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Recently, the Joint Economic Committee Minority released a report alleging that economic performance is generally better during Democratic presidential terms than during Republican presidential terms.  While such comparisons are sometimes used by politicos and pundits as a barometer for policy success, it is important to recognize that economic performance depends on a multitude of factors, some of which include changing global conditions, new technologies, and the rise of disruptive business models.  Sometimes our economy achieves gains despite misguided federal policy. During the current Obama Recovery, our economy is growing—albeit at a very anemic pace—notwithstanding a deluge of excessive regulations, new taxes, and alarming levels of debt.

Government does not, at least on its own, create certain economic conditions aspired to by policymakers.  Yet sound policies can play an important role in setting the stage for private-sector-driven economic growth.  We know that pro-growth tax and regulatory measures, for example, can help the economy flourish. When evaluating policies in relation to economic performance, it is important to consider the role of Congress and its Constitutional power of the purse. Even when considering the Obama Administration’s regulatory overreach during the last seven years, Congress has a pivotal role to play in the formation of economic policy.

In this report, we briefly examine differences in the performance of the economy and debt levels under different party control. To gauge the results, we compared average annual growth in private-sector employment, average annual GDP growth, and the average percent increase or decrease in the debt-to-GDP ratio. We examined data from the most recent six Republican-controlled and six Democratic-controlled Congresses, a time period which also included three Congresses during which control of Congress was split between parties. The timeframe chosen provides an equal number of Congresses during which each party had control. The last Republican-controlled Congress prior to the 103rd Congress was the 83rd Congress, which convened several years prior to the statehood of Hawaii and Alaska.

The data shows that real GDP increased by an average of 3.48% annually when Congress was controlled by Republicans, compared to 2.06% when both chambers were controlled by Democrats. Comparatively, real GDP grew almost 70% faster when Republicans were in control of the legislature compared to their Democrat colleagues. Congresses with split control actually underperformed both parties, with an average real GDP growth rate of 1.75% that is barely half of the growth rates seen during Republican Congresses.

Additionally, the data shows that private-sector employment tended to increase regardless of partisan control. However, private-sector employment increased by an average of 2.03% annually during Republican Congresses, compared to an average of only 0.63% during Democratic Congresses. Republican Congresses thus outperformed Democratic Congresses by an average of more than three times with regards to job creation. Congresses in which the Republicans and Democrats split control of Congress resulted in an average employment growth rate of 0.82%.

 

 

Finally, an examination of the publicly-held debt-to-GDP ratio showed that the national debt grew much more quickly relative to GDP during Democratic Congresses, with debt as a percentage of GDP increasing by an average of 6.78% annually during Democratic Congresses. Conversely, the debt as a percentage of GDP actually tended to decline during years when Republicans controlled both houses of Congress, with an average of -2.25%. Debt as a percentage of GDP grew at an average annual rate of 3.03% during split Congresses.
As discussed above, government policies cannot create economic conditions on their own, but can merely assist the private sector in achieving those desired conditions. With that caveat in mind, however, the raw difference in economic performance between modern Republican and Democratic Congresses is noteworthy. From a policy standpoint, these results make the case for Republican-led, pro-growth policies such as corporate tax reform, reductions in barriers to market entry and economic mobility, and encouraging innovation over tax-and-spend policies that prevent achievement of greater economic potential.