When Bill Clinton ran against George H.W. Bush, the 1992 November unemployment rate was 7.4% while during the previous June, it touched 7.8%. You can see why the big sign in his campaign HQ said, “It’s the economy, stupid.”
Now, Mrs. Clinton’s economic statistics are somewhat different. Updating the Trump/Clinton dot (below), we have to move it down and to the left because the June unemployment rate was 4.9% and the 2nd quarter GDP growth rate slid to 1.2%.
The sweet spot for the incumbent party would be the upper left quadrant:
Predicting the Presidential Election
According to research from Yale economist Ray Fair, we can use four questions to predict who has the best chance of becoming our next president.
- Is the current president running again? If yes, there is an incumbent bias.
- For how long has the current political party controlled the White House? The longer the party is in control, the less the chance of winning.
- Is the Republican Party nominee likely to benefit from a slight Republican Party bias?
- What is the state of the economy? A better economy favors an incumbent party.
The Fair Model
Using data from the past 25 presidential elections, Dr. Fair currently concludes that Hillary Clinton will get 44% of the vote. He believes her problem is the economy. Because she is not an incumbent and the Democrats have been in the White House for eight years, she needs more of a boost from the GDP.
I copied the following numbers from Dr. Fair’s website.
- G is the real per capita GDP growth rate.
- P is the real GDP growth rate.
- Z is the number of quarters in Obama’s 2nd administration with a real per capita growth rate exceeding 3.2%.
- VP is the Democrats’ % of a two-party presidential vote.
- VC is the Democrats” % of a two-party vote for the House vote.
However, Dr. Fair also says,
“It is no secret, of course, that Donald Trump is an unusual choice for a candidate. It may be that people who would otherwise vote for the Republicans because of the sluggish economy and a desire for change will vote for the Democrats because of Donald Trump’s characteristics that they don’t like. If so, then one might say that personalities overwhelmed the economy in affecting voting behavior for this election, which means that the equation’s predictions could be way off.”
Our Bottom Line: The Economy and the Election
So yes, we can say that as economists we support international trade because we agree with David Ricardo that comparative advantage counts. Or we could hope for tax rates with more productive incentives that spur economic growth and a more vibrant GDP.
Instead though, we are in uncharted territory this year and it is not, “The economy, stupid.”
My sources and more: A perfect overview in this LA Times article establishes a good springboard for grasping Dr. Fair’s model. But also, this NY Times Upshot column provided the insight we need about past elections.