Democrats and Republicans have widely different views on the economy. But once in power, candidates' actions don't always coincide with their party's views. That makes it difficult to determine whether Democratic presidents or Republican presidents are better for the economy.
Democrats gear their economic policies to benefit low-income and middle-income families, holding the belief that reducing income inequality is the best way to foster economic growth. This is based on the idea that low-income families tend to spend extra money on necessities, which directly increases demand. Democrats also support a Keynesian economic theory, which says that the government should spend its way out of a recession.
President Franklin D. Roosevelt first outlined the Economic Bill of Rights in his 1944 State of the Union address, which included a realistic tax law, a cost of food law, and a continuation of the law for the renegotiation of war contracts.1 President Harry Truman's 1949 Fair Deal proposed specific legislation to support this expanded vision of the American Dream.2 In 2010, the Democrats expanded the dream to include health care with the Affordable Care Act.
Republicans support economic policies that benefit businesses and investors, following supply-side economics, which states that tax cuts on businesses allow them to hire more workers, in turn increasing demand and growth. It's similar to trickle-down economics, which says that the expansion generated by tax cuts is enough to broaden the tax base. In theory, the increased revenue from a stronger economy offsets the initial revenue loss over time.
One aspect of the Republican American Dream is the right to pursue prosperity without government interference. They argue this is achieved by self-discipline, enterprise, saving, and investing. This business-friendly approach leads most people to believe Republicans are better for the economy. However, a closer look reveals that Democrats are, in many respects, much better.
Republicans say that tax cuts are the best way to create jobs, while Democrats advocate for government spending. The economic stimulus act, sponsored by President Barack Obama, used both. President Bill Clinton created more jobs than any other president. The most, percentage-wise, was Roosevelt who increased jobs by 21.5%. But that was during three terms. If you only count two terms, President Ronald Reagan was the largest percentage-wise. He increased jobs by 16.5%.3
Minimum Wage
Democrats argue that the minimum wage should allow a living wage. FDR created the minimum wage to protect workers during the Great Depression. During that time, it was $0.25 an hour, which translates to just under $5.00 in today's economy. The Democratic Congress raised it in 2007 and set a schedule to raise it to $7.25 an hour in 2009, where it is today. Democrats support raising the minimum wage to $15 an hour and then indexing it to inflation.
Republicans argue that raising the minimum wage could force small businesses to lay off workers; this is partially true. A 2014 Congressional Budget Office report said that raising the minimum wage would take 900,000 families out of poverty, but cost 500,000 workers their jobs.
Taxes
Republicans favor regressive taxation that assesses a lower rate on businesses, investments, and high-income earners. The following includes several tax initiatives taken by the republican party:
In 2018, the Tax Cuts and Jobs Act cut the top income tax rate to 37% and lowered the corporate tax rate to 21%6
The Bush tax cuts fought the 2001 recession
The Economic Growth and Tax Relief Reconciliation Act mailed rebate checks to households in August 2001
In 2004, the Jobs and Growth Tax Relief Reconciliation Act cut taxes for businesses
In 2010, the Tea Party in Congress extended the cuts to fight the Great Recession
Democrats believe in progressive taxation, demanding higher taxes on investments, big businesses, and high-income families.
Clinton's Omnibus Budget Reconciliation Act raised the top income and corporate tax rates to 36%
In 2009, the Obama economic stimulus plan cut taxes to fight the Great Recession
In 2010, Obamacare raised taxes on high incomes and investments
Immigration
Immigrants have driven two-thirds of U.S. economic growth since 2011. They founded 30% of U.S. firms, including more than 50% of startups valued at over $1 billion.8 But many believe that immigrants take jobs from workers who lack college degrees, especially in agriculture and construction. For example, in 2014, immigrants held 43% of agricultural jobs, but only 20% were documented.
