Democrats and Republicans have widely different views on the economy. But once in power, candidates' actions don't always coincide with their party's views. That makes it difficult to determine which party is better for the economy.

Key Takeaways Many factors influence how much impact Republican or Democratic presidents have on economic performance.

These factors include recessions, wars, and prior presidents' policies.

Some research shows that economic growth is better under Democrats.

Overview

Democrats gear their economic policies to benefit low-income and middle-income families. They believe that reducing income inequality is the best way to foster economic growth. This belief is based on the idea that low-income families tend to spend extra money on necessities, which directly increases demand. Democrats also support a Keynesian economic theory, which says that the government should spend its way out of a recession.

President Franklin D. Roosevelt first outlined the Economic Bill of Rights in his 1944 State of the Union address.﻿﻿ It included a realistic tax law, a cost of food law, and a continuation of the law to renegotiate war contracts. President Harry Truman's 1949 Fair Deal proposed specific legislation to support this expanded vision of the American Dream.﻿﻿ In 2010, the Democrats expanded the dream to include health care with the Affordable Care Act.﻿﻿

Republicans advocate supply-side economics that primarily benefits businesses and investors.

This theory states that tax cuts on businesses allow them to hire more workers, in turn increasing demand and growth. In theory, the increased revenue from a stronger economy offsets the initial revenue loss over time.

Republicans advocate the right to pursue prosperity without government interference. They argue this is achieved by self-discipline, enterprise, saving, and investing. This business-friendly approach leads most people to believe that Republicans are better for the economy. A closer look reveals that Democrats are, in many respects, actually better.

Job Creation

Republicans say that tax cuts are the best way to create jobs, while Democrats prefer government spending. The economic stimulus act, sponsored by President Barack Obama, used both.﻿﻿ President Bill Clinton created 18.6 million jobs—more than any other president.﻿﻿ The largest job creation—percentage-wise—was under President Roosevelt, who increased jobs by 21.5%. But that was during three terms. If you only count two terms, President Ronald Reagan was the largest percentage-wise. He increased jobs by 16.5%.

Minimum Wage

Democrats argue that the minimum wage should allow a living wage. FDR created the minimum wage to protect workers during the Great Depression. During that time, it was $0.25 an hour, which translates to just under $5.00 in today's economy.﻿﻿

The Democratic Congress raised the minimum wage in 2007. It set a schedule to raise it to $7.25 an hour in 2009, where it is today.

Democrats, including 2020 presidential candidate Joe Biden, support raising the minimum wage to $15 an hour and then indexing it to inflation.

Republicans argue that raising the minimum wage could force small businesses to lay off workers. This belief is partially true. A 2014 Congressional Budget Office report said that raising the minimum wage would take 900,000 families out of poverty. At the same time, it would cost 500,000 workers their jobs.﻿﻿

Taxes

Republicans favor regressive taxation. It assesses a lower rate on businesses, investments, and high-income earners. The following includes several tax initiatives taken by the Republican party:

In 2018, the Tax Cuts and Jobs Act cut the top income tax rate to 37% and lowered the corporate tax rate to 21% ﻿ ﻿

﻿ The Bush tax rebate fought the 2008 recession ﻿ ﻿

﻿ The Economic Growth and Tax Relief Reconciliation Act cut homeowners' taxes in 2001

In 2004, the Jobs and Growth Tax Relief Reconciliation Act cut taxes for businesses ﻿ ﻿

Democrats believe in progressive taxation, demanding higher taxes on investments, big businesses, and high-income families.

Clinton's Omnibus Budget Reconciliation Act raised the top income and corporate tax rates to 36% ﻿ ﻿

﻿ In 2009, the Obama economic stimulus plan cuts taxes to fight the Great Recession ﻿ ﻿

﻿ In 2010, Obamacare raised taxes on high incomes and investments ﻿ ﻿

Immigration

Immigrants have driven two-thirds of U.S. economic growth since 2011. They founded 30% of U.S. firms, including more than 50% of startups valued at over $1 billion.﻿﻿ But many believe that immigrants take jobs from workers who lack college degrees, especially in agriculture and construction. For example, in 2014, immigrants held 43% of agricultural jobs, but only 20% were documented.

Democrats see America as a nation of immigrants.﻿﻿

Democrats want to welcome asylum seekers and refugees.

President Obama created the Deferred Action for Childhood Arrivals program, also known as DACA. The Trump administration has since fought to nullify it.﻿﻿

DACA protected from deportation people who were brought to the United States as children. But Obama also deported more immigrants than any other president. Total deportations under Obama hit a high in 2012 with 409,849 removals, then dropped below 250,000. Trump has deported between 220,000 and 285,000 a year since 2017.﻿﻿

Republican immigration policies seek to protect American workers and industries.

Republican immigration policies seek to protect American workers and industries. Trump's immigration policies follow economic nationalism. For example, he wants to complete the border wall with Mexico.﻿﻿ He has threatened to deport immigrants protected under DACA.﻿﻿ He wants to reduce the number of refugees.﻿﻿

Health Care

Republicans argue against universal health care, calling it socialism. They prefer the current system based on private health insurance. Instead of Medicaid, they would rather give the states block grants to use as they need. Many of these policies are reflected in Trump's plans to change health care.﻿﻿

Democrats believe the federal government should make health care affordable.

Clinton's Hillarycare program would have controlled medical costs, but she couldn't get it passed by a Republican Congress.

The Clintons achieved two other health care reform measures. The Health Insurance Portability and Accountability Act of 1996 allows employees to keep their company-sponsored health insurance plan for 18 months after they've lost their jobs.﻿﻿ The Children's Health Insurance Program provides subsidized health insurance for children in families that earn too much to qualify for Medicaid.﻿﻿

Obama’s 2010 Patient Protection & Affordable Care Act sought to lower the cost of health care. It covers preventive care to prevent patients from using the emergency room as their primary care physician.﻿﻿

Health organizations have criticized Trump in his response to the COVID-19 pandemic.

The Trump administration took too long to make COVID testing available nationally.﻿﻿ The U.S. detected its first person with COVID-19 on January 12, 2020. By March 9, only 8,554 tests were conducted, which was fewer than South Korea was doing each day.

One reason is that the CDC created a new test instead of using tests already developed in other countries. A design flaw rendered 160,000 tests unusable. Initially, the administration enforced stringent approval requirements that prevented private and foreign providers from filling the gap.

The administration also initially downplayed the risk. As a result, Republicans are more likely than Democrats to believe the pandemic is a hoax.

Climate Change

Global warming affects every other economic issue. For example, the World Bank estimates that climate change could send 1.4 million immigrants north by 2050.﻿﻿ Drought, shifting rain patterns, and extreme weather destroys crops and leads to food insecurity.

Democrats support conservation and are taking measures to stop global warming. In 2009, Democrats in Congress proposed a cap-and-trade policy and the American Clean Energy and Security Act.﻿﻿ ﻿﻿ Republicans defeated both measures. In 2011, Obama's Environmental Protection Agency used its powers under the Clean Air Act to limit carbon as a pollutant. In February 2019, a Green New Deal was launched by Congressional Democrats.﻿﻿

Republicans support the development of oil and gas production with federal government subsidies and tax cuts.

Republicans opposed the Kyoto agreement and carbon emissions controls. Many deny that climate change is occurring or that it's caused by burning fossil fuels.﻿﻿ Trump withdrew the United States from the Paris Climate Agreement. Biden promises that, if elected, he will restore the U.S. commitment.

Role of Government

Republicans don't want government interference with a free-market economy, and they advocate for deregulation, which often leads to monopolies. They argue that economic assistance makes people stop working. President Herbert Hoover supported laissez-faire economic policies. He wrongly believed the free market would self-correct during the Great Depression.

Democrats advocate a strong federal government to support welfare and other social programs to help low-income families.

During the Great Depression, FDR rallied Americans to support massive government spending. In his first 100 days in office, he increased the debt by $4 billion to create 16 new agencies and laws.﻿﻿ For example, the Works Progress Administration employed 8.5 million people to build bridges, roads, public buildings, parks, and airports.﻿﻿ FDR was also responsible for the creation of Social Security. President Lyndon B. Johnson created Medicare, Medicaid, and urban renewal initiatives.﻿﻿

Democrats also have shown their support for regulations to protect consumers. For instance, President Woodrow Wilson pushed for the Clayton Antitrust Act to curb the power of trusts and monopolies in the U.S. market.﻿﻿ FDR signed the Glass-Steagall Act, which banned banks from using deposits to buy risky investments.﻿﻿ Clinton, working with Congressional Republicans, repealed Glass-Steagall. Bank reliance on derivatives later caused the 2008 financial crisis.

The Debt

Republicans advocate fiscal responsibility, but they are almost as guilty as Democrats in increasing the debt. Obama increased the debt the most dollar-wise, adding $8.6 trillion.﻿﻿ President George W. Bush was second, adding $5.8 trillion.

FDR increased the debt the most, percentage-wise, by 1,048%, while deploying efforts to fight the Great Depression and World War II.

President Wilson incurred the second-largest, percentage-wise, thanks to World War I.

On the other hand, Clinton created a $63 billion budget surplus with the Omnibus Budget Reconciliation Act of 1993. Every Republican president since Calvin Coolidge has added to the debt.

National Security

Republicans accuse Democrats of being soft on defense, but both parties spend a large budget portion on the military. Wilson started World War I, and FDR began World War II. Truman dropped two nuclear bombs on Japanese civilians and started the Korean War. He also shifted U.S. foreign policy from isolationism to global policeman with help from the Truman Doctrine.﻿﻿

Obama received the Nobel Peace Prize, but his military spending was much more than Bush.﻿﻿ Bush started the wars in Afghanistan and Iraq.

Trade

Democrats want trade agreements to protect American workers but traditionally have supported fair trade more than protectionism. That attitude has shifted in reaction to outsourcing jobs.

President Wilson signed the Underwood-Simmons Act to lower tariffs.﻿﻿

Clinton signed the North American Free Trade Agreement, the world's largest.

Reagan and President George H.W. Bush negotiated NAFTA.﻿﻿ Obama signed four agreements—Colombia, Korea, Panama, and Peru—but these agreements were negotiated by George W. Bush.﻿﻿

Republicans supported trade protectionism until the devastating impact of the Smoot-Hawley Tariff Act.﻿﻿ Hoover signed the act to help the U.S. industry during the Great Depression, but other countries imposed tariffs, sending global trade down 66%.﻿﻿ Republicans supported free trade agreements until Trump returned to protectionism by starting trade wars.

The Party That's Best for the Economy

Many analyses look at which party is best for the economy. A study from the National Bureau of Economic Research found that Democratic presidents since World War II have performed much better than Republicans. On average, Democratic presidents grew the economy 4.4% each year versus 2.5% for Republicans.﻿﻿

A study by Princeton University economists Alan Blinder and Mark Watson found that the economy performs better when the president is a Democrat.

They report that "by many measures, the performance gap is startlingly large." Between Truman and Obama, growth has been 1.8% higher under Democrats than Republicans.﻿﻿

A Hudson Institute study found that the six years with the best growth were evenly split between Republican and Democrat presidents.﻿﻿

Most of these evaluations measure growth during the president's term in office. But no president has control over the growth added during his first year. The budget for that fiscal year was already set by the previous president, so you should compare the gross domestic product at the end of the president's last budget to the end of his predecessor's last budget.

For Obama, that would be the fiscal year from October 1, 2009, to September 30, 2018. That's FY 2010 through FY 2017. During that time, GDP increased from $15.6 trillion to $17.7 trillion or by 13%.﻿﻿ That's 1.6% a year.

The chart below ranks the presidents since 1929 on the average annual increase in GDP.﻿﻿