Why the Weak Economy Doesn't Doom Obama

Why the Weak Economy Doesn't Doom Obama

By Sean Trende - August 24, 2012

Why isn't Mitt Romney doing better in his quest for the presidency? That's the question a lot of pundits, left, right and center, are asking. Given the weak economic recovery and the president's tepid approval ratings, one might expect Romney to run away with this.

The answers usually come back to those offered up Friday by Charlie Cook, the dean of Washington psephologists: Romney is a weak candidate; Romney’s advertising has been weak; Romney didn’t reach out to Latinos; Paul Ryan was a poor veep choice.

I’ve expressed agreement with many of those criticisms to varying degrees. But there are two important things to bear in mind. First, summer polling has been amplified by the 24/7 news cycle, yet it is of limited utility. The correlation between summer polls and fall outcomes is weak; one need only look at years like 1980 and 1976 to reach this conclusion.

Even so, I doubt that Romney will win by more than a few points, if he wins at all. Obama’s job approval today is at 48 percent, right at the political Mendoza Line (as Josh Kraushaar once put it) separating acceptable mediocrity from unacceptable mediocrity. With job approvals above 45 percent, it is unlikely that Obama would lose by more than a few points, if he loses at all.

More importantly -- and I think a lot of commentators miss this -- the economy isn't as bad as it was in 1980, or even in 2008. Yes, the recovery is weak, and is weak enough to endanger Obama's re-election bid.  But it is still a recovery, and might be strong enough to re-elect the president.

Indeed, if you look at various econometric models of the election, the lion’s share (10 of 13) predict an Obama victory in the fall. Only two, Douglas Hibbs’s “Bread and Peace” model and Alfred Cuzan’s model, give Romney an overwhelming shot at winning.

Of course, the downside of these models is that they tend to focus on a single economic variable, and most include endogenous data such as presidential approval or even polling data. So I wanted to look at a heuristic device I developed, based on an approach I took in the winter, which tries to take a holistic look at the economy.

The technique is as follows. In late 2011, Nate Silver identified a host of economic variables that correlated with previous presidential election outcomes. I took those variables with a fairly robust relationship to presidential election outcomes (r-square of more than 0.25). Then, to eliminate double-counting (or if you prefer, multicollinearity), I went through and excluded variables that correlated strongly with other variables (r-square of more than 0.6). Basically, there’s no need to include changes in real disposable income and changes in per capita RDI, since those both tell us roughly the same thing.

That left me with the following economic variables (all taken over three quarters or nine months): the ISM Manufacturing Index; change in non-farm payrolls; change in the unemployment rate; change in real personal income; change in the employment-to-population rate; real GDP growth; real non-farm output; and changes in real commercial and industrial loans.

I then went through and ranked each presidential year for each economic variable. For example, the best ISM Manufacturing Index we’ve ever seen was in 1984 (61.7), so it was ranked first. The worst was 1980 (11), so it is ranked last.

The results are as follows:

I then averaged the results for each variable to try to get an overall “rating” of the economy. The results are as follows.  Note: The incumbent party share of the vote is listed by "two-party vote," which basically eliminates third parties.  Without it, you'd conclude the Democrats in 1968 did substantially worse than the Democrats in 1960, even though those elections were both very close:

Again, this is meant as a rule of thumb rather than a precise measuring, although the rank order actually correlates with the outcomes pretty nicely (the r-square is 0.66, which is about the best you can expect from a rank ordering).

Looking at these charts, you can readily see that 2012 is simply not a year like 2008 or 1980, which stand as the worst or second-worst presidential years in recent history in almost every category. Nor, of course, is it a year like 1984, 1964, or 1972, when the economy was going full-bore ahead. We also see 1968 stand out as a year where the economy was strong, but outside forces disrupted what should have been an easy re-election effort for the party in power.

Instead, this is a middling sort of year, like 1960, 1976, 2004, or 1992, where the economy is limping along, but not contracting. Those years have generally produced close elections. In fact, those elections describe what I see as something of a “95 percent confidence interval” for this election – i.e., I’m 95 percent sure the result will fall in between these elections -- a 4-to-5-point Romney win (a la 1992) or a 2-to-3-point Obama win (a la 2004). 

So think of it this way.  In 1980, Jimmy Carter didn't have an argument for re-election that appealed very far beyond the Democratic base.  Similarly, in 1984, Walter Mondale simply didn't have much of an argument for getting rid of Ronald Reagan.  The Republicans didn't have a good argument for holding on to power in 2006, nor did the Democrats in 2010.  The elections reflect that.

This year, Barack Obama has an argument -- he didn't inherit the mess, and the economy is slowly expanding.  That's an argument that is probably good enough to get him to 46 or 47 percent of the vote.  Similarly, Mitt Romney has a pretty good argument for electing a new president, one that will shore up his base and Republican-leaning independents.  Thus, we should probably expect what we're presently seeing in the polls: a close race, to be decided by a relatively small slice of the electorate.

Sean Trende is senior elections analyst for RealClearPolitics. He is a co-author of the 2014 Almanac of American Politics and author of The Lost Majority. He can be reached at Follow him on Twitter @SeanTrende.

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