President Obama And Unemployment

by Stuart Shapiro

The New York Times today repeats a mantra heard often (including in comments on this website).   Basically the Times discusses how no president has won reelection since FDR with an unemployment of more than 7.2%.   Steve Benen explains the problem with this logic.

The more relevant question is what Americans are willing to put up with. In 1934, during FDR’s first midterms, the unemployment rate was about 22%. The public was thrilled — it had come down considerably from 1932. By 1936, when FDR was seeking a second term, the unemployment rate was about 17%. How can an incumbent president win re-election with a 17% unemployment rate? Because things were getting better, not worse.

That’s obviously the challenge for President Obama. The 7.2% threshold is largely irrelevant — comparing the current economic circumstances to what other modern presidents have dealt with is silly. The more relevant metric is directional — are things better or getting worse by the time voters head to the polls, and if worse, who gets the blame.

Exactly.  This type of analysis occurs by sportscasters all the time (“No one has won a World Series after being in third place on June 27 since 1874.”)  It betrays a fundamental misunderstanding of causation.  President Obama is a favorite for reelection because unemployment will likely (emphasize likely!) be going down and the economy will likely (emphasize likely!!) be getting better in 2012.  Now a European crisis, a budget that drastically reduces spending, or other factors could change that but at the moment President Obama has reason to be confident.  Oh and of course he’ll also be running against the survivor of this circus.

By: Stuart Shapiro

Stuart is a professor and the Director of the Public Policy
program at the Bloustein School of Planning and Public Policy at Rutgers
University. He teaches economics and cost-benefit analysis and studies
regulation in the United States at both the federal and state levels.
Prior to coming to Rutgers, Stuart worked for five years at the Office
of Management and Budget in Washington under Presidents Clinton and
George W. Bush.