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The claim: 'Every GOP administration since Reagan has overseen a recession while every Democratic administration since then has overseen a strong recovery and economic boom.'
The economic collapse during the coronavirus pandemic has raised the question of recessions and which political party fares better.
The organization Occupy Democrats asked in a May 17 post on Facebook: "How is that every Republican administration from Reagan onward has overseen a recession and every Democratic administration has overseen a strong recovery and economic boom?"
Is it true?
What is a recession?
A recession is generally defined as two consecutive quarters of declining GDP, or gross domestic product, a monetary measure of the market value of all the final goods and services produced during a specific time period.
The definition originated in a New York Times article in 1974 by Julius Shiskin, a professor of economics and statistics at Rutgers University who also served as head economist of the War Production Board from 1942-45.
His article included a number of other economic elements that would contribute to a recession, such as a decline in industrial production over a six-month period and a 1.5% decline in nonagricultural employment. Those have largely fallen away over the years, leaving the two down quarters as the definition.
The National Bureau of Economic Research (NBER), which describes itself as "a private, nonprofit, nonpartisan organization dedicated to conducting economic research and to disseminating research findings among academics, public policy makers, and business professionals," uses other criteria.
It defines a recession as "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales."
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Recessions and the White House
The statement by Occupy Democrats runs from the Ronald Reagan presidency, which began in January 1981, to the present.
But by using the phrase "has overseen" in connection with a recession, the statement is less than precise as to whether it refers to a recession that began during a president's term or whether he has had to deal with a recession in his time in office.
Likewise, applying the phrase "has overseen" to a strong recovery by the Democrats leaves it unclear as to whether the statement means a president started the recovery or inherited an ongoing recovery, as President Donald Trump did from President Barack Obama.
The interpretation of the phrase "has overseen" complicates the process of fact-checking it. Obama inherited a recession from Bush II that began in December 2007 and ended in June 2009, according to NBER, the longest economic downturn since World War II.
Under that Reagan-to-Trump timeline, the Republican presidencies had four recessions start in their terms: one each under Reagan and George H. W. Bush, and two under George W. Bush. By contrast, Democrats Bill Clinton and Barack Obama had zero.
With the economic downturn created by the coronavirus pandemic, a recession is likely to be declared after the latest GDP data is released, sometime in July. We may be in one now, but it has not been deemed official.
Sam Stovall, chief investment strategist for independent investment research firm CFRA, goes further. Digging through the historical record, he tells USA TODAY that every Republican president since Chester A. Arthur (1881-85) had a recession during his administration.
Regarding the claim of strong economic performance by Democratic presidents since Reagan: The Clinton administration posted 7.5% GDP growth in the second quarter of 2000 and averaged 3.7% over eight years, according to data from the St. Louis Federal Reserve.
Of the post-World War II presidents, only Truman, at 4.8%, Kennedy at 5.2% and Johnson at 5.1% scored higher average growth rates. By contrast, Reagan averaged 3.5%, Carter 3.3%, Nixon 3.1%, Bush I and Ford 2.2% and Bush II 1.65%, according to The Washington Post.
The Obama administration posted a modest 2% growth over eight years, after inheriting the worst economic downturn since the Great Depression from the George W. Bush years, with the U.S. losing nearly 800,000 jobs a month.
During Obama's two terms, the economy added jobs for 75 straight months and ended with the highest level of household income ever recorded, according to Factcheck.org.
But was the Obama administration driving the growth or merely overseeing it? James Pethokoukis, economic analyst and columnist for the American Enterprise Institute, argues that the steepest drops in GDP ended before Obama took office and before a new $831 billion stimulus package took effect. The headline on his analysis: "Obama didn’t end the Great Recession that Bush didn’t cause."
Economies under GOP presidents
Real GDP growth, a measure of economic activity in the U.S., averaged 3.33% during the 64 years and 16 presidential terms going back to the mid-1940s, according to a 2013 research paper by professors of economics Alan Blinder and Mark Watson at Princeton University. With a Republican in the White House, though, the economy's growth slowed to 2.54%, the economists found. With a Democrat in office, growth jumped to 4.35% on average.
A variety of other economic indicators, such as per capita GDP, stock market returns, real wages and the change in the unemployment rate, are also more robust with a Democratic president, the economists found. Unemployment fell by 0.8 percentage points with a Democratic president on average, while it rose 1.1 percentage points with a Republican, according to Blinder and Watson.
"The U.S. economy has performed better when the president of the United States is a Democrat rather than a Republican, almost regardless of how one measures performance," according to the report titled "Presidents and the Economy: A Forensic Investigation."
Academics and market historians are trying to figure out why the economy tends to perform less robustly with a Republican president. Research offers a few suggestions, including:
Random "good luck." Democrats have had the fortune of being in office when favorable random shocks go their way during their terms, Blinder and Watson found. Big drops in oil prices, positive boosts in productivity and also optimistic consumer outlooks tend to occur during Democratic administrations, they said. None of these factors is tied directly to the actions of the president, the professors found. These three factors explain upwards of 62% of the better economic performance.
Lag times for policies to kick in. Evidence pointing to better economic growth under Democrats is an illusion created by the timing of when presidents enter office, says Timothy Kane at the Hoover Institution think tank at Stanford University. "The main reason it’s nearly impossible to measure presidential economic performance is the long lag between policy and effect," he says.
The result: "No statistically significant advantage for either party in the White House."
Presidents inherit problems that were created by policy decisions before they were elected. Reagan, Bush and Obama had to deal with existing recessions after they were inaugurated in 1981, 2001 and 2009, respectively, he says.
The business cycle. The economy follows a natural progression of expansion, peaking and contraction, which is more powerful than the president, Stovall says. "I think the business cycle trumps the presidential cycle, and Fed policy is most important of all," he says.
Leading indicators like housing starts, consumer confidence and the Conference Board's Leading Economic Index don't signal a looming recession now.
Understanding why the economy does what it does with different ideologies in the White House remains a mystery, Kane says. "The question of presidential economic performance gets increasingly complicated the more we study it," he says.
Stovall cautions that drawing hard and fast political conclusions from economic data is not simple.
“Looking at stock market performances through a political lens is a perfect example of using data to tell whichever story you want," he tells USA TODAY. "Yes, the S&P 500 has risen an average of 11.1% during Democratic administrations since WWII versus 6.9% for Republicans. However, the market did better under a Republican-controlled House of Representatives (the controller of the country’s purse strings) than it did under the Democrats.”
As Neil Irwin, senior economics correspondent for the New York Times wrote on the eve of Trump's inauguration, the reality is that "presidents have far less control over the economy than you might imagine."
"Presidential economic records are highly dependent on the dumb luck of where the nation is in the economic cycle," he wrote. "And the White House has no control over the demographic and technological forces that influence the economy. Even in areas where the president really does have power to shape the economy — appointing Federal Reserve governors, steering fiscal and regulatory policy, responding to crises and external shocks — the relationship between presidential action and economic outcome is often uncertain and hard to prove.”
Our rating: True
While it is difficult to assess blame for the root causes, at least one recession did begin under every Republican president since Ronald Reagan compared with zero under Democratic presidents over the same period. As a "strong recovery," the Clinton administration clearly qualifies, landing in the fourth spot for growth since World War II. The Obama administration recovery is a jump ball, posting a weaker 2% average GDP, but scoring 75 months of positive job growth.
A clear ruling is difficult given the language of the original statement in saying "has overseen." If that refers to a recession starting in a president's term, then it is accurate, if it refers to simply having to deal with a recession, then it is not, because Obama had to deal with a recession — albeit inherited — during his term.
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This article originally appeared on USA TODAY: Fact check: Do GOP presidents oversee recessions, Dems recoveries?