Now that the first ballots have been counted for 2008, the real handicapping begins. While the political pundits pore over Iowa's electoral entrails, we pause to consider the import of the upcoming general election on the commodity markets.
Conventional wisdom has long held that Democrats, thought to be "tax-and-spend" types, are more likely to run up an inflation bill on their White House watches than Republicans. If one believes there's a positive correlation between inflation and commodity prices (and who among us wouldn't?), the conventionally wise should be slathering over the prospect of a Democratic administration.
Seven Democratic presidents, going back as far as Woodrow Wilson, have guided the ship of state since Consumer Price Index [CPI] numbers have been collected. Old Woodrow had a time of it. Over his two terms, prices rose an average of 12.8% a year. Of course, he was making the world safe for democracy. That costs something.
Subsequent Democratic administrations were much less likely to inflate the economy, though. For the half dozen Democratic presidencies that followed Wilson, yearly CPI growth averaged only 3.1%.
All told, inflation ticked up at a mean 4.5% annual rate while Democratic chief executives presided.
And what of Republican presidents? Well, nine GOP administrations, starting with Teapot Dome's own Warren Harding, chalked up average yearly CPI growth of only 1.5%.
So, conventional wisdom seems to hold up to the numbers. The trouble with conventional wisdom is that it's so, um, conventional. If you look at the median inflation numbers rather than the means, you get a different impression of Democrats. And Republicans.
Republicans occupied the White House during two periods of deflation. In the first instance, our friend Harding watched prices erode at an average annual rate of 1.5% as the 1920s prepared to roar. Then, of course, there was Herbert Hoover. The Great Depression was characterized by a yearly slide of 5% in consumer prices.
Throw in the 5.7% annual inflation rate of the Nixon years with the other Republican administrations' numbers and you'll get median CPI growth of 2.2%. That's not much different from the 2.3% median rate for all Democratic administrations.
Counting the Depression years makes the Republicans look like real inflation fighters when really, their low averages are a statistical artifact. CPI swung a lot more-above and below the line-when the GOP held the White House. Take out all the upheaval of the War to End All Wars, the Roaring '20s and the Great Depression and what have you got?
While post-Wilson Democratic administrations can claim rights to a 3.1% average yearly inflation rate, Republicans watched over annual price increases of 3.2% on their modern-day turns at the helm. And the median numbers? Democrats 2.5%, Republicans 3.1%.
So what can we take away from all this? Well, much Democratic sloganeering in the Iowa campaign centered on the word "change." From an inflation standpoint, modern-day Democrats don't seem that much different from Republicans once the reins of state are handed over to them. Maybe that's what's going to change.
If history is any guide, maybe commodity bulls should think twice about what they wish for this election year.
Annual CPI Growth (1913 - 2006)