Trump and his Republican supporters are losing their argument about Trump being the country’s economic savior as the economy tanks, mainly because of his non-handling of the pandemic.
They appeared to be winning the argument last May when 54 percent of registered voters said Trump would better handle the economy than 42 percent for Biden. Now, incredibly, Trump and Biden are tied at 49 percent apiece on who would manage the economy better.
The regard for Trump’s leadership on the economy appears to be based on two myths. One myth is his so-called great business acumen, despite inheriting/acquiring over $400 million from his father, five bankruptcies, and current debts over $400 million, as well as his bragging about creating an economy that he inherited from the Obama administration.
The other myth is more general. It just keeps hanging out there. This is the myth that Republicans are better with the economy than Democrats.
But before I get to it, let me make one thing very clear. Even if Trump were an economic development whiz, he is screwing up so many of our institutions that electing him to a second term would be an unimaginable tragedy.
Back to the myth. A recent book, “Bulls, Bears and the Ballot Box,” shows that over the last 80 years, the U.S. economy has fared better under Democratic presidents than under Republican presidents. Some data:
Under Democrat presidents
- Personal income grew nearly six times more.
- Stock market returns were 18 times greater.
- Business profits grew over 16 percent more.
On the other hand, the two times the economy collapsed (the Great Depression beginning in 1929 and the recent Great Recession) were during Republican administrations—Herbert Hoover and George W. Bush.
In a 2014 paper, two prominent economists looked at this issue going back to World War II. They concluded that the U.S. economy not only grows faster during Democratic versus Republican presidencies, it also produces more jobs, lowers the unemployment rates, generates higher corporate profits and investment, and creates higher stock market returns.
While the performance differences are clear and significant, it is not always clear what causes these different results. The data do not reveal clear-cut reasons. There are many conjectures and hypotheses. A colleague suggests that maybe it is because Democratic policies tend to put more money into the hands of the middle class, the working poor, and the poor, and all of these groups tend to spend most of their income. The resulting circulation of money stimulates the economy. Republican policies, on the other hand, tend to put more money in the hands of the wealthy, who have so much money that they save considerable amounts of their income. Saving may be a good thing, but saving does not stimulate the economy as spending does.
Another recent book, “Unequal Democracy,” which looks at the last three decades, concludes that income growth was about the same for all income groups if a Democrat was in the White House. However, if a Republican was president, income growth was higher for higher-income groups than for lower-income groups. This might explain why wealthy persons tend to vote for Republicans–and why non-wealthy people should not.