Voters Prefer More Money to Less

Here at The Prospect, we like to stress the extent to which presidential elections are determined by macroeconomic variables, like unemployment. But there's always the risk of being a little reductive, and The New York Times falls into that trap with this piece on the subject:

No American president since Franklin Delano Roosevelt has won a second term in office when the unemployment rate on Election Day topped 7.2 percent. [...]

Ten presidents have stood for re-election since Mr. Roosevelt. In four instances the unemployment rate stood above 6 percent on Election Day. Three presidents lost: Gerald Ford, Jimmy Carter and George H. W. Bush. But Ronald Reagan won, despite 7.2 percent unemployment in November 1984, because the rate was falling and voters decided he was fixing the problem.

Alone, the unemployment rate won't predict the outcome of a given presidential election. Parties have lost control of the White House during periods of historically low unemployment (Stevenson in 1952, Humphrey in 1968 and Gore in 2000), and have retained it during periods of relatively high unemployment: Ronald Reagan in 1984, George H.W. Bush in 1988, George Bush in 2004. Insofar that there's a leading macroeconomic indicator for presidential elections, it's the growth in real disposable personal income per capita. Simply put, when people are better off financially at the time of an election than they were the previous year, they are more likely to reelect the incumbent or his party. As it stands, the forecast isn't great for President Obama. Harry Joe Enten explains:

According to the BEA's prior April report, RDPI grew at 1.8% in the fourth quarter of 2010 over the preceding quarter and 2.9% in the first quarter of 2011. Last Friday, the BEA re-adjusted those numbers to 1.1% and 0.8%.

Why should the President be worried?

It turns out that weighted* quarterly growth in RDPI (along with three other already known variables* for the 2012 election) over the President's term can account for 92.9% of the variation in the incumbent party's percentage of the two-party vote in the 1952-2008 Presidential Elections.

He provides a chart:

If he's up against a fringe candidate -- like Sarah Palin, for instance -- Obama won't have much trouble in his bid for reelection. But if Republicans nominate someone with the appearance of credibility (Pawlenty or Romney), then Obama stands to lose if the economy doesn't improve.

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