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« How do you explain the subprime mess to grandma? | Main | Korean chaebol, hedge funds, and double standards »

April 07, 2008

Comments

Nathan Smith

"Douglas Hibbs... found that Democrats favored expansionary policies producing substantially higher employment and growth rates, while Republicans endured and sometimes prolonged recessions in order to keep inflation in check."

This explanation is congenial to the no-free-lunch instincts of economists. It just seems to be too good to be true that electing a Democrat is a free pass to higher economic growth. This could explain why the voters keep electing Republicans: there's a time to spend, and a time to tighten our belts.

The minimum wage story assumes that minimum wages affect income distribution. The case for this has, I believe, little theoretical or empirical support.

Rich C

I just wanted to thank Larry Bartels for his guest post, which I think is very interesting and makes me want to read his book even more eagerly. I want to note three issues: first, JK Galbraith - in Created Unequal - illustrates the close connection between wage inequality and unemployment. Even if Presidents can't directly control the unemployment rate, they have at their disposal a lot of tools (including appointing the Fed Res Chair, and managing the dollar exchange rate) which can help to balance the economy and either keep unemployment low or goose it to drive down inflation. Second, in addition to the minimum wage (which requires Congressional action), Presidents have the power to appoint members of the National Labor Relations Board (much more union-friendly under Democrats), and to manage the Federal Government's huge number of contracting relationships with private sector employers (eg Project Labor Agreements under Clinton). Finally, Larry suggests in his post that taxes and transfers have become more important recently than expansionary policies; wouldn't that affect the post-tax income distribution rather than the pre-tax growth rates he's reporting? Maybe there's some connection to the pre-tax growth rates, but its not easy to see exactly what those would be , or why they would be so powerful.

Matilde

Seems that a first step for understanding the mechanism by which presidential administrations impact real income growth would be to break out growth in income by source of income (i.e. wages, transfer payments, dividend income, etc.). I confess I haven't read the book, but Census data do provide these breakouts, have you examined them?

shah8

I wish people would talk more about regulatory and resource management aspects of executive influence over economic outcomes. For instance, women and minorities make up over 50% of the population...hardening and softening of outlook towards women and minorities should be a pretty big bump in inequality up and down. Regulatory effort also affects businesses as well. Futhermore, things like the Plaza Accord, and the shaping of the S & L Bailout are also determined by presidents. Thinking on the S & L bailout, it could just be that how a president *fixes* problems introduced by Congress can determine inequality.

Remy Piwowarski

I would agree that more attention should be paid to regulatory and resource management aspects.

Scrapping welfare programmes or keeping minimum wage unchanged seems to have a larger and more permanent influence on the poor than economic fluctuations.

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CJS

Re: "Isn't it unrealistic to consider presidents in isolation from all the other forces affecting income growth?"

I don't quite understand how this works if the Presidential effect is somehow supposed to be isolated from the Congressional effect (yes, I did see the separate listing - no, I didn't understand how it answered the question) and the Fed effect (which I haven't seen mentioned at all but which I would wager is the most important).

CJS

Re: "Isn't it unrealistic to consider presidents in isolation from all the other forces affecting income growth?"

I don't quite understand how this works if the Presidential effect is somehow supposed to be isolated from the Congressional effect (yes, I did see the separate listing - no, I didn't understand how it answered the question) and the Fed effect (which I haven't seen mentioned at all but which I would wager is the most important).

Sean

One question on the presumption of the book, though: If these effects are just being proven now (to be fully vetted when published) how do you presume to speculate on voter myopia and psychology? The Occam's Razor answer would simply be that it doesn't factor with them.

William Perera

My high school economics teacher has a saying which he stole from some professor at UC Davis; “There are two parties in this country, both of them are right-wing.”
Case and point: When Bill Clinton was campaigning for the first time, he pledged to implement a North American Fair Trade Agreement, rather than Bush Sr.’s proposed North American Free Trade Agreement. Among other differences from NA(Free)TA, the fair agreement would require Mexico to boost its environmental and wage standards over time and ensure better protection for American industry. Of course, once elected Clinton decided to implement Bush’s NA(Free)TA with no changes whatsoever. So, no matter who you voted for you got the same thing.
Then again, I’m just a high school student so what do I know about history…
;)

tt

Interesting stuff.

What if the dependent variable is unemployment rather than the income distribution?

Some policies may be progressive in the income space but regressive in the employment space.
For example, a higher minimum wage may at the same time raise the wages at the bottom percentile and reduce employment at the bottom percentile.

HispanicPundit

I'm curious to hear what Bartels thinks about Cowen and Tabarrok's response on Marginal Revolution blog?

Elliott Parker

I wrote a brief paper a couple years ago showing some similar results for GDP growth and a host of other variables. The paper is available online:
Parker, E. (2006), "Does the party in power matter for economic performance?," UNR Economics WP-06008, url
http://www.coba.unr.edu/econ/wp/papers/UNRECONWP06008.pdf.

Elliott Parker

The link is http://www.coba.unr.edu/econ/wp/papers/UNRECONWP06008.pdf (without the period at the end).

RedCharlie

It's just like Harry Truman told us, "If you want to live like a Republican, you better vote for a Democrat!"

Chris Ellison

As I reported on the original post this graph has been debunked. See here:

http://corner.nationalreview.com/post/?q=OTVkNDlmZmJmOTNlYzRmZmM3N2Q5NjQyZWJkZTU5YzM=

The outcome changes as lag times are moved making the association spurious. Other variables actually show almost as strong an association yet no one would think they are factors. Read the entire debunking.

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Bartels seems to overlook the fact that the census data on income inequality, in the plot that has been much reproduced, are much better explained as a result of a gradual change over time:

www.skeptometrics.org/IncomeGrowth.htm

For example, if the data in his income inequality plot are replotted to show the period 1947-1976 vs. 1977-2005 instead of Democratic vs. Republican president, there is a distinctly better separation. The supposed separation by presidential administration does not appear in other views of the data - what is seen is a decrease in inequality to about 1970 and an increase thereafter.

If Bartels's handling of this issue is representative of his general approach to other data I see to reason to buy his book.

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