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June 7 2008

&n= bsp;

Implications of the ‘Bread and Peace’ Model for the 2008 US Presidential Election

(Forthcoming = in Public Choice, September 2008)

Douglas A. Hibbs, Jr.<= o:p>

CEFOS, Gothenburg University, Box 720 40530 Gothenburg, Sweden

= douglas@douglas-hibbs.com www.douglas-hibbs.com

Abstract

Presidential el= ection 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 Da= y. Moreover cumulative US military fatalities in Iraq will reach 4,300 or more= . Given those fundamental conditions, the Bread and Peace model predicts a Republic= an 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for the 2008 election draws upon research reported in my earli= er Public Choice article (= Hibbs 2000)[1] and in my unpublished 2007 paper “The Economy, = the War in Iraq and the 2004 Presidential Election.”= [2= ]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 rate= s of per capita real disposable personal income, computed from the election quar= ter back to the first full quarter of each presidential term. Growth of per cap= ita real disposable personal income is the broadest single aggregate measure of changes in voters’ economic well-being in as much as it includes inco= me from all market sources, is adjusted for inflation, taxes, government trans= fer payments and population growth, and tends to move with changes in unemploym= ent.

The only ad= ditional factor systematically affecting postwar aggregate votes for president is US military fatalities owing to unprovoked, hostile deployments of American ar= med forces in foreign conflicts not sanctioned by a formal Congressional declaration of war – namely the American military interventions in Ko= rea, Vietnam and most recently Iraq. My research shows that the electoral penalt= ies exacted by Korea, Vietnam and Iraq fall almost wholly on the party initiati= ng 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, bu= t they vary randomly from election to election. Because such events are idiosyncra= tic 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 a= nd Peace model is designed to explain<= /i> 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 polici= es and performance affecting voters.[3= ] Likewise the Bread and Peace model makes no use of pre-election poll readin= gs 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 provi= de 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 bet= ting sites like Intrade (www.intrade.com) where punters lay real money on the ta= ble.= = [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:<= /p>

·= ;      =    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 gr= owth rates   runs from t= he election quarter back to the first full quarter of each presidential term.<= /span>= [6= ] The sequence of over-the-term growth rates is divided through by the sum of the= lag weights <= span style=3D'mso-spacerun:yes'> so that the coefficient = <= span style=3D'mso-spacerun:yes'> 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 t= he election. As approaches = zero only the election quarter growth rate affects votes for president. Values o= f between 0 a= nd 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 precedi= ng the 1952, 1964, 1968, 1976 and 2004 elections.^{^[7=
]}

Table 1 reports nonlinear-least-squa= res estimates of the Bread and Peace equation for presidential elections spanni= ng 1952-2004. The model was fit using data on population and disposable person= al 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 po= ints above a benchmark constant of approximately 46%. The weighting parameter estimate = implies tha= t 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 gr= owth 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 point= s.

=

Table 1. Bread and Peace Equation Estimates

Dependent variable: incumbent two-party vote share (%)

N =3D 14 elections

1952 – 2004

=3D .87

Adj =3D.83

Root MSE =3D2.38

coefficient e= stimate

std. error

p-value

Constant

46.2

1.22

.000

Weighted-average

per capita real disposable personal inc= ome 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 Humphrey̵= 7;s loss to Richard Nixon in 1968. Absent America’s interventions in the Korean and Vietnamese civil wars, the strong real income growth record prio= r to those elections easily should have kept the Democrats in the White House. <= o:p>

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 fata= lity numbers were small. At the 2004 election, for example, US military fataliti= es in Iraq stood at 1,130 (3.86 per million population) – too few to exe= rt 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 sh= ow 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 dep= end on the severity of the US economic contraction now underway and the accumul= ation of US military fatalities in Iraq. Over the first full twelve quarters of President Bush’s second term (2005q2 – 2008q1) the weighted-ave= rage 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 sha= re reaches the break-even point of 50% at a weighted-average growth rate of ju= st 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.= = [1= 0] 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

&nbs= p;     Figure 2 shows the evolution of weighted-average growth of real incomes over the t= erm 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 Presi= dent Bush on February 13 2008 that will raise aggregate disposable income by abo= ut 1% in the half-year before the election. The relative sizes of the plot poi= nts 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 gr= owth 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 vict= ory for the out-party Democratic candidate (presumptively Barack Obama) over the incumbent-party Republican candidate (presumptively John McCain) by a margi= n 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 graph= ed 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 “surge̶= 1; 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 p= er 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.= [1= 1] 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= .= [1= 2]

The time paths of projected fatalities during last three quarters of 2008 depic= ted 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 figh= ters 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 20= 08 real income growth rates under the counterfactual situation of zero US mili= tary 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 compa= red to the counterfactual benchmark of zero fatalities. An impact that size wou= ld be decisive in an election that was close on economic grounds alone. But wi= th 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 b= eing 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. T= hose 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 elec= tion 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-avera= ge growth over the term)

-2=

(0.22)

-1=

(0.49)

0<= /span>

(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)<= o:p>

46.3%

47.3%

48.2%

49.2%

50.1%

4,300 (14.0)<= o:p>

46.3%

47.2%

48.2%

49.2%

50.1%

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-avera= ge growth over the term)
			-2= (0.22)	-1= (0.49)	0<= /span> (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)<= o:p>		46.3%	47.3%	48.2%	49.2%	50.1%

4,300 (14.0)<= o:p>		46.3%	47.2%	48.2%	49.2%	50.1%