Why Democrats are better for the economy than Republicans
This discussion is posted in two versions:
- Longer and more extensively reasoned. (This one)
- Shorter and easier to copy/paste.
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Donald Trump and his supporters must be swept from office, for countless reasons, many of which have been highlighted by the coronavirus pandemic. In broadest terms, these include:
- Corruption, incompetence, and science denial.
- The most explicit governmental race-baiting in over 50 years.
- Many-fronts efforts to undermine the voting process itself.
Much in our country needs healing and repair.
Many Americans agree, and favor Democratic candidates, for their intent to govern with decency, empathy, and reliance upon established facts. And so Democrats expect success in the election now underway. Even so, one major Democrat/Republican comparison may still be worth spelling out.
In a nutshell, Democrats are much better and safer for the economy than Republicans, especially but not only in the growth industries that provide so much of our wealth, exports, and favorable career opportunities. Republican propaganda often claims the contrary. But the pro-Democratic view is supported by all of:
- Decades of history.
- Economic science.
- Basic business common sense.
Let’s drill down.
1. (History) For the past 30 years, Democrats have done better for the economy than Republicans. In particular:
- George H. W. Bush’s term in office ended in recession.
- The economy boomed under Bill Clinton.
- George W. Bush started his term with an ordinary recession …
- …. and ended with a huge one.
- The economy grew back steadily under Barack Obama.
- The Obama boom slowed during the first part of Donald’s Trump term.
And of course we’re in economic catastrophe now.
2. (Economics) This is all more than just coincidence or luck. Orthodox Republican economic predictions have been consistently wrong over those same three decades. In particular, and with only minor exceptions:
- Deficits haven’t led to inflation.
- Corporations haven’t reinvested tax windfalls in their businesses.
- Economic growth hasn’t “trickled down” to the rest of the population.
The biggest hole in Republican orthodoxy is this: Making more money available for investment – as tax cuts and the relaxation of regulations are said to do – doesn’t actually cause much investment spending. For example, the recent Republican corporate tax cuts went mainly to dividends, stock buybacks, and increased executive pay. Importantly, this point explains why the stock market is uncoupled from the actual economy. Increasing after-tax profits by allowing pollution or cutting corporate tax rates may be good for stock prices, but nobody EXCEPT fortunate stockholders and investors are likely to much benefit.
3. (More economics) And so it is likely that Democrats will be better for our future economy than Republicans would. For unlike Republican pledges, Democratic ones tend to actually come true. In particular:
- As of the past few decades, Democratic policies lead to healthier domestic demand than Republican ones, for macroeconomic reasons such as:
- Republicans tend to put (or leave) money in richer hands than Democrats do.
- Poorer folks spend more of their incrementally available money on consumption than rich ones do.
- Republican policies that supposedly drive business investment don’t actually have that effect.
- If Republicans remain the party of isolationism and mutually destructive trade wars, Democratic policies will lead to healthier foreign demand than Republican ones as well.
4. (Common sense) Democrats’ advantage doesn’t just lie in simple macroeconomic realism. Rather:
- Democrats are much better than Republicans for high-growth businesses.
- Democratic policies lead to a more effective workforce than Republican ones do.
Key reasons include:
- Democrats invest more in education than Republicans do, especially now that Republicans are so anti-intellectual and anti-science.
- Democrats invest more in research than Republicans do, ditto.
- Democrats are much, much friendlier to immigration than Republicans currently are.
Support for these points includes:
- Much of America’s wealth, economic growth and export power stem from industries whose innovation we’ve led – electronics (across multiple generations), film/media (ditto), pharma/biotech and more.
- Most of those industries rely on educated workers, as do older industries too.
- Many of our top business creators have been immigrants.
- So have many of our less spectacular but still important engineers.
Immigrants are crucial to today’s leading tech companies, including founders of Google and eBay, Microsoft’s most important non-founder engineer, Oracle’s most important current engineer, Intel’s most famous CEO, and current CEOs at Microsoft, Oracle, and Alphabet/Google. And of course, immigrants are also critical to our least glamorous businesses, performing hard, low-paid work in areas such as farming, meat-packing and household services.
5. (Common sense, continued) Republicans make untrue claims that Democrats are committed to policies much more progressive or “socialist” than is really the case. But even if those claims WERE true, Democrats could still be economically superior to Republicans. After all, more generous policies around health care, child care, education, etc. imply:
- Workers and entrepreneurs likely have more risk tolerance and job portability.
- Service-sector workers likely have more discretionary income as well.
In theory, it is possible to be too far left for entrepreneurial growth and economic health. But such policies would be left even of current Western European norms, and vastly further left than anything the United States is at any risk of adopting.
About the author: For almost 40 years, Curt Monash has been an adviser to and observer of many of the world’s greatest entrepreneurs. He was voted by investors as the #1 stock analyst of the computer software and services industry. He has consulted to a large fraction of the world’s important technology companies, often at the CEO level. Before entering business, he was a research fellow in public policy at Harvard’s Kennedy School of Government. His Twitter and Facebook usernames are CurtMonash, and his public email address is curtmonash@monash.com. His official bio is at http://www.monash.com/curtbio.html.
Related links:
- Trump is the biggest issue, but this was election was always going to be party-vs.-party at its core.
- It’s not just the past 30 years; Democratic presidents have outperforming Republicans overall since Truman, if not Hoover. The Los Angeles Times has a great article outlining the facts and possible explanations, based on analyses by economic scholars such as Alan Blinder.
- Immigrants crucial to the technology industry have included Andy Grove, Sergey Brin, Elon Musk, the underrated Charles Simonyi, the similarly underrated Juan Loaiza, and many, many, many, many more.
- The relevant team at Trump’s alma mater Penn Wharton believes Biden’s economic plans are better than Trump’s.
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