Democrats or Republicans: Who is better for the economy?

Ever since Reagan, there has been a serious conversation in this country about whether its economic policies should focus on helping everyone, or whether we should focus on the largest wealth-generators at the top of the income brackets. This used to be a debate in my head too – I honestly believed that making the rich prosperous could possibly be the best step towards making the poor prosperous. But I believe that I've seen enough evidence now that I can say this very clearly:

The policy of looking out for everyone has worked out much better for everybody than the policy of looking out for the rich. All available data points in favor of this conclusion.

Here are some of the simpler numbers:

Unemployment under Democratic presidents since WWII: 4.6%
Unemployment under Republican presidents since WWII: 6.3%¹

Real income growth under Democratic presidents since WWII: 2.8%
Real income growth under Republican presidents since WWII: 1.6%²


If you like data, there’s a lot more where that came from.



Here are Larry Bartels’s breakdowns that show what effect differing policies have had on those at different income levels.

Between 1948 to 2005, 26 years of Democratic presidencies showed the following real income gains (lagging impact by 1 year after the president took office):³*

20th percentile: 2.6±0.8%
40th percentile: 2.5±0.6%
60th percentile: 2.5±0.5%
80th percentile: 2.4±0.5%
95th percentile: 2.1±0.7%


In that same time frame, the 32 years of Republican presidencies showed the following results (with the same 1 year impact lag):

20th percentile: 0.4±0.6%
40th percentile: 0.8±0.5%
60th percentile: 1.1±0.4%
80th percentile: 1.4±0.4%
95th percentile: 1.9±0.5%

* According to Bartels, the 1-year impact lag is consistent with macroeconomic evidence regarding the timing of economic responses to monetary and fiscal policy changes, and results in a 4-5% better fit to the data than 0, 2, 3, 4, or 5-year lags.


The devil’s advocate in me would want to play the middle, say that those Democratic gains are only possible because of what the Republicans did before them. In the short-term, however, that is certainly not true. Whenever you have consecutive Democratic administrations, the economic strength was emphasized. Whenever you have consecutive Republican administrations, the economic disparity got worse.

Looking only at the 14 years of Democratic terms that followed Democratic terms:

20th percentile: 3.0±1.2%
40th percentile: 2.8±0.9%
60th percentile: 2.9±0.8%
80th percentile: 2.6±0.8%
95th percentile: 2.3±1.1%


Now, looking only at the 16 years of Republican terms that followed Republican terms:

20th percentile: 0.2±0.6%
40th percentile: 0.5±0.6%
60th percentile: 1.0±0.6%
80th percentile: 1.3±0.6%
95th percentile: 2.0±0.7%


The longer that Democrats stay in office, the better the situation gets for the majority. The longer that Republicans stay in office, the more the difference between the rich and the poor grows.

When Bartels did this study (found in Unequal Democracy), he tried to see whether a few outliers could explain the results. Yet he found that:

significant partisan differences continue to show even when any 1 or 2 administrations are omitted, if years on both ends of the spectrum are ignored, or if election years and/or transition years are ignored.

What does this all have to do with today? Right now we are experiencing the consequences of having Republican presidents for 20 of the last 28 years. The discrepancy between the rich and the poor has now grown the to highest levels since before the Great Depression. Over 80% of the income growth since 1980 has gone to the top 1% of income-earners, who now control 22% of all income (and half of that is controlled by the top 0.1%).⁴ The average real income of the top 0.1% has more than tripled since 1980, from $400,000 to $1.4 million in 2005 dollars, and the average real income of the top 0.01% has gone up by a factor of five, from $1.2 million to $6.1 million, whereas the average real income of the middle class and the working poor has remained virtually unchanged.

Why hasn’t the growth in the upper sectors helped the average American? It’s all about priorities. In the 16 years between 1989 and 2005, sales growth in the luxury retail industry averaged over 10%/year.⁵ At the same time, the living standards of poor children in American ranked 12th out of 13 rich democracies, approximately 20% below Canada and France and 35% below Norway, despite the fact that America had greater overall wealth than any country on that list.⁶

Continuing to play Reaganomics, cutting the taxes of the rich, promoting business at the expense of the average citizen, and relaxing regulations in order to increase their ability to make wealth, did not help the poor. Cutting government spending and removing the support networks for the poor did not help the poor. The focus on keeping inflation down over striving for full employment did not help the poor. Doubling the wages of CEO’s over the course of ten years while the real value of the minimum wage continuously dropped did not help the poor.

When I used to listen to conservative talk radio and almost trust them (I’m talking Praeger and Medved and Hewitt, not the total crazies), the economic arguments were believable. I could imagine a world where free competition created the most prosperity for all. I could imagine how a low minimum wage and minimal workers’ rights might enable businesses to create more jobs. I could imagine how low taxes on the rich might create greater investment power that trickled down to the poor. I could even imagine that now. But the facts show that that’s not the world we live in. Eight years of Reagan and twelve years of Bushes have given us a much different picture. During George W. Bush’s first term alone, real incomes of middle-class taxpayers decreased 1% and real incomes of the working poor decreased 3%. Yet the 99th percentile saw a 7% increase in real income, and among the 99.99th percentile it was 18%!⁷ Every president redistributes wealth to some degree. The complaint Republicans have right now is with who it’s being distributed too.

It’s long past time that the pendulum swung back to the 99% on the bottom.


^[1]Piketty, Thomas, and Emmanuel Saez. 2003. "Income Inequality in the United States, 1913-1998." Quarterly Journal of Economics 118: table A4. Updated data listed here can be found on Saez's website The numbers listed are only through the end of 2005 and do not factor in the significant increase in unemployment that occurred in the final years of the Bush administration
^[2]Calculated by Bartels from Census Bureau Historical Income Tables. These numbers are also only through the end of 2005 and do not factor in the significant decrease in real income growth that occurred in the final years of the Bush administration
^[3]Census Bureau Historical Income Tables
^[4]Piketty and Saez 2003 (updated in 2008)
^[5]Anna Bernasek, "The Rich Spend Just Like You and Me," New York Times, August 6, 2006, BU 4.
^[6]Osberg, Lars, Timothy M. Smeeding, and Jonathan Schwabish. 2004. "Income Distribution and Public Social Expenditure: Theories, Effects, and Evidence" pgs. 826-834 in Kathryn M. Neckerman, ed., Social Inequality
^[7]Piketty and Saez 2003 (updated in 2008)