Historic Election

Every election is the most important election of our lifetimes, at least so we often hear. There's a case to be made that this year is doubly important, however. Some political science research on elections indicates that economic factors matter more than just about anything else, and that levels at the time of an election do not matter as much improvements (or decreases) in rates. For instance, high unemployment isn't a problem if you started out with very high unemployment, but is a big problem if you started out with low unemployment. Where you start and where you finish are both important factors. You want a downward slope with unemployment and upward slope with personal income. That is why Obama has even a chance to win this year - he started off with catastrophic numbers and now we have only very bad numbers.

It is plausible that whoever wins this year is going to have better numbers in 2016. The nationwide economy is simply too big of an engine for a president to bridle (or to jump start). Barring further catastrophe (always a chance for further catastrophe) unemployment will be better than the 8.3% it is now, GDP will be growing at a faster rate, consumption and investment will pick back up, and so on.  That is probably true no matter who is in office. But we can be sure that voters will look favorably on whomever is in office at the time. If Obama wins, the odds of Democrats being rewarded goes way up. The stimulus will not be viewed as a failure as it commonly is now, the notion that government activism is appropriate in cases of severe recessions of the sort we are in now will be vindicated in the eyes of many, and so on. If Romney wins this year, he is virtually a lock for re-election as an incumbent. Most likely many will credit tax cuts and cuts in entitlement spending as partially responsible for better fortunes.

If we look at an eight year horizon instead of four years, there is a lot riding on this election. Supreme Court Justices will need to be appointed, health care costs and perhaps the implementation of the ACA (a.k.a. Obamacare) have to be addressed, tax reform of one sort or other is certain to be an important issue, along with the increasing importance of climate change and the need for environmental reform. This is a pretty important election.