Do Republicans have better economic policies than Democrats?
• Today's Climate. The Republican party typically says it supports limited government involvement in economic decisions - a laissez-faire capitalism of sorts, if you will. But looking at the protectionist trade wars, threatening the independence of the Federal Reserve, and other events in the last 2 years it seems that the present Republican government is all about government control and manipulation. For better or worse in the long term, this is a far cry from the laissez-faire polices advertised. The current climate seems to be creating an economic boom that could possibly be more artificial than real. And if that is the case, the fall after this boom is going to be greater. To use an analogy, sometimes, it’s better to let your child fall and learn rather than protect them from every external factor and create a spectacular failure when that protection is no longer possible or available.
• The 2 Approaches. Typically, the Democratic party relies on the government to regulate the economy - in a downturn they favor deficit spending to revive the economy. Republicans rely on an approach where they alter the money supply to revive the economy - by adjusting interest rates and reserve requirements on banks. Either approach has the potential of causing economic growth, job creation, industrial production increase and other factors.
• What does the data say? Studies show the economy has done better under Democratic presidents vs. Republican presidents since World War II - and this is accepted by most economists using a plethora of metrics and calculation methods. An average growth rate of 4.4% under Democrats vs. 2.5% under Republicans since World War II. Example: a $100,000 investment in the US economy during this period would have yielded: $209,000 under 30 consecutive years of Republican rule and $363,000 under Democratic rule in the same period. A 73% higher yield under Democrats.
• And what about other Economic indicators? Economic Growth, Job Creation, Industrial Production all seem to fare better under Democratic Presidents since World War II - as confirmed by Princeton University economists Alan Binder and Mark Watson as well as the Joint Economic Committee.• Caveat. Of course, there are other factors at play too - oil prices, wars, trade issues, etc. And there are some pockets of Republican rule that have yielded good economic results as well. But on average the 73% delta is hard to chalk up to “external” factors.
• Who wins when the going gets good? Wealth is distributed unevenly at either growth rate and some quarters of the economy / population enjoy much higher yields while others much lower yields for the average to settle at 4.4% or 2.5%.
• Your thoughts? Is there a better party for our collective economic future? Of course, we need checks and balances - and perhaps the right mix of Democratic and Republican rule over any 30 year period might be the optimal answer to this question. And what about the distribution of wealth - or lack thereof? Regardless of how fast we grow as a whole, a lopsided distribution of opportunities, and hence wealth, seems to be the 800 pound gorilla in the room. Are we primed for an economic policy disruption of sorts? Is the emotional attachment to crypto currencies a symptom of the real underlying problem?
- An opinion piece by Arif Delawalla
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