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Are There Partisan Political Economies?

- April 13, 2011

bq. Several studies of the post-war American political economy find that Democratic presidents have been more successful than Republicans. Most recently, Bartels (2008) found that economic growth had been greater and that unemployment and income inequality had been lower under Democratic presidents since 1948. If true, these findings combined with the frequent success of Republicans in presidential elections pose a challenge to theories of retrospective voting and responsible party government. This reexamination of these findings indicates that they are an artifact of specification error. Previous estimates did not properly take into account the lagged effects of the economy. Once lagged economic effects are taken into account, party differences in economic performance are shown to be the effects of economic conditions inherited from the previous president and not the consequence of real policy differences. Specifically, the economy was in recession when Republican presidents became responsible for the economy in each of the four post-1948 transitions from Democratic to Republican presidents. This was not the case for the transitions from Republicans to Democrats. When economic conditions leading into a year are taken into account, there are no presidential party differences with respect to growth, unemployment, or income inequality.

That is the abstract of a new paper by James Campbell, soon to be published in “The Forum”:http://www.bepress.com/forum/. Find it “here”:http://www.acsu.buffalo.edu/~jcampbel/documents/ForumFinal04052011.pdf.

There is no easy way for me to summarize or comment on the differences in statistical modeling that lead Campbell to different conclusions than Bartels — that is, unless you like extended disquisitions on lagged values. Briefly, the issue is this. Bartels counts the second year of a president’s term as the first year in which those president’s policies would affect the economy and finds that Democratic administrations create more income growth, especially for those with lower incomes. (There is a similar pattern if the first year of a president’s term is counted as a the first year in which that president’s policies could affect the economy.) Bartels controls for economic conditions in the previous year.

Campbell argues that more important are economic conditions in the _two quarters_ immediately prior to the president’s second year. These quarters constitute, in essence, the economy that has been bequeathed to the current president by the previous president. Campbell finds that, overall, Democrats have bequeathed substantially worse economies to Republican presidents than vice versa. Thus, the apparent worse economic performance under Republican presidents may be due to having inherited worse economies, not to differences in policies.

Part of the challenge is identifying when presidents and their policies become “responsible” for the economies. The transition from Bush to Obama illustrates the challenge. When Obama took office, the economy was shrinking (that is, GNP growth was negative). But by the last two quarters of 2009, economic growth was positive again. So, if those quarters are counted as part of the “Bush economy,” it’s clear that Obama inherited a growing economy. But if those quarters are counted as part of the “Obama economy” — e.g., because economic growth in those quarters was due in part to the stimulus package that Obama pushed for — then we might argue that the Obama presidency — in line with past Democratic presidencies, Bartels would say — is producing income growth.

Okay, so this post really wasn’t brief at all. In any case, my point is not to take sides in this debate — I haven’t read and thought about it enough — but to summarize the key point of disagreement and illustrate why scholars might disagree about this.

I welcome further thoughts in comments.