The GOP v. Democrats, Round 2 – The Stock Market

This is the second article in a series of three which examines the relative economic performance of Republican and Democratic administrations over the last forty years. 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, also from 1977 to 2017. There are a lot of ways to gauge economic growth, but most are arguable or complicated or both. (See 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 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
Jimmy  Carter Dem 1977-81  101.00  128.40 27.1%
Ronald Reagan GOP 1981-89  128.40  294.00 129.0%
George HW Bush GOP 1989-93  294.00  441.70 50.2%
Bill  Clinton Dem 1993-01  441.70  1,305.75 195.6%
George W Bush GOP 2001-09  1,305.75  805.22 -61.7%
Barrack  Obama Dem 2009-17  805.22  2,329.91 189.4%

On average, the S&P 500 index increased by 13.6% 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 ten.  

The next time someone tells you that the Republicans are better stewards of the economy than the Democrats, ask, “By what measure?”

Full disclosure: From February 1, 2017 to February 1, 2018, the S&P 500 Index increased from 2329.91 to 2816.45, or 20.9%, but that’s one year on the Trumpian calendar. The performance of the last three Republican administrations suggests that the index will close at 2648 on February 1, 2021 or 2025, or 225 points below the market peak of 2873 reached on January 26 of this year. Fortunately, and by that I refer to the value of our fortunes, past isn’t always prologue.

Notes:

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.

It could be argued that the impact of each incoming president’s policies is not reflected in the indices until a year or so after his inauguration, although Donald Trump would disagree. In this (rare) instance, it’s probably fairer to agree with The Donald because: a) market performance anticipates the policies of the incoming administration, and b) the numbers reflect the impact of the president’s policies at different therefore debatable times after his inauguration. If, however, you feel the need, then by all means change the dates and/or indices and run your own comparison.  It’s unlikely though that the pendulum will swing more than a few degrees, and it may swing in either direction.

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 not ours.  The other candidate was GDP growth, but this measure by its nature 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.

The bottom line is that every measure has its plusses and minuses. We chose what we chose; choose what you will.

The Ban on AR-15’s – By the Numbers

Lately, in the wake of the Parkland high school massacre, there’s been a lot of talk in the nation’s capitals about limiting the sale of the killer’s weapon—a modified AR-15 type assault rifle––to buyers 21 and over who can pass background checks. The objective, presumably, is something that Democrats and Republicans can agree on: to minimize the number of innocent Americans murdered by AR-15 wielding gunmen.

According to ABC News, there were 345 mass murders in the US in 2017, or nearly one per day, so it’s nigh on impossible to argue with the objective. (The definition of a mass shooting varies, but in general it means that three or more people were killed or at least two were killed and two were wounded in the same attack.) The general, politically acceptable and supposedly bipartisan proposal is to limit sales of semiautomatic weapons to sane adults who can pass a background check.

We on The Other Side feel safer already, but we’re skeptical about any solution, or rather semi-solution, that gets bandied about in the halls of Congress. We’d rather examine its efficacy through the lens of the most reliable numbers extant.

According to the National Shooting Sports Foundation, somewhere between five and ten million AR-15 type firearms are owned by American citizens. We can’t speak for you, but our confidence doesn’t soar when the range of informed estimates is two to one. Regardless, let’s settle on the midpoint: 7.5 million rifles capable of being converted into semi-automatic weapons. The population of the US is around 323 million, which means that one in 43 Americans owns an AR-15 or similar weapon.

Now that we’re equipped with best-source data, let’s revisit a few massacres where the killers were equipped with AR-15 type firearms:

  • The population of Sutherland Springs, Texas, where 26 worshippers were murdered and ten were wounded, is around 600. If the averages hold, then the town’s residents owned 14 AR-15 type weapons at the time of the massacre.
  • The population of Parkland, Florida, where 17 high-school students and teachers were murdered and 14 were wounded, is about 31,000. If the averages hold, then the city’s residents owned 738 AR-15’s or equivalents at the time of the massacre.
  • The population of the Las Vegas metropolitan area, where 58 concert goers were murdered and 851 were wounded, is approximately 1,950,000. If the averages hold, then area residents owned 45,000 AR-15 type rifles at the time of the massacre.

Banning the sale of AR-15 or similar firearms to Americans under the age of 21, whether they can pass background checks or not, will have zero effect on the millions of guns already in circulation. Moreover, the banning of all future sales of AR-15’s will hardly contain the supply for those bent on murdering scores of innocents.

Notably, civilian ownership of AR-15 type semiautomatic rifles was prohibited until 2004, when the ban was lifted by a Republican-controlled Congress. By the numbers, it’s inescapably clear that nothing less than reinstatement and enforcement of the ban will make a serious dent in the frequency of mass shootings.

We’re well aware that a significant percentage of AR-15’s would not be turned in if the 2004 ban was reinstated. Many would be locked away in gun safes, and some would disappear into black markets. According to John Maynard Keynes and Milton Friedman, however, price increases when supply is constrained, and that means that all but the well-healed crazies would be forced to brandish less lethal weapons.

We on The Other Side have every hope that the movement started by the students of Marjory Stoneham Douglas High School will cause material, life-saving change, but we’re not holding our breath. Given the current political climate, however, we expect that there will many more massacres before some future Congress has the courage to defy the NRA and protect their constituents––if only from this one, extraordinarily dangerous firearm.