To be completely upfront, it is not our contention that Democrats have exercised a superior economic theory to achieve these results. While the theory may be better, it is more likely a function of the fact that Democrats have supported a broad constituency, Republicans have supported a narrower constituency, and the economy does better the broader the support.
The first chart, employment growth, is simply the average annual percentage growth in the number of jobs in the non-farm economy. The most interesting thing about this, to us, is that the weak job growth under Bush II has not translated into a corresponding rise in the official unemployment rate. (See sidebar.) This is because the participation rate, the denominator in the unemployment rate calculation, has been shrinking.
Shrinkage can occur from several causes, more people choosing college than the job market, retirement of workers, or workers dropped into the black hole called "discouraged workers." The last category comprises those who have given up looking. The unemployment rate counts only those who are actively looking for work. Another category which began to grow in the 1990s is the disabled, with a marked increase in people applying for Social Security Disability.
The second chart, growth in net real GDP, displays a measure that takes into account the federal deficit, including that amount borrowed from the entitlement trust funds -- Social Security and Medicare. Net Real GDP subtracts government borrowing from GDP. If deficits are justified as a stimulant to the economy, priming the pump, as it were, it makes no sense to count the amount used to prime as a product of the pump. Deficits are not a product of the current economy, they are a borrowing from the future economy.
It probably does not surprise you, sadly, that politicians for all their alarm about the fate of Social Security and Medicare have been moving money from these entitlements into the operating budget as fast as it is deposited. Thus, when the baby boomers reach for their social security checks, the operating side of the federal budget will have to start borrowing more or taxing more.A final note: An expanded look at these and other measures of economic performance by president will be up on the web site in two weeks. Tomorrow on the podcast, we'll be looking at the measure of GDP itself. What does it measure? What are the weaknesses? Are there other measures?