Political Economics

Correlation is not necessarily causation.

Once is an accident, twice is a coincidence, but three times is a pattern.

   From the Civil War to the Great Depression, 15 men served as President of the United States. In that time, the Republican Party had a virtual lock on the Oval Office, since all but three of the occupants have been members of the GOP. Those three were Democrats: Andrew Johnson, Grover Cleveland, and Woodrow Wilson.
   Meanwhile, in those 67 years, the nation suffered four economic crises or recessions, three of which began while a Republican occupied the White House. The four crises were the Panic of 1873, the Panic of 1893, the "Rich Man's Panic" of 1907, and the Great Depression, which lasted 11 years, from 1929 until the onset of World War II.
   Correlation, of course, is not always causation, but it can also be said that once is an accident, twice is a coincidence, and three times is a pattern. 
   With that in mind, consider this: The Panic of 1873 occurred while Republican Ulysses S. Grant was President, the downturn of 1893 began in January of 1893, at the end of Republican William McKinley's term (at the time, Presidents were not inaugurated until March), and the so-called "Rich Man's Panic" of 1907 under Republican Theodore Roosevelt. These, however, were relatively minor compared to the disaster of the 1930s.
    Vice President Andrew Johnson, a Democrat, became President when Republican Abraham Lincoln was assassinated, and was highly disliked by Congress, to the extent that he was impeached (but not convicted). Cleveland was elected twice, but not consecutively; Republican McKinley having been elected between the two Cleveland terms. The third Democrat to serve as President in that time frame was Woodrow Wilson, who won the election in 1912 largely because Theodore Roosevelt split the GOP, organizing a third party (the Progressive Party), which took votes away from Republican incumbent William Howard Taft, thus ensuring Wilson's victory.
   So it would seem there is a correlation; when Republicans are in charge, the economy crashes. Now consider the Big One.
   The Great Depression, which began its chaotic slide in October of 1929, while Republican Calvin Coolidge was President, and continued to slide during Republican Herbert Hoover's administration. The one exception was the Panic of 1893, just as Democrat Grover Cleveland was taking over from Republican Benjamin Harrison, so it could well be argued that Harrison was to blame for the downturn and Cleveland engineered a recovery. Similarly, it was Franklin D. Roosevelt who inherited the damage from the 1929 Crash, and presided over recovery efforts through the 1930s. Even so, however, Hoover wrote to President-elect Roosevelt urging a balanced budget, "even if further taxation is necessary," as well as "no tampering or inflation of the currency."
   As economist John Kenneth Galbraith wrote in his book The Great Crash, 1929, rejecting both fiscal and monetary policy "amounted precisely to a rejection of all affirmative government economic policy," and would "disavow all the available steps to check deflation and depression." This was, Galbraith wrote, "a triumph of dogma over thought. The consequences were profound."
   Fast forward, now, to the Presidency of Bill Clinton, a Democrat (1993-2001), who not only reduced the federal deficit but posted four consecutive budgets with surplus funds. Then, under Republican George W. Bush, the surplus he inherited disappeared and the federal budget plunged to a record deficit of $1.4 trillion as the nation stumbled into the worst economic crisis since the Great Depression. His successor Barack Obama, a Democrat, has cut that deficit by two-thirds, and according to the Congressional Budget Office, the country will end its fiscal year this month with a budgetary deficit of $426 billion. This would be the smallest deficit since 2007, according to the CBO, when the Great Recession began.
   This downturn, the largest since World War II and the worst since the Great Depression of the 1930s, began in December 2007, and ended in June 2009, five months after President Obama took office. Government fiscal years begin Oct. 1, so Obama had to cope with a budget submitted by his predecessor as the unemployment rate continued to rise, peaking at 10 percent in October 2009. It has only recently returned to its pre-recession level of 5 percent.
   There are always ups and downs in the business cycle, but the question is, what can or should be done about it, to smooth the path from profit to pain and back again. Conservative economists and politicians maintain that nothing can be done, that the cycle is part of economic life, and government has no business interfering with the private sector. 
   However, history shows otherwise. When Republican Administrations pull back, invoking austerity measures in the name of balancing the federal budget and waiting for the economy to recover, reality only widens the chasm between the haves and the have-nots.
   There were no significant recessions from the Great Depression of 1929-1940 until the Great Recession of 2007-2009. There was, of course, a post-war downturn in 1946 as the nation reconverted to consumer production, another in 1949 as the nation readjusted from its postwar boom, and a brief pause in 1958. But these were not significant, as MIT economist Paul Samuelson has written, compared to the chaotic years of the 1930s.
   It is also true that war production rescues the economy from its doldrums. But that's no way to defeat a downturn. The loss of human life is too high a cost.