I agree with Russ and many of the commenters who point out how silly it is to judge the relative economic merits of the Democrats and the GOP by measuring what happened economically when the White House was occupied by Democrats and comparing to what happened when Republicans had the run of the place.
Pondering this issue raises a question in my mind: has anyone studied the economic consequences of partisan bickering? That is, I propose the following empirical study: use as the dependent variable some composite measure of economic performance, and use as the independent variable of interest some measure of partisan bickering.
A reasonable hypothesis is that economic performance improves — perhaps with a lag — as partisan bickering (or, more specifically, real and honest-to-goodness gridlock) increases.
Surely such a study has been done.
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For myself, I'm satisfied that economic performance improves with partisan bickering, especially absolute grid lock, without the necessity of a study. Since most of what politicians and bureaucrats do does more harm than good, the less they are able to do the more the free market can work its magic to enhance our well being.
But a study that proves this might be done, if it hasn't already. Of course, I would like to see the grid lock broken temporarily to cut taxes and abolish the death tax.
A factor that might frustrate the good effects of grid lock is that so much of government is run by unelected bureaucrats who can impose anti-growth policies on the economy even while the elected politicians bicker away.
Flash G.,
This is a very good observation and absolutely corect:
"A factor that might frustrate the good effects of grid lock is that so much of government is run by unelected bureaucrats who can impose anti-growth policies on the economy even while the elected politicians bicker away.
Posted by: Flash Gordon | Sep 5, 2008 12:07:00 PM"
So very few of "the people" are wise enough to see and understand that.
How about the effects of political bickering, or rather, the absence of it, upon the performance of the stock market?:
Lamb, Reinhold P., Ma, K., Pace, R. Daniel and Kennedy, William F., The Congressional Calendar and Stock Market Performance. FINANCIAL SERVICES REVIEW, Vol. 6 No. 1, 1997
From the abstract:
If you have a copy of the congressional calendar, you might try testing the findings out for yourself here.
It seems to me that a big contributor to economic growth is predictability. If you're constantly worried that the Congress will turn its meddlesome eye to your industry, you may very well not take risks that you otherwise would have.
That risk also encourages companies to toss virgins into volcanoes — they worry that Congress or the regulators will turn their eye to their industry and so spend a lot of money befriending those in power. If Congress is gridlocked and both sides are beating each other up, then the need to sacrifice virgins goes down.
Interestingly, some of the mortgage meltdown is due directly to virgin-tossing. Through laws like the Community Reinvestment Act, Congress encouraged banks to win regulatory favor by lending money to those who, otherwise, would not qualify.
The best deal seems to occur when you have a Democratic president and a Republican House of Representatives. Any other configuration is hopelessy spendthrifty.
Don,
If nobody has done your proposed gridlock study and you can find a qualified colleague to do it, I will personally PayPal them $100.
I was going to say what Flash had said about gridlock.
But also I think that you find that partisan bickering increases as the power and scope of government increases too (ie as more is at stake, the ends justify worse means), which seems like it would be contradictory to what you have stated. And if both were true, could there be some reconciliation of how it's possible?
I am almost 100% sure that Cato did such a study. They even had a podcast on it I believe. Or at least it featured prominently in one of theirs… It's been a while, I don't remember exactly…
We have a study from real life on what happens to economic performance when there in no gridlock in government. That would be The Great Depression.
It is well demonstrated by Amity Shlaes in her book The Forgotten Man. The Roosevelt administration practically ran a terror campaign against business through high taxes, National Recovery Administration regulations, and prosecutions against such figures as Andrew Mellon, Samuel Insull, and the Schechter brothers.
The Schechters were wholesalers of chickens and were convicted of felonies for violating NRA regulations. Their crime was to allow their customers, who sold chickens at retail, to pick out their own chickens to purchase rather than forcing them to take lots packaged by the Schechters. Fortunately, The U.S. Supreme Court reversed their convictions in Schechter Poultry v. United States, and also held the NRA to be unconstitutional. Roosevelt responded with his disastrous (for him) court packing plan. But the Supreme Court never again dismantled any part of the New Deal.
This was just one of the ways that the New Deal, with little partisan bickering, made the Great Depression worse, and was an important factor in creating the depression within a depression of 1937.
It might be said that a lack of political bickering, a lack of grid lock, led to some very poor economic performance.
My dear mother, rest her soul, always said "Well, at least Roosevelt did something." I never said it to her, but I was thinking that we would have been better off if he had done nothing.
We have too small a data set to get much evidence empirically. In theory it looks good because we can adjust pretty well when the rules do not change.
Great topic. I have often echoed the study Ironman posted and (as an investment advisor) I usually encourage a "do nothing Congress".
My only concerns come when Congress makes such a big mess that action is needed to fix it. When marginal tax rates hit 90%, it was pretty clear we could take the risk of further damage and push for Congress to act. With the AMT causing massive economic problems, and with sunset provisions in every major portion of the tax code for 2011, we may again be at a point where we have to promote (accept would be a better word) Congressional action. Doing nothing may once again be as risky as the interference we normally see from lawmakers.
My hope is for removal of rules and laws, and simplification to the tax code, but that only occurs under rare circumstances.
If you think this is contained to the US – think again.
Here is the best rant I've yet seen and it's based in the UK:
http://www.bastardoldholborn.blogspot.com/
Can't wait until the federal budget hits the 4/5/6 trillion marks very soon. How to pay for it? Increase taxes by 1000% on the top 1% and a wealth tax to boot!
"No man's life, liberty, or property are safe while the congress is in session."–Mark Twain
We used to joke about the "Lewensky Boom" in which Congress was too busy with impeachment hearings to pass legislation.
So the point is that there is no empiricism with regards to policy and economic outcome?
Then would that mean belief in classical liberalism is simply a matter of faith? If not what is it based on? If we wanna play smear the data it's a two way street and anyone's beliefs amount to nothing more then handwaving and thinking out loud with good sounding but untestabkle logic.
Just back from Kotzebue, the Arctic bush and the Wulik River basin. With new mining claims and commodities prices rising (well they were) we could well be the last group privledged to see this spectacular area in its natural state.
It seems a reasonable measure of gridlock or bickering would be the inverse of the # of bills that get passed out of congress and put on the president's desk. (Not including resolutions, but maybe you can do a seperate study that includes resolutions, or just resolutions, and see what that tells you.)
Interesting question.
Cross-nationally, you could look at the number of partisan veto-players to get at this (Heinsz and Keefer both have datasets that get at this).
Of course, Cox & McCubbins argued that gridlock leads to more side-payments and thus pork-barrel spending. So rather than providing more public goods, the state might actually distort more when there is gridlock. But that's an empirical question.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1009999
Just back from Kotzebue, the Arctic bush and the Wulik River basin. With new mining claims and commodities prices rising (well they were) we could well be the last group privledged [sic.]to see this spectacular area in its natural state.
Posted by: muirgeo | Sep 5, 2008 10:07:54 PM
Thank God for that!
Someone finally explored Alaska! [Note to self: email Seward.]
That must be a major bitch running a third world surgical energy hedge fund now…
"Just back from Kotzebue, the Arctic bush and the Wulik River basin." – Muirduck (via Mesa)
God, damn it. I was hoping he'd pull a Timothy Treadwell and really become a part of the environment.
Democrats keep promising more socialism, while Republicans are left promising socialism-lite. Nice choices.
Crusader,
You noticed that too, eh. Politicians are politicians. The differences are just target marketing.
So has anyone found that Cato study that Isaac mentioned?
I have suspected such a "gridlock" effect for many years. It would be great to have a scholarly verification of it!
A hybrid car works by harnessing the energy that is created when breaking the car. Is there a possibility to harness the energy that goes into the political bickering… or is its caloric content too low to make it worthwhile?
The problem I have is that our dear tenured Professor assumes that with bickering comes only honest-to-goodness-congressional gridlock but living the polarized divisiveness in Venezuela and that has clearly established divisiveness as the real weapon of mass destruction of a country, I am not sure that I would sign up on proposal of paralyzing government if that meant paying the prize of having a wildly partisan country… Of course it is quite different if it is about completely united country paying off the congressmen for a fun show of bickering.
Alternatively what would happen if these congressmen in Washington were forced to do some hugging over the aisles, 3×5 minutes each day, broadcasted in HDTV by C-Span?
As a foreigner in this country I marvel at your intent of fighting discrimination anyhow, anyway and anywhere, except when that discrimination is based on political affiliation; having a PhD from those universities that serve as an excuse even when human resources completely fail in their pick; and of course the credit scores.
By the way, come to think about it, an interesting hypothesis to analyze, would be that there is always the same amount of discrimination in a society no matter how it shows or hides itself. If proved right that means we need to find ways of divert discrimination to those outlets that create least societal damage… perhaps sports… no republican would be allowed to cheer for the Boston red socks.
PK,
Word, do not go to Boston and be caught demeaning or profaning their beloved Sox with such a label. Boston is highly partisan country, my friend, very highly partisan.
Here’s the spending aspect of divided gov’t, half of the equation:
http://www.cato-at-liberty.org/2006/08/30/in-defense-of-gridlock
And vidyohs is absolutely correct re: Red Sox.
Wicked hahd pahtisans….
Muirgeo – while out at Kotzebue, did you check out the Red Dog mine? Largest zinc mine in the world. You fly for an hour from Kotzebue over complete wilderness, then the mine (a square mile or two) flashes by in a few seconds, then more uninterrupted wilderness. . .
PK,
It is Boston Red Sox, not Boston red socks.
Posted by: vidyohs | Sep 6, 2008 9:50:25 AM
You see it must have been my partisan spelling corrector! You see they are everywhere seeding suspicions!
Maybe 3 or 4 years ago, I saw an NBER working paper that demonstrated that that party dominance at the state level was correlated with lower levels of state economic growth. The implication was, the closer they approached a 50/50 split between parties, the better the economic performance.
Seems like the closest thing to a gridlock study, unfortunately, I don't remember the authors or paper title, just NBER in 2004 or 2005.
Once again, the data shows when Democrats are in charge with or with out gridlock ( defined as control of all 3 branches) debt to GDP goes down. The Cato study is less helpful as it measures per capita spending where as debt to GDP is likely a better measure of economic performance.
A needle in the eye of fiscal conservatism.
Bottom line we have 2 choices. Republicans or Democrats. the economy consistently does better with Democrats by just about any measure I can see. That's likely because Keynes was right and Milton was wrong. An economy simply can't flourish when all the wealth is pooled at the top and hidden away in offshore accounts and investments.
Muirgeo – while out at Kotzebue, did you check out the Red Dog mine? Largest zinc mine in the world. You fly for an hour from Kotzebue over complete wilderness, then the mine (a square mile or two) flashes by in a few seconds, then more uninterrupted wilderness. . .
Posted by: Ak Mike
Yeah I saw Red Dog Mine. Indeed its fairly local and supposedly a state of the art facility that minimizes local contamination. The biggest problem now is the haul road is contaminated from the pulverized dust containing heavy metal and other contaminants.
On the Wulik we drank the water right out of the streams with no filters and no problems. I wouldn't do so for the streams and the Noatak river that drain Red Dog. They have proposed a "pipe-line" to transfer the pulverized ore even more safely.
The big point is had there been NO regulation this would not be the case and the whole area would be a total disaster. There are too many cases in the past that we are ALL paying for where un-regulated mining made their profits and left everyone else with the clean up cost.
Finally, even though the mine site is relatively small as we learned talking to the represntaives of the Tecomo (? sp) mine the acerage that is leased is much larger and not available to the public to travel across for liability reasons.
Muirgeo – Regulation or no regulation, the footprint of the Red Dog mine would be essentially invisible. If you went on the haul road at all you noticed that vegetation near the road was identical to that farther off – so the parts-per million "contamination" is a product of EPA officials more interested in being good bureaucrats than in actually accomplishing anything noticeable. You might also have learned that salmon incidence in the creeks around the mine is better now than before the mine went in, since the natural leaching of metals into the creek water was reduced by environmental measures taken by the mine.
As far as the leasing of additional space, there may have been a few more hundred acres leased, in a region with many millions of acres of uninhabited land. However, that land is privately owned by a native corporation anyway, and not therefore available for the public.
An economy simply can't flourish when all the wealth is pooled at the top and hidden away in offshore accounts and investments.
Money is rarely "hidden away" in investments. When you invest money you put that money into productive use, which grows the economy, typically to the benefit of society in general.
I suspect people "hide" their money in offshore accounts because your government discourages them from keeping it more local.
muirego says:
"That's likely because Keynes was right and Milton was wrong."
It's just that easy is it?
Friedman argued that government could not micromanage the economy because people would realize what the government was doing and shift their behavior to neutralize the impact of policies.
The people have done exactly that when it comes to taxes.
People will go into "tax avoidance overdrive" if Obama becomes president and raises taxes, as he's said he would, in the name of fairness.
It's called "the law of unintended consequences", a.k.a. perverse incentives.
Let's hear it for GRIDLOCK!
The Cato study is less helpful as it measures per capita spending where as debt to GDP is likely a better measure of economic performance.
So what you're saying is that people are better off when their government is borrowing less than when they have more of their own money to spend?