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Proof: Democrats Are Better For the Economy

We've seen a wave of news stories that Wall Street is scared of Obama. But for the investor class, you may want to help elect him because Democrats are better for stocks.
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Today I'll be on KTLK at 11:30 CST to talk about the economy.

We've seen a wave of news stories that Wall Street is scared of Obama, or the Obama will lead to a market crash or that Obama will kill the economy. First -- it's not like the Republicans have a lot to crow about here. We're currently dealing with the long term effects of Republican excesses and the results are terrible. Secondly -- and more importantly, the historical record (those pesky facts again) indicate that Democrats are far better for the economy than Republicans.

The following charts are from the Liscio report blog.

The blog notes:

Democrats have a clear edge on GDP growth: 4.4% vs. 2.6%. Even if you start the clock with Truman in 1949 (eliminating the war boom and immediate postwar bust), the Dem advantage survives, with average growth of 4.5%. The partisan difference is widespread, too, not dependent on a few strong or weak readings: the blue bars stack towards the top of the graph, and the red bars towards the bottom. It might surprise some readers to learn that the Carter years weren't quite as bad as some remember -- though the inflation performance was miserable.

But Republicans are the party of big business! They know the economy! Actually, the facts indicate the Democrats are simply put better at initiating policies that help the whole economy -- not just small segments of it.

Democrats also create more jobs than Republicans. However -- here is a very important caveat. Over the last three expansion we've seen an overall decrease in the total number of jobs created. That is, the total number of jobs created during Clinton were less than Reagan and the total number of jobs created under Bush were less than Clinton. The point here is there is an overall trend in business to continually hire fewer and fewer people. The primary reason for this is two fold. First, there has been a massive increase in productivity over the same time period which means a business needs fewer people to do more stuff. Secondly, business has become more and more cost conscious and employment is typically the most expensive part of a businesses expenses.

Income inequality as measured by the Gini index increases under Republicans and decreases under Democrats. I think this is a very revealing statistic because it gets to the heart of the primary difference between the parties. The Republicans typically cut taxes on upper-income taxpayers, which leads to an increase in income inequality. While some inequality is going to naturally occur and in fact is healthy because it creates a societally wide incentive, the question of how much is an important policy debate well worth having. Now -- because Republicans cut taxes but not spending...

They increase deficits a hell of a lot more than Democrats. The report explains:

Though the picture so far is of the Republicans as the party of austerity and the Democrats as the party of stimulus, there's a surprise when it comes to changes in the federal deficit: Republicans are more liberal with the red ink than Dems. On average, a Republican in the White House has meant a shift of -1.9% of GDP in the government's budget balance (i.e., towards smaller surpluses or bigger deficits), while a Dem has meant a 1.5% improvement in the budget position (or 1.8%, if you start in 1949, thereby omitting the huge World War II deficit). And in this case, the average is a faithful representation of the distribution, with only one Democrat in the minus column and only one Republican in the plus.

Some of this reflects different tax policies, with Reagan and Bush 43 cutting, and Clinton raising income taxes. But it also reflects the partisan difference in GDP growth.

And for the investor class -- as Larry Kudlow likes to say -- you may want to help elect Obama because Democrats are better for stocks:

This gets back to the first chart of GDP growth. Simply put the economy grows more under Democrats than Republicans. That means higher profits which -- again as Larry likes to say -- are the mother's milk of stock profits (So Larry -- why are you a Republican again?????)

In all seriousness -- these data points are extremely telling about the effects of the policies both parties implement. The Democrats clearly have a better record of growing the economy for more people. Those are the facts, not the spin.

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