The following is a guest post from NYU political scientist Patrick Egan on a topic near and dear to the Monkey Cage, the fact that the economic fundamentals (defined here as GDP growth) of the election suggested the likelihood of a victory in 2012 for the incumbent – albeit a fairly narrow one – and not the challenger.
If you think the “fundamentals” (and by the “fundamentals,” I mean the economy) were stacked in Mitt Romney’s favor in the 2012 presidential election, you’re not alone. You share the prevailing beliefs of many political observers. “Fundamentals usually prevail in American elections. That’s bad news for Barack Obama,” wrote the American Enterprise Institute’s Michael Barone in a National Review post on November 5. Barone was referring to what he called the “very sluggish economic recovery”—dissatisfaction with which he predicted would cause challenger Mitt Romney to prevail with 315 Electoral College votes.
In his mea-culpa column that inevitably followed Obama’s victory on Tuesday, Barone graciously—and repeatedly—conceded his forecast was “wrong.” But he clung to the justification for his prediction. “The outcome of the election was not determined, as I thought it would be, by fundamentals,” he wrote. “Fundamentals were trumped by mechanics and, to a lesser extent, by demographics.”
Barone’s analysis sums up much of the conventional wisdom about the results of the 2012 presidential election that has crystallized among pundits across the political spectrum. Most versions of their explanations go something like this: the fundamentals were in the Republicans’ favor, but the Democrats overcame them with better ads, a better “ground game,” successful appeals to a racially diverse electorate, or a better candidate.
These observations make for interesting and colorful post-mortem accounts of the campaign, but they start from a premise that happens to be false. By September, the fundamentals had improved enough to make Obama a slight favorite. The figure below plots the incumbent party’s share of the two-party presidential vote against the average growth rate in the nation’s GDP over the three quarters preceding the election. Separate regression lines trace the relationship for years when an incumbent was actually on the ballot (like 2012) and those when he was not (like 2008). (The steeper slope of the first line indicates that the economy affects election results more strongly when the president is actually running for reelection; the fact that it lies above the second line illustrates the advantage enjoyed by incumbents.)
The growth rate between January and September of 2012 averaged 1.8 percent. As shown in the figure, this yielded a predicted share of 51.2 percent of the two-party vote for incumbent Obama. How well did this forecast the actual outcome? Right now (as of noon on November 8th) the popular vote totals stand at 60,771,081 for Obama and 57,876,223 for Romney—exactly 51.2 percent for the incumbent. The results stand exactly—one might even say fundamentally—where the fundamentals would predict.