Yale Economic Model Still Predicts Bush Landslide in November

Yale - Fairmodel Presidential Equation ^ | February 14, 2004 | nwrep

[nwrep]

The highly accurate "Presidential Vote Equation" created by Ray Fair, a Yale economist, continues to predict a Bush landslide victory in November, despite several recent polls showing a decline in President Bush's popularity.

The model is updated every quarter with the release of quarterly economic statistics by the government.

The latest update to the model was made on February 5, 2004 based on data for the 4th quarter of 2003.

The model prediction is as follows:

Presidential Vote Equation--February 5, 2004

The predictions of GROWTH, INFLATION, and GOODNEWS for the previous forecast from the US model (October 31, 2003) were 2.4 percent, 1.9 percent, and 3, respectively. The current predictions from the US model (February 5, 2004) are 3.0 percent, 1.9 percent, and 3, respectively. In the previous forecast 2003:4 was predicted to be a GOODNEWS quarter, but it turned out not to be. For the current forecast 2004:1 is predicted to be a GOODNEWS quarter, so the total number of GOODNEWS quarters is the same at 3. The prediction of GROWTH, the per capita growth rate in the first three quarters of 2004 at an annual rate, has increased to 3.0 from 2.4 for the previous forecast. Given that the coefficient on GROWTH in the vote equation is 0.691, an increase in GROWTH of 0.6 adds 0.4 to the vote prediction.

The new economic values thus give a prediction of 58.7 percent of the two-party vote for President Bush rather than 58.3 percent before.

This does not, of course, change the main story that the equation has been making from the beginning, namely that President Bush is predicted to win by a sizable margin.

*********************************************************************

The equation, based on Ray Fair's economic model has an excellent correlation percentages of two party popular votes. The only times it has significantly deviated from the November election results was in 1992 due to the presence of a strong third party.

The equation has worked as follows since 1916:

                          Table

                Presidential Elections Since 1916

    Party                                            Actual                      Predicted
     in                                            Vote  Growth Infl. Good     Vote
    Power                                    Share  Rate  Rate  News   Share
1916  D  Pres. Wilson beat Hughes           51.7   2.2   4.3   3    50.7
1920  D  Cox lost to Harding                36.1 -11.5  16.5   5    38.9
1924  R  Pres. Coolidge beat Davis          58.2  -3.9   5.2  10    57.9
1928  R  Hoover beat Smith                  58.8   4.6   0.2   7    57.3
1932  R  Pres. Hoover lost to F. Roosevelt  40.8 -14.9   7.1   4    39.2
1936  D  Pres. F. Roosevelt beat Landon     62.5  11.9   2.4   9    64.3
1940  D  Pres. F. Roosevelt beat Willkie    55.0   3.7   0.0   8    56.0
1944  D  Pres. F. Roosevelt beat Dewey      53.8   4.1   5.7  14    52.9
1948  D  Pres. Truman beat Dewey            52.4   1.8   8.7   5    50.5
1952  D  Stevenson lost to Eisenhower       44.6   0.6   2.3   6    43.9
1956  R  Pres. Eisenhower beat Stevenson    57.8  -1.5   1.9   5    57.3
1960  R  Nixon lost to Kennedy              49.9   0.1   1.9   5    51.1
1964  D  Pres. Johnson beat Goldwater       61.3   5.1   1.2  10    61.2
1968  D  Humphrey lost to Nixon             49.6   4.8   3.2   7    49.6
1972  R  Pres. Nixon beat McGovern          61.8   6.3   4.8   4    59.8
1976  R  Ford lost to Carter                48.9   3.7   7.7   4    48.6
1980  D  Pres. Carter lost to Reagan        44.7  -3.8   8.1   5    45.6
1984  R  Pres. Reagan beat Mondale          59.2   5.4   5.4   7    61.4
1988  R  G. Bush beat Dukakis               53.9   2.1   3.3   6    52.4
1992  R  Pres. G. Bush lost to Clinton      46.5   2.3   3.7   1    50.9
1996  D  Pres. Clinton beat Dole            54.7   2.9   2.3   3    52.7
2000  D  Gore lost to G.W. Bush             50.3   3.5   1.7   8    50.8

[rebel_yell2]

You "think?" Could you provide me with a t-statistic from the econometric model, or do you really not have any idea about what this model is all about?

[WOSG]

Maybe it breaks down under media bias.
The media bascially fooled the people into believing the economy was a lot worse than it actually was in 1992. kind of like AntiGuv on this thread carrying the Democrats water on this "jobless recovery" business.

Had the media been fair, Bush would have not been tarred as badly as he was.

The bias is easy to influence around economic inflection points, since it is easy to twist data.

[rebel_yell2]

Good grief! If ignorance was money, you'd be a millionaire. There are two, yes, two surveys. First is the survey of establishments, from which the job numbers come. Second, there is the survey of households, from which the unemployment numbers come. See (www.bls.gov.) You almost will need a PhD in economics/survey statistics to really understand what is going on, but the liberal press doesn't worry about the details. The first survey is much larger than the second survey. However, the first survey misses new jobs at new firms and at new self-employed persons. Evidence suggests that in a recovery the establishment survey under-estimates new jobs relative the the household survey. Hence, the household survey recently has shown major gains in new employment whereas the establishment survey has not. Now, we don't EVEN want to get into the problems with seasonal adjustments and new population benchmark adjustments that have recently been made to the establishment survey. Until we have several more months of data, we won't have a good idea of what these adjustments have done the the "establishment" survey data. My gut is to believe the stock market rather than these survey numbers. Only time will tell . . . .

[Nick Danger]

That's an interesting note. You begin by calling me an ignoramus, and then proceed to repeat, albeit in different words, everything that I said.

[rebel_yell2]

Sorry, but I did not call you an "ignoramus." I simply pointed out that your post, however erudite, was "ignorant" of some critical institutional facts. You had the gist of the arguments correct! I simply didn't want the very important points that you made dismissed because of a lack of precision. Please accept my apology for any offense taken.

[Timm]

Pop underperformed twice. Not W, I think.

[AntiGuv]

Why is it "dissembling" to ignore the second dip in the 1980's, but not dissembling to ignore the second dip in 2002?

I would say because there was no second dip recession in 2002. As a matter of fact, two of the three quarters which the Yale Economic Model is deeming "good news quarters" were the 1st and 3rd quarters of 2002 (5.0% and 4.0% growth, respectively). Where is your alleged recession? Could it be that the economic statistics simply are not capturing the true state of the overall economy in the same manner they once did? Oh, wait...that's what I said!

[AntiGuv]

No, I have not overlooked any of that. Quite the contrary, I am saying that extraordinary events such as those may well be why the Yale Economic Model which is explicitly predicated on the consistency of historical patterns may not be applicable in 2004. An empirical model such as this cannot account for extraneous factors, and so when these factors are such as to render the values meaningless, the entire Model is consequently meaningless.

Now, I don't know whether in fact that is the case. Just a couple months ago I was dismissing pessimists on the last Yale Economic Model thread and saying that I expected a 57% landslide in 2004. Now, I no longer believe that. Whatever the reason for the stifling of the recovery, it has been stifled and that's what I think matters. All I am essentially saying is that I agree with raloxk that one of the key reasons why these values have worked in the past is because such levels of growth and inflation have generally indicated higher rates of employment and income security.

For whatever multiple reasons, that has not been true the past two years and that is why I expect the Yale Economic Model will fail in 2004.

[AntiGuv]

I should note also that part of the reason I no longer expect a 57% Bush landslide win is because two months ago I was assuming that Howard Dean would be the challenger..

[Nick Danger]

I would say because there was no second dip recession in 2002. As a matter of fact, two of the three quarters which the Yale Economic Model is deeming "good news quarters" were the 1st and 3rd quarters of 2002

1st and 3rd quarter? What happened in the 2nd? And the 4th? Do we have a trend here of high growth, or is there sputtering going on?

I like constant-dollar numbers better, so we can watch GDP without also watching price movements mixed in.

Those look like this:

 2002 01  9655.3   6.544%   2.158%
 2002 02  9694.8   1.646%   3.077%
 2002 03  9858.1   6.910%   4.954%
 2002 04  9909.4   2.098%   4.271%
 

I don't understand what you're trying to do here. You already know that I know where to get these numbers. So why would you try to slip something like "1st and 3rd quarter" by us? Surely you must have anticipated that someone would know what the 2nd and 4th quarter numbers looked like as well. Selectively quoting two quarters that support your point, while pretending that the quarters in between -- which do not support your point -- do not exist, reeks of an attempt to mislead.

The entire series, going back to 1967, is here.

[AntiGuv]

Since a recession is by definition "two consecutive quarters of declining GDP" it is safe to conclude that there was no recession in 2002 no matter what happened in the 2nd and 4th quarters.

I don't understand what you're trying to do here. You already know that I know where to get these numbers. So why would you try to slip something like "1st and 3rd quarter" by us? Surely you must have anticipated that someone would know what the 2nd and 4th quarter numbers looked like as well.

I wrongly assumed that in your spectacular erudition and dazzling brilliance, you knew the definition of a recession. I apologize for my impertinence.

[AntiGuv]

Sorry, that was rude and I've been trying to get in touch with the kinder, gentler AntiGuv. See ya later.

[ninenot]

Agreed. The lag in job-creation is still a problem, and it's already mid-February (that is, we are 1/2way through the first quarter.)

Note that Edwards is making NAFTA/WTO/PNTR for China into a centerpiece in his Wisconsin campaign, and he's beginning to pull numbers his way (anecdotal, not primary evidence..)

I still think GWB wins--but not necessarily because this 'model' says so.

[ninenot]

If so, and it doesn't look so

(Is job-offshoring a major issue? You respond in the negative)

OTOH, you might take a look at the Consumer Confidence survey.

Latest number is down slightly, and the "future expectations" component is WAY down, which dragged down the overall number.

The press is playing up the job-loss/job-less recovery stuff hard, and has LOTS of material to use.

And Mankew's seemingly uncaring statement on the issue does NOT help GWB.

[ninenot]

Everyone I know who wants a job has a job. Period

In the manufacturing belt (WI, IL, OH, IA, TN, MI) there are lots of people who are working--at about 2/3rds (or less) of their former wage.

Yes, they have "a job."

Wisconsin recently released its tax revenue projections for the balance of 04 and the first 1/2 of 05.

Personal income tax will yield $220 million LESS than originally projected (mid-2003.)

As a result, Wisconsin will have a deficit.

This is not evidence FOR a great recovery.

[raloxk]

"Note that Edwards is making NAFTA/WTO/PNTR for China into a centerpiece in his Wisconsin campaign,"

I would love to see one of the guys (edwards, gephart) actually do something about repealing NAFTA, instead of just talking about it. Of course the wont.

[narses]

I should have been more specific, there is a household survey and an employers survey.

To understand what is going on, one needs to know that the Labor Department collects employment data in two different surveys. The first, called the household survey, is based on telephone interviews with about 60,000 households per month. This survey is used to calculate the official unemployment rate, which consists of people not working but looking for work as a share of the labor force (those working plus those looking for work). Those not looking for work, such as retirees and stay-at-home mothers, therefore, are not counted as unemployed.

The second survey is called the payroll survey and is based on the actual employment records of domestic businesses. Economists generally consider this survey to be a more accurate measure of month-to-month changes in national employment. However, there is evidence that during cyclical upturns, such as we are in now, the payroll survey misses many new business startups, causing it to understate employment growth. Eventually, the Labor Department finds these businesses and adjusts its data upward, which it probably will do for recent payroll data when revised figures are released on Feb. 6.

For some time, there has been a growing divergence between the two labor surveys. The household survey has shown strong employment growth — an increase of more than 2 million jobs between Nov. 2002 and Nov. 2003 (including a statistical adjustment last January). In the latest month it showed 138,603,000 jobs in the U.S. But the payroll survey has shown anemic job growth over the same period. Indeed, between Nov. 2002 and Nov. 2003 it shows a net decline of 235,000 jobs. According to the payroll survey, there are only 130,174,000 jobs — far fewer than shown in the household survey.

From http://www.nationalreview.com/nrof_bartlett/bartlett200401070854.asp

[Lael]

Time to update the model...to include OUTSOURCING!!!

[RightWhale]

Right, I know that, everybody knows that. I don't think it will matter. The only ones who hope it will matter are politicians trying to unseat the incumbents this fall and those journalists who need something to write about.

[the invisib1e hand]

So the model is flawed because there is now a disconnect between strong GDP growht and Job growth that didnt exist in the past.

I assume, if this is correct, that the lower-than-predicted job growth (if that is the case, perhaps the data are lagging) would be owing in large part to increased productivity and extra-national employee outsourcing by domestic corporations. Would you agree?

IMHO, extranational outsourcing can be wise long term investment.