When gasoline costs four dollars a gallon, it makes it tough if you're a single mom to get to your job each day in the used car you drive. You want something to change. If you're a flight attendant or baggage handler and you're asked to take a pay cut to keep your job, you want something to change. If you're a young couple losing your house, your credit rating, and your American dream, you want something to change.
—Mike Huckabee, address to Republican National Convention, 2008.09.03
O.K. Take Huck's implicit advice: vote your pocketbook. Historical economic analysis by Professor Larry Bartels of Princeton finds that over the last seven decades, all Americans, rich and poor, have enjoyed better income growth with Dems in the White House. Lower income families (like those Huckabee spoke of) see faster income growth than wealthy families under Democratic administrations, but everyone, even the rich folks the Dems supposedly tax to death, gets richer faster than they do under GOP presidents (see chart).In research from 2004 [PDF alert!], Bartels finds this pattern holds for pre-tax and post-tax income. He also finds unemployment is generally lower and GDP growth generally higher under Dem presidents.
Little things like growing employment and GDP generally benefit the little guy more than the fat cats. What about the stock market? If the Dems are better for Main Street, the GOP must do better for Wall Street, right?
USA Today reporter Matt Krantz did a little almanac searching* in 2005 and found that over the 20th century, under Republican presidents, the Dow increased 6.9% annually. Not bad! But under 20th-century Democratic presidents, the Dow's annual increase was 13.3%.
Now these historical figures don't address the specifics of the economic plans of Obama or McCain. But then neither have this week's speeches at the Republican National Convention.
Huckabee, Giuliani, Romney et al. have been rolling in the old Republican rhetoric that used to persuade my wife and me... before we started looking at reality. The Republicans claim they know better how to produce economic growth, but history says that if you want to vote your pocketbook—or your stock portfolio—you'll vote Dem.
*2008.09.11: Oops! I realized I left this link out in the original post. My apologies!
Marxist...probably not.
ReplyDeleteBumper sticker on car in Minnesota: "Jesus Loves You" In small letters below: "Everyone else thinks your an ^%&hole"
It pretty much sums up what people think of me.
OK, Clinton was president, but Reps controlled Congress, didn't they? Maybe they should be getting the credit instead of him!
ReplyDeleteAnd you can spin it anyway you want - both sides do. I vote for the philosophy I believe in, and it definitely ain't Obama's! (Yeah, I know, should have used isn't, but ain't fit better!!)
How often had those Republican Presidencies had Republican House and Senate too?
ReplyDeleteAsk the people in the 10 most poverty stricken cities how voting Democrat is working for them.
ReplyDeletehttp://www.cnn.com/2008/POLITICS/08/20/beck.cities/index.html
Predominantly voting Democrat for decades (and even centuries) and the top two cities have 1/3 of their population below the poverty line.
Another angle that is entirely missing from this analysis is the economic time lag on fiscal policy. Take the so-called "Reaganomics" of the 1980's: they weren't designed to work overnight, but over time and hence some of the successes of the 1990's can be attributed to exactly those policies. Moreover, if you want to examine how a PRESIDENT affects the economy, look at the policies they propose and how congress reacts. Clinton, for example, began his presidency pushing for fairly liberal spending programs, especially socialized medicine, but was continually struck down by that Republican congress mentioned above.
ReplyDeleteOne more thing to consider, and probably equally as important is Monetary policy and what type of Federal Reserve chairman we have/who put him in place. It seems that many politicians and pundits don't understand monetary policy and so decide to leave it to those that do - e.g. not make a change, or just not comment on it. That probably works in their favor, but a truly robust discussion of voting for one's pocketbook should include a candidate's stance on monetary policy, and his/her plans for the Federal Reserve...
Vote your pocketbook really does mean vote Republican if you are not either ridiculously impoverished, or lavishly wealthy. Those that do understand it takes time for the economy to adjust to changes made at the congressional-executive level (most estimates to have 4-6 years for full integration). A final thought: what type of candidates are you looking at for your comparison - that is, do they actually adhere to their party's line on taxing and spending, or do they pursue more moderate policies, as many Democrats have done in their second terms...
Actually, Anon, Bartels (as well as Blinder, who reports on his book in NYT) acknowledges those factors, acknolwedges that the President should have limited influence compared to other factors, yet still finds the historical fact that income growth and income equality improve under Dem Presidents more than under GOP Presidents.
ReplyDeleteAnd lag? How long is that lag? A year? Any lag that benefited Truman would have come from... fellow Dem FDR.... unless you'd like to posit that Truman-era econ numbers resulted from Hoover-era policy. Any lag under GHW Bush would have come from Reagan. The lag is a wash: the economy does better under Dem Presidents. Period.
But you're welcome to bring numbers to the contrary....
Speaking of numbers, try out ObamaTaxCut.com to find out how much he might help your family post-tax income grow (and commenters, feel free to cut loose with fact-checking on the source!).
ReplyDeleteSo if the rich have the majority of the money. How will making things cost more (tax included) or a higher income tax (put more away for April 15th) make the rich give more of it up?
ReplyDeleteThey are rich because they know how to plan ahead!
I've read Obama's tax plan in some detail from a variety of sources, and I can't find anything about it that's bad. In fact it looks like an improvement over what we have now.
ReplyDeleteI don't like tax hikes, but with the hole we've dug ourselves into in the last seven years, I see no other way out. Obama's plan seems to place the burden on those who can afford to pay.
I hope and pray that enough people will want to read my stuff (translation: buy my books!) so that I may become one of those high-income, highly taxed people!
My main fear about Obama comes from my upbringing during the Vietnam era, when a Democrat presided over much of a wasting war, a disastrous draft, and a tax code that would make Obama's proposed system look like a rich people's haven.
But my fears about Obama, whether reality-based or imaginary, pale in comparison to my concerns that people will buy into the notion that his plan would throw the country into a sustained depression. That notion, I am embarrassed to say, is being tossed about by some of my Republican colleagues.
We're electing a President, not an Emperor. The man who wins the White House will have a lot of power, but he won't be another Louis XIV. It's the Legislature that will mold our tax and economic policies in the coming years. The President will either sign the bills or veto them.
I enjoy your comments Stan, but rarely buy books. You hit it with "this thing is getting weirder and weirder" which has been stuck in my head. Nothing seems rational right now.
ReplyDeleteHey John,
ReplyDeleteCome to think of it now, I don't buy books either. I go to the library! It's walking distance, too!
OK, I think there's a problem with this obamataxcut.com site. I plugged in a relative, single, one child, gross income $25,000, and she would get back about $500 with Obama and pay $200+ with McCain. I don't believe it. She already pays nothing and gets earned income tax credit back. So with Obama she will get back even more, which I'm sure she will like. She won't pay anything with McCain either.
ReplyDeleteAnd if you count in the other tax increases Obama will put in like higher gas tax, no Bush tax cuts, higher capital gains, etc, we who pay will pay more and those who pay nothing will get back more.
And I fully agree with the lag time in policies and results between administrations.
Nice that you fully agree on lag time, Anon... now could you submit some evidence to support that agreement? Or perhaps you are an authority yourself, Alan Greenspan?
ReplyDeleteThe lag time theory is appealing, and in some cases it seems to reflect events, but I think it's way too simple. And it can cut both ways.
ReplyDeleteOne could apply this theory to the Hoover and Roosevelt eras, and conclude that the policies of Hoover gave rise to the difficulties endured under Roosevelt in his early years as President. Roosevelt eventually presided over the end of that disaster, and relative prosperity continued for some time afterward.
Last night (Friday, September 5), Dick Morris said on Fox News (my "unbiased" source) that Obama would "raise taxes on everybody" and that this action would cause a "depression."
ReplyDeleteFrankly, this sort of talk ticks me off. It could become a self-fulfilling prophecy, perhaps even swaying the public mood so an Obama victory would itself cause an instant economic downturn fueled by fear.
When I go to the "Obama tax cut" site, sure enough, it tells me I'll get a tax cut. I'm not rich, but I'm not poor, either.
Somebody is giving us what my mother used to call a "wrong story."
When I strip the last part of the URL off of the "Obama tax cut" site, getting only alchemytoday.com, I come to a site that does not instill a great deal of confidence in me.
I have seen other sites with tables outlining just how much more everybody would pay under Obama as compared to what they pay now.
When I read Obama's notes on his Web site and look at his voting record in Congress (yes, he does vote "yes" and "no" a lot of the time), his plans seem fair to me.
Now I see that, like Joe Biden, I have managed to put a little data into a lot of words.
Question:
Will a worker earning the national average salary pay more tax under Obama, or less, or the same as now?
Comment:
Given the fact that I have seen sources that directly buck each other on this issue and both claim to be fact, I'm inclined to reject them all.
Request:
Somebody please tell me the truth and give me specific references so I can verify it, at least beyond a reasonable doubt.
Mahalo!
[Anon 9/9: If you were really sorry, you'd have deleted the insult and corrected the mistake. With lies like that, you're a perfect fit for the GOP. ;-)]
ReplyDeleteBartel seems more concerned over income inequality than in divulging any meaningful information not targeted for partisan attacks. The paper doesn't show any of the data broken down over each administration, choosing instead to just lump them together under (R) or (D) as well as disregarding the role of Congress and the prevailing conditions in the country. He mentions other factors in passing but then dismisses them since he finds the partisan correlation so strong...which is ridiculous.
ReplyDeletePhae, Bartel doesn't say anything ridiculous. He doesn't say anything that isn't true. He just offers a simple fact, backed with statistical data: whatever else may be going on in the country, income growth and income equality (along with, as Krantz finds, the stock market) improve more when Democrats are in the White House.
ReplyDeleteCould there be other causes? Sure. Maybe Democratic Presidents motivate Republican hacks to write more puff books and generate more economic activity. ;-) Maybe Democratic Presidents are just lucky. Maybe...
...maybe Democratic Presidents do something right. Let's all keep reading; maybe we'll find out!
But the point remains: If you're voting your pocketbook, you look at the historical record, and you see Dem administrations coinciding with better economic conditions for everyone, rich and poor. As Bartel will acknowledge, past performance is no guarantee of future returns, but Bartel offers 60 years of data (and Krantz offers 100 years) that say Obama's the better economic bet.