It's the economy, stupid... right?

Commentator and economist Patrick Anderson puts the theory of "it's the economy, stupid" to the test.

Back in 2004, a colleague and I created something we called the "pocketbook model" to predict the outcome of presidential elections. It considers just five simple variables: unemployment, income growth, inflation, whether we're at war, and third-party candidates. We ignored poll data, approval ratings, personalities, campaign spending, debate performances, advertising, and even the names and positions of the candidates.

Instead, we started with the assumption that most Americans generally reward the incumbent party with their vote when the economy is good, and punish them when it's not. And it turns out this "pocketbook" model has a pretty good track record. If you look back at all the presidential elections since 1916, the model correctly predicts the winner of the popular vote in 21 of the 24 contests.

More recently, the model predicted the outcome of the last three elections to within a couple percentage points, mostly using information that was available months in advance.

In the three cases the model didn't work, voters seem to have had other things on their minds. In 1952, 1960, and 1976, the economy was doing well, but the incumbent party lost all three elections. The Cold War likely handed Eisenhower the White House in '52, Kennedy's made-for-TV charisma narrowly beat out Nixon in 1960, and disgust with Watergate ushered in Carter in 1976.

So what does that tell us about 2012? Right now, the pocketbook model suggests chronic unemployment and sluggish growth will make President Obama a one-term president. If things improve enough between now and Election Day, he might still have a shot. But at this point, there doesn't seem to be anything on voters' minds big enough to trump the economy.

About the author

Patrick Anderson is founder and CEO of the Anderson Economic Group.
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Will Democrats, progressives, and independents ever stop allowing neo-conservative Republicans to frame debates by putting them all on the defensive? If this economy tanked tomorrow, complete with bank closures, bread lines, and roaming gangs of armed militants, it wouldn' be a referendum on Barack Obama's presidency, because we're looking at thirty years of failed neo-liberal economic policies, and what we've seen is only a slimmed-down continuation of the same. Who's talking about expanding the public sector, and gutting defense to do it? Who's advocating for nationalizing ExxonMobil? The best defense is a good and well-reasoned offense. Maybe it's time to start nationalizing these companies while they're profitable, instead of after Wall Street has raped them for all they're worth and then handing the whole mess over to taxpayers and consumers for generations of financial rationalization.

Obama's re-election & the economy.
By ALL measures the economy is improving. Newsweek announced 3 years
ago that the recession was over. But this is using the traditonal definition of
recession as 2 or more quarters of negative GNP growth and according to the
government, we were and continue to be, growing, so no recession? Right?

Let us consider the statistic that seems to have the most weight:
unemployment. I want to ask a question.
Why is the current unemployment rate (8+%) considered to be so BAD?
Most economists consider a 5% unemployment rate to be FULL EMPLOYMENT
because 5% represents the amount of frictional unemployment or the normal
amount produced by people transitioning between a change of employers
seen in the best of times.

So our current unemployment rate is a whole 3% above the rate considered to
be FULL EMPLOYEMENT. THREE PERCENT!!! Methinks the lady, or the press
or the opposing political party, complains too much. If Obama loses the
election it should NOT be because of the economy and especially NOT
because of unemployment.

I'm disappointed that marketplace did not find an economist to present this
point of view. The commentator that you did chose to air, who claimed that the
economy argued against Obama, was quite wrong. If Obama loses because of
"bad economy" then the truth has lost and false propaganda has won.

Sadly, I agree. Obama wins against a party that can't seem to find anyone that resonates with the independents that always decide the election. That's the confounding variable in this year's data set that will make Anderson 21 for 25. As Vera Lynn sang, keep smiling through, just like you always do, till the blue skies chase those dark clouds far away.

Commenter samiinh points out (correctly) that the Republican candidate "has nothing new to offer". But the Democratic incumbent (and party) also offer nothing new, except more deficit spending. Can't we have some candidates who can think?

The model stated within this "paradigm" created by Anderson seems to state the obvious: when something amazing occurs voters pay attention. I think Anderson is happily commenting on the "rules" but not the exceptions. He is overlooking the obvious - Americans, generally, are not stupid enough to believe the party line; they hate the divisions caused clearly by Republicans. And they know that the money lost by deregulation of Wall Street was the result of George Bush letting his buddies run amok (in addition to the repealing Glass-Steagall by Clinton). Nobody with any intelligence blames Obama for the financial meltdown! I (literally) will bet Anderson money that Obama wins in 2012.

I don't know about models, but in 2012 the Republican candidate has nothing new to offer but the same old tired failed policies that we've lived with for the last 30+ years and I think people realize that changing horses in this stream will mean greater failure. Corporations are doing well, the stock market is back, and more jobs have been created in the last three years than in all of the Bush years. One war is over, the other will draw down soon. Even the republicans don't like the candidate whose wife thinks its "their turn." Obama will win in Nov.

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