Just about everyone recognizes that the performance of the U.S. economy affects presidential elections, with the president’s party — especially, though not exclusively, if the incumbent is running for reelection — getting credit for good times and blame for bad times. Some election prediction models focus heavily on economic data (e.g., a well-regarded model from Yale’s Ray Fair, in which per capita GDP growth and inflation measurements play a central role), while others treat the economy as a partial determinant along with such other variables as peace or war conditions, incumbency, the status of the two parties, and presidential approval ratings.
There’s no question a bad economy was an albatross for Republican John McCain in 2008. By 2012, an economy characterized by slow but steady GDP and job growth, balanced by sluggish income indicators for most Americans, was something of a wash for Barack Obama. It’s been generally assumed that similar conditions would affect the 2016 elections, with unemployment rates slowly trending down but total employment stagnant, and with GDP steadily rising even as household income stays the same. In other words, economic conditions are expected to be sufficiently “neutral” that other factors will likely decide the election.
But what if that’s not the case? It’s a question political observers are beginning to ask as the specter of a Chinese-led global economic contraction arises. Yes, it’s entirely possible the U.S. economy could keep chugging along in a modest manner even if emerging countries’ growth collapses. But more adverse circumstances are more likely if the worst happens overseas.
You might normally figure the economic policy prescriptions of the two parties would matter a great deal if the economy goes south — that a Democratic Party committed to fiscal and monetary stimulus to avoid a deep recession would have an advantage over a GOP controlled by the creditor class and obsessed with every phantom sign of inflation. But the way it normally works is that the party controlling the White House will take a hit even if its policies make more sense or are more sympathetic to voters’ interests. And the blame-the-incumbent tendency is probably strengthened when a party has held the White House for multiple terms.
There is considerable speculation about how far in advance the electorate stops absorbing new economic data — which is why Alan Abramowitz, for example, makes second-quarter GDP growth in a presidential year his big economic data point. Thus the timing of bad — or good — economic news could be critical.
So long as China struggles and Wall Street awakens each day to fears about Asian markets, it’s no longer clear the economy is going to be a neutral factor in the elections — or even a small thumb on the scale for Hillary Clinton. And we may have to adjust to talking about economic problems other than the Democratic emphasis on inequality or the Republican emphasis on regulation.