Party incumbency and economic growth in the United States: 1929 to 1984

This paper investigates the relationship between Democratic presidential incumbency and economic growth in the United States in the long run. The analysis shows the Democrats have stimulated growth beyond trends when two conditions are met: first, when an incoming administration is formally committed to promoting growth and employment, and second, when that administration has at least two terms of office to implement those goals. The transmission mechanisms linking incumbency and growth are explored by means of a standard Keynesian IS-LM model, which is augmented by additional relevant variables. The transmissions process works via monetary policy, fiscal policy, and welfare expenditure. It also seems likely that changing expectations of consumers and investors stimulated the economy beyond trends for some Democratic administrations.