The exorcism of voodoo economics

September 2, 2008 by lestro

by lestro

Why do Republicans seem to think that they best know how to run the economy when every indicator says otherwise?

The stark contrast between the whiz-bang Clinton years and the dreary Bush years is familiar because it is so recent. But while it is extreme, it is not atypical. Data for the whole period from 1948 to 2007, during which Republicans occupied the White House for 34 years and Democrats for 26, show average annual growth of real gross national product of 1.64 percent per capita under Republican presidents versus 2.78 percent under Democrats. That 1.14-point difference, if maintained for eight years, would yield 9.33 percent more income per person, which is a lot more than almost anyone can expect from a tax cut.

But it’s not just growth. The whole idea of “trickle down” (or as George H.W. Bush famously dubbed it, “voodoo economics”) has been proven a sham both in practice and now on paper:

Professor Bartels unearths a stunning statistical regularity: Over the entire 60-year period, income inequality trended substantially upward under Republican presidents but slightly downward under Democrats, thus accounting for the widening income gaps over all.

Or in more basic terms:

It shows that when Democrats were in the White House, lower-income families experienced slightly faster income growth than higher-income families — which means that incomes were equalizing. In stark contrast, it also shows much faster income growth for the better-off when Republicans were in the White House — thus widening the gap in income.

Anyone who is not a member of the top percentile of filthy rich already knew that in their hearts, but once again it is nice to have statistical proof.

Especially in light of reports such as this:

This Labor Day finds workers in worse shape than they’ve been in years, according to a scorecard released Monday by Rutgers University. In its first national labor scorecard, the Rutgers School of Management and Labor Relations said more than 10 percent of Americans are unemployed, discouraged from seeking work or underemployed. That is a nearly 25-percent increase from one year earlier.

and this:

– The median weekly earnings for American workers have not grown in real terms over the last eight years. – At $6.55, the federal minimum wage is worth 40 cents less per hour, in inflation-adjusted dollars, than it was a decade ago.

So wait, it’s not all in our heads?

But the real question is, what does this mean in the real world? Is this just an exercise for egghead economics professors or are there honest-to-god real world implications of these findings?

The two Great Partisan Divides combine to suggest that, if history is a guide, an Obama victory in November would lead to faster economic growth with less inequality, while a McCain victory would lead to slower economic growth with more inequality.

Ahhh. There it is.