Democratic Views on the Economy

How Democratic Presidents Have Historically Approached Economic Policies

Former Presidents Bill Clinton and George W. Bush speak onstage
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Democratic presidents have historically promoted economic policies that benefit low-income and middle-income families. They often believe that reducing income inequality is the best way to foster economic growth because low-income families may be more likely to spend any extra money they have on food, medicine, and shelter. This increases more demand than policies that benefit businesses or wealthy families who are more likely to invest extra income. 

Democrats often look at the American Dream as the right to education, a good job, decent housing, and health care. President Franklin D. Roosevelt (FDR) first outlined the Economic Bill of Rights in his 1944 State of the Union address. President Harry Truman's Fair Deal proposed specific legislation to support this expanded vision of this dream. In 2010, Democrats made health care more accessible to all with the Affordable Care Act (ACA).

Furthermore, research shows that the economy actually performs better under Democratic presidents than when Republicans are in office. Learn more about how Democratic presidents have implemented policies over the years while in office to determine whether you agree they're good for the economy or not.

A Few Pros and Cons of Democratic Views

Pros
  • The ACA provided health insurance companies with revenue to cover those with pre-existing conditions by imposing a tax on those without insurance

  • A progressive tax system reduces the debt

  • Priority on spending more on social programs and welfare helps low-income families

  • Democratic trade agreements help protect American workers—they don't support protectionism

Cons
  • The ACA tax penalized people without health insurance

  • Raising taxes above 50% may slow economic growth 

  • Increased spending adds to the debt

  • Free trade agreements allow U.S. businesses to outsource work

Health Care

Democrats often believe the government should make health care affordable.

President Bill Clinton supported the Health Security Act of 1993. It was a managed competition strategy where the federal government would control doctor bills and insurance premiums. Health insurance companies would compete in this framework. It did not pass Congress, but Clinton was successful with two other health care reform measures.

  1. The Health Insurance Portability and Accountability Act (HIPAA) of 1996 made changes to COBRA's continuation coverage and now allows employees to keep their company-sponsored health insurance plan for up to 18 months after a job loss or reduction in hours.
  2. The Children's Health Insurance Program (CHIP) provides subsidized health insurance for children in families that earn too much to qualify for Medicaid.

President Barack Obama’s ACA slowed the rise of health care costs. It required everyone to have insurance or pay a penalty. This provided health insurance companies with revenue to cover those with pre-existing conditions.

Preventive care can help reduce expensive emergency room visits.

Taxes

Democrats often believe in progressive taxation. This means a higher tax rate on investments, large businesses, and high-income families. This includes taxes on capital gains and dividends.

Clinton raised taxes with the Omnibus Budget Reconciliation Act of 1993. It raised the top income tax rate from 31% to 39.6%. It increased the top corporate income tax from 34% to 35%. To ease income inequality, it taxed Social Security benefits for high-income earners and expanded the earned income tax credit.

Obama extended the Bush tax cuts and unemployment benefits through 2011. The American Taxpayer Relief Act cut payroll taxes by 2 percentage points and extended a college tuition tax credit. It also revived the inheritance tax that had lapsed for a year. 

Obamacare raised taxes on high incomes and investments.

Regulations

Democratic presidents have historically advocated for regulations to protect consumers. It's why they're often perceived as less business-friendly than Republicans.

For example, President Woodrow Wilson pushed for the Clayton Anti-Trust Act. FDR signed the Glass-Steagall Act of 1933, preventing banks from using depositors' funds to invest in the stock market and other high-risk activities

Democrats passed the Dodd-Frank Wall Street Reform Act in 2010. It regulates the financial markets and protects consumers. Its components make it less likely the 2008 financial crisis will recur. 

Social Welfare

Democrats typically spend more on social programs and welfare.

FDR created the Social Security Trust Fund and Administration, which provided income to the elderly, the blind, the disabled, and children in low-income families. LBJ created Medicare, Medicaid, and urban renewal initiatives. He championed civil rights and the War on Poverty, and his Great Society created the National Endowment for the Arts, Public Broadcasting Services, and drivers’ education. It also developed new programs to address crime as well as conservation.

Democrats also typically spend more on public infrastructure.

For example, to end the Great Depression, FDR rallied Americans to support the New Deal. The Works Progress Administration employed 8.5 million people to build public works. The Civil Works Administration created 4 million construction jobs. The Tennessee Valley Authority Act built power stations in the poorest area in the nation.

Democrats also often advocate for equality. For example, Wilson supported the 19th Amendment that gave women the right to vote and Truman's Fair Deal raised the minimum wage and prohibited hiring discrimination. 

Education

Democrats typically believe that every child should have the opportunity for high-quality education. That's one pathway to economic growth for the individual and the country.

FDR guaranteed the government would pay for education for all veterans when he signed the G.I. Bill of Rights. The Truman Commission Report proposed federal subsidies for higher education that laid the groundwork for the community college system. President Lyndon B. Johnson (LBJ) signed the Elementary and Secondary Education Act (ESEA) to provide federal funds to schools in low-income areas. The ACA allowed the Department of Education to make loans directly, eliminating the middle-man and cutting costs. 

These initiatives focused resources on those at the lowest income levels. They helped to make sure everyone has at least the basic skills to succeed in the labor force.

National Security

Three Democratic presidents and one vice president have received Nobel Peace Prizes for their work in fighting and winning wars and national security legislation.

Wilson entered World War I and received a Nobel Peace Prize for his Fourteen Points Peace program, which included brokering the Treaty of Versailles. President Jimmy Carter received the Nobel Peace Prize in 2002 for his work on the 1978 Camp David Accord. He also negotiated the Strategic Arms Limitation Talks II, also called the SALT II nuclear limitation treaty, with the USSR. Obama received the Nobel Peace Prize for his efforts to end the Iraq War.

Other Democratic presidents took initiatives for national security. FDR began gearing up for World War II even before Pearl Harbor. Truman ended World War II in the Pacific by dropping two nuclear bombs on Japan. The Truman Doctrine pledged the U.S. to assist any democracy attacked by authoritarian forces. Truman took an active role in the Korean War.

President John F. Kennedy supported the Bay of Pigs invasion. He blockaded Cuba to end the Missile Crisis. He also supported the military coup in Vietnam.

LBJ expanded the unpopular Vietnam War.

National Debt

Democrats typically offset deficit spending with tax increases.

For example, Obama contributed over $8 trillion to the national debt. He couldn't raise taxes because of the 2008 recession.

FDR increased the debt by 1,048%, which is the most percentage-wise, even though the total dollar amount was less.

FDR had to fight the Great Depression and World War II. He introduced the Keynesian economic theory, which generally says that the government should spend its way out of a recession.

Wilson was the second-largest contributor to the debt percentage-wise. His large deficit resulted from World War I.

Clinton created a budget surplus of almost $70 billion by raising taxes on the wealthy. Clinton had no recessions or wars during his presidency.

Trade

Democrats often want to make sure trade agreements protect U.S. workers. They traditionally support fair trade more than protectionism. But outsourcing has made them shift against many trade agreements in recent years.

Wilson signed the Underwood-Simmons Act in 1913. It reduced tariffs on manufactured goods and raw materials.

In 1993, Clinton signed the North American Free Trade Agreement into law. It's the world's largest trade agreement.

Obama's team negotiated the Trans-Pacific Partnership. It would have replaced NAFTA as the world's largest free-trade agreement, but the U.S. pulled out in 2017.

Climate Change and the Environment

Democrats are often committed to curbing the effects of climate change, protecting America’s natural resources, and ensuring air, water, and land quality.

They also often support conservation and efforts to stop global warming. FDR created the Civilian Conservation Corps to plant forests, build flood barriers, and maintain roads. FDR's Soil Conservation & Domestic Allotment Act counteracted the Dust Bowl and paid farmers to plant soil-building crops.

In 1997, Vice President Al Gore proposed solutions to climate change in the Kyoto Protocol international agreement. He received the Nobel Peace Prize for his lifetime work fighting climate change.

In 2009, Democrats proposed a cap-and-trade policy. The Waxman-Markey bill was defeated in the Republican-controlled Senate. Also in 2009, the American Clean Energy and Security Act was approved by the House of Representatives but it never passed the Senate.

In 2011, the Environmental Protection Agency used its powers under the Clean Air Act to limit harmful emissions.

In December 2018, the Green New Deal was launched by Congressional Democrats. It would cut U.S. greenhouse gas emissions in half by 2030. It has yet to pass.

Do Democratic Policies Work for the Economy?

Over the years, Democratic presidents have both fostered prosperity and experienced recessions and economic collapse. Clinton's policies helped created more jobs than any other president. By the third quarter of 2000, homeownership was 67.7%, shortly surpassed by the 2005 housing bubble. The poverty rate dropped to 11.3%.

FDR's policies ended the Great Depression by spending on job creation programs. He created Social Security, the U.S. minimum wage, and child labor laws, as well as the Federal Deposit Insurance Corporation (FDIC), which prevents bank runs by insuring deposits. 

Obama was president at the beginning of the Great Recession. His policies helped end it in the third quarter of 2009 with the American Recovery and Reinvestment Act. It spent about $501 billion on extended unemployment benefits, education, and health care, as well as jobs by allocating money to federal contracts, grants, and loans. It also cut taxes by $286 billion. Obamacare slowed the growth of health care costs. 

On the other side of the coin, Republicans have had similar experiences in office, too. Whether Democratic policies work for the economy may also depend on what matters to you. Examples throughout history may help indicate how future Democratic presidents will fare while in office, but they're not a guarantee. Do your research to learn how both parties have succeeded before coming up with your own opinions.

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