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ZAPP: Trump says business better under Democrats

Other Republican presidential candidates have attacked Donald Trump for saying business has been better while Democrats were in power than when Republicans were in the White House. Some even said he’s a Democrat, not a Republican.

It is interesting that none of them challenged the veracity of Trump’s claim. While many of his statements defy empirical testing, this one may be evaluated by looking at relevant economic data.

To look at business’ success under Democratic and Republican leadership I propose to use two key indicators: annual growth of real gross domestic product (GDP) and average annual unemployment (see chart). The data come from the period of 1981, President Reagan’s first year in office through mid-2015, President Obama’s penultimate year.

Taking the average of these averages, we find that since 1981 our real gross domestic product grew 2.7 percent under Democratic presidents and 2.5 percent under Republican presidents.

We can debate these results endlessly. When should we start? Going back to 1961 (President Kennedy’s first year) produces a wider gap in favor of Democratic leadership as growth during Kennedy-Johnson exceeded that of Nixon-Ford.

Some economists argue presidents are not responsible for what they inherit from their predecessors and the impact of their policies are better seen over time. In that case, we can look at the real GDP growth during each president’s last two years in office.

Here we find GDP growth under Reagan of 3.9 percent, Bush 1.8 percent, Clinton 4.4 percent, Bush 0.8 percent and Obama 2.8 percent. Using these results we find the average under Democrats of 3.6 percent and Republicans 2.1 percent.

Next we can look at unemployment data. The better business is growing, the lower the unemployment rate (over time). Data are from the Bureau of Labor Statistics.

When we average the Democrat and Republican averages, unemployment under Republicans averaged 6.3 percent and under Democrats 6.5 percent. However, using data from each president’s last two years, we see different results: Reagan 5.9 percent, Bush 7.1 percent, Clinton 4.1 percent; Bush 5.2 percent and Obama 6.0 percent.

Taking their averages, unemployment averaged 6.1 percent during the last two years of Republican presidents and 5.1 percent under Democratic presidents.

Does all this mean Trump was correct? No, because there are many other factors to consider when evaluating economic performance. We would want to look at interest rates, productivity rates, national debt and our foreign debt, all of which have long term consequences. We have also learned that some short-term actions to support growth may have negative consequences for the future of the planet on which we all depend.

However, these data do show that Trump was not incorrect. To improve our management of the macro economy, we must rely more on empirical data to assess performance than on ideology. Some people believed that Trump was wrong because ideology told them so.

 

Kenneth Zapp is a professor emeritus at Metropolitan State University and a mentor at Savannah SCORE. Contact him at Kenneth.Zapp@MetroState.edu.

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