The challenge in evaluating a president's performance with respect to the national economy is that the economy is a dynamic, complex system that is influenced by a multitude of endogenous and exogeneous forces, mostly non-forecastable, that cannot be directly attributable to specific presidential actions especially considering the reality that the actions typically represent a compromise involving numerous stakeholders including elected representatives in the US Congress, lobbyists and interested citizens. Economic pledges by presidents and presidential candidates are tempered with the realities of evolving conditions and compromises to implement an action that will improve the economy. Hypothesized statistical relationships among the presidents’ party and other variables of interest are indicated in Table 1.
Table 1
Political Significance of Variables Examined
Variable | Hypothesized effect | Short-run feedback | Long-run feedback |
GDP growth | Increase helps incumbent; decrease helps opponent | Increase tends to lower unemployment, debt/GDP, S&P 500, DJIA | Increase tends to lower unemployment, debt/GDP, S&P 500, DJIA |
Unemployment | Increase helps opponent; decrease helps incumbent | Increase tends to lower GDP growth, S&P 500, DJIA, raise debt/GDP | Increase tends to lower GDP growth, S&P 500, DJIA, raise debt/GDP |
National debt/GDP ratio | Increase helps incumbent in SR but opponent in LR; decrease helps opponent in SR but incumbent in LR | Increase tends to raise GDP growth, S&P 500, DJIA, lower unemployment | Increase tends to lower GDP growth, S&P 500, DJIA, raise unemployment |
S&P 500, DJIA | Increase helps incumbent; decrease helps opponent | Increase tends to lower unemployment, debt/GDP, increase GDP growth | Increase tends to lower unemployment, debt/GDP, increase GDP growth |
Note: Only government debt and the debt/GDP ratio have different long-run and short-run feedback effects. Only the short-run effect can influence a given election in isolation, but once long-run feedback manifests it can help an opposing party unseat an incumbent. |
This study will examine the political party holding the presidency and the resultant 1) gross domestic product growth, 2) unemployment, 3) government debt and debt-to-GDP ratio, and 4) stock market performance. These variables were selected to provide broad metrics of the national economy's performance. GDP, the U.S. national debt, and unemployment are taken from the FRED website. GDP and debt growth are presented as annual percent growth rates. Unemployment and the debt-to-GDP ratio are presented as annual changes. Stock market performance, specifically the S&P 500 and the DJIA are 1948–2022 annual percent returns from the Macrotrends website.
Regressing each of these variables on a dummy variable (P = 1 for Republican presidents, = 0 for Democrats) over 1949–2022 indicates Republicans have delivered or experienced significantly lower GDP growth and greater unemployment growth, but no significant impact on changes in government debt, the debt-to-GDP ratio, or stock market returns (Table 2).
Table 2
Regression Results: Variables of Interest Explained by Political Party
Regression equation | Adjusted R Square | Average RHS variable | Variable | Coeff | Standard Error | t Stat | P-value |
%ΔY = a + bP + e | 0.029455 | 3.11% | Intercept | 0.036364 | 0.004181 | 8.6981248 | 0.000000*** |
| | | Party | -0.00996 | 0.005609 | -1.776162 | 0.080052* |
ΔD/Y = a + bP + e | 0.008821 | 0.4990 | Intercept | -0.21768 | 0.752645 | -0.289214 | 0.773273 |
| | | Party | 1.289948 | 1.00978 | 1.2774554 | 0.205662 |
%ΔD = a + bP + e | 0.013453 | 3.65% | Intercept | 0.027177 | 0.008904 | 3.0522244 | 0.003209** |
| | | Party | 0.016759 | 0.011946 | 1.4029176 | 0.165061 |
Δu = a + bP + e | 0.080421 | 0.0375 | Intercept | -0.35 | 0.193626 | -1.80761 | 0.074964* |
| | | Party | 0.6975 | 0.259776 | 2.6850024 | 0.009048*** |
%ΔS&P500 = a + bP + e | 0.007625 | 9.25% | Intercept | 0.119131 | 0.028717 | 4.148415 | 0.000000*** |
| | | Party | -0.0479 | 0.038528 | -1.24321 | 0.217938 |
%ΔDJIA = a + bP + e | -0.00635 | 8.51% | Intercept | 0.101291 | 0.027553 | 3.6762001 | 0.00046*** |
| | | Party | -0.02746 | 0.036966 | -0.742787 | 0.460096 |
Note: n = 72, Presidential Party dummy variable Dem = 0, Rep = 1. Particularly note the low adjusted R-squares. The significant negative coefficients in the %ΔY and positive slope coefficient in the Δu regressions indicate Republican presidents experience significantly lower real output growth and increased unemployment. |
Although low R-squares suggest that linear regressions have poor explanatory power, one-way ANOVA enables us to test for significantly different outcomes under the 32 annual observations for Democratic presidents and 40 for Republicans.
Although both parties claim ownership for good economic performance and are silent when good news is not forthcoming, unless they can blame that on their opponents, there is no universally agreed causality running from the president’s party to economic performance. The basic assumption is that a Democratic presidency or a Republican presidency is not material when considering GDP performance. Thus, the null hypothesis is that GDP performance would be the same under either a Democratic or Republican presidency.
Student’s t-tests also yield interesting results (Table 3). GDP growth, growth in government debt, and stock market returns are all significantly different from zero for both parties, as shown in the left side of Table 3. Democratic presidents have significantly lowered unemployment, but Republican presidents have had no significant effect. Neither party has had a significant effect on the debt-to-GDP ratio. The right side of Table 3 presents tests for differences in macroeconomic performance under the two parties. None of the average change series are significantly different except for unemployment, which is significantly lower under Democrats. This result confirms Blinder and Watson (2016).
Table 3
t-tests of Dem v. Rep Differences in Average Returns
| Null: Avg Δ = 0 | | | | Null: Avg Dem Δ = Avg Rep Δ | | |
| Avg | Std Dev | t | p(t) | sig | Sample Difference | Pooled s-square | T | p(t) | Sig |
Dem % ΔY | 3.6580% | 2.3188% | 9.1986 | 0.0000 | *** | 1.0179% | 0.0238 | 1.8353 | 0.0705 | |
Rep % ΔY | 2.6402% | 2.3264% | 7.1774 | 0.0000 | *** | | | | | |
Dem Δ(D/Y) | -0.3998 | 4.3444 | -0.5366 | 0.5951 | | -147.2042% | 4.2571 | -1.4824 | 1.0000 | |
Rep Δ(D/Y) | 1.0723 | 4.0607 | 1.6701 | 0.1027 | | | | | | |
Dem % ΔD | 2.6316% | 0.04311 | 3.5594 | 0.0011 | *** | -1.7621% | 0.0498 | -1.5161 | 0.1338 | |
Rep % ΔD | 4.3937% | 0.053578 | 5.1865 | 0.0000 | *** | | | | | |
Dem Δu | -0.4235 | 1.0146 | -2.4340 | 0.0203 | ** | -77.1029% | 1.1667 | -2.8331 | 0.0059 | ** |
Rep Δu | 0.3475 | 1.1705 | 1.8777 | 0.0677 | | | | | | |
Dem % Δ S&P 500 | 11.4315% | 13.5964% | 4.9025 | 0.0000 | *** | 4.3082% | 0.1645 | 1.1231 | 0.2650 | |
Rep % Δ S&P 500 | 7.1233% | 18.2941% | 2.4626 | 0.0182 | * | | | | | |
Dem % Δ DJIA | 9.8259% | 12.2411% | 4.6805 | 0.0000 | *** | 2.4426% | 0.1540 | 0.6801 | 0.4986 | |
Rep % Δ DJIA | 7.3833% | 17.5635% | 2.6587 | 0.0112 | * | | | | | |
Notes: It is especially interesting that the average annual change in the debt-to-GDP ratio is not statistically significant under either party. Democratic presidents have significantly lowered unemployment, but Republican presidents’ impact is not statistically significant. Democratic presidents have brought higher average stock market returns, but the difference is not statistically significant. |
Table 4 presents Granger causality tests. These are interpreted as follows: 1. one-year-lagged unemployment helps explain (rising) government debt; 2. lagged debt explains (lowered) unemployment; 3. lagged unemployment explains lowered output; 4. lagged output explains (higher) unemployment; 5. lagged debt does not explain greater output growth; 6. lagged output growth explains (lower) debt; 7. lagged S&P returns explain greater output growth; 8. lagged DJIA returns explain greater output growth; 9. lagged output growth does not explain S&P returns; 10. lagged output growth does not explain DJIA returns.
Table 4
Pairwise Granger Causality Tests
Test | Adj R Square | | Coefficients | Standard Error | t Stat | P-value | Sig |
1. u→D | 0.5062 | Intercept | 0.0124 | 0.0052 | 2.3723 | 0.0205 | ** |
| | %ΔD(t-1) | 0.7114 | 0.0887 | 8.0218 | 0.0000 | *** |
| | Δu(t-1) | 0.0149 | 0.0039 | 3.7712 | 0.0003 | *** |
2. D→u | 0.0835 | Intercept | 0.2352 | 0.1553 | 1.5144 | 0.1346 | |
| | Δu(t-1) | 0.1300 | 0.1168 | 1.1124 | 0.2699 | |
| | %ΔD(t-1) | -6.7373 | 2.6293 | -2.5624 | 0.0126 | ** |
3. u→Y | 0.0649 | Intercept | 0.0347 | 0.0060 | 5.7585 | 0.0000 | *** |
| | %ΔY(t-1) | -0.1064 | 0.1700 | -0.6261 | 0.5334 | |
| | Δu(t-1) | -0.0080 | 0.0036 | -2.2246 | 0.0294 | ** |
4. Y→u | 0.0367 | Intercept | -0.4334 | 0.2848 | -1.5217 | 0.1327 | |
| | Δu(t-1) | 0.3661 | 0.1707 | 2.1451 | 0.0355 | ** |
| | %ΔY(t-1) | 13.8008 | 8.0420 | 1.7161 | 0.0907 | * |
5. D→Y | 0.0044 | Intercept | 0.0242 | 0.0055 | 4.4227 | 0.0000 | *** |
| | %ΔY(t-1) | 0.1778 | 0.1241 | 1.4332 | 0.1564 | |
| | %ΔD(t-1) | 0.0428 | 0.0593 | 0.7229 | 0.4722 | |
6. Y→D | 0.5102 | Intercept | 0.0380 | 0.0082 | 4.6112 | 0.0000 | *** |
| | %ΔD(t-1) | 0.6288 | 0.0890 | 7.0625 | 0.0000 | *** |
| | %ΔY(t-1) | -0.7191 | 0.1864 | -3.8581 | 0.0003 | *** |
7. S&P→Y | 0.2742 | Intercept | 0.0185 | 0.0044 | 4.2289 | 0.0001 | *** |
| | %ΔY(t-1) | 0.1894 | 0.1048 | 1.8077 | 0.0751 | * |
| | %ΔS&P500(t-1) | 0.0753 | 0.0148 | 5.0981 | 0.0000 | *** |
8. DJIA→Y | 0.2884 | Intercept | 0.0176 | 0.0044 | 4.0332 | 0.0001 | *** |
| | %ΔY(t-1) | 0.2129 | 0.1041 | 2.0459 | 0.0446 | ** |
| | %ΔDJIA(t-1) | 0.0812 | 0.0154 | 5.2786 | 0.0000 | *** |
9. Y→S&P | -0.0049 | Intercept | 0.1299 | 0.0355 | 3.6619 | 0.0005 | *** |
| | %ΔS&P500(t-1) | -0.0891 | 0.1201 | -0.7417 | 0.4608 | |
| | %ΔY(t-1) | -0.9266 | 0.8517 | -1.0879 | 0.2805 | |
10. Y→DJIA | 0.0182 | Intercept | 0.1360 | 0.0337 | 4.0341 | 0.0001 | *** |
| | %ΔDJIA(t-1) | -0.1267 | 0.1188 | -1.0660 | 0.2902 | |
| | %ΔY(t-1) | -1.2538 | 0.8040 | -1.5594 | 0.1235 | |
Notes: n = 71. Interpretation of results: debt (D) causes unemployment (u); unemployment causes GDP (Y) growth; the S&P 500 and DJIA both cause GDP growth. |
Below we discuss and review ANOVA results for each of the macroeconomic variables of interest.
a) Gross Domestic Product (GDP)
GDP is a calculated value identifying the goods and services produced by a nation at a particular point in time. 1971 Nobel laureate Simon Smith Kuznets is credited with introducing the GDP concept in a 1934 report to Congress.3 GDP became the primary method for measuring a nation's economy after the 1944 Bretton Woods Conference. Thus, the business cycle identifies the GDP over time indicating upswings (expansionary periods) and downswings (contractionary periods).
During the 1949 to 2020 period under scrutiny during this study, there have been twelve recessions.4 The depth of the recessions varied from mild, e.g.,1969–1970, 2001, to severe, e.g., the 2007–2009 Great Recession. The president and his political party are identified at the time each recession started in Table 5. The 1960–1961 recession during the Eisenhower administration, the 1990–1991 recession during the first Bush administration, and the 2020 COVID recession during the Trump administration had serious implications for the subsequent Democratic administrations of Kennedy, Obama, and Biden.
Table 5
President | Political Party | Recession |
Harry S. Truman | Democrat | November 1948 to October 1949: Post-War Consumer Spending Slows |
Dwight D. Eisenhower | Republican | July 1953 to May 1954: Post-Korean War Recession |
Dwight D. Eisenhower | Republican | August 1957 to April 1958: Asian Flu Pandemic |
Dwight D. Eisenhower | Republican | April 1960 to February 1961: The Recession that Cost Nixon an Election |
Richard M. Nixon | Republican | December 1969 to November 1970: Putting the Brakes on 1960s Inflation |
Richard M. Nixon | Republican | November 1973 to March 1975: The Oil Embargo |
James (Jimmy) E. Carter Jr. | Democrat | January to July 1980: Second Energy Crisis and Inflation Recession |
Ronald W. Reagan | Republican | July 1981 to November 1982: Double Dip Recession |
George H.W. Bush | Republican | July 1990 to March 1991: S&L Crisis and Gulf War Recession |
George W. Bush | Republican | March to November 2001: The Dot-Com Crash and 9/11 |
George W. Bush | Republican | December 2007 to June 2009: The Great Recession |
Donald J. Trump | Republican | February-April 2020: The COVID-19 Recession |
Source: Prepared by Gary A. Lombardo based on information presented in History. "How the US Got Out of 13 Economic Recessions Since World War II." https://www.history.com/news/us-economic-recessions-timeline#:~:text=Starting%20with%20an%20eight%2Dmonth,expansion%20have%20lasted%2057%20months. |
Blinder and Watson (2016) studied the relationship between the political party holding the presidency and real GDP growth. Their conclusion was that Democratic presidencies enjoyed an advantage when it came to stock market performance due to “more benign oil shocks, superior TFP performance, a more favorable international environment, and perhaps more optimistic consumer expectations about the near-term future (Blinder & Watson 2016: 1015).” Table 6 shows average GDP growth has been higher under Democratic presidents than under Republicans.
Table 6
Annual Average Gross Domestic Product (GDP) Growth Percent, 1949–2022
| Annual % GDP Growth |
All Presidencies, Average Annual GDP Growth | 3.1078% |
Democratic Presidencies, Average Annual GDP Growth | 3.6580% |
Republican Presidencies, Average Annual GDP Growth | 2.6402% |
Source: Prepared by Gary A. Lombardo, Ph.D. based on a review of Data Set 2. |
As shown in Fig. 1, the highest performing administrations are from all Democratic presidents indicated in blue. Although the lowest performing is for Obama I, seven out of ten Republican administrations had GDP growth below the postwar average, while seven out of nine Democratic administrations were above average.
Overall annual GDP growth can be examined more closely by computing the average annual GDP growth percentage during each presidential administration and presenting the results as an ordinal ranking (Table 7). Democratic presidents were ranked in the first through the fourth positions, the sixth position, and the twelfth position out of a ranking series of thirteen. Obama, in the twelfth position, may argue that his ranking was due to the Great Recession inherited from George W. Bush, and generally it seems plausible that the poor economic performance which contributes to a change of presidential party also starts the next incumbent off with poor performance. Poor economic performance cannot generally be changed overnight, especially when candidates campaign on revolutionary change in economic policy more for show than substance.
Table 7
Average Annual GDP Growth Percent: Ordinal Ranking by Presidential Administrations
Average Annual GDP Growth Percent Change |
Presidential Administration | Timeframe | GDP |
Lyndon B. Johnson | 1965–1968 | 5.19% |
Harry S. Truman | 1949–1952 | 5.06% |
John F. Kennedy/ Lyndon B. Johnson | 1961–1964 | 4.70% |
William J. (Bill) Clinton | 1993–2000 | 3.88% |
Ronald W. Reagan | 2009–2016 | 3.48% |
James (Jimmy) E. Carter | 1977–1980 | 3.27% |
Dwight D. Eisenhower | 1953–1960 | 3.03% |
Richard M. Nixon | 1969–1972 | 2.97% |
Richard M. Nixon/ Gerald R. Ford | 1973–1976 | 2.57% |
George H.W. Bush | 1989–1992 | 2.24% |
George W. Bush | 2001–2008 | 2.21% |
Barack H. Obama | 2009–2016 | 1.56% |
Donald J. Trump | 2017–2020 | 1.01% |
Source: Prepared by Gary A. Lombardo, Ph.D. |
In Table 8 we report the results of one-way ANOVA testing for significantly different outcomes under the 32 annual observations for Democratic presidents and 40 for Republicans. The Democratic presidencies average annual GDP growth results are statistically significantly higher than that of the Republican presidencies.
Table 8
Δ |
| Treatments | | |
| Dem | Rep | Total | |
N | 34 | 40 | 74 | |
∑X | 1.2437 | 1.0561 | 2.2998 | |
Mean | 0.0366 | 0.0264 | 0.031 | |
∑X2 | 0.0638 | 0.0495 | 0.1133 | |
Standard Deviation | 0.0235 | 0.0236 | 0.0239 | |
Source of variation | SS | df | MS | |
Between-treatments | 0.0019 | 1 | 0.0019 | F = 3.43351 |
Within-treatments | 0.0399 | 72 | 0.0006 | |
Total | 0.0418 | 73 | | |
Note: The F-ratio is 3.43351. The p-value is .067984. The result is significant at p < .10 but not at p < .05. ANOVA indicates Democrats deliver higher GDP growth or benefit from it. |
b) Unemployment Rate
During the 1949 to 2022 period, GDP was inversely related to unemployment. Table 9 compares average changes in unemployment under Republicans versus Democrats.
Table 9
Annual Average Unemployment Rate Percent Change by Political Party Presidency, 1949–2022
| Annual Average Unemployment Rate | Annual Average Change in Unemployment Rate |
All Presidencies, Average | 5.73% | 3.7500% |
Democratic Presidencies, Average | 5.86% | -0.4235% |
Republican Presidencies, Average | 5.64% | 0.3475% |
Source: Prepared by Gary A. Lombardo, Ph.D. |
Unemployment increased over all but one Republican administration, Reagan 2, decreasing over eight out of ten Democratic administrations (Fig. 2).
The overall average unemployment rate by Democratic and Republican presidencies can be examined more closely by computing the average annual unemployment rate by each presidential administration and the average annual unemployment rate change and presenting the results as an ordinal ranking in a series (Table 10). As the data show, the unemployment rate was reduced during each of the six Democratic president's administrations while the unemployment rate reduction took place in only two of the seven Republican administrations. President Obama inherited an especially relatively high unemployment rate when he took office in 2009.
Table 10
Average Annual Unemployment Rate and Average Annual Unemployment Rate Percent Change During Each Presidency: Ordinal Ranking by Presidential Administrations
Average Annual Unemployment Rate | Average Annual Unemployment Rate Percent Change |
Presidential Administration | Timeframe | Unemployment Rate | Presidential Administration | Timeframe | Unemployment Rate Change |
Lyndon B. Johnson | 1965–1968 | 4.1% | William J. (Bill) Clinton | 1993–2000 | -45.2% |
Donald J. Trump | 2017–2020 | 4.1% | Barack H. Obama II | 2009–2016 | -38.5% |
Harry S. Truman | 1949–1952 | 4.4% | Harry S. Truman | 1949–1952 | -25.6% |
Dwight D. Eisenhower | 1953–1960 | 4.7% | Donald J. Trump | 2017–2020 | -25.5% |
Richard M. Nixon | 1969–1972 | 4.8% | Lyndon B. Johnson | 1965–1968 | -24.5% |
George W. Bush | 2001–2008 | 5.1% | Ronald W. Reagan | 1981–1988 | -24.0% |
William J. (Bill) Clinton | 1993–2000 | 5.4% | James (Jimmy) E. Carter Jr. | 1977–1980 | -16.0% |
John F. Kennedy/ Lyndon B. Johnson | 1961–1964 | 5.9% | John F. Kennedy/ Lyndon B. Johnson | 1961–1964 | -15.2% |
George H.W. Bush | 1989–1992 | 6.1% | George W. Bush | 2001–2008 | 19.0% |
Richard M. Nixon/ Gerald R. Ford Jr. | 1973–1976 | 6.5% | George H.W. Bush | 1989–1992 | 35.2% |
James (Jimmy) E. Carter Jr. | 1977–1980 | 6.5% | Richard M. Nixon/ Gerald R. Ford Jr. | 1973–1976 | 61.2% |
Barack H. Obama II | 2009–2016 | 7.5% | Richard M. Nixon | 1969–1972 | 70.6% |
Ronald W. Reagan | 1981–1988 | 7.6% | Dwight D. Eisenhower | 1953–1960 | 79.3% |
Source: Prepared by Gary A. Lombardo, Ph.D. |
The results of the ANOVA for unemployment are given in Table 11. The F-test indicates significantly lower unemployment under Democratic presidents.
Table 11
Δ |
| Treatments | | |
| Dem | Rep | Total | |
N | 34 | 40 | 74 | |
∑X | -14.4 | 13.9 | -0.5 | |
Mean | -0.4235 | 0.3475 | -0.007 | |
∑X2 | 41.1 | 59.63 | 100.73 | |
Standard Deviation | 1.0299 | 1.1854 | 1.1747 | |
Source of variation | SS | df | MS | |
Between-treatments | 10.9257 | 1 | 10.9257 | F = 8.75993 |
Within-treatments | 89.8009 | 72 | 1.2472 | |
Total | 100.7266 | 73 | | |
Note: The f-ratio is 8.75993. Its p-value is .004166. The result is significant at p < .05, indicating that the change in unemployment is significantly different over Democratic and Republican administrations. |
c) National Debt and Debt-to-GDP Ratio
Democratic administrations reduced the annual average national debt-to-GDP relationship by 2% more than Republican administrations (Table 12). Although 2% may not seem a major difference, in the context of multi-trillion dollar budgets the monetary difference is substantial.
Table 12
Annual Average National Debt Percent Change and Annual National Debt-to-GDP Percent Change by Political Party Presidency, 1949–2022
| Annual Average National Debt Percent Change | Annual Average Change in Debt-to-GDP Ratio |
All Presidencies, Average | 3.6488% | 0.4990 |
Democratic Presidencies, Average | 2.6316% | -0.3998 |
Republican Presidencies, Average | 4.3937% | 1.0723 |
Source: Prepared by Gary A. Lombardo, Ph.D. |
Annual percent growth in the national debt is shown by presidential administration in Fig. 3. The debt-to-GDP ratio is shown in Fig. 4.
Government debt and the ratio of national debt-to-GDP picture by Democratic and Republican presidencies can be examined more closely by computing the national debt percentage change and the national debt-to-equity percentage change for each presidential administration and displaying the results as an ordinal ranking (Table 13). As the data show, Democratic presidents occupied five of the top six ranking positions when considering the national debt-to-GDP changes. The Obama presidency, perhaps due to his dealing with the Great Recession when he entered the Oval Office, was ranked next to last for the thirteen administrations. Also, the data seem to indicate that there may have been an unspoken norm not to raise the debt substantially during the early years of the period under investigation.
Table 13
National Debt Percent Change and National Debt-to-GDP Percent Change During Each Political Party Presidency: Ordinal Ranking by Presidential Administrations
National Debt Percent Change | National Debt-to-GDP Percent Change |
Presidential Administration | Timeframe | National Debt Percent Change | Presidential Administration | Timeframe | National Debt-to-GDP Percent Change |
Harry S. Truman | 1949–1952 | 2.37% | Harry S. Truman | 1949–1952 | -23.66% |
Dwight D. Eisenhower | 1953–1960 | 7.52% | Dwight D. Eisenhower | 1953–1960 | -20.59% |
John F. Kennedy/ Lyndon B. Johnson | 1961–1964 | 7.96% | William J. (Bill) Clinton | 1993–2000 | -12.70% |
Lyndon B. Johnson | 1965–1968 | 9.78% | John F. Kennedy/ Lyndon B. Johnson | 1961–1964 | -11.54% |
Richard M. Nixon | 1969–1972 | 20.62% | Lyndon B. Johnson | 1965–1968 | -9.30% |
William J. (Bill) Clinton | 1993–2000 | 28.63% | James (Jimmy) E. Carter Jr. | 1977–1980 | -5.88% |
James (Jimmy) E. Carter Jr. | 1977–1980 | 29.90% | Richard M. Nixon | 1969–1972 | -5.56% |
Richard M. Nixon/ Gerald R. Ford Jr. | 1973–1976 | 35.37% | Richard M. Nixon/ Gerald R. Ford Jr | 1973–1976 | 0.00% |
Donald J. Trump | 2017–2020 | 37.06% | George H.W. Bush | 1989–1992 | 19.61% |
George H.W. Bush | 1989–1992 | 42.28% | George W. Bush | 2001–2008 | 23.64% |
Barack H. Obama II | 2009–2016 | 64.34% | Donald J. Trump | 2017–2020 | 24.04% |
George W. Bush | 2001–2008 | 72.64% | Barack H. Obama II | 2009–2016 | 28.05% |
Ronald W. Reagan | 1981–1988 | 160.72% | Ronald W. Reagan | 1981–1988 | 61.29% |
Source: Prepared by Gary A. Lombardo, Ph.D. |
The ANOVA for annual national debt percent change is given in Table 14. The F-test indicates there is no significant difference in debt growth under Republican versus Democratic presidents.
Table 14
Δ |
| Treatments | | |
| Dem | Rep | Total | |
N | 34 | 40 | 74 | |
∑X | 0.8947 | 1.7575 | 2.6522 | |
Mean | 0.0263 | 0.0439 | 0.036 | |
∑X2 | 0.0867 | 0.192 | 0.2788 | |
Standard Deviation | 0.0438 | 0.0543 | 0.0502 | |
Source of variation | SS | df | MS | |
Between-treatments | 0.0057 | 1 | 0.0057 | F = 2.30803 |
Within-treatments | 0.178 | 72 | 0.0025 | |
Total | 0.1837 | 73 | | |
Note: The F-ratio value is 2.30803. Its p-value is .133086. The result is not significant at p < .05, indicating that there is no significant difference in the percent change in government debt over Republican and Democratic administrations. |
Table 15 presents ANOVA for differences in the debt-to-GDP ratio, indicating significantly greater reductions (i.e., lower changes) in the debt-to-GDP ratio under Democratic presidents.
Table 15
Δ |
| Treatments | | |
| Dem | Rep | Total | |
N | 68 | 40 | 108 | |
∑X | -12.3484 | 42.8909 | 30.5425 | |
Mean | -0.1816 | 1.0723 | 0.283 | |
∑X2 | 647.2192 | 705.5565 | 1352.776 | |
Standard Deviation | 3.1027 | 4.1124 | 3.5443 | |
Source of variation | SS | df | MS | |
Between-treatments | 39.5957 | 1 | 39.5957 | F = 3.21733 |
Within-treatments | 1304.542 | 106 | 12.307 | |
Total | 1344.138 | 107 | | |
The f-ratio value is 3.21733. The p-value is .075713. The result is significant at p < .10, but not at p < .05, indicating that there is no significant difference in changes in the debt-to-GDP ratio over Republican and Democratic administrations. |
d) Stock Market Performance
Although the stock market responds to GDP growth over the long run, it is more volatile, with transitory changes often leading GDP and responding to changes in fundamentals more rapidly with short-run overcorrections. Economists who have studied the relationship between the president’s party and stock market performance have long known that annual average appreciation is generally greater under Democratic presidents than Republicans. This understanding may not be shared by the public. Conventional wisdom reflects a widely held belief that may or may not be true. When it comes to the United States political parties and national economic performance some people generally and genuinely believe that the Republican Party, by its rhetoric and actions when holding the presidency, enact policies and legislation that benefit the nation's economy more so then when the presidency is held by a Democrat. For example, Arthur Stein Financial5 reported surprise from readers of J.P. Morgan’s June 2012 "Guide to the Markets" observation that 1940–2008 stock market performance was better when a Democrat was president.
The Republican presidency is viewed as favoring business. The Democratic presidency is thought to be unsympathetic to both big business, Wall Street, and individual investors. However, stock market performance captured by the S&P 500 and DJIA is publicly available and incontrovertible. Although various studies use different start and ending dates the results tend to be consistent. French (2023) found the S&P 500 annual return from 1926 to 2019 during the 48 years of a Democratic presidency was 14.94% while the annual return performance during the 46 years of a Republican presidency was only 9.12%.6 The average annual premium of 5.82% for a Democratic presidency is substantial, especially when compounded over 48 years.
Pastor and Veronesi (2019) investigated stock market performance during Democratic and Republican presidential administrations, calling the subject a presidential puzzle and emphasized that the phenomenon can be explained by the “endogeneity of election outcomes.” Their argument is that the president's actions are irrelevant; what is relevant is when the president is elected. They posit that Democrats tend to be elected when expected future returns are high and, conversely, Republicans are elected when future expected returns are low.
Table 16
Annual Average S&P 500 and DJIA Appreciation, 1949–2022
| S&P500 | DJIA |
All Presidencies, Average Annual Appreciation | 9.2521% | 8.5055% |
Democratic Presidencies, Average Annual Appreciation | 11.4315% | 9.8259% |
Republican Presidencies, Average Annual Appreciation | 7.1233% | 7.3833% |
Source: Prepared by Gary A. Lombardo, Ph.D. |
Stock returns under different presidential administrations are shown in Fig. 5 for the S&P 500 and Fig. 6 for the DJIA. The whole of the first year of each administration is attributed to their party, even though presidents do not take office until January 20th .
The average annual appreciation by Democratic and Republican presidencies can be examined more closely by computing the average annual appreciation by each presidential administration and presenting the results as an ordinal ranking in a series (Table 17). Although the results seem mixed on an individual basis, collectively Democratic presidents, while in office, enjoyed higher stock S&P500 and DJIA returns than did Republican presidents, as shown in Table 16. Notably, the stock market performance advantage enjoyed by Democratic presidents is markedly greater with the broader S&P 500 than with the narrower DJIA.
Table 17
Average Annual S&P500 and DJIA Appreciation: Ordinal Rankingby Presidential Administrations
S&P500 Average Annual Appreciation | DJIA Average Annual Appreciation |
Presidential Administration | Timeframe | S&P500 | Presidential Administration | Timeframe | DJIA |
William J. (Bill) Clinton | 1993–2000 | 15.87% | William J. (Bill) Clinton | 1993–2000 | 16.68% |
Harry S. Truman | 1949–1952 | 15.07% | Harry S. Truman | 1949–1952 | 13.33% |
Donald J. Trump | 2017–2020 | 14.58% | Donald J. Trump | 2017–2020 | 12.26% |
George H.W. Bush | 1989–1992 | 12.87% | George H.W. Bush | 1989–1992 | 11.78% |
Barack H. Obama II | 2009–2016 | 12.43% | Dwight D. Eisenhower | 1953–1960 | 11.44% |
Dwight D. Eisenhower | 1953–1960 | 12.09% | Ronald W. Reagan | 1981–1988 | 11.41% |
John F. Kennedy/ Lyndon B. Johnson | 1961–1964 | 10.80% | Barack H. Obama II | 2009–2016 | 10.98% |
Ronald W. Reagan | 1981–1988 | 9.89% | John F. Kennedy/ Lyndon B. Johnson | 1961–1964 | 9.87% |
James (Jimmy) E. Carter Jr. | 1977–1980 | 6.91% | Richard M. Nixon/ Gerald R. Ford Jr. | 1973–1976 | 3.01% |
Lyndon B. Johnson | 1965–1968 | 5.93% | Lyndon B. Johnson | 1965–1968 | 2.85% |
Richard M. Nixon | 1969–1972 | 3.79% | Richard M. Nixon | 1969–1972 | 2.58% |
Richard M. Nixon/ Gerald R. Ford Jr. | 1973–1976 | 0.90% | James (Jimmy) E. Carter Jr. | 1977–1980 | -0.33% |
George W. Bush | 2001–2008 | -2.42% | George W. Bush | 2001–2008 | -0.74% |
Source: Prepared by Gary A. Lombardo, Ph.D. |
Although presidents of both political parties invariably take credit for an appreciating stock market and blame bear markets on their opponents, there does not exist a universally agreed causality running from the president to stock performance. The basic assumption is that a Democratic presidency or a Republican presidency is not material when considering stock market performance. Thus, the null hypothesis is that stock market performance would be the same under either a Democratic or Republican presidency. Table 18 presents ANOVA for differences in S&P 500 performance under Democrats versus Republicans and finds no significant difference.
Table 18
ANOVA Dem v Rep % S&P 500
Δ |
| Treatments | | |
| Dem | Rep | Total | |
N | 34 | 40 | 74 | |
∑X | 3.8867 | 2.8493 | 6.736 | |
Mean | 0.1143 | 0.0712 | 0.091 | |
∑X2 | 1.0728 | 1.5417 | 2.6145 | |
Standard Deviation | 0.138 | 0.1853 | 0.1656 | |
Source of variation | SS | df | MS | |
Between-treatments | 0.0341 | 1 | 0.0341 | F = 1.24847 |
Within-treatments | 1.9672 | 72 | 0.0273 | |
Total | 2.0013 | 73 | | |
Note: The F-ratio is 1.24847. The p-value is .267559. The result is not significant at p < .05, indicating that S&P 500 returns are not significantly higher under either Republican or Democratic presidents. |
Table 19 presents ANOVA for differences in DJIA returns under Republican versus Democratic presidents, also finding no significant difference.
Table 19
Δ |
| Treatments | | |
| Dem | Rep | Total | |
N | 34 | 40 | 74 | |
∑X | 3.3408 | 2.9533 | 6.2941 | |
Mean | 0.0983 | 0.0738 | 0.085 | |
∑X2 | 0.8377 | 1.452 | 2.2897 | |
Standard Deviation | 0.1243 | 0.1779 | 0.155 | |
Source of variation | SS | df | MS | |
Between-treatments | 0.011 | 1 | 0.011 | F = 0.45286 |
Within-treatments | 1.7434 | 72 | 0.0242 | |
Total | 1.7544 | 73 | | |
Note: The F-ratio is 0.45286. The p-value is .503135. The result is not significant at p < .05, indicating that DJIA returns are not significantly higher under either Republican or Democratic presidents. |
Though not statistically different, the difference between the 7% average return under Republican presidents and 11% under Democrats is quite dramatic, being best understood by comparing their impact on retirement savings. Consider an investor who saves $12,000 annually starting at age 35, doubling their contributions at age 50. A compounded 7% return provides $1,559,533 at age 65, but an 11% return provides over twice as much, $3,133,237. This makes it as curious that Republicans are misperceived as being pro-business and pro-investor as Democrats’ persistent fixation on income inequality—which they have contributed more to aggravate in practice.