Economic Growth By Presidential Party

Oct. 20, 2020 9:14 AM ETSPDR S&P 500 Trust ETF (SPY)105 Comments
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  • In this article, real economic growth by presidential party is analyzed.
  • The economy has grown faster under Democrats, even when shortening the long time horizon to the post-World War II era.
  • Ascribing economic growth to a presidential party is fraught with difficulties, but the narrative that Democrats are worse for economic growth has not held in the data.

We are exactly two weeks from election day in the United States. Former Vice President Joe Biden leads in the national polls, but when likely voters are polled on which candidate would handle the economy better it is more of a statistical dead heat. The economic record for Trump is difficult to separate from the current pandemic-driven recession. The simple chart below on the unemployment rate in the United States demonstrates the muddled picture. Supporters of President Trump can point to the fact that the unemployment rate pre-pandemic was at the lowest rate since 1969. Detractors of the President can rebut that unemployment levels briefly surged to Depression-era levels.

U.S. Unemployment Rate

Unemployment rate in the United States over the trailing 50 yearsSource: Bloomberg

Similarly, supporters of Joe Biden can point to the long track record of job gains during the Obama Administration. While the Obama-Biden administration presided over the bulk of the longest economic expansion in U.S. history, President Trump correctly points out that the recovery from the last downturn was slow and sluggish.

The same set of facts can be used to paint two very different narratives around the last two administration's success in driving employment in the United States. The picture gets even more confusing when the candidates use their own "facts"! In this article, I wanted to take a long-run examination of the growth in gross domestic product (NYSEMKT:GDP) when both dominant U.S. political parties have occupied the White House.

Using the full set of data on inflation-adjusted economic growth per year from Bloomberg (EHGDUSY Index), which dates to 1930, I have listed the real economic growth per year by President. When there have been transitions of power (like 2020 potentially), economic growth is ascribed to the incumbent.

Economic growth by presidential political partyThe mean at the bottom of the table geometrically links the growth rates for the two political parties. For

This article was written by

Ploutos profile picture
Institutional investment manager authoring on a variety of topics that pique my interest, and could further discourse in this online community. I hold an MBA from the University of Chicago, and have earned the CFA designation. My articles may contain statements and projections that are forward-looking in nature, and therefore inherently subject to numerous risks, uncertainties and assumptions. While my articles focus on generating long-term risk-adjusted returns, investment decisions necessarily involve the risk of loss of principal. Individual investor circumstances vary significantly, and information gleaned from my articles should be applied to your own unique investment situation, objectives, risk tolerance, and investment horizon.

Disclosure: I am/we are long SPY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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