Is it the Economy? Second Quarter GDP and Predicting the Outcome of the 2012 Election
Posted at: 06/06/2012 5:53 AM
By: Dr. Timothy Kneeland | WHEC.com
Ever wonder how political scientists and pundits make their predictions about the outcome of a presidential election? For the next several months I will be sharing with you some insights into the methods used by pundits and politicos to predict elections. Some of these models are fun, some are serious, and some are just zany!
Elections are sometimes about big ideas, sometimes about personality or character, but more often than not elections are about the economy. As Bill Clinton’s advisor James Carville put it in 1992, “It’s the Economy, stupid.” Translated this means that people tend to vote for the person they think will deliver on jobs, economic growth, taxes, etc. Knowing that people are susceptible to economic trends led political scientist James Campbell to successfully predict the outcome of presidential elections using an econometric model. Campbell noticed a pattern in economic growth that was strongly correlated to the outcome of the presidential election. In fact, it accurately predicted the outcome of elections from 1952 through the present with one exception, the 1968 election.
In this model the growth of the economy, as measured by GDP (Gross Domestic Product) in the second quarter (or April, May, and June) of the election year is the key to predicting the outcome of the election. Note we are not concerned with the overall economic growth during the incumbent president’s term, just that one pre-election quarter. Using this Campbell found that if the GDP growth was 2.6 % or higher the incumbent president or his party won the election, on the other hand if GDP growth was 1.5% or lower the incumbent president or his party lost the election. Anything in between 1.6 and 2.5 % was too close to call. Second quarter GDP numbers will not be available until the end of July and even then these numbers will be revised by the government in August and September to make them more accurate.
Rather than wait until nearly the end of summer, many pundits take a short cut and go to the Federal Reserve Bank of Philadelphia which predicts GDP growth in May -- their prediction is for a second quarter growth rate of about 2.4% which means the outcome of the 2012 presidential election is still too close to call.
Many people wonder what the effect of inflation and unemployment will be on the outcome of the presidential election. Unemployment and inflation have been insufficient economic indicators for the outcome of a presidential election. Therefore even if the unemployment rate hovers above 8% neither President Obama nor Mitt Romney have a predictable advantage using this measurement. In the end, it will be up to each candidate to make their case to the voting public on the economy, jobs and inflation all of which will remain campaign issues for the next five months. Sadly, this means that we will be treated to television ads, radio ads, and social media popup ads on economic issues for months to come! I suppose the good news here is that even if you have not already registered to vote or begun to think about the election you still have time to influence the outcome of the 2012 election which in the end is really in the hands of those who show up to vote!
Speaking of voting...my next blog will reflect on the outcome of the Wisconsin recall election of Governor Scott Walker—Democrats are dismissing it as insignificant and Republicans are claiming it is a harbinger of the presidential election. Leaving spin aside I’ll give you my thoughts soon.