Trump’s Reelection May Hinge On The Economy — And Coronavirus

President Trump’s approval rating has improved slightly amid the coronavirus pandemic. But the short-term gains, reflecting a possible rally-around-the-flag effect at the time of national emergency, may not hold. On the contrary, the strong likelihood of a potentially very deep recession triggered by coronavirus puts Trump’s reelection chances in jeopardy.

Aggressive measures to slow the spread of the disease, and economic stimulus packages that soften the economic blow, could allow the United States to rev back up to speed in the second half of the year and improve Trump’s position. Without that — even though there isn’t any perfect analogy to coronavirus in recent electoral history — the bulk of what we do know suggests that he could be in trouble.

We’ve written a lot about the effect of the economy on presidential elections here at FiveThirtyEight, especially in the run-up to the 2012 general election, when the economic recovery was a major focal point in the contest between Barack Obama and Mitt Romney. For that reason, I’m going to compress a very complicated discussion into under 3,000 words here:

• First, I’ll explain my basic view on how to implement an election forecast based on economic conditions.
• Next, we’ll see what a series of relatively simple economic models would say about Trump’s potential performance in the fall.
• Finally, we’ll run through some possible objections — do econometric models really apply for a president like Trump in the case of something like coronavirus?

To be clear: This is meant to be an opening bid rather than a comprehensive evaluation of these questions, many of which will be worth exploring at greater length between now and November.

A bad economy makes life harder for the incumbent party. Beyond that, we don’t know much.

I’ve often found myself trying to carve out a middle ground between people who think that presidential elections are strictly predicted by economic conditions — and people who think it all boils down to idiosyncratic factors such as candidate charisma and campaign strategy.

It might surprise you to learn that I’m agnostic in this debate, rather than siding with the seemingly more data-driven economic “fundamentalist” approach. The problem with the data-driven approach is that … there just isn’t all that much data to work with. There have been only 18 presidential elections since World War II. (Before that U.S. economic data isn’t very robust.) To account for all of the various ways that the economy can impact people’s lives (for example, joblessness, inflation, take-home income, etc.) — plus all of the other factors that influence elections (such as incumbency, wars, pandemics, scandals, etc.) — is not easy to do with only 18 data points.

In particular, we don’t have enough data to make overly specific claims about the economy. That is, any time you see what you might call a “magic bullet” claim, such as that second-quarter GDP is crucial or that per-capita disposable income is the key economic variable, you should be wary.

In fact, magic-bullet models such as these don’t perform very well out of sample. That’s because they’re prone to suffer from p-hacking and overfitting because of the small sample size of post-WWII elections and the large number of ways to design a model. In practice, what this means is that people designing these models can twist enough knobs so that they fit the past data well, but they don’t actually predict future election outcomes effectively when the modelers don’t know the outcome in advance.

At the same time, it’s very likely that there is some type of meaningful correlation between economic performance and the performance of the incumbent party’s presidential candidate. If you look at a wide range of economic variables, you’ll find that most of the more obvious ones (GDP or employment numbers) indicate that a stronger economy predicts a better performance for the incumbent party.

The best approach in our view — and the one we’ve used in FiveThirtyEight’s presidential forecasts — is to combine various major economic variables into an overall index of economic conditions. To avoid overfitting, we choose variables that reflect a cross-section of economic activity rather than picking ones that happen to fit the results from a small number of presidential elections. In addition, FiveThirtyEight’s Economic Index averages how these numbers have changed at various points, instead of focusing on one particular time frame such as the second quarter.

Overall, the data shows a reasonably clear — although far from perfect — correlation between the economy and incumbent-party performance. Since 1968, the worst years for economic performance as of Election Day were 1980 and 2008, each of which were associated with steep losses for the incumbent party. The next-worst economic year was 1992, in which incumbent George H.W. Bush lost to Bill Clinton. The best years for the economy, 1984 and 1972, resulted in incumbent-party landslides, although another good year, 1968, produced a narrow loss for the incumbent Democrats.

A recession would probably make Trump an underdog — although not hopelessly so

OK, let’s plug in some numbers to our Economic Index and see what it says about Trump. The goal here is to predict Trump’s margin of victory — or defeat — in the popular vote; the Electoral College is another issue and a potential advantage for Trump; we’ll talk about that more in a moment. I’m going to run four versions of the model:

• Model 1: Predict the performance of the incumbent party based on the FiveThirtyEight Economic Index as of Election Day. We’ve calculated the Economic Index back to 1968, so that’s the data we’ll use.
• Model 2: The same as above, but using the data for incumbents only. That means we’d include 1972 (Richard Nixon), 1980 (Jimmy Carter), 1984 (Ronald Reagan), 1992 (George H.W. Bush), 1996 (Bill Clinton), 2004 (George W. Bush), and 2012 (Barack Obama) but exclude 1968, 1976 (Gerald Ford was an unelected incumbent), 1988, 2000, 2008 and 2016.
• Model 3: Predict the performance of the incumbent party based on the FiveThirtyEight Economic Index as of Election Day and the incumbent president’s approval rating as of this point in the election year. For Trump’s approval rating, that’d be 45 percent — which is his approval in polls of likely or registered voters as of March 24 in the FiveThirtyEight presidential approval tracker.
• Model 4: The same as above, but for incumbent presidents only.

And for each model, I’ll run through five economic scenarios:

• If the economy looks like 1984, meaning booming growth.
• 1996, meaning above-average growth.
• 2012, meaning sluggish but positive growth.
• 1992, meaning a mild recession, although on the brink of recovery.¹
• Finally, 2008, meaning a severe recession.

All right, here’s what each economic scenario looks like under each model:

Note that the models are reasonably similar to one another. However, there are some differences. Namely, the predictions are more sensitive to economic performance when we use data for elected incumbents only (Models 2 and 4). That means incumbents like Trump get a larger share of credit or blame when they’re managing the economy, rather than when the torch is being passed, such as between Clinton and Al Gore in 2000 or George W. Bush and John McCain in 2008.

The economy also matters a bit less once you account for a president’s approval ratings (Models 3 and 4) since approval ratings gives us some sense for how popular the president actually is in practice, rather than how popular he “should” be based on the economy. In the pre-coronavirus economy, Trump was less popular than you might have expected based on economic conditions. That could limit his upside in the event the economy recovers or somehow manages to avoid recession. At the same time, he’s popular enough — and partisanship is strong enough — to potentially limit his downside in the case of a recession.

Nonetheless, in the event of a mild recession — with economic conditions tantamount to 1992 — all four models predict that Trump would lose the popular vote by a solid amount, by margins ranging from 4.0 percentage points (Model 3) to 5.7 points (Model 2). And in the event of a severe, 2008-style recession, they predict a potential landslide loss, by amounts ranging from 9.1 percentage points (Model 3) to 14.6 points (Model 2). However, Trump has two potential saving graces:

• First, the Electoral College. In 2016, there was roughly a 3-point gap between Trump’s performance in the popular vote, which he lost by 2 percentage points to Hillary Clinton, and in the tipping-point state, Wisconsin, which he won by about 1 point. Losing the popular vote by 4 to 6 points would probably not be enough to save Trump in the Electoral College, but it would at least be an open question.
• Second, these models have fairly high margins of error, which ranges between roughly 5 points and 10 points depending on which version you use. Thus, a model showing Trump losing the popular vote by 4 to 6 points wouldn’t have to be that far off for Trump to win the Electoral College (and perhaps even the popular vote) in the event of a mild recession. In the case of a severe recession, a popular vote win would be quite unlikely, but he’d retain some outside chances at drawing an inside straight in the Electoral College.

Will models like these really work in 2020?

Do models built on ordinary business cycle crests and slumps work in the midst of a global pandemic — something that the U.S. hasn’t experienced in any recent election year?

I’m reserving my right to change my mind on this subject upon deeper philosophical reflection — but the truth is, we can’t really know for sure. When we release the full-fledged FiveThirtyEight 2020 election model later this year, we may have it use a combination of several different priors, some of which use our Economic Index and some of which do not. All of this is still in the whiteboard stage at the moment.

At the same time, there are some objections that I don’t necessarily find compelling. Each of these could make for its own article, and we may cover some of them at more length later. But let’s run through them quickly in a lighting round:

Could voters give Trump a pass because coronavirus is the cause of the recession? Maybe. But even in the case of ordinary economic booms and busts, it’s never entirely clear how much credit or blame the president actually deserves — and the answer is, probably less than he typically gets from the public.

Does Trump deserve more blame for a coronavirus-triggered recession than Bush did for the financial crisis in 2007 and 2008, or Carter did for the rampant inflation and the oil crisis of 1979 and 1980? Well, the Democrats will say yes — especially given Trump’s slow-footed, erratic response on coronavirus — and the White House will say no. But the more a recession brings hardship to families and communities, the more the Republican side of the argument will be pushing uphill.

But what about Trump’s approval rating improving since the coronavirus crisis began? Indeed, Trump’s approval rating has improved in recent days so that it’s among the highest ratings of his presidency. As I mentioned, his approval rating among voters is now roughly 45 percent, which is up from 43 or 44 percent since early March, while his disapproval rating has fallen from 52 to 53 percent to 51 percent.

However, compared with typical rally-around-the-flag effects that follow national crises, these gains are fairly meager. For instance, Bush’s approval rating improved from 51 percent to 86 percent following the September 11 attacks, and Carter’s approval rating nearly doubled in 1979 in the immediate wake of the Iran hostage crisis. (Granted, both of their ratings declined sharply from there.) But Trump is also not seeing nearly as much of an approval rating bounce as other leaders in Western countries, such as Italy’s Giuseppe Conte, France’s Emmanuel Macron, and the UK’s Boris Johnson. So it’s not clear that a small approval rating gain is a bullish sign for Trump.

Do “the fundamentals” even apply anymore? Isn’t everything different in the age of Trump? Sorry, but this is dumb. The 2016 election result — a narrow popular vote win for the incumbent Democrats given the mediocre economy — was actually fairly well-predicted by economic models. (These models don’t say anything about the Electoral College.) The 2018 midterms also went pretty much exactly how the fundamentals predicted given Trump’s middling approval rating and the typical midterm backlash against the incumbent party. Heck, even this year’s Democratic primary, in which Joe Biden is the very likely winner, has been good for the fundamentals-driven “Party Decides” view of the primaries in which the party establishment has a lot of influence.

Could partisanship dull the response to a recession? This is a better objection. With more polarization in the electorate and fewer swing voters, it stands to reason that Trump’s approval ratings will be less responsive to different news events than an earlier president’s might have been. And indeed, Trump’s approval ratings have trended within a narrow range so far throughout the course of his presidency, despite tumultuous events such as the Ukraine scandal and the impeachment proceeding against him.

There is an important catch, however. If the range of possible outcomes is narrower for Trump, that also means the margin of error is lower since the outcome is more predictable. Suppose that in less polarized times, a sharp recession would result in Trump being projected to lose by 12 points, plus or minus 10 percentage points. Given polarization, however, he might only be projected to lose by half as much, or 6 points — but the margin of error would also be half as much, or 5 points.

It’s also worth noting that Trump currently trails Biden in most general election polls by a wide enough margin that the Electoral College probably wouldn’t save him. So if higher partisanship means the outcome is more “locked in” and less likely to change, that isn’t great news for Trump.

Could an economic recovery in the second half of the year help Trump? Yes, it could. If there’s a sharp decline in economic activity over the next few months, and then a steep rebound, I wouldn’t want to have a model that only used second-quarter GDP and pretended everything that happened afterward didn’t matter.

At the same time, there is not a lot of certainty in how long the coronavirus crisis will last, nor how long the economic recovery would take. Moreover, a lot of epidemiologists worry about a potential second wave of the coronavirus in the fall, as occurred in the flu pandemic of 1918.

If I were Trump, I’d want to think six months ahead to the fall. That means I’d want a broad-based stimulus plan that helps ordinary Americans and small businesses to stay afloat during the weeks — or months-long shutdown. I’d want to stamp out the disease as much as possible — even if that means social distancing is in effect for a bit longer. And I’d want to have a Manhattan Project on treatments, testing and surveillance so that the coronavirus is more manageable until a vaccine is developed, which is unlikely until well after Election Day.

Frankly, this isn’t that complicated, and Trump’s incentives are well-aligned. The better off America is by November, the more likely he is to be re-elected.