To determine which party has done a better job managing the economy, I looked first at the evolution of the unemployment rate since 1948. In addition to according pride of place to unemployment over inflation, I assumed that presidential administrations are at least partly responsible for the business cycle. This is a simplistic and somewhat arbitrary assumption, but it allows me to use Goals and Policies to formulate an opinion about which party has done a better job managing the economy (control of Congress is not represented in our graphs). When we look at the graph of the unemployment rate on page 15 of Goals and Policies, we see that the rate was lower when the following presidents left office, compared to where it was when they began their terms: Truman (Democrat), Kennedy (Democrat), Johnson (Democrat), Carter (Democrat), Reagan (Republican), Clinton (Democrat). Excluded from this accounting is President Obama, whose term has not yet ended (though his inheritance of a recessionary 10% unemployment rate and the current rate of 5.9% suggest he, too, will net an increase in employment). That is to say that for 100% of Democratic presidents (5/5) the unemployment rate was lower when they left office than when they entered, compared to 20% (1/5) for the Republicans. Going from these numbers, the Democrats have a clear advantage when it comes to the unemployment rate.
One conceivable rebuttal to this argument is that the Republican administrations inherited the postponed inflation that resulted from their Democratic predecessors’ inflationary policies, with all that portended for interest rates, investment, and (subsequently) unemployment during their terms. When we return to the graph, however, we see this argument is invalid, or at the very least inconsistent. After rising during the first years of the Eisenhower administration, the unemployment rate fell, plateaued, and rose again on two separate occasions before he left office. Unless the inflationary effects of the Korean War were postponed for a decade, and came in waves, Truman cannot be held primarily responsible for these rises. Likewise, the unemployment rate began to climb during the first few years of the Nixon administration, as the American presence in Vietnam declined. But it fell and began to rise again before he resigned. The increase in unemployment under Ford was therefore inherited from a Republican predecessor. The same is true for the rise in unemployment under George H.W. Bush.
A more convincing argument from the Republican perspective is that the dramatic peaks under Republican presidents were caused by political and economic events that were beyond the president’s control. For instance, it is likely that the initial rise in unemployment under Nixon had to do with the OPEC embargo. Similarly, the spike toward the end of the Bush administration came at the beginning of the housing crisis in 2008, for which the policies of Clinton’s White House and Greenspan’s Fed had as much to do as Bush 43. But this can also be said of Democratic administrations. The Vee-curve under Carter probably had something to do with the Iranian hostage crisis of 1979 and the resulting oil shock. The degree to which Nixon and Carter had control over the crises of 1973 and 1979, respectively, is the only way to settle this dispute.
It is also important to note that Truman, Kennedy, and Johnson all fought wars. The dramatic increase in government purchases during wartime likely drove down the unemployment rate for these three Democrats. The same can be said for Reagan’s defense expenditures (recall that Reagan was the only Republican who netted a decline in unemployment). One might well ask if low unemployment is an appropriate price to pay for the social consequences of fighting wars (though I doubt anything can be done about it if one concludes it is not).
Taking all these things into account, I am inclined to say the Democrats have done a better job managing the economy since Truman came into office. It is important to remember that I have assumed presidents can affect the business cycle and that unemployment is more important than inflation. Challenges to my argument must contend with those two assumptions.