Economic Forecast

An article posted today on Bloomberg discusses a model developed by Yale University professor Ray Fair that allows him to predict the outcome of Presidential elections based on several factors, including inflation, economic growth, how long the incumbent party has held office, and the unemployment rate. Since 1916 Fair's model would have been wrong in only three instances, and none of these mistakes were by very wide margins.

Fair, like other analysts, believes that the economy will be the driving force for this election, as a recession nears, personal life savings decline, gas prices rise over $4 a gallon, and the number of home foreclosures increases. Fair's model says the Democrats are in a favorable position, even if the economy does improve marginally, as he sees them getting 52 percent of the vote in November. That is because of the fact that any improvement to the economy between now and November will likely be minor, and anything done to improve the economy now will likely not have a major impact for quite some time to come. Analysts see the hard economic times continuing, with wages down and an increasing numbers of job cuts on the horizon, and Fair believes that voters will be walking into the voting booth with the economy firmly on their minds.

What hurts John McCain the most in this situation is that he is a member of the party currently in power, which is the one that is being blamed by many in the public for leading us into the dark economic times we are now in. Stuart Rothenberg agrees and is quoted in this article as saying, "the president's party usually gets a disproportionate amount of the blame." Also, McCain has explained his interest in continuing much of Bush's economic policy, including making his tax cuts permanent. His main new ideas include reducing the corporate rate and eliminating congressional earmarks, which do not appear to be wildly popular ideas to the public and will not seem like major changes to the system. Also hurting McCain, in the present, and surely down the road in this campaign, is his sound bite from December, when he stated, "[The economy issue] is not something I've understood as well as I should." It would clearly not be a surprise to see this quote reappear in several Democratic campaign ads heading into November.

The Democrats are trying to portray McCain as a member of "the party of old" and unable to turn the economy around with the same old methods that President Bush has tried. According to the article, that is why the "change" message seems to be working so well, especially for Obama-- because it's becoming evident that what's in place now isn't working. Obama and Clinton, therefore, have an advantage as long as the economy remains a significant issue to voters, which Ray Fair and others quoted in this article believe it will. Clinton has taken the issue to Bush, and Republicans in general, by accusing him of "fiscal irresponsibility" and stating that, on oil prices, "there is no sense of urgency or presidential leadership." Clearly Clinton and Obama want to pin the blame of the current economic woes on the Republicans, despite their own recent run in power in Congress.

However, neither Clinton nor Obama has yet to offer a broad plan to pull the nation out of the current economic recession, but such a move would make sense in the near future. They have already offered proposals on taxes and the mortgage market, as Obama has pushed for a $1,000 tax cut for lower-income people, while Clinton, has called for a moratorium on home foreclosures. Moving forward, it is seen that the Democrats will have an advantage in this election due to the prominent role that the economy will play in the minds of voters, but Obama and Clinton must capitalize on this advantage by coming out strong with new ideas and an overall plan that will highlight their ability to lead the country out of our current dark economic times. It appears to be their advantage to utilize or squander.