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Economy Models Predict Bush Win; Democrats Unfazed (Update3) Listen
Aug. 4 (Bloomberg) -- President George W. Bush, locked in a statistical tie with John Kerry in national opinion polls, will be re-elected in November, according to five computer models that use economic performance to forecast the vote.
One model devised by Yale University economist Ray Fair combines gross domestic product and inflation data to predict Bush will win 58.5 percent of the votes cast, the biggest margin of victory in the popular vote since fellow Republican Ronald Reagan defeated Walter Mondale in 1984 with 59.2 percent.
``On the basis of the economy, the equations are predicting a pretty big victory for Bush,'' said Fair, a fellow at Yale's International Center for Finance in New Haven, Connecticut. Fair, who began studying elections in 1978, said the approach would have correctly predicted 18 of the past 22 elections back to Woodrow Wilson's victory in 1916.
Kerry's advisers said such forecasts are subject to error because they miss dissatisfaction about economic factors such as income growth and ignore concerns about the Iraq war, which has cost the lives of more than 900 U.S. servicemen and is viewed in some polls as the most important topic for voters. Fair's model also predicted Bush would lose in 2000 to then-Vice President Al Gore, who had the benefit of a decade-long expansion under his boss, President Bill Clinton.
``The models are fallible and will prove to be so again,'' said Robert Shapiro, an economic adviser to Kerry and managing director of consulting firm Sonecon LLC in Washington.
Other Models
The president, 58, and Kerry, 60, are tied within the margin of error in national surveys taken over the past month by the Washington-based Pew Research Center, the Los Angeles Times, Fox News and the Wall Street Journal/NBC.
An ABC News/Washington Post poll published on Monday found Kerry with 49 percent support to Bush's 47 percent among likely voters. A Gallup poll for USA Today/Cable News Network the same day found likely voters favoring Bush by 50 percent to 46 percent.
Election models based on the economy and used by Global Insight Inc. and Economy.com, as well as professors at Sweden's Goteborg University and the University of Iowa, also give Bush the nod. Global Insight predicts the president winning 56 percent of the vote, while the three other models project a Bush victory in a closer result.
Fair's Formula
The models say Bush will benefit from both economic growth and from gains in the labor market. The economy may expand 4.5 percent this year, based on the median forecast in a Bloomberg News survey of economists. That would match the rates of 1999 and 1997, which were the fastest since 7.2 percent in 1984. The economy has also added 1.3 million jobs this year, the biggest six-month gain in four years.
Fair, who contributed to the presidential campaign of Democrat Howard Dean, uses a model that relies on gross domestic product in the election year and inflation over the past four years. It also factors in quarters of ``good news'' -- defined as those in which GDP growth per capita exceeded 3.2 percent. The benefits of incumbency and whether the nation is at war have small weightings in Fair's equation.
Nigel Gault, U.S. research director at Global Insight, a Lexington, Massachusetts, consulting company, meshes economic indicators including per capita income and the unemployment rate with political factors such as incumbency and party affiliation. Since the first of the year, payrolls have grown by an average of 211,000 a month.
``The equation is confident Bush will win again,'' Gault said.
Electoral College
Both Gault and Fair called it wrong in 2000. While both correctly calculated Gore would win more votes than Bush, their models didn't take into account the Electoral College and the possibility that the loser of the popular vote would still be elected president. Bush won the presidency after a five-week dispute in which the U.S. Supreme Court ultimately ruled there would be no further vote recounting in Florida.
Economy.com, an economic forecasting company in West Chester, Pennsylvania, retooled its model to better reflect the Electoral College after making the same mistake in 2000. Its new version, which would have predicted the last six presidential elections, sees Bush securing 373 Electoral College votes to Kerry's 165, more than the 270 needed to win.
Senior economist Robert Dye monitors each state through unemployment rates, as well as nationwide inflation rates.
``The election works regionally, so it's a more realistic approach,'' said Dye.
Iraq Effect
In an effort to encapsulate the role of national security in this year's election, Douglas Hibbs, a professor at Goteborg University in Sweden, combines gains in inflation-adjusted disposable income with the number of U.S. servicemen who have died in Iraq. Again Bush is the winner with around 53 percent of the vote.
A much narrower margin is forecast by an election model developed by Professors Michael Lewis-Beck and Charles Tien of the University of Iowa in Iowa City. Based on growth in jobs and the economy, it sees Bush winning 51 percent of the vote to Kerry's 49 percent. The equation would have been accurate in every election except 2000.
Aides to Kerry, a four-term Massachusetts senator, said models fail often enough that they can't be trusted.
Along with 2000's misfire, Fair and Global Insight's models failed to predict Republican Richard Nixon's win over Hubert Humphrey in 1968. Fair missed Democratic wins by Clinton over President George H.W. Bush in 1992 and John F. Kennedy over Nixon in 1960. Global Insight's equation incorrectly said Republican Gerald Ford would beat Jimmy Carter in 1976.
National Security
Democrats see similarities this year to 1968, when Nixon capitalized on concern about the Vietnam War to beat Humphrey, even though the economy was growing at an annual rate of almost 5 percent and had added over 1.2 million jobs in seven months.
National security, a factor the majority of economic models award little importance, is playing a bigger role with voters this year as the fallout from the Iraq war continues, Kerry supporters said. The war and the battle against terrorism are the top issues for voters, according to the Post/ABC poll.
``I cannot think of another year in recent history where foreign policy was so dominant and therefore could be determinative on the election,'' said Robert Hormats, vice chairman of Goldman Sachs International in New York and a contributor to the Kerry campaign.
In 1992, the elder Bush sought to win the election by highlighting the recovery from the 1990 to 1991 recession. While the improvement in growth was enough for some models to hail him the victor, Clinton capitalized on an unemployment rate of more than 7 percent to win the White House by decrying a ``jobless recovery.''
Jason Furman, Kerry's economic policy director, said that approach might also work for Kerry. He pointed to a net loss of 1.1 million jobs under Bush and a decline in the median income of households as reasons not to trust the economic forecasts. He rejected the use of disposable income in the economists' work because he argued that has been skewed by tax cuts that he says have benefited just the rich.
``We've seen a disconnect in the economy that the models don't detect, but voters do,'' said Furman, who also advised Clinton.
Aug. 4 (Bloomberg) -- President George W. Bush, locked in a statistical tie with John Kerry in national opinion polls, will be re-elected in November, according to five computer models that use economic performance to forecast the vote.
One model devised by Yale University economist Ray Fair combines gross domestic product and inflation data to predict Bush will win 58.5 percent of the votes cast, the biggest margin of victory in the popular vote since fellow Republican Ronald Reagan defeated Walter Mondale in 1984 with 59.2 percent.
``On the basis of the economy, the equations are predicting a pretty big victory for Bush,'' said Fair, a fellow at Yale's International Center for Finance in New Haven, Connecticut. Fair, who began studying elections in 1978, said the approach would have correctly predicted 18 of the past 22 elections back to Woodrow Wilson's victory in 1916.
Kerry's advisers said such forecasts are subject to error because they miss dissatisfaction about economic factors such as income growth and ignore concerns about the Iraq war, which has cost the lives of more than 900 U.S. servicemen and is viewed in some polls as the most important topic for voters. Fair's model also predicted Bush would lose in 2000 to then-Vice President Al Gore, who had the benefit of a decade-long expansion under his boss, President Bill Clinton.
``The models are fallible and will prove to be so again,'' said Robert Shapiro, an economic adviser to Kerry and managing director of consulting firm Sonecon LLC in Washington.
Other Models
The president, 58, and Kerry, 60, are tied within the margin of error in national surveys taken over the past month by the Washington-based Pew Research Center, the Los Angeles Times, Fox News and the Wall Street Journal/NBC.
An ABC News/Washington Post poll published on Monday found Kerry with 49 percent support to Bush's 47 percent among likely voters. A Gallup poll for USA Today/Cable News Network the same day found likely voters favoring Bush by 50 percent to 46 percent.
Election models based on the economy and used by Global Insight Inc. and Economy.com, as well as professors at Sweden's Goteborg University and the University of Iowa, also give Bush the nod. Global Insight predicts the president winning 56 percent of the vote, while the three other models project a Bush victory in a closer result.
Fair's Formula
The models say Bush will benefit from both economic growth and from gains in the labor market. The economy may expand 4.5 percent this year, based on the median forecast in a Bloomberg News survey of economists. That would match the rates of 1999 and 1997, which were the fastest since 7.2 percent in 1984. The economy has also added 1.3 million jobs this year, the biggest six-month gain in four years.
Fair, who contributed to the presidential campaign of Democrat Howard Dean, uses a model that relies on gross domestic product in the election year and inflation over the past four years. It also factors in quarters of ``good news'' -- defined as those in which GDP growth per capita exceeded 3.2 percent. The benefits of incumbency and whether the nation is at war have small weightings in Fair's equation.
Nigel Gault, U.S. research director at Global Insight, a Lexington, Massachusetts, consulting company, meshes economic indicators including per capita income and the unemployment rate with political factors such as incumbency and party affiliation. Since the first of the year, payrolls have grown by an average of 211,000 a month.
``The equation is confident Bush will win again,'' Gault said.
Electoral College
Both Gault and Fair called it wrong in 2000. While both correctly calculated Gore would win more votes than Bush, their models didn't take into account the Electoral College and the possibility that the loser of the popular vote would still be elected president. Bush won the presidency after a five-week dispute in which the U.S. Supreme Court ultimately ruled there would be no further vote recounting in Florida.
Economy.com, an economic forecasting company in West Chester, Pennsylvania, retooled its model to better reflect the Electoral College after making the same mistake in 2000. Its new version, which would have predicted the last six presidential elections, sees Bush securing 373 Electoral College votes to Kerry's 165, more than the 270 needed to win.
Senior economist Robert Dye monitors each state through unemployment rates, as well as nationwide inflation rates.
``The election works regionally, so it's a more realistic approach,'' said Dye.
Iraq Effect
In an effort to encapsulate the role of national security in this year's election, Douglas Hibbs, a professor at Goteborg University in Sweden, combines gains in inflation-adjusted disposable income with the number of U.S. servicemen who have died in Iraq. Again Bush is the winner with around 53 percent of the vote.
A much narrower margin is forecast by an election model developed by Professors Michael Lewis-Beck and Charles Tien of the University of Iowa in Iowa City. Based on growth in jobs and the economy, it sees Bush winning 51 percent of the vote to Kerry's 49 percent. The equation would have been accurate in every election except 2000.
Aides to Kerry, a four-term Massachusetts senator, said models fail often enough that they can't be trusted.
Along with 2000's misfire, Fair and Global Insight's models failed to predict Republican Richard Nixon's win over Hubert Humphrey in 1968. Fair missed Democratic wins by Clinton over President George H.W. Bush in 1992 and John F. Kennedy over Nixon in 1960. Global Insight's equation incorrectly said Republican Gerald Ford would beat Jimmy Carter in 1976.
National Security
Democrats see similarities this year to 1968, when Nixon capitalized on concern about the Vietnam War to beat Humphrey, even though the economy was growing at an annual rate of almost 5 percent and had added over 1.2 million jobs in seven months.
National security, a factor the majority of economic models award little importance, is playing a bigger role with voters this year as the fallout from the Iraq war continues, Kerry supporters said. The war and the battle against terrorism are the top issues for voters, according to the Post/ABC poll.
``I cannot think of another year in recent history where foreign policy was so dominant and therefore could be determinative on the election,'' said Robert Hormats, vice chairman of Goldman Sachs International in New York and a contributor to the Kerry campaign.
In 1992, the elder Bush sought to win the election by highlighting the recovery from the 1990 to 1991 recession. While the improvement in growth was enough for some models to hail him the victor, Clinton capitalized on an unemployment rate of more than 7 percent to win the White House by decrying a ``jobless recovery.''
Jason Furman, Kerry's economic policy director, said that approach might also work for Kerry. He pointed to a net loss of 1.1 million jobs under Bush and a decline in the median income of households as reasons not to trust the economic forecasts. He rejected the use of disposable income in the economists' work because he argued that has been skewed by tax cuts that he says have benefited just the rich.
``We've seen a disconnect in the economy that the models don't detect, but voters do,'' said Furman, who also advised Clinton.
