Why is it that even though the economy grows more under Democratic presidents than Republican presidents, businesses seem to favor Republicans? If you look at the years 1948 to 2007, with Republican presidents, the gross national product grew by an average of 1.64% per capita, while under Democratic presidents, the GNP grew by 2.78% per capita. That’s a difference of 1.14%. Over eight years, that means that the average person will be earning 9.33% more, which is WAY more money that you would get from any possible tax cut.
Not only that, but income inequality grew substantially during Republican administrations — the rich got richer while the poor got poorer — but under Democratic administrations income inequality actually went down slightly. And on top of that, historically the national debt has grown substantially more under Republican presidents than Democratic presidents.
UPDATE: If you had invested $100,000 in the stock market (using an index fund based on the Dow) the day Obama was sworn in to office, it would be worth $180,000 today. If you had invested $100,000 in the stock market the day Dubya took office, it would have been worth $65,000 the day he left office.
31 Comments
I was onboard with this until the last comment…Obama is doing to destroy the deficit statistic, but what can ya do
Oh, sorry, but that’s a bit disingenuous from you, IK.
“Businesses seem to favor Republicans” is too general, throwing all “business”–ie economic sectors for this post–into on group. But they aren’t one group. If, say, Hollywood has an excellent year, Northrup Grumman isn’t going to give a damn. Different sectors support the two parties, usually based on how those parties have supported their sectors and what promises those parties have made to those sectors.
Lumping it all under “business” is sufficiently broad to be not only inaccurate, but disingenuous from you, IK. You’re far to thoughtful, well-read, knowledgeable, etc. to get away with that. Sorry.
The gist of what you are getting at is clear, but the way it’s said is just too broad for me to not call it out. Again, sorry.
(BTW, I said “economic sectors for this post” because I recognize that economic sectors are not limited to only private business activity. Sorry for the abuse of terms: I couldn’t figure out/remember the one I needed.)
Ok, so why is it that organizations like the US Chamber of Commerce, which is supposed to represent all businesses, are overwhelmingly pro-Republican?
IK – I was following you until the last sentence. You forgot to include the current President’s 1st year 1.4 trill and 2nd year 1.3 trill deficits, which dwarfs even big spending Bush43 during any 2 years of his presidency. The other stats stand although they do not take into account the make-up of the congress each president had under him.
To answer your 1st question, “Why is it that even though the economy grows more under Democratic presidents than Republican presidents, businesses seem to favor Republicans?” it is simple. Uncertainty. For instance, under the current admin and congress business does not know the cost of doing business. What are the new costs associated with HCR? HHS doesn’t know exactly, they’re still trying to figure it out. What are the costs with the new wall st reform? Don’t know exactly yet, they’ve just begun to figure that one out. What are the costs for cap and trade if the congess had its way, again don’t know. What are the costs for the energy bill congress would propose? Again they don’t know. Business needs to forecast expenses out in short and long terms.
You point out that most businesses, such as those friendly with USCC, tend to favor the GOP while also pointing out that income gaps grow under Republicans while Democratic administrations appear to benefit average people more. Well, people running businesses are not average Americans or poor Americans. If they see themselves making more money under a certain party it is common sense for the leaders of business to support that party.
PatriotSGT makes a good point about uncertainty, but so far the costs of these reforms seem to have boosted the earnings of many businesses affected by the bailouts. The American auto industry may not be doing fantastically, but mediocre is better than oblivion isn’t it? This applies way beyond the auto industry too.
Since I’ve been paying attention to government and economic policy, I have also noticed this and asked the same question. My take on it is that, in general, the Democratic Party wants to improve our nation and make it work better for all. In contrast, and in general, the Republican Party is more concerned about individual states, businesses and wealthy citizens and not the nation as a whole. The only time they want a strong nation is when they feel the urge to kick some backwater country’s ass.
Here’s a possibly analogous ‘dilemma’: Although the economy is better off when there’s healthy competition, any particular business is going to fight against the existence of competition in its market segment tooth and nail.
That pattern is clear: pay lip-service to competition but prefer a monopoly for yourself.
I mention this because I think PSGT has a good point about uncertainty. While we could all agree that Wall St reform is going to be beneficial overall, any specific company affected by it (even marginally) is probably going to prefer to keep the status quo.
Speaking of Wall St, the banking sector is rife with awful legacy practices and inefficiencies, which remain in place only because anyone with the audacity to make changes would quickly lose out.
Mad Hatter: What you say fits well with the tribal, “Us versus Them” mentality that I’ve been seeing in the GOP and that Mitch McConnell recently voiced explicitly by saying that the GOP’s number one “priority over the next two years should be to deny President Obama a second term in office”.
It’s not possible to be more political and less nation-bettering than that!*
*Unless you admit you can’t do anything to improve the problems, or blame Obama for 100% of the bad things that happen.
I think I’ll take that in reverse order 🙂
Regarding the deficits – No U and Patriotsgt, while it is true that the first two years of the Obama administration have incurred record deficits in single years, it is also true that there have been several one-time events that drastically change the picture (TARP, the stimulus package), some short term but unusual events (extending unemployment benefits because of the Great Recession), outside events that started under Bush (lower tax revenues due to the Great Recession) and some accounting clean-up (putting both Iraq and Afghanistan officially in on the books and in the budget, as opposed to being funded in off-budget).
It is disingenuous to blame the Democrats and Obama for taking a “tax and spend” approach since they’ve lowered taxes and the few new programs implemented are self-funded. There can be a debate about health care, but the debate is about what will happen in the long run, since the actual non-partisan budget estimates show the plan as it was approved should be at worst revenue neutral and at best might save some money.
Agree with Thought Dancer, different sectors of the business community have different reactions and it’s too general to lump them all in, but it is also true that a majority of larger businesses tend to favor and support Republicans over Democrats.
In my opinion (and Thatguy’s), this is for two major reasons based on the policies Republicans push – first, they like to reduce taxes for the rich – and big business executives and Board members are rich. It’s in their own best interest to keep more of their money. Second, they like to eliminate government oversight and regulations, which give businesses a freer hand to get even richer. Businesses are in business to make money, and Republican policies help make more money with less oversight.
Bottom line – business are managed by people whose JOB is to make that business the largest and most profitable possible, not by altruists or philanthropists. That’s why they are self-focused –that’s what they are paid to be. Our political leadership, however, should be thinking about the best environment for ALL the citizens and not biased towards any single group. And, while there are humans there will be politics, it is disgusting and inexcusable to have any party willing to sacrifice the good of the country for their own personal power, and I’m afraid that’s what we’ve been seeing in Washington.
IK, one point of clarification. You said the difference between the 1.64% GDP growth under GOP presidents and 2.78% under Democrats is 1.14%. It’s 1.14 percentage POINTS. But it’s actually a difference of 70%! You undersold the significance of that.
As for Patriot’s explanation that it’s “uncertainty” that grows GDP, I’d like to see that backed up by economist. I work for a small company and uncertainty causes us to be much more conservative in our business approach. Certainty and confidence is what causes us to take bolder steps toward growth.
Businesses may do better under a democratic leadership, but the individuals who run the businesses do better under a republican leadership.
pgt, Please expand your thoughts about uncertainty introduced by democrats. Are you saying that “obamacare” introduces more uncertainties than pre-obamacare healthcare and if so would we have been better off without any type of reform? Also what type of uncertainties did bill clintons two terms introduce? And are you seriously saying that uncertainty benefits the economy?
I would say that (as a businessman) that the uncertainty of not knowing what health care costs were going to be (and watching them go up 20% and more each year for several years) definitely negatively impacts businesses.
Fellas -I don’t know where you understood me as saying uncertainty benefits the economy. If thats what I said it is wrong and actually the exact opposite is true and I would apologize for being misunderstood. Also, it is not the president I referred to, it is the congressional control. The president R or D can only do what their congress will allow them.
The costs I am referring to are for instance the mini ins plan that Mcdonalds offered its part time employees. I understand HHS will make an exception at the presidents request, but it is the uncertainty about similar and other potential cost buried within the bill. I understand IK’s point about rising costs negatively impacting business, and thats true. My response was addressing unknown future cost increases/adjustments due to recent and (if Pelosi and company had remained)future legislation. HCR is not the only one I mentioned.
I think HCR will in some future form stabilize health care costs. We have alot of uncertain growing to go through though before any stabilization occurs (5-15 years maybe)
(fairly good article showing the benefits to HCR and the challenges it will simoultaneously create)
http://www.csc.com/health_services/insights/31098-us_health_care_in_the_year_2015
A rhetorical question for you, if my explanation as to why business prefers R’s over D’s is wrong then what is the answer? Please don’t use the tired “the rich just want to get richer”.
Pointing out that “the rich just want to get richer” is tired? If it is so tired, then why are the Republican so determined to extend the Bush tax cuts for the wealthy, to the point where they will filibuster extending the tax cuts for everyone else?
I will promise to stop saying things like that, when the right wing stops claiming that liberals only want to tax and spend. Ok?
Regarding using the tired phrase of “the rich just want to get richer”, facts are facts and the information in the NY times article is fact. I also posted another link a few weeks ago about income disparity.
Some interesting facts about health insurance and the implications of having americans uninsured.
http://www.reuters.com/article/idUSTRE6A905U20101110
IK an Jonah – using the tired saying just demonizes business and it doesn’t help our discussions. IK your business, so are you just trying to get richer? I don’t think so, but why would we lump all business together, I’m sorry but I don’t see how that helps the discussion. Jonah – I agree we need to have HCR and do something about our health costs. My issue has never been with that as you know from my posts. My issue has always been about how to fund it. Tell me up front as best you can what the cost is and i’ll be ok with it. I don’t think cutting 1/2 trill from medicare and 100’s of billions from education, food and housing for the poor will cut it. Why not have some sort of payroll health care tax like SS and medicare? Thats all
(and most business) want. Don’t paint a fairy tale tell me up front.
Oh for goodness sake. Corporate spending in the last election was 9 to 1 for the Republicans. So yes, I am a businessman, and so is Warren Buffett, and we are in the 10%. Why are 90% throwing money at the party that drove the economy into the toilet and caused record number of businesses to fail?
No U, even ignoring whether Obama’s stimulus bill was necessary only because the Republicans fumbled on the economy, Obama’s first fiscal year deficit is *smaller* than Bush’s last deficit. How so? Remember that the government operates on a fiscal year that ends Sept 30. That means that FY2009 started before Obama was even elected. FY2009 had a (record) deficit of $1.416 trillion. FY2010, which is the first fiscal year that started after Obama assumed office, had a deficit of $1.294 trillion. Still way too high, of course, but it is going in the right direction. See http://www.reuters.com/article/idUSTRE69E54M20101016
Without the stimulus, which saved 3 million jobs, it would have been half that.
And speaking of tired phrases, I’m tired of people suddenly complaining about the deficit now that Obama is in office. Where were these people when Reagan was in office and running up record deficits? Where were they when Cheney said that deficits don’t matter? Where were they when Bush rammed a completely unfunded Medicare Part D down the throat of Congress and started two wars while cutting taxes for the rich? I’ll tell you where they are — when Obama actual does something to save money by making Medicare more efficient, they are screaming about death panels. It is completely hypocritical.
Actually IK, i’ve been complaining about deficits for the last 25 years, but i’ve only been complaining on this site for a shorter time.
So TARP was a Bush program now (that its a deficit add) and will become a Obama program when it makes money. I see how it works. Your right on numbers, it makes a big difference when we choose dates, but we have to use the same dates for all comparisons then.
Also, the Dems have been running the economy since coming to power in 2006, they oversaw the financial meltdown and did nothing, but blame it on Bush and the republicans for political gain in 2008. Now we (i’m one) don’t want hear it when the other side takes shots at us? Thats hypocritical. Neither party has had a solution or the will to attack the problem. Voters are desparate to get somebody (congressman types) in Washington who can do whats right. If no progress is made, trust me they’ll boot this crowd out in a couple years.
I’m tired of the bull on both sides.
The TARP one is simple, PatriotSgt. Two ways to look at it. First of all, it was the right wing that was blaming “The Bank Bailout” (i.e., TARP) on Obama, even though it was passed before Obama was even elected president.
Second of all, under Obama’s stewardship (after he got elected), TARP managed to recover virtually all of the money it spent on bailouts.
So I think in this one example, you can make good case that Obama should get all of the credit, but none of the blame. 🙂
On a more serious note, it is simply not true that the Democrats don’t have “a solution or the will to attack the problem.” The Democrats actually passed financial reform that had many good provisions. It was watered down because the Republicans fought it tooth and nail.
You may claim that you are “tired of the bull on both sides”, but you keep making these tired false equivalences.
I’ll give TARP to you and Obama, even though he voted for it as a Senator and candidate, my head hurts. False equivalence must be your new favorite phrase of the week. 🙂
Finacial reform sounds good, but as I recall during the debates on it, most republicans were against the house bill because they thought it didn’t go far enough in addressing the real problems. For instance, it does nothing to freddie or fannie, the 2 largest perpetrators of what the media has labled predatory lending (although I don’t know how you make a predatory loan, even from a loan shark the lendee knows what their doing). It adds another gov’t agency. It does nothing to improve the economy or add jobs (except gov’t workers). It will tighten credit and make mortgages even harder to get. (already has) There is no way middle class people can save 20% in todays economy, but this legislation will force that. I think it was hurried through because the Dems could see Nov coming. I agree they tried to do something, but I’m not sure its the best thing they could have done.
Here’s a different take on the legislation:
http://www.indepe.ndent.org/blog/index.php?p=5908&cpage=1
Tell me what you think
Fannie Mae and Freddie Mac are not lenders. They buy mortgages on the secondary market. Therefore they cannot be categorized as “perpetrators” of predatory loans.
In every reserve bank report that I’ve read, the largest predatory lenders have been (in order): non-bank mortgage companies, the largest banks (Bank of America, Wells Fargo, etc.), and finance companies bundling these mortgages into derivatives and sending them into financial limbo.
I agree Starluna on Fred/Fann not being direct lenders, but they do approve/reject loans before buying them (or at least they used to). Those derivatives most definately needed regulation. Their content was shielded from the buyers who looked more at the potential return and not the risk. After all when does real estate ever lose, until now that is.
But, i would not call that predatory. Investors savy enough to be looking at derivatives should be smart enough to investigate the product. I lump them in with those who invested with Madoff. They were also smart, educated people who got greedy. So I don’t think for the educated investor there were any predatory lenders or brokerage firms, only greedy investors who thought “it will never happen to me”.
I also don’t believe there were not any predatory loans to homebuyers. There were people granted loans who could not afford them, they knew it and took the loan anyway. There were loan brokers who absoutely broke laws by not collecting documents or securing proof of applicants claims. None to my knowledge have been investigated and/or are being charged at this point. That should be step 1. Step 2 is looking at the banks and big players who bought these unverified loans from the brokers. I don’t know of any DOJ investigations of Wells Fargo or BOA for this. They did get free federal bailout loans though and then the taxpayers bought all their toxic debts, but no investigation? I think its inexcusable.
The true victims in this whole mess are the taxpayers.
PSGT, it’s true that investing decisions are mostly an individual’s responsibility, but if you’ve ever done any investing yourself, you’ll know that the flow of information is often highly restricted and the symmetry of information is a myth. There’s a reason brokers and people who give advice have to be licensed.
None of this mitigates the banks of responsibility. It must be understood that the reason the markets and products are kept obscure is not out of laziness, but rather precisely because the banks know that obscurity allows them to make more money! Even ignoring the bubble the banks were making insane amounts of money by exploiting a lack of transparency in the credit markets. The fact that they shot themselves in the foot this time is no excuse for the perpetual fight they put up against any form of transparency or regulation.
Let’s hope this will change for the better. The Dodd-Frank Act is a step in the right direction.
I agree Dan, I guess my point is there were no “novice” investors snapping up derivatives. Thats not to say that they were’nt snatched up by an experienced investor or group and repackaged again into something like a mutual fund that could be more convincingly marketed to the novice or less experienced investor.
Your absoluteuy correct as well that the big players were raking in the dough and they should be realed in, my issue is more that no consequence, regulation aside, has befallen any of the responsible institutions. The best way to deter future bad behavior is to apply a consequence now and hold a bigger consequence (hammer) in your hand to prevent some different form of manipulation.
It seems the gov’t bailed them out, shook their finger at them, called them naughty boys, and said don’t do that again. It just doesn’t seem right to me considering the consequences.
By the way I held a series 7 license a number of years ago.
The investigations, lawsuits, and prosecutions of predatory lending are generally done at the state level. Here in Massachusetts, we have prosecuted several non-bank mortgage companies as well as the big banks, including Bank of America, Washington Mutual, Wells Fargo, Chase, and Citibank. There have been several very large settlements with others still pending. NY state is also pursuing several lawsuits, both criminal and civil.
I don’t think Fannie or Freddie have any role in the approval of mortgages. They do have a role in the release of mortgages because when they buy a mortgage they become the owners of it. But in the original mortgage, they do not have any role. There may be some exceptions for specific federal programs, but not in the average mortgage that is given today. The overwhelming majority of mortgages originate through private banks or private non-bank mortgage companies. Subprime and predatory loans have come mostly from non-bank companies.
Regarding investors, my understanding from watching the Nightly Business Report is that some significant number of those derivatives comprised of sub-prime mortgage were packaged into mutual funds and sold to pension funds and other more experienced investors. Mutual funds are supposed to be safer forms of investment, but the risk was hidden to the investors. This is one of the reasons why the sub-prime and predatory lending practices had such a big impact on the economy. The complexity that this whole thing created is also making havoc even in trying to foreclose on homes where people really cannot afford the mortgage. Here in MA, there are serious questions about who actually owns the mortgages that some of these banks are foreclosing on. The whole thing is a mess. But at least here in MA and in NY state, there have been consequences.
Again, if you watch the Nightly Business Report or listen to Marketplace on NPR, you would hear about these things.
Thanks Starluna, you also reminded me of another point about actual ownership of the note. I know for mine, it is bought by wells fargo, but when I asked a question they told me they were only the loan servicer and that it was actually owned by an investor. However, every piece of info and my documents say wells fargo, only. I asked who the owner was and they said they couldn’t tell me without a formal written request. I wish my state was a proactive as yours.
When we bought our house we specifically went with a community bank that holds all of their own mortgages. We did that in part because part of the messiness of buying our house was because the whole issue of who owned the note. Closing ended up taking months because they could not figure out who owned the note. It turned out to be either Freddie or Fannie (I don’t remember which), but the servicer still would not do the legwork needed to get a release on the note in a timely manner. I ended up calling Barney Frank’s people who managed to locate the mortgage and get it released in 4 days. If you can, and can afford it, refinance with a local credit union or community bank. We’ve had no problems with our mortgage compared to our friends who’ve had erroneous foreclosure letters sent to them, mistakes on paying the property taxes, etc.
Good idea. I discovered the problem when the canceled my automatic payment withdrawal because they were converting computer systems, then sent me a failure to pay notice with a threat of foreclosure. When I was straightening “their” issue out and getting the auto-payment set back up is when i discovered they don’t really own my loan.
But in regard to the post: Apples, oranges and artifacts. Why is it that partisans continuously contort statistical artifacts to validate their political preferences? Partisan inferences using National Income Product Accounts are meaningless in regard to the impact of government policy on the individual’s bottom line.
I will say using economic time series to “prove” the superiority of one’s partisan desires is sort of quaint in way.