Trading Places

White House rhetoric and reality

In matters economic, Democrats are supposed to be the party of big government, Republicans the faction of fiscal and regulatory restraint. That distinction is reflected by the parties' rhetoric and, in relative terms, by their legislative behavior. But when it comes to the executive branch, the sides seem to have reversed.

So argues Jeffrey Frankel in the March 2003 issue of the Milken Institute Review. "When it comes to White House economic policy, the Republican and Democratic parties have switched places since the 1960s," writes Frankel, a Harvard economist who served on the U.S. Council of Economic Advisers from 1997 to 1999. "By now the pattern is sufficiently well established that the generalization can no longer be denied: The Republicans have become the party of fiscal irresponsibility, trade restriction, big government, and failing-grade microeconomics." Democratic presidents, comparatively speaking, are "the agents of fiscal responsibility, free trade, competitive markets, and good textbook microeconomics."

Frankel supports this counterintuitive conclusion by comparing the actual economic policies of Carter, Clinton, Reagan, and the Bushes. "A simple look at the federal budget statistics shows an uncanny tendency for the deficit to rise precisely during Republican presidencies," Frankel notes, while "declining deficits and then record surpluses were achieved during the Clinton Administration."

Similarly, Carter and Clinton were harder on inflation than either Reagan or the first Bush. Federal employment grew under Reagan and Bush I, then shrank under Clinton. Recent Republican presidents have been protectionists, "judged not just by some politics-free ideal, but as compared to the record of Clinton." And it was Carter who unleashed deregulation in the 1970s, while "Reagan at best continued the trend." (The paper ignores Nixon, but the president who gave us wage and price controls would certainly seem to fit the pattern.)

Frankel recognizes that Carter and Clinton were scarcely libertarians, citing the earlier president's energy policies and the later one's intensely bureaucratic proposal for health care reform. And as a deficit hawk, Frankel gives Republicans little credit for their tax cuts, to the point of praising Bush I's decision to break his "no new taxes" pledge. A consistent limited-government man would want to balance the budget by reducing spending, not increasing revenues.

But then, Frankel isn't a limited-government man. He's a mainstream economist noting a very real pattern—one that would be obvious were it not for the obfuscating effects of the two parties' rhetoric.