The Magazine

The Economy and the Election

If the past is any guide, Bush looks formidable.

Apr 12, 2004, Vol. 9, No. 30 • By JAMES PIERESON
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THE STATE OF THE ECONOMY is looming, as it always does, as a key issue in the presidential election. The Democrats are hammering President Bush for some 2 million jobs "lost" during his tenure in office, and for the sluggish rate of job growth during the current recovery. These attacks appear to have struck a chord with the public, eroding the president's approval rating and elevating the jobs issue to a central role in the campaign.

President Bush, of course, can make a good case in his own behalf. His policies, he argues, especially his tax cuts, have put the economy on a path to recovery. The economy grew at a 3.2 percent clip in 2003, and independent forecasters are expecting growth of 4.5 percent in 2004. Last week the Labor Department reported that the economy created 308,000 new jobs during the month of March, the most since April 2000. This new report suggests that the expansion which began two years ago is beginning to generate large numbers of new jobs.

If we consult history and long-standing patterns of voter behavior, there is every reason to think that the economy is going to work strongly to the president's advantage (see chart). But will those patterns hold true this year?

Of course the economy is not the only issue that decides presidential elections. War and peace, and foreign policy crises of various kinds, have frequently been decisive as well. In 1952 and 1968, for example, the interventions in Korea and Vietnam were the key issues in the campaigns, and, indeed, forced incumbents Harry Truman and Lyndon Johnson into retirement, even though in both years the economy was strong and unemployment very low. This year the war on terrorism, and the intervention in Iraq, may be even more important than the economy in shaping the outcome of the race for the White House.

Still, it is probably safe to say that an incumbent president cannot hope to win reelection in the face of a weak economy, even though he may be able to point to important achievements in foreign policy. In the modern era, three incumbent presidents (Ford, Carter, and Bush) have been defeated for reelection, and in each case a weak economy was the chief reason.

Jimmy Carter's economic record was the weakest of any incumbent since Herbert Hoover. During the first three quarters of 1980 the U.S. economy contracted by nearly 4 percent in real terms; the unemployment rate hovered around 7 percent during the campaign, and inflation that year exceeded 10 percent.

The economic situation in 1980 was far worse than it was in either 1976 or 1992 when Ford and Bush were defeated for reelection. In each of these cases, the economy was growing, albeit too slowly to generate much in the way of job or income growth. The incumbents had to deal with unemployment rates that were well over 7 percent, and with a perception, promoted by their opponents, that they were out of touch with the difficulties of ordinary Americans. Ford faced the additional disadvantage of having been appointed, rather than elected, which diminished the advantage of incumbency. Yet, despite these troubles, Ford lost his reelection bid by a very narrow margin (51 percent to 49 percent), and George Bush lost to Bill Clinton in a race that many felt he should have won.

The fact that Presidents Ford and Bush might have won those races suggests that the unemployment rate is probably overstated as a deciding factor in presidential campaigns. Presidents Nixon and Reagan were re-elected in historic landslides despite fairly high unemployment rates. In Nixon's case, unemployment averaged 5.6 percent during 1972; and in Reagan's case it averaged 7.5 percent in 1984. Clinton won reelection by a comfortable margin with an unemployment rate of 5.4 percent--which is very close to where it is today.

The key factor seems to be not what the unemployment rate happens to be during the election campaign, but the direction of the overall economy. If voters are persuaded that things are improving, they will overlook a high unemployment rate in the belief that it will soon be falling. Voters, that is, appear to be more oriented to the future than to the past. Unemployment, moreover, affects just a small fraction of the electorate, while broader factors such as inflation or income growth affect everyone.