State of Economy a Plus for Obama?

The accepted thinking has been that it serves Mitt Romney to keep the electorate focused on the state of the U.S. economy. At the Washington Post's Wonkblog today, Ezra Klein looks at a new model for predicting presidential elections with an incumbent candidate and suggests that the current state of the economy is just fine for President Obama's re-election, provided his job approval rating remains in the 40% to 50% range.  The model was collaboratively designed by Klein with Seth Hill, postdoctoral associate at Yale University; John Sides, associate professor at George Washington University; and Lynn Vavreck, associate professor at UCLA

Klein:

Some months ago, I worked with political scientists Seth Hill, John Sides and Lynn Vavreck to build a model that used data from every presidential election since 1948 to forecast the outcome of this presidential election. But when the model was done, I thought it was broken: It was forecasting an Obama win even under scenarios of very weak economic growth.

After a lot of frantic e-mails, my political scientist friends finally convinced me that that’s the point of a model: It forces you to check your expectations at the door. And my expectation that incumbents lose when the economy is weak was not backed up by the data, which suggest that incumbents win unless major economic indicators are headed in the wrong direction, as was true with unemployment in 1980 and 1992.

This year, the major economic indicators are headed in the right direction, albeit slowly. We’ve been adding jobs, though not enough. We’ve been growing, though not particularly fast. We’ve seen the unemployment rate drop, though partially because workers are leaving the labor force. All in all, it’s not an impressive record. But it’s weak growth, not a new recession. And the political valence of that weak growth is unusually hard to discern, as voters continue to place more blame for our current economic troubles on George W. Bush than on Barack Obama.

You can play with a calculator for the model here.  At the bottom of the calculator there is a link to expand the post and read the methodology used in constructing the model.

First quarter GDP on an annualized basis was 2.0%.  Second quarter was 1.7%.  Even assuming that the annualized GDP in quarter three drops off to 1.4%, that would leave the growth rate at 1.7% for the first three quarters.  As of today, Gallup has President Obama at a 50% job approval rating on its six day rolling average polling.  This undoubtedly reflects some bounce from Bill Clinton's down home public policy "'splaining" in Charlotte.  Before Charlotte, Obama was running at about 45% to 46%.  The model though actually relies on the incumbent president's job approval rating in June of the election year.  During June, the average of the thirty days of President Obama's job approval rating was 46.7666%, or 47%.

If you go into the model linked above and enter 1.7% GDP growth and 47% job approval rating, it projects that Obama has a 81.6% likelihood of winning in November.  If you bump up nine month GDP to 1.9%, Obama's likelihood of re-election jumps to 84%.  This is very close to the projection of Nate Silver at the FiveThirtyEight blog at the New York Times based on current polling numbers.  Silver's has Obama with a 79.8% likelihood of winning.  Silver's described his methodology here in 2008.

Having said all this, the Badgers were 32 point favorites against Northern Iowa and 7 point favorites against Oregon State, so it's the actual contest that counts, not predictive models.  And, of course, we have to wait and see whether there is an October Surprise, perhaps from Netanyahu.