Class Note for INDV 102 with Professor Kenworthy at UA
Class Note for INDV 102 with Professor Kenworthy at UA
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Date Created: 02/06/15
What difference can a president make Hypothesis 1 Not much Even in countries where the government has a great deal of power much remains outside its influence In the United States the executive39s power is especially constrained Congress has legislative authority The courts have ultimate say in deciding what laws do and don39t conform to the constitution and how those laws should be administered The Federal Reserve controls monetary policy Hypothesis 2 A lot How Fiscal policy Monetary policy Taxes and transfers Minimum wage Labor policy Larry Bartels quotThe Partisan Political Economy 2008 A clear and forceful statement of the case that presidents matter Shows that patterns of income growth at various points in the distribution have been markedly different under Democratic and Republican presidents since WW2 Offers a plausible causal mechanism Fiscal and monetary policy through the late 1970s Taxandtransfer policy since then Bartels evidence Income Inequality Income Growth by Percentile S O D 3 5 2 J 2 3 E 0 U I I 393 E I E g aquotg g 2 m 1 In 0 a a 2 9 e Democratic g I Democratic 6 Republican lt 3quot 9 Republican 1 o I I 1945 1955 1965 1975 1985 1995 2005 0 20 40 60 80 100 Year Percentile of the income distribution Note 1948 to 2005 These charts replicate Bartels39 figures 22 p 35 and 21 p 33 The income data include cash transfers except the EITC but exclude nearcash transfers and taxes The unit is families In this and all subsequent charts I follow Bartels in lagging the outcomes one year for example 1993 is coded as Republican and 2001 as Democratic Source My calculations from Census Bureau data wwwcensusgovhheswwwincomehistincf01arhtml Is Bartels right For 194879 I think he is For 19792005 I39m skeptical The partisan difference shrinks The difference appears to be pretransferpretransfer contrary to Bartels39 conclusion If we use data that take into account the top 1 there39s virtually no partisan difference Income growth 194879 V5 19792005 1948 to 1979 1979 to 2005 4 4 S5 S5 I I Democratic E E 9 Republican C C E 2 er E 2 U 039quot U E 9quot E g 9 g 6 6 D I 0 Democratic 0 1 9 Re ublican 1 E P E 1 1 I I I I I I I I I I O 20 4O 60 80 100 O 20 4O 60 80 100 Percentile of the income distribution Percentile of the income distribution Note These income data include cash transfers except the EITC but exclude nearcash transfers and taxes The unit is families Source My calculations from Census Bureau data wwwcensusgovhheswwwincomehistincfO larhtml Prepre vs postpost income growth 19792003 Pretransfer Pretax Income Posttransfer Posttax Income 4 4 I Democratic I Democratic E 6 Republican 5 6 Republican C C E 2 E 2 U U x 0 C 5 e C C a m 6 W D D Q Q E 0 E 0 lt lt 1 1 l l l I I I I l l l l l O 20 4O 60 80 100 O 20 4O 60 80 100 Percentile of the income distribution Percentile of the income distribution Note The unit is households Source My calculations from Census Bureau data wwwcensusgovhheswwwincomehistincrdi6html definitions 4 and 14 Causal mechanisms Possibilities Macroeconomic policy unemployment and wages Technology Educa on Globalization Unionization Minimum wage Macroeconomic policy Unemployment P20 Wages 1O 1O 90 M 3 8 8 25 Gee Q0 lt93 1 LO 5 6 h P 39 6 g 995 go a E g g 4 2 4 E E g Democratic 2 Democratic 2 9 Republican 2 6 Republican 0 O 1980 1985 1990 1995 2000 2005 1980 1985 1990 1995 2000 2005 Year Year Note P20 20th percentile ofthe distribution The unit is individuals Source Bureau of Labor Statistics statsblsgov Economic Policy Institute wwwepiorg Macroeconomic policy The pattern fits unemployment has been lower and wages have increased more under Democrats But due to what policies The Federal Reserve has acted much more autonomously in setting monetary policy since 1979 And it39s been Republicans rather than Democrats that have pursued the more stimulative fiscal policy during this period Technological change No reason to think it has been less rapid under Democratic presidents Education 30 Fouryear college degree or more oxoeeeeee eeeo 20 Weeeeeeeeeeeeweeeo Less than HS degree 10 Share of 25to29yearolds Democratic 9 Republican 0 I I I I I I 1980 1985 1990 1995 2000 2005 Year Source My calculations from Census Bureau data Education The empirical pattern appears to fit but changes in educational policy should take much longer to have an effect Globalization 16 g0 Democratic 1 6 Republican 12 4 I 9969999690 90 Share of GDP or of population A o Outward FDI 399909899990 Ge I I l I 1980 1985 1990 1995 2000 2005 Year Note Data for the foreignborn share ofthe population are available for only selected years so the line segments do not correspond perfectly to president39s party Outward FDI data are missing for 197981 and 2005 Source My calculations Census Bureau OECD and United Nations data Unions 99990 1 5 Unionized share of employed persons 10 5 Democratic e Republican 0 I I I I I I 1980 1985 1990 1995 2000 2005 Year Note Average tenyear change 43 percentage points under Democratic presidents 48 percentage points under Republicans Source Bureau of Labor Statistics statsblsgov Unions The small quantitative partisan difference in union decline may overlook a large qualitative difference the NLRB39s enforcement of labor law Minimum wage 00 9 a 6 9 Ci D 3 4 E E 3 E E E 2 Democratic 6 Republican 0 I I I I I I 1980 1985 1990 1995 2000 2005 Year Note Average tenyear change 030 under Democratic presidents 110 under Republicans Source My calculations with adjustment for inflation using the CPIURS Past19705 trends in the bottom 95 summary There has been a partisan difference in patterns of income growth It39s in pretransferpretax income The most likely partisan sources are union and minimum wage policies What if we take the top end into account The Census Bureau CPS data are not very helpful for the top 1 which is where much of the income gain has occurred since the 1970s Income growth and inequality 19792005 with data that include the top 1 Income Growth Income Inequality 4 a 40 3 Democratic g E 9 Republican 9 E 0 I o 9 639 3 3 30 I L O c Q 5 E 3 05 2 Q E 2 F 20 391 gm 0 G g 3 625 39 v39 0 C m 9 3 g 1 E 10 g g Democratic lt E 9 Republican 0 I I 1 I I I I I Bottom 60 Top 1 1980 1985 1990 1995 2000 2005 Year Note The income data are posttransferposttax Average tenyear change in the top 1bottom 60 ratio 70 under Democratic presidents 87 under Republicans Source My calculations from Congressional Budget Office data wwwcbogovdoccfmindex8885 Tax rates and inequality 19792005 with data that include the top 1 Top Tax Rates Income Inequality 75 a Q 0 Higher line top marginal rate 3 40 I Lower line effective rate on top 1 0 Higher line pretax I 60 E Lower line posttax PG 30 g 45 2 2 Q o gt E b o 20 30 3 099 b 39 me 15 Democratic g 10 w 9 Republican g Democratic E 6 Republican 0 1 I I I I I I I 1980 1985 1990 1995 2000 2005 1980 1985 1990 1995 2000 2005 Year Year Source My calculations from Congressional Budget Office data wwwcbogovdoccfmindex8885 Post19705 trends including the top 1 summary Little or no partisan difference Tax policy has had an impact But that impact has been swamped by trends in pretax income Social scientists don39t yet have a good handle on the causes of the sharp rise in pretax incomes at the top Overall summary We39ve considered only one outcome though an important one patterns of income growth There was a clear partisan difference in policies and in income growth from WW2 through the 19705 Since the 1970s by contrast there39s been a smaller nonexistent partisan difference Policies toward unions the minimum wage and taxes differed and they39ve probably had an impact But they don39t appear to have been the key factors
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