Friday, August 12, 2011

Fortune-Telling the Presidency

Can social science fortune-tell the results of the presidential election? Of course not. Culture is too complex, especially in an age of rapid technological change, globalization, and recent wild economic swings. Having said that, there are some historical precedents that can be useful.

First, of all the candidates in the 2000 election, 90% with the most campaign contributions won. This doesn't necessarily mean that money bought the election, since contributions themselves can be a reflection of who the voters liked best. As this relates to the upcoming presidential election, as of mid-July 2011, the Obama campaign earned almost 3x all of the GOP candidates combined, and it is predicted that Obama will get over $1 billion in contributions. That is a tough number to beat, even for millionaire front-runner Romney.

Second, as I mentioned in an earlier blog, while it seems like our nation is lurching back and forth between liberal and conservative politics, that switch isn't cultural, but rather, an artifact of our winner-take-all political system. Culture itself is fairly evenly divided, and most of us fall in a large centrist camp. Historically, our presidential elections don't seem to evidence a radical left and right cultural lurch, but a slow meander back and forth over the center. Here's what I mean--if you look at the presidential party changes since 1900, we have a fairly predictable rotation. We like to keep our presidents in office for their full 8 years, and at the end of a president's service, we like to switch parties. This may be an angry, lurching mandate against the party previously in office, but because of the predictability, I see it as simply a slow meandering back and forth. The longest stretch we have had with a 1-party presidential track were the FDR-Truman years for the Democrats (1933-1953). Otherwise, our next two longest stretches were the Republican between-World-Wars, Harding-Coolidge-Hoover years (1921-1933) and the Reagan-Bush years (1981-1993). In each of these three cases we saw a Vice President take office either by presidential death, or end of legal term, except for Hoover, who, it could be argued, was simply taking over for Coolidge's 2nd term, who had declined to run. Otherwise the rotation has been surprisingly predictable for the last 100 years: 8 years of one president, then switch parties.

Third, it is constructive to explain the divergences from the "8-year president then switch parties" pattern. While multivariate and complex, a simplistic model of two variables is highly predictive: 1) economic growth (GDP) during the year of the election, and 2) change in unemployment rate from the year prior to the election to the election year itself. As a baseline, I took these averages (median) just from the year of and prior to presidential elections with the following real GDP growth and unemployment rates, respectively, since 1904: 2.3% and -6.4%, meaning that the years of presidential elections, we tend to have an increase in real GDP growth of 2.3%, and between the year prior to an election and the election itself, we have an average decrease in unemployment rates of 6.4%. However, when we look at one-term presidents (Hoover, Bush Sr and Carter; I ignore Ford since he simply took over for Nixon, thus representing the end of an 8-year cycle), their ending economies had growth rates of -5.1%, and unemployment increase of +22.5% (48% for Hoover, 22% for Bush Sr, and 11% for Carter)! Further, the 2-year and 4-year averages are far less predictive, indicating that just the election year change itself seems to create a 1-term president.

Were there exceptions to these exceptions--namely, were there times when the economy was bad that we stuck with an incumbent president's party, or times when the economy was good that we changed from an incumbent president's party? Yes and yes, but they are exceptions that prove rule #2 above. Since 1913, we have only twice kept an incumbent president's party during negative economic growth and worsening unemployment, both during the between-World War elections of 1924/1928, and neither of these represented continuations of the prior president's two full terms. In the first instance we re-elected Coolidge for one term, who had taken over the presidency after Harding's death, followed by the election of Hoover for one term. The larger context is that at the opening of the 20s there was a profound spike in unemployment and a declining real GDP, ushering in a new presidential party with Harding. While both of these Republican elections (Coolidge and Harding) had slightly negative economic indicators, they were far better than that of the early 20s, and all three of these presidents combined still only create a 12-year run, none of whom could claim 2 full terms in office. On the other hand, we almost always rotate out presidential parties despite good economic indicators when their 8-year term limit is up. In fact, the only time we have failed to rotate out an incumbent president's party since WWII was Bush Sr, a Vice President, who of course lasted only one term.

For the upcoming election, each of these bodes well for President Obama. Clearly, it seems he will win on money, plus he wins on our historical proclivity for preferring 2-term presidents. The one factor that seems to be able to produce an historic reversal of this pattern, assuming the other patterns hold, is a worsening economy as measured by real GDP and unemployment. While the economy so far has been bleak, polls still show consistent "Bush blame" for the downturn, and similarly, there has been a widespread shift away from Republicans tied to Tea Party. Two questions that persist for me is whether this Bush/Tea Party-Blame will last until the end of 2012 when we actually go to the polls, and whether unemployment will improve. If we see some improvement, even a slight improvement between this year and next, Obama wins, assuming the statistical trends hold. However, even if conditions worsen, the other factors may override a negative economy, assuming Bush/Tea Party-Blame persists.

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