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Economic Growth: What year is it?



During Republican administrations, the year during the term (first, second, third, fourth) is a powerful determinant of economic growth. Counting the election year as year 0, year 4 is always one of strong growth and years 2 and 3 of weaker growth. There is a fair amount of variation within the columns, but no particular second or third year is as high as the average fourth year, nor any individual fourth year as low as the average second or third year. Nor is any second or third year as high as the following fourth year. The ranking of the first year is not reliable; it can be the highest or the lowest in growth.

Election YearOffset
+1 +2+3+4
1968 3.09% 0.17% 3.36% 5.29%
1972 5.76 -0.50 -0.19 5.33
1980 2.52 -1.94 4.52 7.19
1984 4.13 3.47 3.38 4.13
1988 3.54 1.88 -0.17 3.33
2000 0.75 1.60 2.70 4.22
Mean 3.30 0.78 2.27 4.91
Standard Deviation 1.67 1.92 1.98 1.35

The mean economic growth for all years with a Republican president from 1960 to 2004 is 2.81.

This pattern is unlikely to be caused by chance. For a fuller analysis, see Alternative Explanations.



While I'll leave the statistical analysis there, a few comments on the exceptional nature of economic performance during presidential election years of Republican administrations might be in order Four percent, or better, might be considered "good growth." (4% is something close to the median rate.) The economy performed that well during five (of six) fourth years of Republican administrations and only three (of 18) other years. Were growth even for the four years of a presidential term, 25% (very slightly less, due to compounding) of the growth would occur during the fourth year of the term. In fact, all six Republican terms had more than 25% of their growth in the fourth year. Five of the six had more than 30% of their growth during the fourth year.

As the fourth year is the presidential election year, the hypothesis that this pattern is a result of deliberate, planned, action tempts one. Further consideration makes this hypothesis less persuasive. The second year is , after all, a year of Congressional elections. The president wants and needs more congressmen of his party. On the other hand, he has less reason to want a successor of his party. Moreover, two of the three slowest fourth-year growths were when incumbents were running -- including the weakest growth of all.