Friday, June 29, 2012

Obama Will Lose in November Based on Two Key Economic Indicators

Over the last almost 50 years, two economic indicators, have done a great job predicting the vote share of incumbents in Presidential elections (note I used vote share vs. the main opponent to adjust out the third party candidacies), real GDP growth and consumer confidence. Each has a correlation of 0.8 with vote share and each suggest that Obama will not be able to get 50% in a two way race with Romney.

Let's start with real GDP growth (more precisely, real quarterly GDP growth compared to the prior year during the quarter prior to the election):


As you can see, this is a pretty good indicator, with all the relatively deviations from the trend having great explanations. LBJ did better than expected because JFK had just been assassinated the year before, George H.W. Bush did worse because of Perot's outrageously successful 3rd party challenge that siphoned off votes and Ford did worse because of the Watergate fiasco.It suggests that Obama will likely get about 48% of the vote in November, with a full 1% more GDP growth necessary to cross the 50% threshold.  That is a pretty tall order given that Obamacare was just affirmed (with all of its job killing taxes and regulations), the upcoming fiscal cliff (taxes increase by 3.4% of GDP in January) and China & Europe are slowing down.  If anything, there is a good chance our economy will worsen, putting Obama even deeper in the hole.

Now let's take a look at consumer confidence:


As you can see, based on the abysmal University of Michigan consumer confidence readings, Obama is likely to get only 42% of the vote.  That's what happens when consumers are more unhappy under your administration than they were under Carter! 

It seems the only way Obama can continue his reign of terror is by either stealing the election or bombing Iran in October (to get a patriotic boost). 

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