What if everything happened according to plan?

I had occasion to revisit this graph:


And then, it suddenly struck me: what if everything had gone as planned? From the perspective of Obama’s reelection chances, the light blue graph (“without recovery plan”) is much better than the dark blue (“with recovery plan”). By Election Day, 2012, the two curves are nearly at the same point. But in the year from 2011 to 2012, the economy is improving much faster with the top curve than the bottom curve. And, as Doug Hibbs, Bob Erikson, Steven Rosenstone, and others have taught us, year-to-year change in the economy is what it’s all about.

I’m not exactly saying that Obama and his team actually want unemployment in 2011 to be any higher than necessary; it’s just funny how, from a crude curve-extrapolation perspective, the above graph is looking like it could be good news for them in two and a half years.

Once again, it’s the Hoover-or-Reagan story.

6 thoughts on “What if everything happened according to plan?

  1. Note, however, that year-to-year *change in unemployment* is not at all the same thing as year-to-year change in the overall economy. Regardless of the first derivative of unemployment, you would expect wage, income and GDP growth to be higher in the period with lower unemployment.

  2. There's a lot of variability and risk around the without recovery plan forecast. It's a dangerous strategy politically, as well as, of course, horrible for the country.

    Things could have gotten much worse than that "without recovery plan" forecast. The midterms would be a complete disaster even if that forecast was correct. But it might easily have been quite incorrect and the recovery might not have started to roll until after the 2012 election, maybe much after. Japan's slump lasted more than a decade, and who knows how long the Great Depression might have lasted with no action, and without the enormous fiscal stimulus that was World War II.

  3. I have a question that I've been trying to find an answer too. I know the overall economy plays a large role in predicting voter behavior, but is this based on personal experience with the real economy (yourself, family, friends, community etc) or is this based on economic data they hear in the news? I'm wondering this because it might have interesting implications for electoral success for the Democrats or Republicans. As the economy continues to recover (very weakly, like most post-financial crises economies, but still recover) is it likely that the official unemployment figure will actually rise. This is because as those people who have "given up", and thus not counted as part of the labor force, will re-enter the job search market and drive that number up temporarily, even though the economy is recovering. Do voters look at personal experience or data when making a vote?

    As a side note, I always thought Romer's predictions were widely inaccurate. I think the problem was they were asking her to be a forecaster and not only is that incredibly difficult to do, but it's far more guesswork, luck, and intuition than actual analysis. What they should have asked her to do was estimate the number of jobs (well, technically estimate GDP effects and then translate that to jobs via Okun's) it would create rather than it's effect on the unemployment figure, she could have much more easily done that. In fact, if you look at her calculations for the actual number of jobs that would be created she isn't actually that far off (though she's still a bit peachy, I think she really underestimated the effects of state budget cuts counteracting the stimulus). As an additional side note, when Romer was doing her analysis I thought unemployment would peak at about 12% without stimulus and with this package I expected the peak would drop by about 1.8-2%, so either I'm quite lucky or I should become a professional forecaster.

  4. Government figures are nice, but I suspect votes are more driven by whether your immediate circle of friends is doing well or not — your Facebook friends may have more impact on the election that the official stats?

    Are the official stats corelated enough with this circle of friends to be as meaningful as they used to be?

    Note important government stats are more questionable. The source you liked above notes "There’s been a growing realization that the unemployment rate doesn’t mean much" due to labor market exits and more extensive use of part-timers.

    Productivity stats have been similarly compromised as government statistical methodology lags behind ecoonomic changes. I've written more on this at http://mikekr.blogspot.com/2010/03/is-productivit

  5. If I remember the Bread and Peace model correctly, the key variable is the average growth rate of real disposable personal per capita income over the entire presidential term, not the last year or two years.

    So a sharper recovery in the election year shouldn't matter for the Presidential election if it is only getting you back to where you would have been without as steep a downturn.

    Of course there are other models which focus on the election year, I just don't recall them being as brief or powerful (or accurate at predicting the 2008 results) as Hibbs.

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