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Personally, one of my least favorite things to discuss, especially in an election year like this one, is who is right and who is wrong between the various political parties in the the US.
Why is this? Simple – because it is almost a lost cause to get someone to change their mind about their beliefs in this area. As such, these conversations usually just turn in to arguments for the sake of arguing, which I am not a big fan of. In my book, everyone is entitled to their own opinion, and that is fine by me!
However, one of the things I do enjoy researching and sharing are the various financial differences between Democrats and Republicans based on available data.
For example, in Jeremy Siegel’s book, Stocks for the Long Run, his team analyzed the various returns of the stock market when Republicans vs. Democrats held the Presidency and found that from 1948-2001, the annualized real return for when Democrats were in office was almost 5% higher than for Republicans. This was fairly surprising to me since Republicans are often generalized in the financial media as being the party that is more interested in the success of private industry.
As a continuation of the Democrats vs. Republicans financial comparison, today, I wanted to try to seek an answer to the following two questions based on available data:
- Are Democrats or Republicans wealthier (as far as personal finances go) in the US?
- And, who is better at creating wealth?
Based on the general impression given by the financial and political party campaign media, I would guess that Republicans, on average, have more personal wealth and are better at creating wealth in the US than Democrats.
Comparison of the Political Affiliations of the Richest People in America
Starting at the top sounds like a good place for us to begin our numerical investigation. In other words, the first thing I looked for was a listing of the political affiliations of the top 20 richest people in the US, based on the Forbes Richest Person in the World listing.
Luckily, a study in 2011 by the New American Gazette had already analyzed this data exactly the way I was wanting to.
What they found was that 75% of the top 20 richest people in America support the Democratic party. Even George Soros, a stock market financier, was listed as being a Democrat. In fact, Bill Gates, Warren Buffet, Larry Ellison (the top 3 wealthiest on the list), and the two Google principals were all associated with the Democratic Party. This was rather surprising to me!
Comparison of Congressional Representatives
Moving down the ranks of richest people in America (now to the tens to hundreds of million Dollar net worth level), the next groups that we come to where political affiliation is very easy to identify are individual members of the House of Representatives and the Senate. By now, I’m sure we’re all fairly well aware that nearly every member (regardless of political party) in Congress is wealthy and a millionaire.
- In the Senate, the Democrats appear to be slightly wealthier, with a median net worth in 2010 of $2.69 million compared to $2.43 million for Republicans. Honestly, this is hardly any difference at all, and I would actually consider them to be tied for wealth for practical purposes. Source.
- In the House of Representatives, Republicans seem to be significantly wealthier, with a median net worth of $834,250 compared to $635,500 for House Democrats. Source.
Comparison of Political Affiliations of “The 1%”
Does anyone remember 2011? It seemed like you couldn’t even turn on the TV or bring up a web browser without hearing about the infamous 1% protests, etc. I even got to see the 1% protest / Occupy Wall Street camp in the heart of New York City during my girlfriend’s ING New York Marathon in November!
According to a 2011 Gallop Poll, the wealthiest 1% of the US population is defined as earning an annual income of $500,000 or more. The results of this study showed that the largest percentage (41%) of the 1%’ers identify themselves as “Moderates/Independents.” However, when it comes to voting, a majority (57%) tend to lean/vote Republican.
Wealth & Political Affiliations for the Rest of Us
When it comes to determining if more normal-income earning Democrats or Republicans are more wealthy, the conclusions become VERY complicated, but rather interesting!
Listed below is a summary of what I found in digging around the Internet:
- The 10 poorest states in the US according to average income levels (Arkansas, Mississippi, Tennessee, West Virginia, Louisiana, Montana, South Carolina, Kentucky, Alabama, and North Carolina) by majority, vote and are represented in Congress by Republicans.
- According to USA Today, Slate.com, and CityData.com, the wealthiest overall geographic locations (counties and states) in the US tend to vote, by majority, Democrat. In other words, these areas had higher overall average incomes compared to locations that voted majority Republican.
- However (and here’s where it gets interesting!), according to slide 9 of a University of Arizona academic report, when the entire overall voter population is taken in to consideration, the majority of wealthier voters ($100,000+ income per year) tend to vote Republican, and the majority of less wealthy voters vote Democrat. This same finding was confirmed by other reports I came across online as well.
At this point, we have a little bit of disparity on our hands. Or, at the very least, these results seem rather confusing. On one hand, we have that across the entire US population, richer voters tend to pitch their ballot for Republicans. However, geographic areas where on average, there are wealthier people are Democrat. At this point, you may be asking – what is the reason for this? Or furthermore, is this even possible?
As far as I understand it, there are two agreed-upon reasons in the literature for this seemingly odd paradox:
- In states/geographic locations with overall lower incomes, the lower-income earners tend to vote Republican.
- And, in locations with overall higher incomes, the higher-income earners tend to vote Democrat.
Are Democrats or Republicans More Effective at Creating Wealth?
From the paradoxical reasons mentioned above, an interesting question presents itself: are these wealthy locations wealthy because they are Democrat, or do locations already with high concentrations of wealth just tend to vote more majority Democrat? In other words, is being Democrat the cause, or the effect of high concentrations of wealth/high income earners in an area?
In terms of more measurable quantities, (if we investigate the ’cause’ route) the question might become – are Democrats more effective than Republicans at increasing average income levels and Gross Domestic Product (GDP)?
Listed below is a summary of the various results I found relating to this question:
- In his book, Unequal Democracy, Princeton professor, Larry Bartel, analyzed the average annual growth rate in real income levels in the USA from 1948-2005 during Democrat and Republican Presidencies.
- His results showed that across all income levels, average annual incomes increased more under Democrat Presidents than Republican Presidents.
- In addition, I found a Bloomberg report showing that more private jobs have been created during the times that Democrats have held the White House than Republicans since 1961 .
- Lastly, I found a FoxBusiness report showing that since 1949, the GDP increased an average of 4.2% per year during Democrat Presidencies versus 2.6% when Republicans controlled the executive branch.
From this data, it seems that Democrats are more effective at creating wealth, at least at the country-wide level, than Republicans.
Since all of this can get a little convoluted, let’s summarize the key things we found from this investigation:
- If you take the entire US population in to consideration, Republicans voters are in fact, individually more wealthy, as was suspected in the initial hypothesis. Because of this, we could say that they are better at creating self-wealth than Democrats.
- However, a majority of the top 20 wealthiest people and wealthiest geographical locations in America are Democrat.
- In addition, the statistics show that Democrats are also better at increasing the overall wealth of the nation in terms of GDP, average income, job creation, and the stock market.
Another key takeaway for me from this post is that I now do not believe either party can be universally called “the party of the wealthy” or “the party of low-income earners,” since there clearly are very wealthy and not-as-wealthy people on both side of the political party aisle.
Share your experiences by commenting below!
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