The Data Don't Lie

Democrats, NOT Republicans, Are Good for the Economy Across Almost Every Metric

Note from Rachel:

For the second time I’ve invited a guest author onto The Cycle because he has very important information to convey to you.

As you know, I am working hard to get more directly involved in shaping the party’s strategic posture going forward. A large part of that work involves getting Democrats on offense about the Republican Party’s dismal record on the economy since they implemented Project 1980 (otherwise known as Reaganomics). “Voodoo Economics” (nicknamed that by one, George Bush Senior because he was quite correctly pointing out that if you cut revenue, you get deficits and boy was he ever right) which depressed wages for the middle class, crushed upward mobility, and destroyed small town America.

Those of you who have been on this journey the whole time with me might remember when I launched Strike PAC (some of you no doubt contributed to that effort, thank you, your investment helped me get to this point) which I wanted to use to spend a billion dollars smearing the Republican Party’s brand. Instead that money went to Future Forward, who wasted it all on positive ads and left swing voters in the exit polls with a positive memory of Trump’s 1st term.

No, I’m never, ever getting over it and if it kills me, I swear this will not happen going forward.

One of the first ads we created and the one I took to Morning Joe was called “Win” and it was designed to correct the record that the Republican Party has a good record of economic performance.

Anyhoo, back to the main point. Today I have invited Ron Gebhardtsbauer, Emeritus Professor of Actuarial Science at Penn State University, to publish an analysis he has conducted to answer what I think will be the defining question of the party’s strategy going forward: which party has the back of working Americans.

Spoiler Alert: Its Democrats!

Over to you, Ron.

The US Economy by President and Party from 1981 to 2024

Ron Gebhardtsbauer

In the runup to the 2024 election, polls showed that a majority of people believed Republican Presidents do a better job on the economy. While I knew that wasn’t true on certain economic indicators, I didn’t know whether it was true for all of them. So, I investigated data from 1981 through 2024 on nine of them.

What I found was that the Democrat average was better on every one of them, as shown in the top two rows of Table I: under Democrats, the US had higher real stock returns, lower inflation, greater productivity and wage increases, greater increases in jobs (and business startups), lower unemployment, and greater reductions in crime. In addition, deficits as a percentage of GDP always had a net increase over each Republican Administration and a net decrease under each Democratic Administration.

Subsequent to my analysis, I found research over earlier time periods showing the same thing: “the US economy performed significantly better on average” under Democratic presidents than Republican presidents. Research on 1949 to 2012 by Princeton economic professors Alan Blinder and Mark Watson showed the same results. They also found that business profits and labor productivity were higher under Democratic Presidents. I then looked at Real GDP growth going back to 1921 and found that it was always higher under Democratic Presidents over any long period (22 years or more).

Table I provides a synopsis of my analysis. The party (and President) with the better averages are highlighted in color (red for Republicans and blue for Democrats).

The third row shows that a Democrat President was the best on each economic indicator. Biden was the best on three of them (four if 2022 is excluded from his average for real stock returns, as COVID was not his fault) and second best on three more. Trump was second best on four of them, but never the best. The last two rows compare Biden and Trump. Biden was better than Trump on seven of the economic indicators, while Trump was better on two (eight to one, if 2022 was excluded from the real stock return average as noted above).

The fact that Democrats had better averages on all 9 indicators and higher GDP growth over any long time period suggests that this is not just coincidence, but causal. Maybe it’s because Republican Presidents had many more recessions than Democratic Presidents. That may be because Democrats are Keynesians (i.e., believers in using government to stimulate the economy) and their policies directly support the lower and middle classes, whereas Republicans generally have pursued policies that reduce taxes for the rich (and the rich are less likely to use their tax cuts to increase production than if the government used the funds). Or the recessions and less productive economies could be due to:

• Oil shocks (which impacted Republican Presidencies more, but sometimes they were caused by war which the President caused),

• COVID (impacting Trump and Biden),

• Increased Interest Rates (the Fed increased interest rate on average by 3.3% under Democratic Presidencies, but decreased them over Republican Presidencies by 2.8% on average, which should have hurt the Democrat average more, if nothing else happened, but the Democratic Presidents still did better on average),

• Increased war budgets during Democrats (which increase production) and decreased war budgets under Republicans, or

• Better resource utilization under Democrats (as shown by Blinder’s analyses of TFP - Total Factor Productivity). That could be influenced by the President’s policies (e.g., Republican supply-side tax cuts vs. Democrat demand-side policies which directly encourage production).

The fact that the results are similar in every area also suggests that the indicators are correlated. More stimulus decreases unemployment, increases jobs and business startups, and increases productivity, which increases earnings (which decreases poverty and crime) and real stock returns and can reduce deficits as a percentage of GDP (due to higher GDP, higher tax revenues, and lower costs for the unemployed).

Donald Trump has said Biden and the Democrats “destroyed the economy”. The above shows that is not true. Many were unhappy with Biden due to high inflation and it may have been the reason Trump got elected. However, experts argue over what caused the high inflation. Many say it was caused more by COVID’s factory closures and supply disruption. Others say it was caused more by the six stimulus bills Trump signed costing well over $4 trillion than by Biden’s one stimulus bill costing less than half of that (which in fact, President Trump had urged Congress to pass in December of 2020).

Trump also said he handed over a good economy to Biden. While mostly caused by COVID (not Trump), inflation had already gone up to an annualized rate of 6% when handed over, unemployment was at 6.7% in the fourth quarter of 2020, the federal deficit for 2020 was 14.7% of GDP (the highest ever in US history), and violent crime was up 6% in Trump’s last year. While we may not remember 2020 as well, the economic indicators show that the economy was better at the end of Biden’s Administration than four years earlier at the end of the Trump Administration. In fact, Democrats on average provided higher GDP growth to the next President (corroborated by the Blinder paper in their Section III). Blinder noted that “growth slows sharply and quickly when a Republican is elected, but accelerates on a dime following the election of a Democrat.” The recent crash under Trump after good growth in 2024 is an example of this.

Also important are the policies that affect inflation. According to 16 economists who won the Nobel Prize and the conservative Peterson Institute for International Economics, “Trump’s pledges to impose huge tariffs on imported goods, deport millions of refugees, and demand a voice in the Federal Reserve’s interest rate policies would likely send prices surging”. It may take a little while for us to see the full impact of all his policies (on tariffs, deportation, and the Fed), but the supply chain is already being impacted at the west coast ports, so we may see some impacts on empty store shelves and prices soon.

For this reason, the public needs to see what the data says. This analysis “substitutes facts for appearances and demonstrations for impressions” the long-standing motto of the Society of Actuaries (and famous quote by John Ruskin in 1893).

Attribution: I’ll note that associating economic events to Presidents is an inexact science. Events in a particular year may not be caused by that year’s President. For example:

1. Problems in an administration could have been caused by the prior administration or by neither administration (such as Covid in 2020 or the OPEC oil shocks in the late 1970s).

2. Stock market increases (and other good economic results) right after an election could be partially attributable to the winner of the election or due to eliminating election uncertainties that hurt businesses, or both.

3. Laws are passed by Congress, not the President. On the other hand, Presidents have lots of influence and can veto what Congress passes, so the consequences can also be attributed to the President.

An analysis of the nine indicators are discussed on the following pages.

1. Real Returns on Stocks (net of inflation)

The dots in the chart below show the real S&P 500 stock returns each calendar year from 1981 (when Reagan became President) to 2024 (Biden’s last year as President). Bold bars were added to show the average returns under each President (red for Republicans and blue for Democrats). The average real return under all Democrats (12.2%) was more than twice the Republican average (5.2%). The lower return for Republicans is partially due to the negative returns under George W. Bush (who had two recessions, including the Great Recession).

If one wants to compare individual Presidencies, we may want to adjust the averages when a President is not responsible for an event which hurts their average. Negative returns were included in the averages, even when not caused by the administration, if later returns in the same administration compensated for them by being higher. A case could be made for excluding 2022 from Biden’s average (due to the Fed keeping interest rates higher than at the beginning of his administration). In this case, his average would be 21.1% (instead of 8.1%).

The Blinder paper noted that stock returns, labor productivity, and business profits were significantly better under Democratic administrations, so it is surprising that business people are more likely to vote Republican.

2. Inflation

Inflation was high from 1979 to 1981 due to OPEC oil price hikes, so Carter nominated Paul Volcker to head the Federal Reserve in 1979, knowing he’d immediately increase interest rates to bring down inflation (to just below 4% under Reagan). Recently, inflation returned to rates almost as high due to COVID. The Fed again raised interest rates and inflation went down to just below 3% this time.

The Obama Administration had the lowest average inflation rate of 1.7%. Due to attribution concerns, the chart below shows a second average inflation rate (in pale red) for Reagan. It excludes 1981 from his average, because Reagan was not the cause of the high inflation in 1981. The pale blue bar for Biden excludes 2021 and 2022 from his average for similar reasons. The average inflation rate under Republicans is higher than the average for Democrats (whether the above years are excluded or not). This may be surprising, since the Phillips Curve would have predicted higher inflation (due to lower unemployment under Democrats). On the other hand, inflation decreased more under Republicans primarily due to the higher rate in Clinton’s last year and the big drop in the 1980s, and inflation was lower in the last year of Republican administrations on average (due to it being so low in Bush Jr’s last year).

Globalization reduces prices (and thus inflation, as foreigners work for less) and increases investment returns (for the owners of industry). In theory, people in both countries are better off, as foreign workers get better jobs and we get cheaper goods, but many in the US lost their jobs. This is oversimplified, but globalization initially helped Republican Administrations as they initially encouraged it, but eventually Democratic administrations got on board after enacting laws to (a) train people for new jobs, (b) provide moving and Housing assistance, (c) set minimum standards for imports (they should at least meet the same standards that companies in the US must meet), and (d) gradually improve pay, benefits, working conditions, and environmental rules for the foreign workers to US levels if they want to sell in the US.

Unfortunately, accumulated job losses and wage stagnation created terrible malaise in the US, particularly among the lower and middle classes in rural areas and inner cities, while the upper classes benefited from their stock ownership of global companies, as shown in the next chart. Rural areas need more infrastructure bills to create more jobs (as in Biden’s Inflation Reduction Act) and items in section 5 (and footnote 22) below, such as an increased minimum wage. In addition, reciprocal tariffs (where we tariff another country’s exports if they tariff our exports, not the tariff that Trump imposed) and tightened restrictions in our Trade Agreements could help, but they are complex and have negatives, such as: they will increase inflation here and other countries may retaliate with their own tariffs against US products (including services from banks, Wall Street, and our high-tech industry). In addition, our industry and jobs may not come back, as US wages are much higher than wages in the poorest countries, and rebuilding our infrastructure is expensive and takes time (CEO’s may not want to gamble on the tariffs being permanent unless they can fully automate jobs or hire immigrants).

By HARVARD BUSINESS REVIEW (HBR) - Own work, CC BY-SA 4.0 (N.B. this does not reflect the benefits of reduced inflation that everyone receives, and is especially valuable to low-income people.)

The following chart shows the high tariffs that the US had in the past when it was trying to protect its “infant industries”. We reduced them post-WW II after our industry was strong. They jump back up in 2025 exceeding the tariffs that helped cause the Great Depression. Trump’s tariffs are not reciprocal. They are intended to eliminate our trade deficit, by setting them equal to our trade deficit with each country divided by their trade with us. If a country increases their purchases from the US (along with our domestic industries producing more here) enough to eliminate their trade surplus with us, then that will eliminate the tariff on them. Many economists doubt that it will work.

3. Real Growth in Gross Domestic Product (GDP)

Average growth in real GDP between 1981 and 2024 was 2.9% for Democrat Presidents and 2.5% for Republican Presidents. All of the Presidents during that time had average annual real growth between 2% and 4% if we reflect the following adjustments:

• We could exclude the low 2020 growth rate (due to Covid) from the Trump average (improving it), as COVID was not his fault.

• We could exclude the low 2009 real growth rate from the Obama average (improving it) as the Great Recession started in the prior Administration and was not his fault.

• The high 2021 growth rate could be dropped from the Biden average (hurting his average), as it was high due to the GDP rebound from COVID. Some analysts might argue to include 2021, but excluding it is a more careful response, and still the Democrat average is better.

The Democrat average exceeded the Republican average, whether the above years were excluded or not. It makes sense to include the 2008 recession in George W. Bush’s average, as it happened after many years of his Presidency. Prior recession years were included in the Reagan and George H. W. Bush averages, as their offsetting recoveries were also included.

Recessions: From the chart below, one can see a reason why the Republican average was lower than the Democrat average - all the recessions in this period started in Republican years. The Appendix providing Recessions since 1900 shows almost three times as many recessions occurred during Republican Presidencies (17 to 6), even though Republicans and Democrats had about the same proportion of years holding the Presidency (52% and 48%, respectively). Also, the worst two recessions prior to the COVID recession (the Great Depression and the Great Recession) occurred after many years of Republicans being President. Interestingly, the only presidents since 1900 without any recessions starting in their terms were all Democrats (Kennedy, Johnson, Clinton, Obama, and Biden) and they were all post-1960. In the years 1900 to 1960, there were 15 recessions (one every 4 years on average), whereas after 1960 there have been only 8 recessions (one every 8 years). Thus, recessions are only half as frequent now as in the years 1900 to 1960. Some things do get better.

4. Budget Deficits (as a percentage of GDP)

The chart below shows that US Budget Deficits (as a percentage of GDP) decrease under Democratic Administrations and increase during Republican Administrations. Although not shown in the graph below, this was also true during the Ford and Carter years.

For the prior economic indicators, I compared the averages in each Administration, sometimes after dropping years that shouldn’t be attributed to them. However, for this one, there is a question as to how many of the Great Recession years should be excluded from the Obama average. Since that is subjective and the decision could unfairly help the Democrat average, a better measure is needed.

Analyzing the decreases in budget deficits during an Administration reduces that problem. As you will notice from the chart, Obama reduced the budget deficit the most (6.7% of GDP) and Clinton was second (6.1% of GDP). For purposes of this calculation 2020 and 2021 were excluded, as it wouldn’t be fair to Trump to attribute COVID to him. For similar reasoning, credit for the drop in deficit from 2021 to 2022 was not given to Biden. That changed Biden’s 5.5% reduction in deficits to a 1.2% increase. Even with that change, Democrats still had a much better average than Republicans. Democrats reduced deficits over the course of their Administrations by 3.9% of GDP on average (and in fact, Clinton had 3 surpluses), while Republicans increased deficits over the course of their Administrations by 2.0% of GDP on average.

The chart below ranks the Presidents. It is easy to see from that chart, that budget deficits (as a % of GDP) went down during all Democratic Presidencies and went up during all Republican Presidencies.

5. Jobs Added (as a percentage of the employed population)

As Bill Clinton noted in his talk to the 2024 Democratic National Convention, the number of jobs added in Democratic Administrations is much higher than in Republican Administrations. While his numbers were correct, he started with 1989, which helped his numbers. My analysis corrects that by going back to 1981 and determining jobs added as a percentage of the employed population to be fair to the earlier administrations like Reagan’s. The year 2020 is excluded from the Trump average as he was not responsible for COVID and he didn’t get the rehiring boost in the following year (Biden did). Reflecting that, the average percentage in Democrat years is 1.6% and 1.0% in Republican years. If all years are included, the Democrat average is also better than the Republican average.

As noted earlier, there were more recessions under Republican Administrations. This may be because Republicans prioritize supply-side legislation such as tax cuts for the rich (Note that the rich are less likely to increase production with their extra income than if the money went to lower-income people). Democrats prioritize demand-side legislation which is more likely to go to lower-income people, create jobs, and stimulate the economy, which helps avoid recessions. Others note that the economies under Democrats benefited from the two World Wars, but that wouldn’t apply to the years I studied. In addition, the US economy has been less volatile since the Great Depression and World War II and recessions have been much less frequent since 1982. The markets are less volatile under Democratic Presidents possibly because they are more likely to regulate industry. This might be another reason (in addition to being Keyensian) for them having much fewer recessions than Republicans who prefer less regulation and more freedom for industry.

6. Percentage Increase in Business Startups

The Small Business Administration said the 4 years under Biden were the top 4 years in our country’s history for entrepreneurs’ filings of business applications (more than 20 million). That could be due to more people starting up their own businesses post-COVID. Business startups are also at an all-time high, per Census’s Business Formation Statistics. Biden had the highest percentage increase in startups (4.4%) and Reagan had the second highest (2.0%). Democrat administrations also had a higher average than Republican administrations (0.6% versus 0.5%).

7. Unemployment Rates

For determining average unemployment rates, the years 2020 and 2021 were excluded due to COVID being an aberration not attributable to either the Trump or Biden Administrations. However, as with budget deficits, it would be subjective to decide how many years to exclude for the Great Recession not being Obama’s fault, so I included all of Obama’s years. Even using that generous rule for Republicans, the average unemployment rates were 6.1% under Republicans and a lower 5.9% under Democrats.

If 1981-1982 and 2009-2010 were excluded (from the Reagan and Obama averages), the comparison would have been 5.7% to 5.5%, so the Democrat averages would still be better. The lowest average unemployment rate was 3.8% in the Biden Administration.

A comparison that reduces the above problem would be to determine how much unemployment rates decreased during a Presidency. They decreased 2.9% on average when Democrats were President but increased 0.1% when Republicans were President (excluding 2020 from the Trump average as COVID was not his fault). In fact, unemployment rates always decreased when Democrats were President, but not for the two Bush Presidencies. Alternatively, one could compare the unemployment rates at the end of a Presidency to reflect their accomplishments. In that case, the Democrat average was 4.3% and the Republican average was 5.6%.

8. Real Earnings Growth

The growth in real earnings is especially important for low-income workers when inflation is high. The chart below shows that real growth in hourly earnings was negative in the 1980s and early 1990s, which means people’s earnings growth was less than inflation. Thus, the purchasing power of low-income people without assets decreased each year.

Unfortunately, earnings data has problems. During the Great Recession and COVID, job losses were higher among lower-income people, so the official growth in real earnings was misleadingly way higher than the actual growth in earnings for people who remained in the workforce. So when I determined the average real growth in earnings, I excluded 2008 and 2020 to 2022. With that adjustment, the average growth in real earnings was -0.1% under Republican Presidents and 0.7% under Democratic Presidents. If all years were included the Democrat average would still be higher.

As noted above, growth in earnings is most important for low-income people for whom the costs of living can exceed their earnings. A couple studies have looked at earnings by income level. Wikipedia says that professor Larry Bartels found that incomes from 1982 to 2013 grew faster for low-income people during Democratic presidents and that the growth for all income groups was more equal during those times. He also found that the real value of the minimum wage increased under Democrats and declined under Republican Presidencies.

A Center for American Progress (CAP) paper found that after COVID’s onset, the growth in average hourly wages:

1. was more than inflation (CAP Figure 4),

2. was highest for low-wage workers (CAP Figure 7), and

3. was higher than ever, even after adjusting for purchasing power (CAP Figures 5A & 5B).

My analysis of the growth in real hourly earnings corroborates (1) and (3).

9. Violent Crime Rates (Murder, Rape, Robbery, and Aggravated Assault)

Although not an economic measure, I included violent crime rates (as a fact-checking exercise) as Trump campaigned on his crime rates being the lowest and that crime increased under Biden. Actually, crime rates went down under Biden. In fact, recent information shows murders decreased 16% in 2024 alone.

The average annual decrease in the violent crime rate under Biden was 3.0%, while the average was 0.0% under Trump (i.e., no decrease in the crime rate) because his last year saw a 6% increase in violent crime. The best crime rate decreases were under Obama and Biden, while the worst were under Bush Jr and Trump. The average decrease in crime rates was 3.4% for all Democratic years. It was a 0.7% increase for all Republican years. Increases in crime didn’t correlate to higher unemployment, but it did inversely correlate with increases in earnings (and other studies show it increases with poverty).

Conclusion: Hopefully, this article (and other similar research) shows that the US economy has performed better on average under Democratic presidents than Republican presidents by “substituting facts for appearances and demonstrations for impressions” and helps people make better decisions. This is my first attempt at associating economic indicators to Presidents and parties. I hope that others (especially people who know our history and economics) might further investigate ways to associate events to Administrations.

Ron Gebhardtsbauer, FSA (rug16@psu.edu) is Emeritus Professor of Actuarial Science. Before retiring, he was the head of the Actuarial Program at Penn State (the largest actuarial program in the US at that time), Senior Benefits Advisor to the Chairman of the US Senate Finance Committee, Senior Pension Fellow and Spokesperson for the US actuarial profession at the American Academy of Actuaries (where he testified frequently before Congress), and Chief Actuary of the PBGC (the federal Pension Benefit Guaranty Corporation).