June 7 2008
Implications of the ‘Bread and Peace’
Model for the 2008 US Presidential Election
(Forthcoming in Public Choice, September 2008)
douglas@douglas-hibbs.com www.douglas-hibbs.com
Abstract
Presidential election
outcomes are well explained by just two objectively measured fundamental
determinants: (1) weighted-average growth of per capita real personal
disposable income over the term, and (2) cumulative US military fatalities
owing to unprovoked, hostile deployments of American armed forces in foreign
conflicts. The US economy weakened at the beginning of 2008 and average per
capita real income growth probably will be only around 0.75% at Election Day.
Moreover cumulative US military fatalities in Iraq will reach 4,300 or more. Given
those fundamental conditions, the Bread and Peace model predicts a Republican
two-party vote share centered on 48.2%.
1 Background
My analysis of the
fundamental determinants of aggregate presidential voting outcomes and their
implications for the 2008 election draws upon research reported in my earlier
Public Choice article (Hibbs
2000)[1] and
in my unpublished 2007 paper “The Economy, the
War in Iraq and the 2004 Presidential Election.”[2]
The
Bread and Peace model assumes that postwar American presidential elections should
for the most part be interpreted as a sequence of referendums on the White
House party’s economic record. The incumbent party is punished for poor
economic performance and rewarded for good performance. Economic performance is
best measured by a weighted-average of quarterly growth rates of per capita
real disposable personal income, computed from the election quarter back to the
first full quarter of each presidential term. Growth of per capita real
disposable personal income is the broadest single aggregate measure of changes
in voters’ economic well-being in as much as it includes income from all
market sources, is adjusted for inflation, taxes, government transfer payments
and population growth, and tends to move with changes in unemployment.
The only
additional factor systematically affecting postwar aggregate votes for
president is US military fatalities owing to unprovoked, hostile deployments of
American armed forces in foreign conflicts not sanctioned by a formal
Congressional declaration of war – namely the American military
interventions in Korea, Vietnam and most recently Iraq. My research shows that
the electoral penalties exacted by Korea, Vietnam and Iraq fall almost wholly
on the party initiating the commitment of US forces – the Democrats for
Korea and Vietnam, the Republicans for Iraq – and they are proportionate
to the cumulative numbers of American military fatalities, adjusted for
population size. Other factors of course influence presidential voting,
sometimes dramatically, but they vary randomly from election to election.
Because such events are idiosyncratic rather than systematic, they cannot be
incorporated to the Bread and Peace model which aims to pin down quantitatively
the impact of persistent fundamental determinants.
The Bread and
Peace model is designed to explain
presidential election outcomes in terms of objectively measured
political-economic fundamentals rather than to predict optimally election results or to track them statistically after the fact. For those
reasons the model includes no arbitrarily coded dummy, trend, count, or
switching variables which have no connection to objectively measured policies
and performance affecting voters.[3]
Likewise the Bread and Peace model makes no use of pre-election poll readings of
voter sentiments, preferences and opinions. Attitudinal variables are
themselves affected by objective fundamentals and consequently they supply no
insight into the root causes of voting behavior, even though they may provide
good predictions of voting results.[4]
In fact the best predictions of presidential elections (along with other
elections and other events) most likely are obtained from price data at betting
sites like Intrade (www.intrade.com) where punters lay real money on the table.[5]
2 The Bread and Peace Equation
Estimation of the following simple
nonlinear equation yields quantitative estimates of the effects on votes for
president of per capita real income growth and the cumulative number of
American military fatalities in Korea, Vietnam and Iraq:
·
Vote is
the percentage share of the two-party vote for president received by the
candidate of the incumbent party.
·
R is per capita disposable
personal income deflated by the Consumer Price Index. 
is the
quarter-to-quarter percentage change expressed at annual rates, computed 
. The weighted sum of annualized quarterly real income growth
rates 
runs from the
election quarter back to the first full quarter of each presidential term.[6] The
sequence of over-the-term growth rates is divided through by the sum of the lag
weights 
so that the coefficient 
represents the effect on the
incumbent vote share of each percentage point of weighted-average annualized
quarter-to-quarter real income growth sustained over the presidential term. As
the weighting parameter 
approaches a
value of 1.0 the incumbent party vote share is affected by a simple average of per
capita real income growth rates over the whole term; growth at the beginning of
the term has the same electoral impact as growth just before the election. As approaches zero
only the election quarter growth rate affects votes for president. Values of between 0 and 1
determine the relative political importance of real income growth rates just
before the election as compared to growth rates earlier in the term.
·
Fatalities
denotes the cumulative number of American military fatalities per million US
population in Korea, Vietnam and Iraq during the presidential terms preceding
the 1952, 1964, 1968, 1976 and 2004 elections.[7]
Table 1 reports nonlinear-least-squares estimates of the Bread and Peace equation for presidential elections spanning 1952-2004. The model was fit using data on population and disposable personal incomes from the Bureau of Economic Analysis (http://www.bea.gov) and consumer prices from the Department of Labor (http://www.stats.bls.gov), along with data on US military fatalities in Korea, Vietnam and Iraq originating with the US Department of Defense.[8]
According
to the coefficient estimates in Table 1, each percentage point of growth in per
capita real disposable personal income sustained over a presidential term
boosts the in-party candidate’s vote share by about 3.6 percentage points
above a benchmark constant of approximately 46%. The weighting parameter
estimate 
implies that the
real income growth rate in the last full quarter before an election (q3 of
election years) has more than three times the electoral impact of income growth
in the first full quarter of the term 
. The fatalities coefficient estimate means that each 100 US
military fatalities per million population owing to hostile deployments of US
forces in unprovoked wars depresses the incumbent vote by about 5 percentage
points.
|
Table 1. Bread and Peace Equation Estimates |
|||
|
|
|
|
|
|
Dependent variable: incumbent two-party
vote share (%) |
|
N = 14
elections 1952 – 2004 |
|
|
|
|
Adj |
Root MSE =2.38 |
|
|
coefficient
estimate |
std. error |
p-value |
|
Constant |
46.2 |
1.22 |
.000 |
|
Weighted-average per capita real disposable personal income
growth rate, % |
3.55 |
0.605 |
.000 |
|
Lag weight |
0.909 |
0.057 |
.000 |
|
US military fatalities per million
population |
-0.052 |
0.013 |
.002 |
The
pronounced connection of two-party vote shares received by incumbent party
candidates to weighted-average per capita real income growth rates over the term
at postwar elections 1952-2004 is graphed in Figure 1. (Appendix Table A1 shows
more statistics for each election.) Voting outcomes in 1952 and 1968 exhibit
the biggest deviations from the regression prediction line – they
register the effects of the second fundamental determinant of presidential
voting: American military fatalities in unprovoked foreign wars.
High
cumulative US military fatalities in Korea at the time of the 1952 election
(29,260 or 190 per million population) and in Vietnam at the 1968 election
(28,900 or 146 per million population) cost candidates of the incumbent
Democratic party dearly, most likely causing Adlai Stevenson’s loss to
Dwight Eisenhower in 1952 and almost certainly causing Hubert Humphrey’s
loss to Richard Nixon in 1968. Absent America’s interventions in the
Korean and Vietnamese civil wars, the strong real income growth record prior to
those elections easily should have kept the Democrats in the White House.
In
principle, military fatalities due to discretionary American involvement in
foreign conflicts were also relevant to the 1964, 1976 and 2004 election
contests, but the impact on aggregate votes was negligible because the fatality
numbers were small. At the 2004 election, for example, US military fatalities
in Iraq stood at 1,130 (3.86 per million population) – too few to exert
great negative effect on the vote for Bush. However by the time of the 2008
election US military fatalities will have quadrupled. Consequently, as I show
ahead, Iraq will play a more important role in 2008 than in 2004.
3. The Economy, Iraq and the 2008 Election
Republican fortunes in 2008 will depend
on the severity of the US economic contraction now underway and the accumulation
of US military fatalities in Iraq. Over the first full twelve quarters of
President Bush’s second term (2005q2 – 2008q1) the weighted-average
growth rate of per capita real disposable personal income was 1.04%, which although significantly below the
postwar average of 1.8% is within striking distance of the performance
necessary to keep the incumbent party in the White House. According to the
Bread and Peace model other things being equal the incumbent party vote share
reaches the break-even point of 50% at a weighted-average growth rate of just
1.07%.[9]
However in 2008 “other things” are not going to be equal. At the
beginning of 2008 the US economy weakened, perhaps drifting into recession.[10]
And at June 1 2008 cumulative US military fatalities in Iraq had reached 4,084.
Both developments hurt Republican chances.
3.1 Growth of Per Capita Real Disposable Personal Income
Figure
2 shows the evolution of weighted-average growth of real incomes over the term along
with various scenarios for real income growth during the last three quarters of
2008. Fairly pessimistic scenarios are probable, notwithstanding the fiscal
stimulus package passed by congress and signed into law by President Bush on
February 13 2008 that will raise aggregate disposable income by about 1% in the
half-year before the election. The relative sizes of the plot points for
hypothetical 2008 growth rates reflect my reading of the tea leaves.
As indicated by
Figure 2, I think real income growth rates near the postwar average of 1.8% are
unlikely. 2008q2-2008q4 growth rates will probably be in the vicinity of 0%,
which at Election Day would yield an over the term weighted-average real growth
performance in the vicinity of 0.75%. According to the Bread and Peace model
such a real income growth record by itself implies a relatively narrow victory
for the out-party Democratic candidate (presumptively Barack Obama) over the
incumbent-party Republican candidate (presumptively John McCain) by a margin of
approximately 2 percentage points: 51% to 49%.
3.2 US Military Fatalities in Iraq
Time paths of US
military fatalities in Iraq, quarter-by-quarter and cumulatively, are graphed in
Figure 3. During the second half of 2007 the fatality rate turned down, falling
to about 100 per quarter at the end of 2007 from rates of 200 to 300 per
quarter in prior years. Contrary to some claims, it is doubtful that the
decline in American fatalities has much to do with the US “surge”
launched on January 10 2007, which added approximately 30,000 US troops to the
effort to pacify a conflict-plagued country of nearly 30 millions. Instead, the
Mahdi Army cease fire ordered by the Shia leader Muqtada al-Sadr on August 29
2007, along with the incorporation of some 80,000 or more formerly insurgent
Sunni fighters to the US pacification effort (at the bargain price of $10 per
man per day plus new weaponry) are the main direct reasons for the big improvement
in the rate at which US soldiers are being killed.[11]
Both Shia and Sunni (and Kurdish) forces appear to be biding their time and
building their strength in preparation for the civil war that many informed
observers believe will inevitably break out when the US withdraws from Iraq.[12]
The
time paths of projected fatalities during last three quarters of 2008 depicted
in Figure 3 are based on the plausible (or perhaps merely the hopeful)
assumptions that the Mahdi Army continues to stand down and that Sunni fighters
remain in cooperative liaison with US forces. Under those assumptions
cumulative US military fatalities will increase from the June 1 2008 level of
4,084 to about 4,300 at the time of the 2008 election.
4. 2008 Vote Predictions from Political-Economic Fundamentals
Table 2 shows the
upshot for the presidential election result of past trends and likely
developments during 2008 in real income growth and US military fatalities. The
first row of the Table reports calculations of expected votes at various 2008
real income growth rates under the counterfactual situation of zero US military
fatalities in Iraq (equivalent to a ‘no invasion’ scenario). The
counterfactual reveals the Iraq war’s estimated quantitative impact on
2008 votes for president: Cumulative fatalities in the vicinity of 4,300
– the projected magnitude around Election Day – depress the
Republican vote by approximately three-quarters of a percentage point compared
to the counterfactual benchmark of zero fatalities. An impact that size would
be decisive in an election that was close on economic grounds alone. But with
US fatalities in Iraq running above 4,000, the vote projections in Table 2
indicate that 2008q2-2008q4 real income growth rates need to exceed 2% per
annum for the Republicans to have a decent chance of holding the presidency. As
already mentioned, growth that high seems unlikely in what shows signs of being
a year of at least mild recession.
The
shaded region of the Table identifies the most probable combinations of
cumulative US fatalities in Iraq and weighted-average real income growth. Those
political-economic fundamentals imply an expected Republican two-party vote
share centered on 48.2%. Barring unforeseen political shocks favoring the
Republican candidate (presumptively John McCain), the Democratic standard
bearer (presumptively Barack Obama) ought to win the 2008 presidential election
by a margin in the neighborhood of 3.6 percentage points.
|
Table 2.
Expected Two-Party Vote Shares for the Republican Candidate under
Various Assumptions about US Military Fatalities in Iraq and Real Income
Growth Rates in 2008 |
|||||||
|
|
|
Per capita
real income growth rates 2008q2 - 2008q4 (resulting weighted-average growth
over the term) |
|||||
|
|
|
|
-2 (0.22) |
-1 (0.49) |
0 (0.76) |
+1 (1.03) |
+2 (1.30) |
|
|
|
|
|
|
|
|
|
|
Cumulative
US military fatalities at 2008q4 (per million
population) |
0 (0) |
|
47.0% |
48.0% |
48.9% |
49.9% |
50.8% |
|
|
|
|
|
|
|
|
|
|
4,100 (13.4) |
|
46.3% |
47.3% |
48.2% |
49.2% |
50.1% |
|
|
|
|
|
|
|
|
|
|
|
4,300 (14.0) |
|
46.3% |
47.2% |
48.2% |
49.2% |
50.1% |
|
|
|
|
|
|
|
|
|
|
|
5,000 (16.3) |
|
46.2% |
47.1% |
48.1% |
49.0% |
50.0% |
|
|
|
|
|
|
|
|
|
|
5. Qualifications
The Bread and Peace
model aims to quantify the effects of fundamental determinants of presidential voting
outcomes. However every election is affected by random, idiosyncratic factors
which at times are important enough to obscure the persistent influence of
fundamentals. Indeed idiosyncratic events contribute a lot of the fun to
political affairs and their unexpected appearance and impact from one election
to the next are why many of us follow election year developments so carefully
in the media. Some obvious idiosyncrasies in the 2008 political drama pertain
to the race, age and health of the contenders.
In
2008 the Democratic nominee for president presumptively will be an
African-American man – a first in American major party politics (as would
the nomination of Hillary Clinton). Most of us would like to think that the US
has matured enough that candidate race (or gender) as such are of no electoral
consequence. Most of us are also realistic enough to know that this untested
proposition is at best uncertain and, in fact, is probably wrong. Pure race (or
gender) effects will cut both ways in 2008 but on balance they likely will hurt
the Democratic Party candidate – more so Obama (the presumptive nominee)[13]
than Clinton if one believes, as I do, that nowadays race prejudice
substantially exceeds gender bias among US voters with a taste for
discrimination.
On
the Republican side are the issues of John McCain’s age and health.
Should he win election, McCain (b. August 29, 1936) would be the oldest first
term president ever – a fact that could begin to weigh more heavily on
voters than earlier as attentions get focused after the party conventions.
Another episode of melanoma (McCain is known to have had three non-metastatic
bouts so far) would also be a significant negative. A diagnosis of metastatic
melanoma, which would be impossible to keep secret, would devastate
McCain’s chances producing a much lower Republican vote share than
expected from fundamental factors.
References
Bartels, L. (1997). Correspondence: econometrics and elections.