By Daniel Hamermesh, Department of Economics
Published: July 20
Daniel Hamermesh is the Sue Killam Professor in the Foundations of Economics. A nationally known labor economist, Hamermesh specializes in social programs, the economic benefits of beauty, academic labor markets and unusual applications in everyday life.
For over 30 years my friend and former colleague Ray Fair of Yale University has been using economic and other measures to predict the outcomes of Presidential elections. His research shows that being an incumbent helps a candidate get elected. Being of the party that has held the White House for additional terms beyond the first hurts a candidate. Each extra quarter-year since the last Presidential election (15 quarters possible) that the economy has grown faster per capita than a certain, quite rapid rate (3.2 percent per annum) helps the incumbent, as does slower price inflation over the past 15 quarters. The faster that economic growth in the three quarters before the election is, the more help to the incumbent party.
We are now only 13 quarters into the Obama Administration, so some uncertainty remains. And like any statistical prediction there is always uncertainty surrounding it.
Given those caveats, what do the numbers thus far say, and how might unexpectedly good or bad economic numbers between now and November affect the forecast. Using Fair’s equation, the best forecast is that Obama would get 50.7 percent of the two-party vote for President. Given the size of errors in predicting past Presidential elections, we can be 62 percent certain that he would get more popular votes than Romney. A better-than-even bet in a very close election.
If inflation averages what it has for the past 13 quarters, and if economic growth picks up a bit from where it has been this past quarter (January-March 2012), the equation predicts that Obama would receive 52.5 percent of the two-party vote, and be 85 percent sure of getting a majority. If inflation worsens over the next six months, and the economy grows more slowly than it has in any of the past four quarters, the prediction is that he receives only 49.0 percent, yielding only 34 percent certainty of attaining a majority of the two-party popular vote.
So a lot depends on what happens between April and November. An economic forecast of this election ranges from a fairly solid victory for Obama (although somewhat narrower than his win in 2008) to a close loss (Ford’s loss to Carter in 1976). But the best current forecast is for a cliffhanger Obama victory, a bit less narrow than Nixon over Humphrey in 1968 (or than Gore’s “victory” over Bush in 2000).