The GOP’s capture of the Senate will be good for economic growth, if history is any guide.
A Democratic president with a Republican-controlled House and Senate is a combination with a far better track record for economic growth in the postwar period than a split Congress, according to University of Georgia economist Jeffrey Dorfman.
It’s a well-established fact that Democratic presidents have enjoyed faster growth than Republicans. Dorfman found that the economy grew fastest when Democrats also had control of both chambers, but that growth was next strongest when the GOP was in charge of both. And no period has had faster growth since the 1970s than the years in which Bill Clinton was in the White House and Republicans led by Newt Gingrich held the House and Senate.
It’s a historical comparison that bodes well for Obama, Dorfman told the Washington Examiner, if President Obama embraces the moderate path that Clinton did.
“If President Obama follows Bill Clinton’s lead — triangulation, compromise with Republicans” on areas such as tax reform and fiscal policy, Dorfman said, “if he does those things, it’s good.”
“I think there’s a pretty decent chance that he doesn’t decide to compromise with them and we still get mostly the gridlock we’ve had,” Dorfman added, but nevertheless the potential is there if Obama wants it. “It isn’t even hard,” he said. “If the government just doesn’t screw things up, we get economic growth.”
Fast economic growth has eluded Obama throughout his first six years in office, even though all but five months of his tenure have taken place during an official economic recovery. He and his advisers have typically blamed the weakness of the recovery on the fact that he came to office after a severe financial crisis, citing evidence that financial crises lead to deeper recessions and slower recoveries.
That makes him the exception rather than the rule among Democratic presidents.
From 1947 to 2013, inflation-adjusted gross domestic product grew by an average of 4.35 percent annually under Democratic presidents versus just 2.54 percent under Republicans, according to the Princeton economists Alan Blinder and Mark Watson. That amounts to a nearly 50 percent difference in total growth over a four-year presidential term.
In a 2013 study probing the cause of the gap between Republican and Democratic presidents’ records, Blinder and Watson ruled out a role for Congress. Instead, they found, it had mostly to do with factors beyond the president’s control, namely technological shocks, oil prices and consumer expectations.
Of those factors, Obama and Boehner cannot count on a tech bubble like the one that drove the economy and the stock markets during the late 1990s, inflating the accomplishments of Clinton and Gingrich.
Oil prices, on the other hand, will likely help the U.S. economy during the 114th Congress. The price of oil has dropped more than a quarter since the summer to near $80 a barrel.
Falling oil prices are less helpful for the U.S. economy than they have been in past decades because of the growth in domestic oil production. But economists expect the lower prices to boost growth, with the savings to consumers at the gas pump outweighing the revenue loss for producers.
That boost to growth would be a welcome development. Currently the Federal Reserve sees the economy growing only at 2.6-3 percent over the final two years of Obama’s presidency, well below the average for Democratic presidents.
