It's NOT the economy, stupid

[David Farber <dave () farber net>]

Begin forwarded message:

From: Arik Hesseldahl <arik () arik org>
Date: August 25, 2004 12:53:22 PM EDT
To: dave () farber net
Subject: It's NOT the economy, stupid
Reply-To: arik () arik org

Dave,

This is a fascinating peice from my colleague Dan Ackman at Forbes.com, 
that I
thought would be a good submission for IP.

Arik
-------
U.S. Economy
It's Not The Economy, Stupid
Dan Ackman and Mark Hazlin, 08.25.04, 6:00 AM ET

NEW YORK - That the state of the economy predicts U.S. presidential 
elections
is one of the hoariest pieces of conventional wisdom around. But the 
evidence
is far from clear. While the economy is certainly a factor, financial 
facts
alone have proved poor predictors of political results.

Just how much of an influence does the economy have? To help answer that
question, we studied the last 14 presidential elections, focusing on 
seven
economic variables. These economic factors, whether taken individually 
or
together, predicted the winner just 64% of the time. In short, the 
economy is
not a particularly accurate indicator. One reason for this failure is 
that in
most years, the economy is a mixed bag, with some indicators looking up 
and
others staring down.

There is, however, one important exception to this failure of 
prognosis: when
all, or nearly all, the economic planets are in line, the economy 
predicts the
election quite well. That's what happened in 1956, when Dwight 
Eisenhower
easily won re-election over Adlai Stevenson. It happened again in 1964, 
1988,
1992 and 1996.

In our study, we looked at the economic numbers preceding the 14 
elections
since World War II, including the latest data for 2004. We considered 
seven
factors: stock market returns for the first six months of the election 
year and
for the first three-and-a-half years of the incumbent's term; gross 
domestic
product growth for the same two time periods; personal income growth;
unemployment; and the overall federal tax burden relative to GDP. We 
compared
each indicator to the average performance for the entire post-war 
period. Where
the factor was positive (that is, better than average) we considered it
predictive of a victory for the incumbent president (or his party if no
incumbent was in the race).

It turns out that economic factors predicted the winner of the 
presidential
election in just nine of the last 14 contests. That's better than 
flipping a
coin, but not by much.

for the rest see
http://forbes.com/home/business/2004/08/25/cx_da_0825economy.html

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