There is very little that can make me go non-linear faster than when someone attributes economic growth to a politician, e.g. Reagan's economy or Clinton's economy. So this post from Kevin Drum on the correlation between economic growth and the flavor of president in the Oval Office is just the kind of thing to make me lose it. And not because I really care whether Team Coke or Team Pepsi looks better.
Larry Bartels says that Democratic presidents produce higher economic
growth than Republican presidents, and that the differences in average
growth rates for middle-class and poor families (but not affluent
families, apparently, who do well under both parties) are statistically
significant by conventional social-scientific standards.
OK, I have seen the analysis done different ways and accept the statistical conclusion. You used to be able to get a really tight correlation between Washington Redskin football team performance and presidential election outcomes (via Snopes):
Sometimes one natural phenomenon supposedly
forecasts another, as in the belief that a groundhog's
seeing his shadow on
February 2portends another six weeks of
winter. In other instances the linkage is between affairs of mankind, as in the
superstition that the winner of football's
Superaugurs that year's stock market performance (or vice-versa).
A recent item of this ilk maintains that the results of the last game
played at home by the NFL's Washington Redskins (a football team based in
the national capital, Washington, D.C.) before the
U.S.elections has accurately foretold the winner of the last
fifteen of those political contests, going back to 1944. If the Redskins win
their last home game before the election, the party that occupies the White
House continues to hold it; if the Redskins lose that last home game, the
challenging party's candidate unseats the incumbent president. While we don't
presume there is anything more than a random correlation between these factors,
it is the case that the pattern held true even longer than claimed, stretching
back over seventeen presidential elections since 1936
What gets me is not the existence of a correlation, but the explanation:
In recent decades taxes and transfers have probably been more
important. Social spending. Business regulation or lack thereof. And
don't forget the minimum wage. Over the past 60 years, the real value
of the minimum wage has increased by 16 cents per year under Democratic
presidents and declined by 6 cents per year under Republican
presidents; that's a 3% difference in average income growth for minimum
wage workers, with ramifications for many more workers higher up the
wage scale. So, while I don't pretend to understand all the ways in
which presidents' policy choices shape the income distribution, I see
little reason to doubt that the effects are real and substantial.
I have three thoughts, of which the third is what really gets me:
- It is funny that no one considers that this correlation may work in reverse. Everyone assumes government drives short-term economic performance. What if, to some extent, short-term economic performance drives changes in government? If one assumes that, even without the public spirited and Herculean efforts of our presidents, economies are naturally cyclical, then why try to explain cycles on politics when we know cycles are going to exist anyway. Why wouldn't a perfectly valid alternate explanation be that one political party tends to be elected if the economy is in one part of the cycle and the other gets elected if the economy is in another place?
- The political brand names "Republican" and "Democrat" shift in meaning over time vis a vis economic policy recommendations, and individual presidents can diverge quite a ways from their party center line. One can easily argue that Nixon was the most interventionist and economically ignorant president (think: wage and price controls), despite the "Republican" brand name. John Kennedy was more laissez faire than most Republicans are today. Regulation, as measured by pages added to Federal Register, increased at a far faster pace under George Bush (I) than Bill Clinton. Bill Clinton passed free market legislation, including NAFTA, that John McCain shys away from today, while George Bush passed an expansion of Medicare that Bill Clinton did not consider. Oh, and when we discuss regulation and such, Congress sortof matter too.
- The author's argument boils down to "the more governors and useless loads we add to an engine, the more strongly the engine will run." It is just absurd. None of these guys have the first clue what it takes to run a business day to day, nor how much of a business owner's time and effort is aimed not at service customers better, and not at being more productive, and not at making employees happier or better trainined, but at responding to the latest mass of government regulation, paperwork, liscensing, taxes, and other total crap. Here is just one example I wrote up about what sits on my desk.
To this last point, take just two things on my desk this morning. The first is a pile of tax returns and some licensing paperwork. Last year, our company's total tax bill was not that large. But the problem is that the government takes the taxes in so many bites, and every bite costs time on our part learning the process and filling out paperwork. For example, if I take all the taxes and licensing fees we pay to federal, local, and state governments, and multiply times the number of months or quarters each requires a report, I get a number of over 400. Four hundred individual bites, each with its own paperwork and overhead.
The other problem sitting on my desk is a snack bar I inherited on a lease in California at Lake Piru. The snack bar is a dump. It is designed wrong, it is set up to cook the wrong kinds of foods, and uses space in the building very inefficiently. I want to lay the whole thing out differently, as a win-win for everyone. We could sell more with fewer workers. The customers would get more selection, including much healthier choices. The operation would be safer, because we would eliminate most of the heavy cooking (e.g. deep fat fryers). And it would be cleaner, with less wastewater and cleaner wastewater because there would be less grease and oil.
Unfortunately, it is very clear that Ventura County, California is not going to allow me to make these changes, at least at any cost I can afford. First, apparently I need to build a new wastewater treatment plant for the snack bar! But I am reducing the waste water load, I argue. Does not matter. New code requires a plant. So because of this environmental code, I am pushed to continue the current operation which is environmentally worse than my proposed alternative. We have the exact same problem on fire suppression. But I am removing the ovens and most of the cooking equipment! It's safer! Doesn't matter, if I make any change at all, I have to install a new fire suppression system. And on and on. this is the true face of government regulation. We face this kind of thing ten times a day.
Anyway, I could go on and on about this stuff, but that is what the blog is about, so I will refer you to my past (and future) posts.