In the entire history of official recession dating (beginning in the 1850′s) there is a startling fact:
Every newly-elected Republican President has brought a first-term recession. All of them. “Always and only” as we hear from a popular data-mining pundit.
It is not quite “only” since Democratic Presidents avoided recessions on a 10-2 basis. I am not surprised that there was no first-term recession for Bill Clinton or JFK, but who would have expected a clean record for FDR or Jimmy Carter?
Economic Comparisons by Party
Here is another study that says Democrats win on a balance of economic indicators, 11-2. The authors conclude as follows:
“President Barack Obama does not feature in the rankings, as he has not yet completed a four-year term. But if Obama were evaluated now on all 12 of the indicators, he would fall somewhere in the middle of the pack, Deitrick says. The bottom of the pack overall is populated by Republicans: Presidents Richard Nixon, Gerald Ford, George W. Bush and Herbert Hoover.”
Lessons in Inference
I trust that readers will understand my tongue-in-cheek approach to this subject. It is silly to conclude, based on this evidence, that electing Romney will lead to a recession.
Meanwhile, many people use similar evidence to make bold claims about recessions. Their readers consume the pseudo-scientific claptrap and blindly follow the pundit to a dubious decision.
If you agree with me that the conclusion about Romney is not valid, then maybe you need to reconsider the work of the guy who keeps describing a syndrome involving his Aunt Gertrude. The methodology — using many years of backfitted data — is just the same as you see here.
Causal reasoning in economics involves many variables. Especially when the number of cases is relatively small and the number of variables is large, the causal model can be tricky.
Try this one: When a Republican is elected, it is often the result of Democratic economic failures. This means that the GOP winner is saddled with a bad economy.
See how easy it is to create reasons after the fact? Check out one of my favorite stories from “the old days.” The smarter you are, the easier it is to fool yourself.
If you understand this article, you can win an Olympic all-around medal!
- Separate politics from your investments;
- Ignore bogus pseudo-science;
- Beware of recent trends in both fear and greed;
- Look for stocks with attractive valuations.
Each week I summarize the very best recession forecasts. Since those with the best records are not featured in the financial media, this gives thoughtful readers an advantage. Those scared witless by the recessionistas are selling cyclical names and tech stocks while piling into defensive sectors and dividend stocks.
The comparative valuations are becoming extreme. I favor early-stage cyclicals like Caterpillar, Cummings, and Illinois Tool Works. I like tech stocks including Apple, Oracle, Microsoft, and Marvel.
When I look for “dividend stocks” I am not seeking those with super-high yields, but strong balance sheets and PEG ratios, where I can also sell calls to enhance the yield.
The individual investor can find many good opportunities, but you must start with a good grasp of the business cycle.
This post was originally published at A Dash of Insight and is reproduced here with permission.
4 Responses to “Romney? 100% Chance Of Recession!”
This general effect isn't exactly something nobody noticed before, though;
"what these numbers show almost beyond doubt is that Democrats are better at virtually every economic task that is important to Republicans. … On average, in years when the president is a Democrat, the economy grows faster; inflation is lower; fewer people can't find a job; the federal government spends a smaller share of GDP, whether or not you include defense spending; and the deficit is lower (or—sweet Clinton-years memory—the surplus is higher). The one category that Republicans win is, unsurprisingly, federal taxes as a share of GDP. But it is no trick to lower taxes if you don't lower spending. … a president's economic policy doesn't work overnight. To account for that, Tab 5 goes back and recalculates everything with a one-year lag. …. This changes the result remarkably little" http://www.slate.com/articles/news_and_politics/r…
"Simply put, the United States economy has grown faster, on average, under Democratic presidents than under Republicans. … 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…. 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. … Families at the 20th percentile fared much worse under Republicans than under Democrats (0.43 percent versus 2.64 percent). Eight years of growth at an annual rate of 0.43 percent increases a family’s income by just 3.5 percent, while eight years of growth at 2.64 percent raises it by 23.2 percent." http://www.nytimes.com/2008/08/31/business/31view…
"Under Democratic presidents, every income class did well but the poorest did best. The bottom 20% had average pretax income growth of 2.63% per year while the top 5% showed pretax income growth of 2.11% per year. Republicans were polar opposites. Not only was their overall performance worse than Democrats, but it was wildly tilted toward the well off. The bottom 20% saw pretax income growth of only .6% per year while the top 5% enjoyed pretax income growth of 2.09% per year. (What's more, the trendline is pretty clear: if the chart were extended to show the really rich — the top 1% and the top .1% — the Republican growth numbers for them would be higher than the Democratic numbers.)
In other words, Republican presidents produce poor economic performance because they're obsessed with helping the well off. Their focus is on the wealthiest 5%, and the numbers show it. At least 95% of the country does better under Democrats. [But] Republicans produce great economic growth for all income classes in election years, and that's all that voters remember. They really are voting their pocketbooks." http://www.washingtonmonthly.com/archives/individ…
"First the data compiled in the table below shows that there is no proof that Republican Presidents are better for the U.S. economy than Democratic Presidents. Indeed, the data indicates the opposite is likely true." http://www.eriposte.com/economy/other/demovsrep.h…
Even the Japan Times (2009)
" Over the period for which modern statistics are readily available, Democrats have outperformed Republicans by almost every traditional measure of economic performance (per capita GDP growth, unemployment, inflation, budget deficits). Democrats have managed to beat the Republicans on their own turf. Thanks to the profligacy of the Bush administration (and the prudence of the Clinton administration), average federal spending as a proportion of GDP under Republican presidents now exceeds that under Democrats during the measured period." http://www.japantimes.co.jp/text/eo20081013a1.htm…
But hey, if you let reality trump your dreams and hopes, you're most certainly not a post-Reagan rightwinger.
Uhh?? The US was already rolling over into a recession from dotcom madness and Y2K baloney when Bush II was coming into the Presidency. The US is going into, if it is not already in, a recession Right Now. Who ever gets elected will have to deal with.
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Lucky thing I read the actual articles; the headlines alone seemed to imply a pro-Obama bias. Sometimes too many sarcastic headlines can get in the way, witty or not.