Ask an economist if you want to know which political party will take the White House in 2016
This week NPR’s Morning Edition is taking the pulse of the American electorate heading into the Iowa Caucuses. It’s examining Five Big Themes this week. WGVU is exploring the same themes closer to home.
Monday, we spoke with voters about their mood. Tuesday, we met with families experiencing the middle-class squeeze. Today, it’s the economy. WGVU spoke with a West Michigan investor and an economist about what the financial state of the nation is telling them.
“Everybody buys gas. When you’ve got gasoline at multi-year lows, it’s clearly an economic barometer that people are going to see and are going to feel. And they basically can vote accordingly.”
Mitch Stapley is chief investment officer with ClearArc Capital, managing about $6.2 billion in client assets and institutional client assets.
“One of the things you’re seeing with gas prices being down here, Consumer Confidence being up, and if you look at the presidential approval ratings out there - President Obama holding in kind of the mid- to high 40s. Which is somewhat surprising to us, given some of the overall signs of weakness in the economy and the fact that this is [the] end of the second term in a presidential cycle.
"Normally, those popularity numbers are coming down. So we think it’s very telling how positive the consumer can be just based on where gasoline prices are."
If you want to know how Americans will vote, ask an investor like Stapley - or an economist like Grand Valley State University’s Paul Isely. He's associate dean of the Seidman College of Business.
“Americans tend to vote on their wallet. And does my wallet feel good? If we look at the economic models around that, it says they don’t feel so good. So they’re going to go with the alternative.”
Isely likes to plug the data into the Ray Fair model for predicting presidential elections and voila, no need to stress over Trump or Hillary – Bernie or Cruz, it’s all about the Benjamins.
Isely says the Ray Fair model has been accurate over the past 100 years based on a two-party system. He explains an increase in the Gross Domestic Product helps the party in power and an increase in inflation hurts the party in power.
“So if we look later in the year I see an even wider race than what’s being projected on the Ray Fair calculator right now. Because I expect that we’ll have slightly higher inflation and slightly slower growth rate in GDP than is being projected. And that’s going to be good news for the party that is not currently in the presidency.”
“I think Paul’s point of GDP and inflation out there clearly works,” Stapley explains. “If you see inflation staying down and GDP growing 2.5 percent or above, clearly that’s going to favor the democratic side of the ticket. If the economy stumbles here in the first quarter or the second quarter, you know, it could be something that’s going to play into the Republicans hands.
"But then you really have to say, if gasoline prices stay low here - that might actually benefit the democratic candidate out there. So there are a lot of moving parts, and I really think you need to pay attention to gas prices right now.”
Gas prices, check. But what about those moving parts?
"This model has had extremely good success over time. It doesn’t mean that it will be right this time. It means that if people behave like they have for the last 30 years, then we’re pretty positive about the direction that it’s going to be. This is outside the margin of error at this point in time.
"But that’s assuming that people will behave like they did. And the wildcard out there is the income dispersion issue. So the economy may still be getting better. People’s wages still may be going up, but they still may feel like the rich people have so much more than I do. And that could create a wrinkle that’s different than what we’ve seen in the past."
And remember, the Ray Fair model for predicting presidential elections is based on a two-party election system.
If former New York Mayor Michael Bloomberg enters the race as a third-party candidate, all bets are off.