American political economics in one picture

Look at the figure below, and then look at it again, and again, and again.  It is the most telling picture about the U.S. political economy I have ever seen.

 

It comes from Princeton political scientist Larry Bartels' new book, soon to be released. What it shows is the difference that the President's party affiliation makes to the distribution of income during the four years of the president's term. (The distributional outcomes are shown with one year's lag.)  When a Republican president is in power, people at the top of the income distribution experience much larger real income gains than those at the bottom--a difference of 1.5 percent per year going from the bottom to the top quintile in the income distribution. The situation is reversed when a Democrat is in power: those who benefit the most are the lower income groups. If you are in the bottom quintile, the difference between having a Democratic or a Republican president in office is an income gain (or loss) of more than 2 percent per year! Strikingly, compared to Republicans, Democratic presidents generate higher income gains for all income groups (although the difference is statistically significant only for lower income groups).

Bartels shows in his book that this difference is not a statistical artifact or a fluke.  It is not the result of Democrats coming to power during better economic times, or of Republicans reining in the unsustainable excesses of Democratic administrations they replace. (It turns out that the same pattern prevails even when a Republican president is succeeded by another Republican.) These numbers are real and they are the outcome of partisan differences in policy. So if you are one of those who have bought the story that income distribution is the result of pure market forces and technological changes, with politics playing no role--think again.

Bartels' findings raise an important puzzle: if Democrats produce better income results for everyone, and particularly for the more numerous lower-income groups, why do they not always win?  Bartels offers a rather complicated, but well-supported answer to this question having to do with voter myopia and psychology.  (You will have to wait to read his book to get the full story). But Bartels does demolish two of the standard arguments regarding Republican advantages at the polls: the idea that poor Americans vote Republican for cultural reasons, or that Americans do not care about inequality.

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