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Do Democrats Really Create More Jobs?

It turns out neither political party has a lock on job creation. Business owners hire when they feel secure.
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In a struggling economy, amid a tight election campaign, successfully claiming the mantle of job creation can make or break a candidate.

That's why President Bill Clinton made a splash Wednesday night, during a speech at the Democratic National Convention, with the claim that Democratic presidential administrations have had a better employment track record than their GOP counterparts.

"For 52 years now, the Republicans have held the White House 28 years, the Democrats, 24. In those 52 years, our private economy has produced 66 million private-sector jobs. So what’s the job score? Republicans, 24 million; Democrats, 42 [million]," Clinton said.

It's an important issue for small business owners, because they want to know which party's policies will be best for the nation's economic health--and, by extrapolation, for their own plans for business growth.

Getting Lucky

But while both parties want to claim superiority, it turns out the answer cuts across party lines.

While economists say the statistics Clinton cited are correct, it turns out Democrats may have benefited more from business cycles that had little to do with the presidency. Since World War II, more Republican presidents than Democrats have started their administrations with recessions under way.

Once that and other indicators--like employment rates, which tend to lag behind recoveries--are factored in, job creation per party becomes more of a wash.

"Presidential policies kick in during the second year of their administrations, and once you take into account the inherited economic conditions for presidents, there is no difference between the parties" for private sector job creation, says James E. Campbell, chairman of the political science department for the University at Buffalo.

Campbell has written extensively on the economic records of the presidents and party differences in relation to economic conditions after World War II.

Rival economic policies may even produce similar employment results, although the price tags may show up in different places: Democrats tend to favor upfront spending for things like stimulus programs--with more immediate effects but greater cost later on--while Republicans opt to pay upfront, through things like tax cuts, which may stimulate better economic conditions later on, Campbell says.

Congress & the President: It's Complicated

Another complicating factor: It’s Congress, not the president, that often sets policy. And in many instances in the last 50 years, the party that occupied the White House confronted a Congress led by the opposing party.

"If you look at some of the big things that happened politically, from the Reagan tax reform to Clinton tax reform, those took place during periods of divided government, when there was more negotiating," says John Dunham, managing partner of John Dunham & Associates, an economic consultancy in New York.

What small businesses want most is a stable business environment, which experts say includes a guarantee of government fiscal responsibility, and a fair regulatory and tax environment before they start hiring again. And both parties claim they will be able to provide those conditions.

"There is uncertainty everywhere you look, and that does not stimulate growth," Campbell says.

Last updated: Sep 6, 2012

JEREMY QUITTNER | Staff Writer | Staff Writer, Inc. and Inc.com

Jeremy Quittner is a staff writer for Inc. magazine and Inc.com. He previously covered technology for American Banker and entrepreneurship for BusinessWeek.




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