Three Economic Myths Republicans Would Like You to Believe

Listen very carefully while I try to keep a straight face
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Everyone is by now familiar with the image of John Boehner, Republican House Minority Leader, lecturing President Obama on economics.

Everyone is familiar with the 8-year administration of George W. Bush, another Republican, and no one at all is unfamiliar with the economic crisis of 2008, since it laid waste to the world economy.

And everybody remembers that Barack Obama, while campaigning for the presidency, ran not only against John McCain but against the failed Republican economic policies of the past eight years; the same policies that had gotten us into that mess by 2008 and the same policies John McCain was peddling as a way to get us out of them.

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President Obama is right today in arguing that a return to those policies will finish us off.

A recent poll shows that most Americans (correctly) blame Bush for our economic woes. But what exactly are we talking about when we speak of Republican and Democratic economic policies? Is one really preferable to the other?

Republicans will give you the unequivocal answer: Democratic economic policy leads to ruination.

Perhaps we should look at some facts before we believe them. After all, we have some elections coming up and we should be as well informed as we can make ourselves.

And remember all the Republican rhetoric as you read this. It’s important.

Over the past 50 years – as long as I’ve been alive – we have done better economically under Democratic administrations.

  • From 1948-2007, per capital GDP (Gross Domestic Product – a measure of a country’s overall economic output) grew 2.78% under Democrats and 1.64% under the Republicans.
  • Family income growth from 1948 to 2005 was 2.6% under Democrats versus 0.4% under Republicans for the bottom 20 percent;
  • This growth was 2.1% vs. 1.9% for the top 5%.

Yes, Virginia, even the rich do better under Democratic administrations.

As Alan Blinder, discussing Unequal Democracy, by Larry M. Bartels, wrote in the New York Times in 2008, “The stark contrast between the whiz-bang Clinton years and the dreary Bush years is familiar because it is so recent. But while it is extreme, it is not atypical.” And as Blinder points out, “That 1.14-point difference, if maintained for eight years, would yield 9.33 percent more income per person, which is a lot more than almost anyone can expect from a tax cut.”

The Democrats have given us solid economic growth, more money than the GOP’s desperate cries for tax cuts can provide; tax cuts that wouldn’t be an issue if the Republicans hadn’t destroyed our economy in the first place.

“Over the entire 60-year period (1948-2007), income inequality trended substantially upward under Republican presidents but slightly downward under Democrats, thus accounting for the widening income gaps over all.” As Blinder puts it, “the bad news for America’s poor is that Republicans have won five of the seven elections going back to 1980.”

We do not have to look far for the reasons for America’s current economic condition.

Tommy McCall, writing in the New York Times, illustrates the relative merits of Republican and Democratic economic policies. If you invested $10,000 in stock market and index securities during the 40 years that Democrats ran the country from 1929-2008, you’d have more than $300,000. The same money, if invested during Republican administrations, would yield you only 51,000 – a staggering one-sixth. If Hoover’s Administration is included, the Republican total shrinks to $11,733.

Boehner’s “Economic Plan” would increase the deficit by 3.781 trillion dollars over 10 years. This is the plan of the party of fiscal responsibility. (For an analysis of the impact of the New Boehner Economic Plan go to http://ndn.org/blog/2010/08/ndn-analysis-fiscal-impact-new-boehner-economic-plan)

We can talk about globalization too, since it’s another favorite Republican rant. It turns out, though the Republicans will never tell you this, that global inequality ceased growing from 1980 to 2000 and in many respects began to shrink and that income inequalities are largest within the nations least touched by globalization. As Professor Timothy Ferris writes in his new book The Science of Liberty (2010), “Ideologues blame globalization for the world’s ills” but economists like Paul Collier know that “We need stronger and fairer globalization, not less of it.”

This may seem shocking but you have to consider that both George W. Bush and Ronald Reagan ran up huge deficits and increased the size of government, and that it was a reviled Democratic president. Clinton, who last balanced the budget and reduced the deficit. Clinton even reduced the size of government.

Reagan increased the nation’s debt from 23% to 69% of the GDP (Harry Truman shrank it 8.6% and Clinton 1.8%).

You might remember too while we go into the final weeks of the pre-mid-term election cycle, that when President Obama was elected Republicans cautioned America with regards to all the Clintonites in his administration and how following into Clinton’s footsteps would harm the country.

I don’t know, but it sounds like we could do a lot worse than to emulate Clinton.

You have to think too about the fear-mongering the Republicans like to engage in. Look at it this way:  As Professor Ferris puts it, if the so-called “urban elites” did what the Republicans say we must do and cut taxes and slash federal government spending, the people worst impacted would be the rugged individualists in the red counties – Sarah Palin’s “real” Americans.

Boehner is apparently unaware of the irony in his words that “”Never before has the need for a fresh start in Washington been more pressing.”

We got that fresh start in 2008, Mr. Boehner. And we’re all better off for it. While things may not be great right now, they could be a lot worse. And if America listens to you, they will be.

23 Replies to “Three Economic Myths Republicans Would Like You to Believe”

  1. This is very well-written because it underscores the wide chasm between stated GOP policies and their usefulness. Instead of acknowledging that their policies have not worked, the Party of No insists on digging in its heels and has made it clear that they would do the same things while expecting a different result. Einstein cited this kind of thinking as the definition of insanity. He would have been even more spot on in calling it the definition of block-headed stupidity.

  2. Einstein? You are trying to bring Einstein into political thinking? Politicians never reveal the real facts or give you real numbers because they use statistics that favor their agenda.

  3. You forget that Congress passes budget laws. You overlook the lag between laws being passed and effects on the economy. You overlook the few big growth periods (internet under Clinton, for example) that have nothing to do with the president. When you redo your analysis, you’ll find that your “correlation implies causation” fallacy falls short for anyone that thinks through more than just the simple set of numbers you posted.

    I have worked through this. You are repeating the correlation because you think it shows an outcome you want to be true. Now think through and correlate all the other relevant factors I listed, and you will learn something.

    The growth on D versus R presidents only has a small number of samples over the last hundred years, far to small to make a blanket D is better for the economy than R at the presidential level.

  4. Yes our economy has taken a bigger dump in the last four years with Reid and Pilosi at the helm. People forget these two have been there the last four years and Obama has just pushed the throttle full speed ahead for frivolous spending and bail outs.

  5. All these past numbers on economic statistics don’t mean a thing now! Politicians do not want to tell you the truth as to what caused or economic headacks. The Internet and Automation have caused it and the way to fix it is Tax Reform, Tort Reform and impliment our monoply laws. Right now we have 46% of the population depend on goverenment money. Lets get back to self reliance.

  6. An important reminder for us all
    Thanks for breaking this down. I see the partisan ideologues have already stepped in with their pelosi fears yetthey miss that you used non partisan sources.you cant talk to everyone but the sane people are listening. Thank you.

  7. self-reliance requires almost fully optimized employment. Self-reliance is something that you just don’t go back to at this point, it’s something that you have to get to by changing the way our economy works

    The Internet has not caused unemployment or a lack of self-reliance however I totally agree with you when you say automation. I was thinking that very thing this morning that Americans are going to have to go back and throw most of the automation out of the factories and wherever it has taken the place of people. I really hate to say this because I love technology. But it’s easy enough to see that a factory full of robots does not buy product. Either we have factories full of people again or we have nothing. Wages are going to have to go down ALONG with the price of the products. And I hate to say that too, because let’s face it no matter how much money you give companies the last thing they want to spend it on is people

  8. Just an FYI – doing TWO wars on a credit card ALWAYS catches up. Bush TRASHED our economy. End of discussion. You can make all sorts of excuses and try to blame Pelosi and Reid but BUSH mortgaged OUR country to China w/o paying for it.

    Congrats – YOU will NOW pay for BUSH’s wars. Good luck with that.

  9. Sorry – have to say it. You misread the GOP “meme” for the day. Fortunately the RWNJ’s can scream “Pelosi/Reid” until they lose their breath, but trying to budget TWO wars on Supplementals and NOT including it in the budget is a BUSH trick.

    So how you likey that? Can U afford it? I can … can YOU???

  10. could you tell us what the economy would look like without some of the bailouts? The CBO paints a terribly different picture in your world than it does in the real world. Reid and Pelosi are hardly a cause of where our economy is at this point. The Bush tax cuts as has been shown repeated times are a vastly higher part of our deficit than anything Reid and Pelosi have done. Everything Obama tries to do that will lower the deficit the Republicans are against. If we went full bore with healthcare our deficit would drop like crazy. If we dropped all of Bush’s tax cuts instead of just for the rich people we would be out of this mess.

    Anytime you keep a person working or put a person to work in is not frivolous. You might want to start reading the CBO reports

  11. Well the meme for the day was “9/11” and Alaska Kegger w/Douchebeck and SkankHo. What a way to pay tribute to the victims of 9/11 – get drunk w/Beck and Palin and FEED them your $$$.

    Stupid is … as stupid does. When w/the RWNJ realize that THEY are going to be paying for BUSH’s WARS for years? They can try and blame everyone else, but history WILL tell the truth even w/their attempt at rewriting.

    Poor trolls = obviously have lost their jobs and this is all they are qualified to do….troll Liberal sites and get paid 5c a post to spew their hate.

    Oh…that’s right. President Obama is half AfricanAmerican. The T-bigots are coming unglued … still.

  12. I refuse to even acknowledge those worthless Dane money whores today. And u r so right about the rwnj memo. They can all kma today. Today is about bigger things.

  13. Manny,
    Rather than spouting Fox sound-bite rhetoric, why not underscore your argument with some actual verifiable facts? There are those who actually research for themselves what the truth is when it comes to politics and policy so that the need to believe politicians (or Fox News) is negated.

    Blaming Reid, Pelosi or Obama is the easy thing to do. If you admitted that the previous administration has more to do with where we are than the current one, more credence to what you say might be given. The fact is that after 911, the Bush administration had free reign to do what it wanted to do in the name of national security. Those subsequent acts could have put the country in a better place, but instead it drove our economy into recession, created an needless war based on lies, and cost thousands of American lives.

    The internet and automation did not cause the economy to fail. That is just idiocy. Buzzwords like Tax and Tort reform are meaningless. The reason why a percentage of the population relies upon government money is because of Greed, pure and simple. That is why companies downsize or outsource to overseas and then pay their CEOs obscene amounts of money for raising their profitability. Because they don’t have to pay American workers what they deserve. And the ones they keep are afraid of losing their jobs so they’ll take a pay cut. This is what you’re defending.

  14. I don’t believe you have worked through this. The basis for your argument has merit, however if you are capable of being objective, if you put down your bias and do the research, you will find that the evidence will lead you to a similar conclusion. There is plenty of data available. You can sample as much as you’d like and still find overall growth under D and overall attrition under R.

  15. People also conveniently forget that the first bailout came from the Bush administration. The “frivolous spending” you’re referring to brought us back from a global economic meltdown. Compare that to the trillions lost on Iraq…

  16. I did work through this. You apparently did not. I said there is growth under D and not as much under R. I said that correlation does not imply causation, and in this case it is demonstrably so as described below. The above numbers are correct, but that is not the same as saying one caused the other, which is what people that are D want to claim.

    Is is true the growth is greater under D presidents. Statistically (I am a PhD math and know very well how stats works) the sample size of presidents is too small to be very significant.

    Do the work. You’ll notice the growth under D president was greatest when R controlled both houses of congress. If you remove growth that was clearly not attributable to either the president or congress, like the internet boom in the 90’s, then the overall growth is a wash. For example, Clinton gets credited with the Internet boom, but it was just starting to fall when he lost office to Bush, and then Bush gets the bubble pop immediatley on his watch, which clearly was not his (nor that term of congress) fault. The reasons were already in the works.

    Don’t get me wrong, I think Bush economics were terrible. But the stats above are not at all casually provable from the tiny sample size.

    A much bigger problem is when people of R or D religion find some item they think supports their cause and then lose the ability to do honest, hard criticial thinking about it. This is exactly one of those cases. When I first heard this correlation many years ago, I thought is was great, until another scientist and I decided to really dig through it, and found it seriously lacking as anything to base making future judgements on. The economy and these few sample points have too many outside factors.

    Here, I’ll make it simple for those with enough intellectal honesty.
    1. The President does not pass the budget or make laws. He has say, but both houses of congress must pass apropriations and laws. Therefore the congress is also important.
    2. When you do the analysis aboe looking at control of congress, you’ll not find the bias you see above.
    3. Laws and tax changes have long term effects, so you need to analyze each case instead of just looking who sits in a *current* seat.
    4. There are outside effects that have huge influence on growth that are outside the control of any govt agency, such as increase in foreign competition, World Wars, technology booms, standard business boom and bust cycles. Govt response may have some effect, but you need to add this to your analysis.

    And yes, I spent weeks working through this and my fellow researchers concluded there is no clear benefit to either side.

    Google “coorelation does not imply causation” please.

  17. Jay..evidently it is not ok to blame Pelosi, Reid , and Obama but it is ok to take the credit when there is a Democratic President under a Republican congress. Thats the problem with the majority of people, want to take all the credit but can’t handle any blame

  18. You had a resonable argument until you fell for the same knee-jerk non-researched statements.

    You write “The reason why a percentage of the population relies upon government money is because of Greed, pure and simple.”

    This is nowhere near this simple, except in people’s minds who do not care to understand more about it. You really claim 46% rely on government money but the rest somehow don’t? The states with the highest government paybacks to keep them running (police, roads, schools) are almost ALL republican voting ones; the same people who make the most noise about being self-reliant are the most reliant states. The ones paying for those state are democrat.

    You write “That is why companies downsize or outsource to overseas and then pay their CEOs obscene amounts of money for raising their profitability. Because they don’t have to pay American workers what they deserve.”

    After you want self-reliance, then you claim some class of workers “deserves” some level of pay? What happened to competition for your wages? If you cannot compete, you do not get paid if you’re self-reliant. No one owes you a wage other than what they are willing to trade for your labor. It is their capital, not yours. Start a business and hire all these workers if you think it is sustainable.

    “And the ones they keep are afraid of losing their jobs so they’ll take a pay cut.” This is the reasonable outcome when you get paid more than the market will bear. And I’d rather have 80% of my pay than none of it. There is no law of economics, physics, politics, or reality that requirs wages to rise forever. There are however economic laws like supply and demand that have always won out in the long run, and trying to circumvent them through politics has usually cost more then the solution in the long run.

  19. I would challenge anyone to provide data that disputes or disproves the claims made in this article. I have been unable to find anything that refutes the assertion that the economy is stronger under Democrats than Republicans.

    Any takers?

  20. Aw that’s. Not fair you know they can’t debate. And until Beck does special chart for them they are in the dark. But here’s what they willlean toward “commie Pinko libtards”.

  21. See my above comments. I do not dispute the numbers, however they are not the cause and effect you are hoping for. They are correlation, not causation. Just numbers match what you believe is true does not make them truth. That is how numerology works, but reality is not numerology. You need to eliminate various other hypotheses before you can claim this is a causal relation. I have worked out several other hypotheses with colleagues, and this set of numbers is coincidence, not cause and effect.

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