Yahoo Finance William Watson: ‘Are you better off now than four years ago?’ is a lousy election yardstick
It was at the end of the second and final presidential debate in 1980 that Ronald Reagan introduced the yardstick that has measured incumbents’ achievements ever since. (That debate, incidentally, was Oct. 28, just seven days from the election — no time to overcome a lousy performance: they played high-risk politics in those days.)
“Are you better off now than you were four years ago?” Reagan asked the 80.6 million people watching. “Is it easier for you to go and buy things in the stores than it was four years ago? Is there more or less unemployment in the country than there was four years ago? Is America as respected throughout the world as it was? Do you feel that our security is as safe, that we’re as strong as we were four years ago? And if you answer all of those questions ‘yes’, why then, I think your choice is very obvious as to whom you will vote for. If you don’t agree, if you don’t think that this course that we’ve been on for the last four years is what you would like to see us follow for the next four, then I could suggest another choice that you have.”
I like the “whom you will vote for” (not who) and the fact that he doesn’t say “vote for me” or “vote for President Carter” but assumes all that doesn’t need spelling out. “I could suggest another choice that you have”: It was very gentlemanly, unlike the braying and hectoring we’ll be treated to June 27 when Joe Biden and Donald Trump “debate” on CNN.
Ever since 1980, candidates running against incumbents have asked the “Are you better off now?” question. But it’s a lousy test. Presidents ride the economy, they don’t rule it, despite what some may believe.
In 2017 Q1, when Donald Trump took over, real per capita U.S. GDP was $59,494 (in US$). In 2020 Q4, when he was running for re-election, it was $62,411 — only $2,917 or 5.0 per cent higher. By contrast, when Joe Biden took over it was $63,224, rising to $67,702 in the first quarter of this year, an increase of $4,478 or 7.1 per cent, 2.1 points better than Trump.
But of course in the final four quarters of Trump’s administration COVID slammed the economy. We never-Trumpers believe many bad things about the former president but no one credibly suggests COVID was his fault. Similarly, you’ll hear countless times from the Biden campaign over the next six months about how many millions of jobs his administration has “created” over the past four years — 15.3 million at latest count. But he presided over the U.S. economy’s perfectly natural recovery from COVID lockdown. Of course employment rose during his years. I could have been president — an illegal alien with no political experience — and U.S. employment would have risen handsomely as the economy got back to normal.
Instead of asking what happened to key economic aggregates over a president’s term, voters should try to figure out how much of it was a president’s fault or doing. Even more importantly, since “past performance is no guarantee of future results,” they should focus on what candidates plan for their second term. Second terms typically disappoint, no doubt because even non-octogenarian presidents wear down in the world’s toughest job. Unfortunately, the two major parties have arranged things so that this year it’s all but certain somebody gets a second term.
In his first term, Trump went along with debt-financed tax cuts generated by a Republican-traditionalist Congress and also did lots of useful pro-growth deregulation. But the House in particular is now more MAGA-oriented and Trump’s main plank for a second-term platform is an aggressive tariff. They will help America’s least productive industries but prevent the rest from exporting, not to mention the harm it will do to consumers.
As for Biden, once safely elected to a lame-duck second term he will be less beholden to the left wing of his party and, to the extent he remains an effective political force, may moderate his policies at least somewhat.
In the end, though it really shouldn’t be, it probably remains the case that “It’s the economy, stupid,” as Clinton adviser James Carville said. The best-known, longest-running forecaster of presidential elections is econometrician Ray Fair of Yale. His calculations say the best predictor of the Democratic presidential vote, in percentage points, is the following: 49.48 + .708*G – .606*P + 0.865*Z. G is the growth rate of real per capita GDP in the first three quarters of the election year (expressed at an annual rate). P is the annual growth rate of the GDP deflator in the first 15 quarters of the administration. And Z is the number of quarters during those first 15 that real per capita GDP grows faster than 3.2 per cent, again at an annual rate. Biden has had four such rapid-growth quarters, though only one since 2021, which was still a recovery year.
Fair’s website allows you to plug in what you think those numbers will be in November. Go wild.
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