‘The Economy, Stupid’? Not So Much Anymore.

If every voter were an economist (ghastly thought), elections would be easy to forecast. The performance of the economy would reliably predict consumer sentiment, which in turn would predict approval ratings for the incumbent president, which in turn would predict the outcome of the election in the Electoral College.

It doesn’t work that way. Few know that as well as Robert Gordon, an 84-year-old economist at Northwestern University. He has studied presidential elections going back to 1956, when he was 16 years old and Dwight Eisenhower, the incumbent Republican president, and his running mate, Richard Nixon, were squaring off against the Democrats Adlai Stevenson and Estes Kefauver.

The economy is a big factor in elections, but it’s not as influential as it once was, according to a working paper released by Gordon just in time for this year’s election. The economy’s performance only loosely affects the presidential approval rating, which is a predictor of election outcomes. The turning point was around 2000, when polarization increased and people became more likely to vote based on party affiliation, all other criteria (including economics) aside.

Oddly, Gordon found that even in the period before 2000, consumer sentiment did not predict winners, even though it would seem to be the logical go-between linking economic performance and feelings about the candidates.

The equation that best predicted election outcomes included two economic factors: economic growth adjusted for population and “excess” inflation, defined as average inflation over the president’s first three and a half years in office compared with the same period under the previous president. The equation also included the approval rating of the incumbent president.

“Prior to the 2000 election the equation does a remarkably good job in matching the sharp ups and downs of the incumbent party’s electoral vote outcome,” Gordon found.