Many political analysts say the condition of the economy is a key determinant of presidential election contests. But just how do economists think the various aspects of the economy factor into elections? N.C. State University economist Mike Walden responds.
“Well, first of all … we’re not so focused as to think that it’s only economics. … But we do think that economics is very important in determining how people will vote.
“Probably the best work that’s been done on this is by a Yale economist named Ray Fare. He’s developed a model to predict presidential elections using economic factors. His model has been very, very successful. He’s predicted correctly 21 of the past 24 elections.
“Now in his model, first of all he recognized that if you’re an incumbent president running for re-election, that’s a big plus. And obviously that’ll be a big plus for President Obama this year. But in terms of economics, what Fare has found in sifting through the data and doing an analysis is that two factors, economic growth — how fast the economy is growing — as well as inflation both affect how people will vote.
“Now in terms of economic growth, what he found is that the faster the economy is growing, the more likely the individual will vote for an incumbent president — for example in our current situation — who is running for re-election. The slower the economy is growing, then the more likely they’ll vote for the challenger.
“On the inflation front, it’s just the opposite. Higher inflation hurts an incumbent president. Lower inflation helps that president.
“So if we look at the data where we stand right now, actually I think it indicates that we’re going to have a very close election. On the inflation front, actually inflation so far in President Obama’s term has been very low — 1.4 percent average for the last three years. But of course everyone knows inflation is beginning to creep up primarily because of energy prices. So, that might be a challenge for the president come Election Day.
“On the other hand, economic growth has been very, very slow. So that would hurt the President, but it’s actually beginning to pick up. And so that would help the President if economic growth is significantly higher come election day.
“So, I think right now what Fare’s model is predicting is, I think, what a lot of the experts are saying: This will be a close presidential election.”