The Economy: Good News for Dems, Right?

Economic woes usually favor the challenging party in a Presidential election. But this may be one more pattern the 2008 campaign upends

From left: Senator Barack Obama, Mitt Romney, Senator Hillary Clinton, and Senator John McCain.

by Jane Sasseen

With fears of recession on the rise and voters in state after state now citing the economy as the most important issue in the election, it's hardly an auspicious time to strike out as the Republican Party's new Presidential nominee.

That's because elections that take place when the economy has turned sour historically have not gone well for the candidate representing the incumbent party. Think of Ronald Reagan's crushing victory over Jimmy Carter in 1980 or Bill Clinton's ouster of George H.W. Bush following the early 1990s recession.

Rightly or wrongly, "voters tend to assign culpability for the economy's poor performance to the outgoing President, even if there's a split government," says Goldman Sachs (GS) senior economist Ed McKelvey. That makes it tough for a potential successor to get a leg up.

Will that pattern continue this year for John McCain, who appeared headed for the nomination Feb. 5 as Republicans in 21 states took to the polls? Certainly, the models created by political scientists and economists to predict electoral winners based on economic conditions suggest problems ahead for the Republican nominee, be it McCain or Mitt Romney, should he manage a surprise turnaround.

The Economy Calls It

The best-known among them, devised by Yale professor Ray Fair, has reliably picked the winner of the popular vote. This year, Fair's model forecasts that even if the economy shows modest growth of 1.8% for the first three quarters of 2008, the Democratic nominee will win 52% of the popular vote vs. 48% for the Republican nominee. And if the economy does stumble into recession, things will get worse: Assume the economy contracts by 1%, and the Republican share of the vote could fall to around 46%.

So does that mean this year's race for the White House is over before it has even begun? Not so fast. In a year in which few past patterns or political predictions have proven correct, an increasing number of analysts and strategists say the view that a bad economy could doom the Republican candidate also may no longer be so clear-cut.

"Historically, a poor economy helps the challenging party, which in this case is the Democrats," says Jon Delano, a political scientist at Carnegie Mellon University. "But given that the 2008 cycle is turning all other political assumptions upside down, that could be the case here as well."

Delano and others point out that renewed problems in Iraq or some other foreign-policy crisis could easily return national security to front and center. And there's no easy way to anticipate the impact of the fact that the Democratic nominee is likely to be either a woman or an African American.

Wriggle Room

But even if the electoral debate remains focused on the economy, some analysts and strategists argue that the Republican nominee could wriggle free of the bad-economy curse—particularly if McCain does emerge as the nominee.

Daniel Clifton, a Washington policy analyst at investment-research firm Strategas Research Partners, argues that even as many Democrats assume a general-election campaign waged over the economy would play to their strengths, it still might play more to McCain's than many believe. "If the war is neutralized as an issue, we will have a debate focused more squarely on the economy and the upcoming proposals for tax increases that would be put forth by the Democratic candidate," Clifton argues.