It’s hard to hear a conversation about the 2012 presidential election and not hear either a Democrat gloating about the weakness of the GOP field or a Republican lamenting the lack of a strong candidate.
True or not, this focus on personalities drives me crazy because it ignores that incumbent reelections are more referenda on the current president rather than contests for president of the high school senior class.
It also ignores the importance of the economy. Americans tend to vote their pocketbooks and their sense of economic security and well-being is paramount in the presidential voting decision-making process.
If only it was as simple as someone walking into a Baskin Robbins and having to choose between strawberry and pistachio.
Keep in mind the rule of thumb is that the U.S. economy, as measured by real gross domestic product, needs to grow at a rate of about 3 percent a year or more to generate a meaningful increase in jobs. Then recall that real output shrank 2.6 percent in 2009, edged up 2.9 percent last year, and appears likely to climb even less in 2011. The chances of 2012 coming in under 3 percent are very real.
On Friday, the International Monetary Fund released its latest economic forecasts, projecting that U.S. GDP will grow only 2.5 percent this year. A new World Bank estimate sees 2.6 percent growth, the same as the early June survey of 51 top economists by Blue Chip Economic Indicators.
For 2012, the IMF survey predicted 2.7 percent growth, the World Bank 2.9 percent, and the Blue Chip consensus was 3.1 percent.
Notable about the Blue Chip survey, taken at the very beginning of the month, was that 19 of the 51 economists canvassed predicted that growth will come in below 3 percent in 2012. Twenty of the 51 had revised their forecasts downward from a month earlier. Just six forecasted growth right at 3 percent.
With more gloomy economic news since the last survey was conducted, don’t be surprised if the next consensus forecast comes in below that 3.1 percent level.
Later this week the Federal Reserve will release its latest estimates. Fed forecasts in recent months have been more relatively optimistic, so watch to see if policymakers ratchet down their outlook.
If economic growth continues along such a plodding pace, President Obama’s administration could be defined by minimal progress on jobs.
This could mean unemployment could be well above 8 percent on Election Day.
And there are other important indices to watch besides real GDP growth and unemployment. One is gasoline prices.
Although prices at the pump have declined since their spike this spring, they are still more expensive than a year ago.
What is so powerful about gasoline prices is that motorists are reminded every time they drive past a gas station that prices are higher than they are used to. If they stay around today’s levels, voters may decide this is the new normal, and they won’t like that one bit.
Political scientists and economists have long pointed to changes in real disposal personal income as the best single predictor of presidential voting behavior.
Though it isn’t a headline economic number, real disposable income (inflation-adjusted personal income minus taxes) is a good, broad measurement of economic well-being. This is why political scientists believe it is a great predictor of voting behavior.
Year-over-year, the change in real disposable income right now looks steeper than a black diamond ski slope.
Modeling by Douglas A. Hibbs Jr., the retired chairman of the Economics Department at the University of Gothenburg in Sweden, shows an astonishing degree of correlation between change in real personal disposable income and the presidential vote share of the incumbent party’s presidential candidates.
The only major deviations were in 1952 and 1968, during periods of high casualties in the Korean and Vietnam wars, respectively.
That finding led Hibbs to come up with his “Bread and Peace” presidential voting model, which uses change in real income and cumulative military casualties as its two components. Although Obama inherited a terrible economy and two wars, the combination of the two, if Hibbs’s model holds up in 2012, suggests that he is in for a very difficult reelection campaign.
As of the end of May, his model, obviously subject to change as newer real disposable numbers and casualty figures come out over the next 16 months, suggested the incumbent will receive just 44 percent of the two-party (independent and third-party votes excluded) vote.
Toss in the continued drop in home values and the stock market’s recent drop, and there is little wonder why voters are so down or why the “bin Laden bounce” was so brief. It’s also why this Republican nomination is so valuable.
None of this means Obama can’t win reelection.
It’s just that there are a lot of factors that will go into whether he gets his contract renewed, factors that go well beyond whom Republicans choose to be their nominee.
Fundamentals matter in politics; too often the focus is on personalities. The identity of the Republican nominee is obviously important, particularly if the race is as close as many expect.
But the fundamentals are what make the contest close or less competitive.
This article appears in the June 21, 2011, edition of National Journal Daily.
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