Presidential Vote Equation

Presidential Vote Equation--August 2, 1996

The vote equation originally presented in Ray C. Fair, "The Effect of Economic Events on Votes for President," The Review of Economics and Statistics, 1978, pdf file (1,276KB), has been updated through the 1992 election. The update is discussed in two papers. The first, which is in the June 1996 issue of Political Behavior, is Ray C. Fair, "The Effects of Economic Events on Votes for President: 1992 Update," pdf file--200 bpi (982KB), pdf file--300 bpi (1,674KB). The second, which is in the summer 1996 issue of the Journal of Economic Perspectives, is Ray C. Fair, "Econometrics and Presidential Elections," pdf file (714KB). Both papers cover the same issues. The first is more complete, and the second is somewhat easier to read.

Given that President Clinton is running for reelection, the equation for 1996 can be written as:

V = .4859 + .0065*g3 - .0083*p15 + .0099*n

where V is the Democratic share of the two-party vote, g3 is the annualized growth rate of real, per capita GDP in the first three quarters of 1996, p15 is the annualized growth rate of the GDP price index in the first 15 quarters of the Clinton Administration, and n is the number of quarters out of the first 15 quarters of the Clinton Administration in which the annualized growth rate of real, per capita GDP exceeds 2.9 percent. n is called the "good news" variable.

Given values for g3, p15, and n, the equation can be used to predict V. A prediction of V was made in the Journal of Economic Perspectives paper mentioned above. The economic values that were used in the paper for this prediction were 2.1 for g3, 3.0 for p15, and 2 for n. This gives a prediction of V of .495, which is a narrow Republican victory (assuming the electoral college vote is consistent with the popular vote). It was stated in the paper that the economic values were from the US model forecast made May 3, 1996. This is true for the forecasts for g3 and n, but not for p15. The May 3, 1996, forecast from the US model for p15 was 2.3, not 3.0. When 2.3 is used in place of 3.0 for p15, the predicted value of V changes from .495 to .5003, which is a very narrow Democratic victory (assuming electoral college consistency).

Between May and now the actual data for 1996:2 have become available. The main change in economic assumptions in light of the new data is that 1996:2 is a good news quarter, whereas it was not predicted to be so in the May 3, 1996, forecast. The growth rate for 1996:2 was forecast to be 3.7 percent (2.7 percent per capita), which is not quite a good news value, whereas the actual growth rate was 4.2 percent (3.2 percent per capita), which is a good news value. So n is now at least 3. The current US model forecasts (August 2, 1996) imply values of 2.3 for g3, 2.3 for p15, and 3 for n. (The predicted growth rate for 1996:3 is 2.9 percent--1.9 percent per capita--so 1996:3 is not predicted to be a good news quarter.) Using these values, the predicted value for V is .5115, which is a narrow Democratic victory (again, assuming electoral college consistency).

Although the predicted value of V between May and now has increased by .0115, the main message from the equation is the same, namely that the election is predicted to be very close. If 1996:3 turns out to be roughly as forecast (an OK but not great growth-rate quarter) and if the election is close, the vote equation will have done well regardless of who wins. If, on the other hand, 1996:3 turns out to be roughly as forecast and the election is not close, the vote equation will have done poorly regardless of who wins. In particular, if President Clinton wins with nearly 60 percent of the two-party vote, as many of the polls are currently showing, the equation will have done poorly even though it got the winner right.

To summarize, given the current economic forecasts, the vote equation says that the election is too close to call with any confidence. If, of course, 1996:3 turns out to be a much stronger quarter than currently forecast, the predicted victory margin for the Democrats increases.