Greg Mankiw, Harvard Economist and former member of the Bush economic team, put a post up on his blog linking to a study with a chart showing the relationship between % of the vote received by incumbents and economic growth. (The only thing I don’t like about the chart is that it uses average economic growth over the previous 4 years where I’d like to see economic growth in the election year)(hat tip Abnormal Returns).
With the economy set to tank next year, Bush will take the blame and voters will likely elect a Democtrat as a result.
Add in the continuing debacle in Iraq (The Bread And Peace Model of Presidential Voting) and a Democratic win seems all but certain.
Prediction markets suggest the same with InTrade showing investors, who wager real money, putting a 61% chance on a Democratic win – versus 37% for a Republican.
That probably means Hilary in the White House in ’09 – as InTrade investors give her a 62% chance to win the Democtratic nomination versus 30% for Obama.