At Hedgeye economist Daniel Thornton lays out his case that neither president nor party does much to produce economic growth:
These data and analysis support my belief that the party of the president has had little to no effect on economic growth. Individually, presidents and their policies can affect growth, but the ultimate effects of these policies may not be reflected in growth during their term in office. We would need much more data and many more changes in the political party of the president to have any reasonable chance to say whether one party is more pro-growth than the other.
But even if we had such data, I’m inclined to believe that we would find it difficult,if not impossible, to attribute the effect to the party in power. We would have a better chance to attribute the change in growth to a particular action taken by a particular president or party, but, even here it would be difficult to separate the effect of this action from the effects of other factors that determine growth.
Note that Dr. Thornton’s essay does not claim that policy does not influence growth. His data suggest that Democrats and Republicans alike have pursued policies that have produced weak results. Check out the “Washington consensus”. If that’s what they’re pushing on developing countries, what is the likelihood that their advice is better domestically?
Is it possible that we could have greater economic growth without producing adverse effects on the environment, income equality, etc.? Who knows?
I think the real issue is that you can’t produce greater economic growth without having an adverse effect on incumbency.
Don’t construe that as my thinking that Donald Trump’s preferred policies (cuts in the personal income tax, infrastructure spending, more military spending) will produce more economic growth. I don’t think that will be the case unless wealthy individuals and businesses start investing much more vigorously in the U. S. economy. Whenever you read the words “productivity growth”, you should think “business investment”. They’re the same thing.
And, as I’ve been saying for more than a decade, the problem with the U. S. economy isn’t a consequence of inadequate consumer spending which is what the policies putatively address. It’s inadequate business investment.
