This article is in response to “Comparison of Democratic and Republican Economies” which was written in response to “Is History Siding With Obama’s Economic Plan?” from the New York Times. My friend Brandon did some excellent research and made excellent points explaining the changes in our GDP. But my source didn’t confirm some of the numbers he chose to provide (the source of their data was not listed). Also, only growth from specific years during presidential terms was mentioned as opposed to showing all of the data.
I looked into the history of our GDP from 1977 to 2007 and got my statistics from the Bureau of Economic Analysis from the US Department of Commerce. The numbers I found there did not match up with the numbers referenced from the article which leads me to assume there is some misinterpretation or misunderstanding of the numbers so please forgive me (and correct me) if I’m not interpreting them correctly.
The Three Tables I Cited are as Follows:
- Table 1.1.1. Percent Change From Preceding Period in Real Gross Domestic Product
- Table 1.1.5. Gross Domestic Product
- Table 3.1. Government Current Receipts and Expenditures
Average Growth in GDP During Each Presidential Term
What I found was that there was not a large difference between the average annual GDP growth rate amongst presidents during their terms:
- Carter (77-80): 3.3% average annual growth
- Reagan (81-88): 3.425% average annual growth
- Bush (89-92): 2.125% average annual growth
- Clinton (93-00): 3.725% average annual growth
- Bush (01-07): 2.3% average annual growth
Additionally, over the last 30 years there have been only three incidents where there was a period of negative growth in GDP:
- Carter in 1980: -0.2%
- Reagan in 1982: -1.2%
- Bush in 1991: -0.2%
You can see in the graph below, the growth of our GDP for every year over the past 30 years. You can also see the percentage of change over the prior period for each year in the second graph:
External Factors Positively or Negatively Impacting the US Economy
Brandon’s article does a great job citing references to external factors that excuse dips in growth in the early 90’s as well as excess growth during Clinton’s presidency (I highly encourage that you read through the article to understand). But it did not cite the external factor outside of policy makers control which lead to the 1980 recession. That of course was the 1970’s energy crisis and more specifically the energy crisis of 1979.
Carter Did Not Inherit a Good Economy
“In 1973, during the Nixon Administration, the Organization of Petroleum Exporting Countries (OPEC) agreed to reduce supplies of oil available to the world market. This sparked an oil crisis and forced oil prices to rise sharply, spurring price inflation throughout the economy, and slowing growth. Significant government borrowing helped keep interest rates high relative to inflation.”
(Energy Crisis)
“The 1970s are described as a period of stagflation, as well as higher interest rates. Price inflation (a rise in the general level of prices) creates uncertainty in budgeting and planning and makes labor strikes for pay raises more likely.”
(Stagflation And the Appointment of Volcker)
“Led by Volcker, the Federal Reserve raised the discount rate from 10 percent when Volcker assumed the chairmanship in August 1979 to 12 percent within two months.[38] The prime rate hit 21.5 percent in December 1980, the highest rate in U.S. history under any President.[39] Investments in fixed income (both bonds and pensions being paid to retired people) were becoming less valuable. The high interest rates would lead to a sharp recession in the early 1980s.[40]“
(Stagflation And the Appointment of Volcker)
The resulting exchange in world events and policies set forth for conservation by the Carter administration led to:
“After 1980, oil prices began a six-year decline that culminated with a 46 percent price drop in 1986. This was due to reduced demand and over-production, and caused OPEC to lose its unity. Oil exporters such as Mexico, Nigeria, and Venezuela expanded. The US and Europe got more oil from Prudhoe Bay and the North Sea.”
(1979 Energy Crisis)
This reduced our energy prices greatly which most likely had a very positive effect on GDP during Reagan’s term.
Overall, I believe that GDP is more or less a reflection of exchanges in world events and key monetary policies that are controlled by external organizations such as the federal reserve. The presidential tax policy certainly does have an effect as well but it is most likely to a lesser extent.
The Actual Cost of The Tax Cuts
Here is where the real discrepancy is. The expenditures to receipts ratio. Over the past 30 years our country has been in red ink each year with the exception of three years during Clinton’s second term. If you look at the graph of total receipts to expenditures you can clearly see that there is a large spending discrepancy during periods of Republican tax policy. Especially during Reagan and even more so during George H.W. See the graphs below:
The consequences of the Bush tax cut can be seen here. The policies set in place over the last 7 years have passed off massive amounts of debt to my generation. This is the greatest hypocrisy of the neo-conservative movement. They run on a platform of fiscal responsibility and limited government but you don’t see that here. Whether or not there is a democratic or republican president or controlled congress our government’s overall expenditures consistently rise.
In my opinion, the Bush tax cuts are fiscally irresponsible and John McCain’s notion to keep them in effect is reason enough not to vote for him. You can really see the difference when we break down the net lending or borrowing down by each president. Or rather the amount of debt incurred by each of the past five presidents as not a single one has racked up more debt during his term:
The numbers break down as such when written out:
- Carter (77-80): -169.5 (billions of dollars) (-42.375 per year)
- Reagan (81-88): -1443.9 (billions of dollars) (-180.5 per year)
- Bush (89-92): -1083 (billions of dollars) (-270.8 per year)
- Clinton (93-00): -773.9 (billions of dollars) (-96.7375 per year)
- Bush (01-07): -2573.6 (billions of dollars) (-367.65 per year)
It’s clear that each republican administration has significantly over spent in comparison to their democratic colleagues. That is not fiscally responsible. It’s reckless. I’m not opposed to the concept of limited government. But you have to cut spending before you cut taxes. Unless you can first balance the books you can’t cut the taxes. This just kicks the can along to the next generation. Mainly mine.
All in all, the ideal candidate doesn’t exist in my opinion. We are at a point where we need to take both parties ideas – raise taxes and cut spending. But the numbers show – during the period of democratic leadership GDP growed at the same pace or better than when their republican colleagues held office. During these times, the government also did a much better job at managing the federal budget.
Income Inequality is a Serious Problem
One last thing I would point out is that Brandon’s article distorts income equality by making a comparison to the communist form of socialism in the past Soviet Union. This is more so a comparison of communism to democracy than a depiction of the economic results of socialistic policies. If you look at the country with the one of the best ratings on the GINI coefficient, Sweden, you learn a lot. The people in this country and others like it such as Denmark and Switzerland experience a higher quality of life on average. Also, their GDP continues to grow despite high taxes. Sweden’s taxes are nearly twice that of the United States at 51.5% of GDP yet their growth in GDP has faired much better than our own over the past 5 years. This year Mercer rated Stockholm #20 on their best places to live list. Higher than any city in the United States. Clearly we have something to learn from governments other than our own.
* Feel free to digg this article if you appreciated the content.
Alex Berger Says:
1:22 pmSep 13Jim, absolutely fantastic piece. Bravo on actually retrieving factual information and citing it so thoroughly.
It confirms everything we already knew. It’s a shame the lies on the issue have been bought wholesale for so many years.
Chad Swaney Says:
2:36 pmSep 13Hey Jim-
I really like how you presented the information. From my perspective, the real answer is to have true spending cuts (such as reducing the size and scope of the American Imperial war machine) so that we can have both lower expenditures and lower receipts. This country was able to survive for 100 years without an income tax, yet somehow we managed to have roads, a national defense, etc.
Dan Says:
7:41 amSep 14Some fine analysis made easy to understand, kind of like “Economics for Dummies,” which is definitely for me–my talents lie elsewhere.
I think it is also important to understand that though we see a tax rate like Sweden’s and are apt to choke and gasp on our emotional response to the seemingly high number, Sweden and Denmark are not a double and triple tax society. I would presume (and would love to see the numbers) that when you look at ALL of our taxes combined, we are right there with them when you add up income tax (federal and state), social security tax, sales tax (federal, state, and local), gas tax, sin taxes, toll tax, hobby taxes (fishing, hunting, boat, etc.), car registration tax, dividend taxes, financial transaction taxes, capital gains tax, property tax, IRA withdrawal tax, 401k withdrawal tax, convenience taxes, transportation tax, and service tax, etc., etc.
However, we do not have the same quality of life for everyone in our country and our social services and concern for people’s health and welfare seem to always take a back seat to our Defense budget and Infrastructure spending. Many European countries really seem to have an eye on furthering their society for all (health care, college paid for, lower cost of living for those in need, etc.) and as a whole, the society is stronger, more loyal, and less likely to suffer–that formula seems like a great angle for ALL the people, not just the “lucky” few who have unequal advantages from the git go.
Not to get into it, but it seems like racism and sexism in our country rear their ugly heads in our economic models, and that does nothing but to keep us all down as a country. We might like to say that everyone is “created equal,” but they do not by any means have equal opportunities in America.
Jim Jeffers Says:
9:45 amSep 14Wow, excellent points Dan. Some states nix a few of those taxes. Unfortunately, I do not live in Oregon or Nevada. But yes – the tax on everything is really pretty ridiculous. I’m not sure if the more socialist european governments layer their taxes similarly or not. I do know that the form of tax cuts or increases by the presidential candidates digs into these layers. That is how Obama intends to raise taxes for the top 1% by increasing the corporate tax, dividend tax, etc.
It’s really quite interesting how ridiculously complicated such a straightforward process has gotten. As always I get a bit weary when simple things get complicated. It leaves a lot of room for abuse. Our government could benefit a great deal by simplifying the tax process.
Nick T Says:
9:29 pmSep 14Jim,
Great article and really well researched. I’m especially interested in your points on taxation and income inequality.
From an outsiders view, I am astonished by the relatively low amount of income tax the high earners pay in the United States.
Australian income tax rates for middle incomer earners are comprisable to those of the USA, however it’s at the top end of town you really see a difference. Our top tax rate of 45%, kicks for every dollar over $180,000 AUD, compared to the USA Federal rate of 35% from $357,700 USD.
Though like some of the comments already state, this would not nearly be as big as a problem if overall spending was decreased (or at least diverted into areas like welfare, education and health).
Another interesting point to note is that while the GDP in the US has risen significantly in the past 8 years, the median “real” income has actually decreased.
http://www.dailyreckoning.com.au/gdp-grew-substantially-during-the-last-8-years-but-people-actually-got-poorer/2008/09/01/
I’m a massive fan of the Scandinavian “cradle to the grave” system, and think Australia could also learn a lot from it. However if the price of a beer at a pub went up to over $10 like it is there, you’d have a riot on your hands, ha ha.
Jim Jeffers Says:
9:48 pmSep 14Nick,
Thanks for your response. That is a great article and sparks even more ideas for research that I need to look into. And I agree, no taxation without representation. Those higher taxes mean a beer subsidy would need to be in order.
Is History Really Siding With Obama or is it McCain? Read THIS Before You Vote! « Brandon and Jennifer’s Weblog Says:
11:33 pmSep 14[...] 15, 2008 This article is in response to “Is History Really Siding With Obama or is it McCain? Read this Before You Vote!” which was written in response to “Comparison of Democratic and Republican Economies” which [...]
Brandon Says:
11:45 pmSep 14Hey JJ – I just noticed your original comment on the article. It was marked as Akismet Spam. But since the trackback is on there to this article, no need to add it now. By the way, our response to your response on our response is up now.
Enjoy!
Jay McGavren Says:
11:29 amSep 16Been wanting to run these kind of numbers for quite a while now and haven’t had the time. Excellent work! I think we’re a little too quick to assume there are sound research methods behind the articles we read; wish everyone explained their thought process like you did.
Tom Says:
1:24 pmOct 25If Sweden has it so good why did they change it[1],[3], and you may want to look a little bit closer on the tax breakdown[2] in the old Swedish life-style: website(1)[ http://www.time.com/time/politics/article/0,8599,1812964,00.html ] and a retrolook at Sweden’s situation (2)[ http://www.namyth.com/SocialismWORKS!/index.php?sw=Sweden ] cradle 2 grave works in NO country…bottom line? Why work!! (3)[ http://www.washingtontimes.com/news/2007/jun/16/20070616-080932-5740r/ ]Lastly hold up a graph for unemployment, welfare recipients, next to the graph on GDP…what a difference you’ll see…By the way both my wife and I have been working for the last 20 years straight and are abbout to go over the $150,000 annual list…WHY did I work my buttocks off? To give to a person who keeps submittimg for welfare and not looking for a job!! I am for welfare, everyone’s life gets hard at times, BUT more than 4-5 years on the free room and board train HAS got to STOP!!! And the leadership in this country better be vigelent because Osama bin Laden cycles about every 8 – 10 years and I expect him to be back and twice as nasty. What good are economic reform if there is no one around to enjoy it!!!
Qoute -” The greatest rule of safety is justice, and stopping injustice and aggression. It was said: Oppression kills the oppressors and the hotbed of injustice is evil. The situation in occupied Palestine is an example. What happened on 11 September [2001] and 11 March [the Madrid train bombings] is your commodity that was returned to you.
It is known that security is a pressing necessity for all mankind. We do not agree that you should monopolise it only for yourselves. Also, vigilant people do not allow their politicians to tamper with their security.”
[http://news.bbc.co.uk/1/hi/world/middle_east/3628069.stm]like “United States suspects Osama Bin Laden – a wealthy Saudi dissident based in Afghanistan … Attacks linked to Bin Laden. 1993 World Trade Centre bomb” – [news.bbc.co.uk/1/hi/world/south_asia/155236.stm] and
“Now, Osama bin Laden has set his sights on and has sworn to bring an end of … on the U.S. Marine barracks in Beirut that killed 241 Americans and more”
continue “Until Osama Bin Laden appeared on the radar of US intelligence, … bombing of the US marine barracks in Lebanon, which killed 241 people” [news.bbc.co.uk/2/hi/middle_east/7242607.stm ] I rely on BBC because CNN,ABC,NBC and CBS plus FOX are no longer news agencies the are glorified talk shows as cited “You can almost hear his supporters around the country chanting ‘Ol-lie, Ol-lie, …. CBS anchorman Dan Rather tells the BBC that he and other journalists …” [www.historycommons.org/entity.jsp?entity=dan_rather] GOD help us if all we do is argue over money at a time like this, we knidof get what we deserve for taking our collective eye off the terget!!
creativeherb Says:
11:14 pmDec 05nice info and charts, would have been nice if I found your page before the elections!
Web Design Horsham Says:
5:20 pmJan 04Some great info thanks Jim. I agree with creativeherb – it would have been nice to have found this before the election.
alex farguson Says:
12:27 pmFeb 10nice post…
Mesh Says:
12:08 pmFeb 13nice info and charts, would have been nice if I found your page before the elections!Fantastic post! All this graphics are very valuable but now, with this crack of the world economy… It’s hard to boost the economy for any president, republican or democratic.
Bob White Says:
2:37 pmMar 09To say that x fraction of a deficit is due to a tax cut requires that one presume that spending could not have been cut to achieve a balanced budget. Spending is too often considered necessary and tax cuts considered risky or frivolous.Nothing is more disgusting to true fiscal conservatives than the overspending of the GOP Congresses (except the spending of subsequent Democratic Congresses, which has proven worse).