Congresses matter, but some more than others.

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What Congress Does to the Economy

Richard J. Carroll is an economist for international financial institutions including the World Bank. He is the author of "The President as Economist: Scoring Economic Performance From Harry Truman to Obama."
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Since World War II, Democratic presidents have generally had significantly better economic records than Republican presidents. But can those records be affected by who controls Congress? Have Democratic presidents gotten a boost from a Republican Congresses, or did Democratic Congresses drag down Republican presidents?

Some people believe Congress is the real driver of economic policy, because it approves spending and passes regulations, as well as tax increases and reductions.

After comparing economic performances of all postwar presidents based on 17 indicators , it turns out it does matter whether there are Democratic or Republican majorities in the House and Senate. But it matters less than which party controls the presidency.

On that score, Democratic presidents’ economies perform better no matter which party controls Congress.

In "The President as Economist," I measured the economic performance of presidential administrations. For this analysis, I used the same quantitative method to evaluate Congress’s performance by party majority alongside the president.

Any time one of these three changed hands, I started a new record. For example, if Democrats controlled the presidency, the Senate and the House, but then the Republicans captured the Senate, I started a new record of performance. 

There are eight possible combinations of Democratic and Republican control of the presidency, the Senate and the House. 

Democrats were the dominant party overall in Congress from 1947 to 2015. Republicans held the presidency for 36 of 69 years, but Democrats held majorities for most years in the Senate (47) and House (48).

Democratic control of the presidency, the Senate and the House occurred five times for a total of 20 years in the 69-year period analyzed, most recently in 2009-2011. Republicans controlled the presidency and both houses of Congress only twice and for a total of six years (1953-55 and 2003-2007). The combination of a Republican president and Democratic House and Senate occurred four times for a total of 22 years.

In all, there were 17 distinct party changes. 

It turned out that if a Democratic president was in charge, economic performance was better regardless of which party controlled the Senate or the House. Five of the top six economic performances occurred with a Democrat in the White House.

The lone Republican, Dwight Eisenhower, was No. 1 from 1953-55. The John Kennedy and Lyndon Johnson administrations (1961-1969) were second; Harry Truman's two terms were third and fourth, and Bill Clinton's were fifth and sixth.

The bottom six places are equally divided between Republicans and Democrats in the White House.

Note that the dates are lagged. For example, for the first-place ranking, the dates 1953-55 capture data for the years 1954-55. This allows effects, good and bad, of the previous configuration of the presidency and Congress to dissipate before the next party combination takes hold.

Jumping ahead, my analysis attributes the fallout of the 2008-09 financial crisis to the congressional Democrats who controlled the House and the Senate during those years, even though the crisis had been incubating through the poor policy choices and poor oversight when Republicans controlled the White House and Congress from 2003-2007.

Although Republicans held the presidency for 36 of the 69 years, they account for only two of the top 24 years of performance, while they account for 10 of the 17 years of weak performance.

For much of the weak performance years when Democrats were in the majority in the Senate and House, a Republican was president. By contrast, there was a Democratic president for only one year when the Republican Senate and House had their worst years. 

With the Democratic presidents performing better, it makes sense that Democratic Senates and Houses should perform at least as well and somewhat better than their Republican counterparts.

Their cooperation is needed because the Congress amends and approves the federal budget, passes changes in tax rates and the tax code, and passes trade agreements and all manner of regulations affecting economic activity. 

It is sometimes possible to record a good performance with divided government, but not usually. The exceptions were six years during the Clinton administration and two years under Truman.

But, to repeat, the president is far more influential in setting the agenda for economic policy than Congress is. He can, for example, stop any congressional initiative with the stroke of a pen. Thus he has more control over economic performance, for better or worse.

This is the second of two articles. Part 1 was on Barack Obama's economic performance compared with that of other presidents.

  1. The indicators include job growth, inflation rate, growth of employment, productivity growth, gross private investment, personal savings, real interest rate, percent of the population below the poverty line, exports share of GDP, trade balance, federal budget growth rate and share of GDP, and tax revenue share of GDP.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Richard J. Carroll at richjcarroll@comcast.net

To contact the editor responsible for this story:
Katy Roberts at kroberts29@bloomberg.net