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Will the economy (stupid) again determine the outcome of a presidential election? Based on two important economic measures that I've examined and their relationship to the presidential races since 1956, Obama supporters have cause to worry.
All but the most recent of those races featured an incumbent, whether it was a sitting president (nine races out of 13) or a vice president seeking to move into the Oval Office (four out of 13). Based on consumer spending and unemployment—the two variables I tracked—Obama probably would have lost had he run for re-election this past November.
The numbers have improved since then, but not enough to tip the odds in the president's favor. (See summary data in the table below.)
*Voters' Economic Well-Being = Consumer spending growth minus the jobless rate
For my first variable, I took the percentage increase in real consumer spending in the last six months of the year in which the election was held, compared with the previous year's last six months. That's a more tangible sign of confidence, in my view, than surveys of confidence.
For my second variable, I examined the rate of unemployment for married males over the last six months of each election year. This provides a more continuous measure of labor's pain over the past half-century than the overall rate of unemployment, whose demographic mix has changed over time.
To compute my measure of voters' economic well-being, or VEWB, I subtracted that bad thing, the married-male unemployment rate, from the good thing, the rate of increase in real consumer spending, and got a single number.
In seven of the 13 races, the incumbent won. In six out of those seven, the VEWB was flat or positive. In one race, the VEWB was slightly negative, and the incumbent also won (Dwight Eisenhower in '56).
According to the data, then, a flat-to-positive index is virtually required for an incumbent to win. Also, no one has ever won with an index as negative as Obama's is now. But a positive index doesn't guarantee victory. In the six of 13 races the incumbent lost, the VEWB was negative in three but positive in the others.
STARTING FROM THE BEGINNING, incumbent Eisenhower's win in 1956, even with a small negative VEWB, was followed by V.P. Richard Nixon's loss in 1960 with a much larger negative. Lyndon Johnson won re-election in '64 with a positive VEWB, followed by V.P. Hubert Humphrey's loss in 1968 despite an even larger positive. Incumbent Nixon won in '72, with a positive index, while incumbent Gerald Ford lost in '76, despite a small positive. Incumbent Jimmy Carter lost in '80, with a huge negative, while incumbent Ronald Reagan won in '84, with a flat VEWB.
V.P. George Bush won in '88, with a positive index, but lost in '92—by then his VEWB had gone negative—against a challenger who campaigned on the concept that "it's the economy, stupid." Incumbent Bill Clinton won in 1996, with a positive index. But V.P. Al Gore lost with a positive index (although he won the popular vote) to George W. Bush in 2000, who in turn was re-elected with a flat index in '04.
Last November, Obama's VEWB would have been the second-worst since 1956 (behind only Jimmy Carter's in 1980). Sure, the president's number could turn at least flat or maybe even positive by November, but that's quite unlikely. However, as my data show, it isn't always the economy (stupid) that determines presidential elections. But it sure helps the incumbent if the economy is healthy when he seeks a second term.
E-mail: gepstein@barrons.com
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