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Macroeconomics and presidential elections
Commentators criticize many political campaigns as resembling beauty contests: looks, personality, and images created by public relations specialists are viewed as dominating recent political contests. But there is a growing body of evidence that economic circumstances have powerful effects on the outcomes of major elections.
Prosperity favors political incumbents and, apparently, the candidates of the party of the previous president. Economist Ray Fair has developed a simple statistical equation based on simple macro-economic variables—unemployment and growth of per capita real income—that "picked" the winner in the presidential elections held between 1948 and 1994.
Republican President Hoover did not stand a chance of reelection in 1932; the Great Depression that began late in 1929 (the year he took office) continued to worsen until 1933. Democrat President Franklin D. Roosevelt's reelection in 1936 occurred during recovery, as did his reelection in 1940. World War II yielded high levels of patriotic fervor and economic prosperity, ensuring Roosevelt's reelection for a fourth term in 1944. President Truman was reelected in November 1948, the month a business cycle reached its peak. Republican Dwight Eisenhower’s victory in 1956 occurred in the middle of an economic recovery from a 1954 recession.
Richard Nixon blamed a minor recession in 1960 for his narrow loss to Democrat John F. Kennedy. President Lyndon Johnson was reelected in 1964, in the middle of the longest economic recovery since World War II. President Nixon was determined to win by a landslide in 1972; per capita income soared in that election year, and his wish was granted.
Gerald Ford (who became president after Nixon resigned amid the Watergate scandal) lost his 1976 bid for reelection to Jimmy Carter because the economy was still weak from the "energy crisis" and a severe recession in 1975. The double-digit inflation and growing unemployment in 1979 and 1980 doomed President Carter to his loss to Ronald Reagan.
President Reagan's goal of stimulating rapid economic growth through incentive-based supply-side policies was frustrated by the Fed’s disinflationary policies in the early 1980s, but a strong recovery that began in 1983 swept President Reagan into another four-year term.
This recovery continued through the 1988 election, which was won by George Bush. Between 1983 and 1988, unemployment fell steadily, finally reaching 5.5%, the lowest rate in nearly two decades. Inflation, which had been at double-digit rates in 1981, had stabilized by 1988 to a rate that most people perceived as tolerable. With the economy looking up, George Bush's victory in the 1988 election was no surprise.
This analysis suggests that President Bush may have lost reelection in 1992 because of the recession of 1990 to 1992. Fair's equation predicted a very narrow victory for Bush. Only after Bill Clinton had taken office were corrected data found to indicate that growth during 1992 was faster than the data available at election time had indicated. 2575 digits