Tag Archives: Clinton

Update: More Economists Oppose Trump

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The number of economists having signed a letter opposing the Republican presidential candidate reached 785 the morning before Election Day.  The list of signatories is still open.

To repeat my earlier post, 19 Nobel Laureates endorsed Hillary Clinton. And when the WSJ surveyed all previous members of the President’s Council of Economic Advisers, spanning eight presidential administrations, none, Republican or Democrat, supported Trump.

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A Radical Solution to the Fundamental Flaws in US Politics: Vote!

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The train of American electoral politics has gone further and further “off the rails” in recent decades.  A number of suspected culprits have been identified as the specific fundamental flaw in the system that needs to be fixed.  Gerrymandering.   Campaign finance.  Economic inequality.  “False balance” in the media.

It is strange that the public debate gives so much attention to these four explanations — and a few others like them. Those diagnoses don’t offer a ready remedy that is in the hands of the people.  There is one remedy that is directly in the hands of the people and that if applied can also fix the other flaws over time.  That is voter turnout.

Only 71 percent of U.S. citizens of voting age have registered to vote, and only 54 percent of eligible voters go to the polls in a presidential election. Many young people are disillusioned with the political system and feel that they have no power to affect political outcomes, being up against the rich and powerful.  So they don’t register or don’t vote. The same is true of members of particular socioeconomic groups.  Hispanics and Asian-Americans have particularly low voter turnout rates [48 and 47% in the 2012 election, respectively, as compared to 64% for whites and 67% for blacks.]

Diagnoses of the fundamental flaw in American politics

One of the most common diagnoses of where American politics has gone wrong is the belief that too much money now goes to people in the upper 1% of wealth and that too much money in turn flows into politics.   Actually, these two factors are distinct.  Plenty of powerful interest groups use donations to get their way on individual issues of particular interest to them, without the concurrence of the upper 1%.  The NRA is one example.

There is a lot of validity to concerns about money in politics.  But it is worth noting that in US politics, money overwhelmingly goes – not into the pockets of corrupt officials – but rather into the advertising and get-out-the-vote drives of election campaigns.  A citizen who stays home rather than vote his preference of the two major candidates thus has the same effect on the outcome as a fat-cat who gives money to the opposing candidate’s campaign.

What is to be done?  We need a more equal distribution of income and a reversal of the Supreme Court’s decision on Citizens United, which opened the floodgates for political contributions by corporations.   But the people can’t enact such policies directly.

This year, as usual, the Democratic candidate favors policies that will promote economic equality alongside growth: a more progressive tax system, higher wages, universal health care insurance, financial regulation, and many more.   With enough support in Congress, a second President Clinton would enact these policies.  As usual, the Republican candidate is on record favoring the opposite positions: tax cuts for the rich, lower wages, abolition of Obamacare, and the dismantling of the Dodd-Frank financial reform bill.  Similarly, the Democrats would like to reverse Citizens United. As usual, the Republicans are opposed.  It is likely that Hillary Clinton would appoint Supreme Court justices who would eventually help overturn the decision. And so on.

Other diagnoses have to do with the observation that so few congressional districts are in play in the general election, with most locked up by one political party or the other, giving incumbents an incentive to go to the extremes, since only the primary contest is a threat.  In that case, the fundamental problem may be gerrymandering, the deliberate drawing of congressional district boundaries to maximize political advantage for one party or the other, rather than according to geographical sense.   Electing more Democrats, at the state level, is an achievable pre-requisite to redistricting reform, more than the other way around.

If those citizens who think that people like them have no effect do exercise the ballot box, they can not only have an effect in this election but change the system for the future.  If, on the other hand, they simply gripe to their friends or write angry blog posts (“the system is rigged”), rather than voting for a major-party candidate, they will indeed have no effect.

Voter turnout in other countries

The problem of low voter turnout does not apply to the US alone.  Consider last June’s vote in the United Kingdom on whether to leave the EU.  Most young folks were unhappy that the referendum came out in favor of Brexit.  Almost 75% of voters aged 18-24 wanted Britain to stay in.  They had come to see themselves as cosmopolitan citizens of Europe to a far greater extent than older voters had.  Suddenly the English Channel has become much wider, and is likely to remain so for the rest of their lives.  Who to blame?   Only a third of that 18-24 age group turned out to vote, as compared to more than 80% of those over 65.  The implication is  that if the voter participation rate among the young had been even fractionally closer to the rate among the old, the outcome would have been in favor of Remain instead of Leave.

It is true that many other countries have figured out how to achieve higher electoral participation.  Voting is mandatory, for example, in Australia and some other countries. The fine for noncompliance is very small.  But Australia achieves 94% voter turnout, compared to an estimated 57% in the 2012 US presidential election. And the US is almost the only country to follow the anachronistic and inconvenient habit of scheduling Election Day on Tuesdays. Most countries vote on the weekend.

One might argue, however, that if any citizen is too lazy or uninformed or self-involved or uninterested in politics to take the trouble to vote, so be it.  Why drag them to the polls?   Perhaps it is just as well if the views of the uninformed or self-involved don’t carry as much weight as others!  I am not going to take a position on this question one way or the other.  Let’s consider only those citizens who are as informed and civic-minded as the rest of us, but are alienated by the system and think that “votes of people like them” don’t make a difference.  There are, by far, enough of these people for their votes in fact to make the difference to the outcome.

Protest votes

By way of illustration, consider those who do go to the polls but feel alienated with America’s two-party system and so choose a protest vote for a third-party or write-in candidate, thus having the same effect on the outcome as if they had not voted at all.  Ralph Nader, the Green Party candidate in the 2000 election, received 2.9 million votes.  If a tiny fraction of them had gone to Al Gore it would have changed the outcome.  The Democratic candidate officially lost Florida by 537 certified votes. Nader received 97,421 votes in Florida [1%].  Thus 1 % of his votes [974] would have made easily the difference. Not all Nader voters would have preferred Gore to Bush; but if one takes into account the evidence (which is that they would have favored him by almost two-to-one over the Republican candidate), the implication is that eliminating the Nader option in Florida would have given Gore a net boost of 17,548, more than 30 times what he needed to win!

Thus Gore would have received not only a majority of the vote among voters, as he did, but also a majority on the Supreme Court as well.  It would have saved us eight years of George W. Bush and everything that flowed from his policies.   What if one is suspicious enough to assume that those in power in Florida would have figured out a way not to count the additional votes in that state?  The Nader vote In New Hampshire alone would also have been enough to give Gore a clear majority in the Electoral College.

Yes, I know, Nader argued that he was building a grass-roots movement for the longer term.  In other words, causing Bush to become president by taking votes away from Gore in 2000 was worth the cost because now the Green Party survives …to elect Donald Trump president in 2016 by taking votes away from Hillary Clinton!  And so on every four years.

Obama said it at the Democratic National Convention in July, when a few delegates booed the mention of Trump’s name: “Don’t boo. Vote!”  It’s trite, but true.  Voting is the solution to what ails America.

[A shorter version appeared at Project Syndicate.  Comments may be posted there or at Econbrowser.]

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Does the Economy Really Do Better Under Democratic Presidents?

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Hillary Clinton has been saying that the US economy does much better when a Democrat is president than when a Republican is.  When the press goes to fact-check the claim, they can be forgiven for having  a presumption that it can’t be 100 per cent true.  After all, if it were completely true, then wouldn’t we all already know it?

Well, there is no other way to say this: The claim is 100 per cent true.

The qualifier is that the president is only one of many influences of what happens to the economy.   Luck of course plays a big role.  Hillary’s speeches don’t include footnotes making this obvious point.  But that doesn’t justify a rating of only “half true” for Clinton’s claim, as some fact-checkers proclaim.  And the surprising reality is that the difference in economic performance between Democratic and Republican presidents is sufficiently systematic that it cannot be statistically attributed to mere chance alone.

The gap in economic performance

She says (e.g., June 5, 2016), “It is a fact that the economy does better when we have a Democrat in the White House.”  What is the evidence for this claim?

A timely and careful statistical study was published in April in the American Economic Review [106(4): 1015-45] by Alan Blinder and Mark Watson of Princeton University:  “Presidents and the US Economy: An Econometric Exploration.”   The starting point, the central fact, is that the rate of growth of GDP has averaged 4.3 percent during Democratic administrations versus 2.5 under Republicans, a remarkable difference of 1.8 percentage points.  This is postwar data, covering 16 complete presidential terms—from Truman through Obama.  If one goes back further, before World War II, to include Hoover and Roosevelt, the difference in growth rates is even stronger.

The results are similar regardless whether one assigns responsibility for the first quarter of a president’s term (or the first few quarters), to him or to his predecessor.

Of course many political actors in Washington influence the course of events.  Blinder and Watson find that the economy does a bit better if the Democrats have appointed the Federal Reserve chairman or if they control the Congress.  But these conditions are not necessary for the central result:  it is the party of the presidency that makes the big difference.

Furthermore, over the 256 quarters in these 16 presidential terms, the US economy was in recession for 1.1 quarters during the average Democratic presidency and 4.6 quarters during the Republican terms, a startlingly big difference.  These gaps in performance are highly significant statistically.  The odds that they are the result of mere chance are 1 in a 100 or less.

The two Princeton economists find superior results by other measures as well, including the change in unemployment during the president’s term and the performance of the stock market.  The unemployment rate fell by 0.8 percentage points under Democrats on average and rose by 1.1 under Republicans, a significant gap of 1.9 percentage points. Perhaps better known than the other economic statistics, returns in the S&P 500 have been higher under Democrats:  8.4% versus 2.7 % for a differential of 5.7% (though this differential is not as significant statistically, because stock market prices are so volatile).  Also the structural budget deficit is smaller under Democratic presidents (1.5% of potential GDP) than Republicans (2.2%). But the authors mainly focus on GDP.

Could it be chance?

One does not need to understand fancy econometrics to understand how unlikely it is that chance alone could have produced such big differences in outcomes.  Economists use sophisticated econometrics when publishing an article in the AER, the top peer-reviewed journal; but sometimes simpler calculations are more effective.  Consider some very simple facts, which anyone can easily check for themselves.  The last four recessions all started while a Republican was in the White House. If the chances of a recessions starting during a Democrat’s term were equal to that of a Republican’s term, the odds of getting that outcome would be (1/2)(1/2)(1/2)(1/2), i.e., one out of 16.  Just like the odds of getting “heads” on four out of four coin-flips.  Not especially likely.

Still, four data points constitute a very small sample.  So let’s go back ten business cycles.  By my count nine of the last ten recessions have started under Republican presidents.   The odds of the Democrats doing that well just by chance are about 1 in a hundred.  (Anyone can easily check the recession dates for themselves, at the site of the NBER Business Cycle Dating Committee.)

An even more startling fact emerges from a review of the last 8 times when an incumbent from one party handed over the White House to a president from the other party.  In four of these transitions, a Democrat was succeeded by a Republican; each time the growth rate went down from one term to the next.  In four of the transitions, a Republican was succeeded by a Democrat; each time the growth rate went up.  No exceptions, as Blinder and Watson point out.  Eight out of eight.  What are the odds of this happening by chance?   The answer is the same as the odds of getting heads on 8 coin tosses in a row:    ½ times itself 8 times, which is 1 out of 256.  I.e., ¼ of 1 percent.  Very unlikely.


Given the strength of these results, it is surprising that Hillary Clinton’s claims have been rated as only “half true” by some media, including the Pulitzer Prize-winning PolitFact. Its source appears to be a particular fact-checker in Arizona.  (I feel a personal stake in setting the record straight, because I am inexplicably quoted as supporting this finding that the claim is only “half-true.”  I had told the Arizona interviewer that the claim of a performance gap was clearly true, even though finding the gap was not the same as proving its cause.)  The “false balance” syndrome strikes again.

The first half of the Blinder-Watson paper reports the aforementioned numbers showing the difference in how the economy has behaved under the two parties. This difference seems incontrovertible.  The second half of the paper tries econometrically to identify causes for the gap.  Here the authors are less successful, because it is inherently a much harder task.  The precise reasons  for the surprisingly big differential are unknown.

They find some evidence of four or five factors that may together explain 56% of the gap between growth rates under the two parties:  oil shocks, productivity growth, defense spending, foreign economic growth, and consumer confidence.  It is impossible to know whether some of these five factors may have been influenced by the policies of US presidents.  We know still less about the channels that might explain the remaining 44% of the gap.  Thus it is impossible to say to what extent specific policies adopted by presidents are responsible for the difference in economic performance.

This is the reason that the fact-checkers give for rating Hillary’s claim as only half true.  But her claim was that the gap in performance exists, not what were the specific causal channels.  The claim that a gap exists is not the same thing as a claim to have identified the policies that contributed to the gap, let alone a claim that they explain the entire gap.

The fact-checkers also make much of a finding by Blinder and Watson that, contrary to widespread assumptions, fiscal and monetary policies are not more “pro-growth” (i.e., expansionary) under Democrats than under Republican presidents, and therefore can’t explain any of the performance differential.  But, in the first place, presidents make lots of policy decisions beyond fiscal and monetary stimulus, including energy, anti-trust, regulation, trade, labor, foreign policy, and much more.   There is no way to test econometrically this myriad of policies.

In the second place, leading Republican politicians claim to believe that easy money and high spending hurt the economy rather than helping it.   At least, they claim to believe that when they are out of office, and especially if the economy is weak, as in the post-2008 environment.  (When they are in office, they tend to find that they rather like spending money, even if the economy doesn’t need it.  Remember, for example, when Vice President Richard Cheney reportedly said “Reagan proved that deficits don’t matter.”   It should not be news that Ronald Reagan and George W. Bush cut taxes and increased spending, whereas Bill Clinton acted to bring the budget deficit down.)

Regardless, let’s be clear about the central finding.  Hillary Clinton’s claim that the economy does better on average when a Democrat is in the White House is true, judging from past history.  And the difference is large enough that it cannot be attributed to pure chance.

[A shorter version of this column appears in Project Syndicate.  Comments can be posted there or at Econbrowser.]

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