The Complex Relationship Between Economics and Elections
If every voter were an economist—a rather unsettling notion—the forecasting of elections would become a straightforward task. The trajectory of the economy would consistently guide consumer sentiment, which would, in turn, influence the approval ratings of the sitting president. This approval rating could then be used to predict the election outcomes in the Electoral College. However, the reality is far more complicated.
Few individuals understand this nuance better than Robert Gordon, an esteemed economist at Northwestern University, who is now 84 years old. Gordon has meticulously analyzed presidential elections dating back to 1956, a year when he was just 16 years old. This was a time when the incumbent Republican president, Dwight Eisenhower, and his running mate, Richard Nixon, were facing off against the Democratic candidates Adlai Stevenson and Estes Kefauver.
While the performance of the economy plays a significant role in elections, its impact has diminished over the years, according to a recent working paper released by Gordon, coinciding perfectly with the current election cycle. He contends that economic performance has only a loose correlation with presidential approval ratings, which are crucial indicators of election outcomes. A pivotal shift occurred around the year 2000, when political polarization surged, leading voters to prioritize party affiliation over other considerations, including economic indicators.
Interestingly, Gordon’s research revealed that even before the year 2000, consumer sentiment failed to predict electoral winners, despite the apparent logic that it should serve as a bridge connecting economic performance and voter perceptions of candidates.
The equation that proved most effective in predicting election outcomes comprised two key economic variables: economic growth adjusted for population and what Gordon termed “excess” inflation. This “excess” inflation is defined as the average inflation rate during the president’s initial three and a half years in office, compared to the same timeframe under their predecessor. Additionally, the incumbent president’s approval rating was a vital component of this equation.
Gordon’s findings suggest that “prior to the 2000 election, the equation adeptly matched the sharp fluctuations in the electoral vote outcomes of the incumbent party,” highlighting the intricate interplay between economic indicators and electoral behavior.