THE SUGAR HIGH WEARS OFF?

During the last Democrat nominating convention, former president Bill Clinton sought to credit his party with taking "It's the economy, stupid" seriously.

"You're going to have a hard time believing this, but so help me, I triple-checked it," Clinton said. "Since the end of the Cold War in 1989, America has created about 51 million new jobs….What's the score? Democrats 50, Republicans one"—meaning 50 million new jobs created under Democratic presidents, 1 million under Republican presidents.

Harvard's Jeffrey Frankel sees Mr Clinton and raises him the end of an earlier war.

Since World War II, Democrats have seen job creation average 1.7 % per year when in office, versus 1.0 % under the GOP.  US GDP has averaged a rate of growth of 4.23 percent per annum during Democratic administrations, versus 2.36 per cent under Republicans, a remarkable difference of 1.87 percentage points. This is postwar data, covering 19 presidential terms—from Truman through Biden.  If one goes back further, to the Great Depression, to include Herbert Hoover and Franklin Roosevelt, the difference in growth rates is even larger.

That's long been a ritualized dance in politics.  Republicans blame Democrats for wars and Democrats blame Republicans for recessions.  That the whole spat validates old-school Marxists who see war as the natural order of capitalist competition seems not to stop those partisans.

But is the pattern a consequence of policy?

A remarkable 9 of the last 10 recessions have started when a Republican was president.  The odds that this outcome would have occurred just by chance are even more remote: one out of 100.  [That is, 10/2¹⁰ = 0.0098.]

Blinder and Watson (2016) pointed out another remarkable fact.  They considered the eight times since World War II when an incumbent from one party had handed over the White House to a leader from the other party.  We have had two more presidents by now. Let us update, by adding the records of Trump and Biden (so far).  In five of the last 10 transitions, a Democrat was succeeded by a Republican; each time the growth rate went down from one term to the next. In five of the transitions, a Republican was succeeded by a Democrat; each time the growth rate went up.  No exceptions.  Ten out of ten.  What are the odds of this happening by chance?  The answer is the same as the odds of getting heads on 10 coin tosses in a row:  ½ times itself 10 times, which is 1 out of 1,024.  In other words, the difference is statistically significant at the 99.9% level.

So, one can safely reject claims of stronger economic performance under Republicans.  But what accounts for the surprisingly better record under Democratic presidents?  It remains a puzzle.

Reason's Joe Lancaster suggests not bothering to attribute too much to presidencies.

But it's misleading to suggest that the president—and by extension, the major political party to which the president belongs—is singularly or even primarily responsible for the success or failure of the job market. Rather, individuals in dynamic economies operate independently of the political party that happens to occupy the White House.

There's enough stuff affecting economic activity that attempting to attribute causation to a party manifesto is hazardous.  Not impossible, as several major asset bubbles, going back to October 1929, popped during Republican presidencies.  But hazardous all the same, as the abstract to Blinder and Watson's paper notes.  "The answer is not found in technical time series matters nor in systematically more expansionary monetary or fiscal policy under Democrats. Rather, it appears that the Democratic edge stems mainly from more benign oil shocks, superior TFP performance, and perhaps greater defense spending and faster growth abroad."  And Democrat wars, to revisit that old partisan squabble.

But just before the 2024 general election came a jobs report that might have documented the end of the Biden era sugar high.  "If it wasn’t for government spending, this economy would be sputtering to a halt. The growth of government jobs has been a primary driver of employment."  We've been calling attention to the employment gains in Illinois, such as they have been, and new government hires, local, state, or federal, account for over 100% of the state's gains.  So too appeared it to be in that final jobs report before the election, in which net government employment gains were four times the net gain of twelve thousand jobs.  Yes, that report relies on a dubious survey, and yes, there were strikes and episodes of bad weather affecting the tallies, and yet the possibility remains that the government sugar high is about to wear off.  Buckle in.