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Capitalism and Skepticism

BALTIMORE – As each new day brings word of another Wall Street bailout even more colossal than the last, one question presents itself with ever-increasing force: why does America’s economy perform so badly under Republican presidents?

The facts are hard to dispute; indeed, the historical record is now so stark that diehard Republicans are probably starting to wonder if there is a curse. Over the period for which modern statistics are readily available, Democrats have outperformed Republicans by almost every traditional measure of economic performance (per capita GDP growth, unemployment, inflation, budget deficits).

Democrats have even managed to beat the Republicans on their own turf. Thanks to the profligacy of the current Bush administration (and the prudence of the Clinton administration), average Federal spending as a proportion of GDP under Republican presidents now exceeds that under Democrats during the measured period.

The pattern of Republican deficiency holds up when the span of historical analysis is extended by using stock returns to measure economic performance. On average, since the inception of the Standard and Poor’s composite stock index in 1926, the reward for putting your money in the market has been about 16 percentage points lower per presidential term under Republicans than under Democrats. Republican underperformance remains a stubborn fact even when the Great Depression and World War II are left out of the analysis (in the fond hope that they will prove to have been unique experiences).