Is the “Iron Law” kicking in?
Last December I introduced you to the “Iron Law ” (“Clock to tick soon on the ‘Iron Law of Presidential Elections’ “). The IL is a simple (or, “-istic”) rule for predicting the next presidential election. If there is one negative quarter (real GDP change is a “minus”) in either the election year or the year prior to the election–2016 or 2015 in this case–the party in power in the White House switches. If all those quarters are positive, the party in power stays in the White House.
It’s the economy, stupid!
The IL seems almost stupidly facile. Except it works.. It has worked for every election for which we have any kind of decent economic data (1868) except Eisenhower in ’56. It’s most impressive call was March 1991 .In March 1991 the IL would have predicted a Democratic win in 1992 (1st quarter of 1991 was obviously going to be negative). This despite President Bush 41 having post-Gulf War 80%+ approval ratings and every big name Democrat of the day (Bradley, Cuomo, etc.) taking a pass because Bush appeared unbeatable (I wonder what odds you could have gotten then in Las Vegas on an obscure ex-Arkansas Democratic governor named Clinton?).
Here’s where we stand now. The first cut on 1Q2015 GDP was o.2% growth. Weak but positive, and the IL speaks only to the direction of change, not the magnitude. But it’s looking increasingly likely that this number will be revised downward, largely but not totally because of a wider trade deficit than initially reported. In the National Income Accounts, a larger trade deficit reduces GDP.
So here are two neck-stuck-out predictions:
(1). First quarter GDP will be revised downward to a negative number.
(2). This activates the Iron Law. A Republican will be elected president in 2016.