As the 2024 election season gets under way, one has to look pretty hard to find bad economic news coming out of the United States. The stock market is at all-time highs, unemployment is low, and inflation is coming down. Real wage growth has returned to its pre-pandemic upward trend. Even gas prices have come down since peaking during summer driving season and the uncertainty in July 2022 related to the Russia-Ukraine war.
But rosy economic prospects are not translating into higher approval ratings for President Joseph R. Biden Jr., which remain near 40 percent. Why isn’t Biden getting credit for presiding over a good economy?
The answer is a subject of much debate among economists and political analysts, with some saying it’s only a matter of time before Biden benefits. But it’s also true that as US partisan politics have become more vicious, voters are less and less likely to judge incumbents on the state of the economy. Candidates and campaigns spend less time trying to persuade potential swing voters with strong economic performance and more time trying to animate their bases around social issues (abortion, gun control) and appeals to their identities or groups. This trend augurs poorly not just for social harmony and democracy but for the economy as well.
What’s economic voting?
Economic voting theory posits that since the state of the economy is one of the most significant determinants of social and individual welfare, voters will reward candidates and parties who have presided over good economic times and punish those who have not.
There are nuances, of course, but the general conclusion can be summed up by political consultant James Carville’s message to Bill Clinton’s campaign staff regarding messaging in the 1992 presidential race, “It’s the economy, stupid.” Evidence from the United States—but also from Europe, Latin America, and elsewhere—is consistent with “the responsibility hypothesis” that voters hold the government accountable for economic performance. As Michael Lewis-Beck and Mary Stegmaier put it in 2000, “Although voters do not look exclusively at economic issues, they generally weigh those more heavily than any others, regardless of the democracy they vote in.”
But that mountain of evidence was drawn mostly from the 1980s through the 2000s. That period saw the collapse of the Soviet Union and with it the end of the broad ideological push-and-pull between capitalism and communism: Capitalism had won. The US elections of the 1990s and early 2000s occasioned consequential third-party bids by Ross Perot and Ralph Nader, both of whom expressed deep skepticism of the then growing consensus around free trade among Democrats and Republicans. What can more recent data tell us?
Reading the tea leaves
Several data points suggest economic voting— and economic evaluations of presidential approval in the United States— are in decline and have been for at least a decade. First, presidential approval no longer tracks gas prices. It’s axiomatic in Washington that high gas prices are bad for an incumbent president: Gas prices are widely known and of interest to those who otherwise don’t care about politics. And as the University of Virginia’s Center for Politics has shown, that was mostly true, especially between 1977 and 2011. As gas prices went up, presidential approval went down (r = - 0.52). Indeed, one could explain over a quarter of the variance in presidential approval just by tracking prices at the pump. But since 2011, the two variables essentially don’t track one another at all: Between 2011 and 2022, the correlation was, if anything, weakly positive (r = 0.09). Consumers still complain about gas prices, but gas prices no longer appear to be shaping their views of presidential performance in as direct a fashion.
Second, Donald Trump became the first president not to be re-elected despite holding office during broadly prosperous times. Over the past 60 years, the one-term presidents (Ford, Carter, and Bush I) had all presided over challenging economies, especially when measured by “kitchen table” indicators like unemployment or inflation (or both, a.k.a. the misery index below).
Until the COVID-19 pandemic, Trump had presided over the least “miserable” economic circumstances of the past 50 years: low inflation and low unemployment. The historic pandemic— and the massive social and economic upheaval that came with it— makes assessing the role of economic voting in Trump’s 2020 defeat difficult. But even before the pandemic, Trump was a historically unpopular president despite low unemployment and stable prices.
The role of hyperpartisanship
The unstated premise of economic voting theory is that voters form opinions based on assessments of hard economic realities. But political scientists have known since the 1960s that partisan self-identification— seeing oneself and a Democrat or a Republican— shapes the way voters interpret informational signals, and that partisanship is highly durable in part because it shapes beliefs, rather than beliefs shaping partisanship. As partisan self-identifications become more entrenched and passions inflamed, as they have over the past decade, the link between objective economic indicators and vote choice will decline.
That’s exactly what political scientists Chris Ellis and Joseph Ura found in 2021. Analyzing seven decades of presidential election data, they found that at higher levels of partisan polarization— measured as the levels of overlap or non-overlap in Democratic and Republican voting in the US House of Representatives— economic variables from the second quarter of the election year (the pivotal moment, according to economists) had less predictive power in explaining presidential vote choice and overall vote shares. And over the past decade, Congress has been its most partisan since the US Civil War, largely driven by a pronounced rightward move among Republicans.
It's not that voters no longer care about the economy. Instead of assessing the economy as a basis for evaluating presidential performance, voters are now assessing candidates and their parties and then expressing economic misgivings or highlighting successes to cast their preferred candidate in a better light.
Hyperpartisanship and the economy
This turn of events—in which presidents and presidential candidates don’t appear to benefit from presiding over a strong economy— has broad economic implications that should be troubling for all Americans. First, it encourages candidates from both the right and left to spend less time focusing on the economy and more time focusing on social issues that divide, rather than unite, the electorate: gun control, abortion, immigration, and diversity, equity, and inclusion (DEI) efforts on college campuses. These are important issues, and they should be topics of political discourse. But they will inevitably reinforce partisan divides more than erode them, heightening the perceived stakes of each election to the point where nearly a quarter of Americans believe political violence may be necessary to save the country.
Second, it expands the range of politically acceptable choices—the Overton window—for economic policy, as these choices are less consequential for presidential approval and electoral prospects. Self-defeating policies like across-the-board tariffs (and the supply shock they will doubtlessly generate) and attempting to make a purely “Made in the USA” supply chain for renewable energy and transport are back on the table in ways that would have been largely unthinkable just a couple decades ago. The 2024 presidential election is set to be the most protectionist in recent memory— supplanting the 2020 election, which supplanted the 2016 election. These ideas would harm US workers and consumers, slow desperately needed energy transitions, and put the United States on a path toward increasing friction with its closest trading partners in a dangerous moment for the US economy.
The reasons for hyperpolarization are myriad, ranging from the echo chambers of social media to increasingly nativist sentiments among white non-college-educated voters to economic and partisan sorting in housing and the businesses people frequent, and a full investigation is far beyond the scope of this blog post. But the available evidence suggests President Biden, as an incumbent, won’t receive as much electoral credit for slowing inflation and low unemployment as he would have in the past. And lack of credit is a bad thing for the United States, regardless of whether one supports President Biden or not.
This publication does not include a replication package.