 43.1%. Not awful, but still paltry compared to average stock-market performance during the last four Democratic administrations.
1) The comparison begins on February 1, 1977, twelve days after Jimmy Carter was inaugurated, and continues through February 1, 2017, twelve days after Barack Obama left office.
2) Common metrics we might have chosen but didn’t were per capita income and gross domestic product (GDP) growth. Since 1977, per capita income has increased every year except 1991, 2002, and 2009, but the majority of that growth favored the wealthy––which may make it the Republican party’s favorite benchmark, but it’s certainly not ours. The other candidate was GDP growth, but this measure has a long policy tail. There’s no reasonable way to approximate the beginning of each administration’s influence, and the length of the tails will vary.
3) For simplicity’s sake, we ignored the length of each administration, which, excepting the update from the Trump administration, was equal in total for both parties. Once again, apples to apples.