Economy has grown the most when Democrats have been in power

Earlier today, I linked to a Goldman Sachs research note arguing that the most fiscally conservative outcome in the 2012 election would be an Obama victory and Republican control of Congress. But their analysis was limited to deficit reduction. Last week, JPMorgan looked at this question using a broader lens: what happens to the economy under Democratic and Republican presidents, and Democratic and Republican Congresses?

(SOURCE: JPMORGAN) The economy has grown the most when Democrats have been in total control of Washington. But, interestingly, it’s grown the least when there’s been a Democratic president and a split Congress--our current scenario. But those are precisely the political conditions under which the stock market tends to perform the best, as well as the scenario that Goldman Sachs believes would lead to the most deficit reduction in 2013.

(SOURCE: JPMORGAN) Correlation, of course, doesn’t mean causation: The party in power didn’t necessarily produce all the gains in the GDP or the stock market, or lack thereof. Voters could be more inclined to vote for Democrats when the economy is picking up. Or, given the relatively small sample size, the results could simply be random. And quite a bit of new policy includes a lag between passage and implementation, so it’s possible that some of these congress/president combinations deserve credit for growth that came on somebody else’s watch.