Census Bureau data reveal striking differences in patterns of real pre-tax income growth under Democratic and Republican presidents in the U.S. over the past half-century. Democratic presidents have produced slightly more income growth for poor families than for rich families, while Republican presidents have produced a great deal more income growth for rich families than for poor families. As a result, families at the 95th percentile of the income distribution have experienced identical average income growth under Democratic and Republican presidents, while those at the 20th percentile have experienced more than four times as much income growth under Democrats as they have under Republicans.
I report a variety of analyses suggesting that these partisan differences in income growth are too consistent to be merely coincidental. For example, I show that inequality increased under each of five Republican presidents in the post-war period, while four of five Democratic presidents (all except Jimmy Carter in the midst of the late 1970s oil shock) presided over declines in income inequality. I also show that the partisan differences persist if we assume that each party’s policies take effect immediately upon inauguration or with a one-year lag, whether or not we control for persistence in growth rates using linear or non-linear trend terms or lagged growth measures, and whether or not we include election years or presidential transition years.
For the post-war period as a whole, partisan differences in patterns of income growth are attributable to marked partisan differences in prevailing levels of unemployment (which has been 30 percent lower under Democratic presidents, on average) and GDP growth (which has been 30 percent higher under Democratic presidents, on average). Since unemployment and GDP growth both have much stronger effects on income growth for lower- and middle-income families than for upper-income families, the former are much more sensitive than the latter to partisan differences in macroeconomic performance.
Partisan differences in pre-tax income growth appear to have declined since 1980, perhaps because the Federal Reserve Board and global financial markets have reduced the ability of presidents to pursue partisan macroeconomic agendas. However, similar partisan differences appear in the distribution of post-tax income growth since 1980, suggesting that tax and transfer policies (for example, the expanded Earned Income Tax Credit under Bill Clinton and massive upper-class tax cuts under George W. Bush) continue to provide considerable scope for partisan differences in the targeting of income growth by income class.
My analysis suggests that partisan politics and policy-making have played a crucial role in exacerbating or mitigating the purely economic causes of rising economic inequality in the U.S. in recent decades. Indeed, my projections suggest that income inequality would actually have declined slightly over the past thirty years had the patterns of income growth actually observed during Democratic administrations been in effect throughout that period, while continuous application of the patterns of income growth actually observed during periods of Republican control would have produced an even greater divergence in the economic fortunes of rich and poor, with the 80/20 income ratio growing more than 80 percent faster than it actually did.