6 Reasons a Biden Reelection Could Be Better for Your Wallet
As another presidential election looms, the economy remains top of mind for many Americans, especially as that translates to paychecks, jobs and overall financial stability. Still in the throes of higher-than-normal inflation, many Americans are looking to this next election with some concern.
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If research proves true, Americans may find President Joe Biden to be their best bet on helping them secure a richer future, despite the fact that in polling voters often rate Republicans as the party that does a better job at managing the economy, according to the The Economic Policy Institute (EPI).
EPI recently revisited research on this subject, including work done by economists Alan Blinder and Mark Watson, summarizing that, “The economy performs much better during Democratic presidential administrations than during Republican ones.”
Blinder and Watson wrote that, “While you can easily cherry-pick brief periods and economic measures that show superior economic performance under Republicans, over any lengthy comparison period (say, 25 years or more), by pretty much any economic measure, Democrats have outperformed Republicans for a century.”
Here are six key areas where the economy does well under Democratic administrations, according to the EPI study, and caveats about how today’s economy has performed.
The Economics, by Party
The EPI just published a report that confirms this, detailing macroeconomic data from 1949 to the present by party, which revealed some stunning results in favor of Democrats.
They showed that in the aggregate, over these many decades, real gross domestic product (GDP) growth rose by 3.79% under Democratic presidents and only 2.6% under Republicans. Similarly, total job growth has averaged out at 2.47% under Democrats, 1.07% under Republicans.
Inflation (less energy and food) has stayed lower under Democrats, at an average of 2.87% to Republicans’ 3.59%. The unemployment rate has also been lower under Democrats, at an average of 5.41% to Republicans’ 6.01%.
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Fiscal Policies Emphasizing Growth and Equality
According to David Reyes, a financial advisor with Reyes Financial Architecture, part of the explanation for why the economy appears to do better under Democrats is that Democratic administrations often prioritize fiscal policies geared toward stimulating economic growth and reducing income inequality.
“They may increase spending on infrastructure, education, healthcare and social welfare programs, which can bolster economic activity, create jobs and enhance productivity, thereby fostering overall economic growth,” he said.
Boosting Consumer Confidence
Democratic policies also often center around social welfare programs, healthcare reforms and consumer protection measures, Reyes explained. While these are often sources of political warfare, he argued these programs instill greater confidence among consumers.
“When individuals feel financially secure with access to affordable healthcare and social services,” he said, “they are more inclined to spend money, thereby propelling economic activity and growth.”
Progressive Taxation Policies
Another reason might be that Democrats typically advocate for progressive tax policies that place a heavier burden on higher-income individuals and corporations, Reyes pointed out.
While such policy is often contested by Republicans, Reyes argued that it can lead to “augmented government revenue, facilitating funding for public goods and services, deficit reduction and investments in crucial areas like education and infrastructure, all of which are conducive to sustained economic growth.”
Enhanced Regulation and Oversight
It also has been shown that Democratic administrations often push for stronger regulations and oversight in the financial sector to curb fraud, market manipulation and excessive risk taking, Reyes said.
“While excessive regulation may dampen growth,” he said, “appropriate oversight can maintain financial stability and mitigate economic downturns triggered by risky financial behavior.”
Job Creation and Wage Growth
Though each party likes to claim it’s the one bringing more new jobs to the U.S., Reyes said Democrats walk their talk more frequently with policies that prioritize initiatives aimed at job creation and wage enhancement. This includes such things as raising the minimum wage, investing in workforce development and supporting workers’ rights.
“Increased employment and higher wages lead to greater consumer spending, driving up demand for goods and services and fueling economic expansion,” he said.
Encouraging Innovation and Entrepreneurship
Lastly, Reyes said Democratic administrations often support policies promoting innovation and entrepreneurship, including investment in research and development, support for small businesses and the promotion of clean energy technologies.
“These policies nurture an environment conducive to innovation, attract investment and create new opportunities, contributing to economic growth and job creation,” he said.
While these insights suggest a correlation between Democratic leadership and economic performance, Reyes stressed, “It’s important to acknowledge that economic outcomes are influenced by a myriad of factors beyond political affiliation.”
Additionally, historical trends may not always hold true in every circumstance, as economic conditions are shaped by global events, technological advancements and other unpredictable variables.
Gains Occur Under Both Parties
Despite EPI’s research, according to David Blain, CFA and CEO at BlueSky Wealth Advisors, “[A]verage stock market returns have historically been positive under both Democratic and Republican presidents, challenging the notion that one party is systematically better for the economy or investors’ personal finances.”
He said this perspective is supported by the analysis of S&P 500 performance, which has shown double-digit gains regardless of the president’s party.
“Therefore,” he said, “recognize that while policy changes can have impacts, especially on specific industries, these tend to be incremental and are rapidly priced into markets, demonstrating the complex interplay between policy, economic cycles and market performance.”
Ben Johnston, chief operating officer of Kapitus, said that while Biden’s administration has done a lot to stimulate and sustain the economy there are still economic issues.
He pointed to pressures from overseas manufacturing continuing to weigh heavily on U.S. manufacturers and inflation remaining high despite attempts to curb it.
Johnston added, “Even a strong employment rate is seen as challenging by many small businesses who are struggling to find quality workers at affordable prices. While Biden has done a good job framing his legislative successes, the struggles of consumers and small businesses are real and will continue to be an issue throughout the campaign.”
How You Can Take Advantage of This
The months before the November election may be a good time to make investments and take advantage of financial products with high interest rates, from high-yield savings accounts to CDs and money market accounts.
Additionally, real estate is an investment that almost always tends to appreciate, no matter when you buy it. This might be a great time to jump on a property if you’re in position to do so.
No matter who is president, you can still take control of your own finances by making smart money choices.
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This article originally appeared on GOBankingRates.com: 6 Reasons a Biden Reelection Could Be Better for Your Wallet
