Robert CaldwellAn Unbiased Look at the Upcoming Election: Why Obama Will Win.
June 18th 2008 03:56
Now that Hillary Clinton has conceded and the Democratic nomination is finally behind us, we can finally take a look at the upcoming election. Coming off their respective nominations, Senators John McCain and Barack Obama will battle it out. Although a number of factors come in to play in deciding an election, economic conditions typically play a major role. In fact, most elections can be predicted if one can gauge voters' perception of the economy correctly.
This is nothing new. During the Great Depression, F.D.R. defeated Herbert Hoover and the Democrats held the White House for the next 20 years. In the 1980s, when inflation hit double digits and the economy was in the midst of a recession, Ronald Reagan easily defeated President Jimmy Carter. Four years later the U.S. was booming, and President Reagan once again rolled to reelection.
As indicated, the economy is a major factor in deciding elections. Let's look at the economic facts of today and then we will try to be as succinct as possible in gauging their possible affects on the upcoming election. First, the housing market is a complete mess and has been for quite some time. Second, the credit contagion from the housing market has seeped into financial markets. Even investment grade firms have found it difficult obtain financing. As such, job growth is slowing and the unemployment rate has jumped. Moreover, GDP growth in the first quarter was dismal and it is not expected to be revised up. In fact, many believe we are in the midst of a recession or a contraction in GDP. Finally, inflation is a major concern. Oil prices have peaked recently hitting $140 a barrel. Food prices are also crippling consumption, which is already struggling due to the decline in mortgage equity withdrawal.
Don't let this economic jargon scare you. The basic gist is that the economy is a mess. Can it improve? Sure. But, will it in time for the election? Most likely,... no.
If we look at just one economic indicator (say job growth) and attempt to discern its correlation with the incumbent party winning an upcoming election, we will find telling results. As job growth slows going into an election, the incumbent almost always loses. And this is just when we are looking at one economic indicator. We have just mentioned several, and as I am sure you know by looking at your wallet, most are not looking too good.
So, what's the point? Well, if you trust at the economic theory and empirical evidence, Barack Obama will almost certainly become our next president because the economy is in shambles and voters will most likely blame the incumbent party--in this case the Republicans. This isn't to say that John McCain doesn't have a chance. He just has an enormous disadvantage. The wild cards are going to be voter’s feelings on the candidate’s capabilities when it comes to National Defense and Morality. Personally, I don't feel there's "enough" of a difference in the candidate’s platforms in either of these spectrums to alter voters' economic perspectives. So, I'm going to predict it now.... Barack Obama will be our next president.
If you are looking for more analysis or client-specific work, please contact me at schmidpat@regionaleconomiccon sultants.com
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