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April 24, 2012

Obama Up 7, 49-42, On Gallup, But Over Weekend Polling

It's an old saw which I happen to think is true that weekend polling results in a more liberal skew. So before I cut my throat, I'll wait to see if Gallup's numbers shift back to Romney as Friday, Saturday, and Sunday's figures drop off the track.

Allah links to a Washington Post purported election model. You enter guesses as to what you think Obama's job approval rating, and the GDP rate of growth, will be on election day, and that predicts, supposedly, Obama's odds of victory.

According to the model, his odds of winning are high. As Allah notes, you have to assume a job approval rate of 45% (likely) and 0.0% growth (unlikely but possible) before Obama's odds of winning drop, fractionally, below 50%.

Here's my problem with that.

First, we have to look at the typical business cycle. It begins with a recession, and then proceeds to a recovery. After that comes a period of expansion, and then stagnation, and then a new recession.

But the recession/recovery usually has a V shape -- the economy drops in activity fairly precipitously, but then regains in activity also quite rapidly. Thus forming a "V." Quick stroke down, quick stroke up.

A real recovery is marked by rapid growth-- 5.5%, 7%, even 8 or 9% -- as the economy quickly makes up for past losses and rises back up to about where it had been before the recession.

Now, that is critical -- that a recovery usually brings the economy back to where it had been before the recession. Because after the recovery comes a growth or expansion phase of around 3%. Now, that's 3% of real expansion, of new dollars, new wealth. Because the economy had already recovered, so any amount you add -- 2.5%, 3.0% -- it's all to the good. It's all new wealth.

2.5% - 3.5% growth is what you expect out of an economy in the expansion phase. Such growth figures are good. The economy is growing -- great!

The Washington Post model assumes that such rates of growth will be good for Obama.

I do not believe this assumption.

Because, in the past, 2.5%-3.5% growth was new economic growth above and beyond the previous level of the economy.

Obama has not presided over a proper recovery. I don't think the term "recovery" really applies here. It's an L-shaped recession, a severe drop down and then a horizontal eking along the bottom.

Yes, there's some feeble growth -- 2.5%, 1.7%, 0.4%, whatever the quarterly rate might be in a quarter.

But note the missing thing here -- at no point has the economy actually rebounded to its past levels. If that happened, 2.0% growth might be considered "Meh, not bad, but I'll take it."

But given that the economy has never actually recovered, it's a mistake to assume that the 2.5-3.5% growth rates we typically see in an expansion following an actual recovery are acceptable in an expansion along the bottom, that is, an expansion, yes, but from the previous low created by the recession, and not the previous high established pre-recession.

You know?

In a normal economy -- say, Clinton's -- 2.5% growth would be acceptable because, by the time of November 1996, we'd already recovered from the 1991 recession (in fact, we had almost fully recovered before the election) and were now just adding on to that.

That's not true here.

We have 8+% unemployment -- really 10%, and really 15% by the real unemployment figures.

That's not normal in an "expansion."

Because this isn't an expansion. It did not follow a recovery.

So it is a mistake to think that 1.7% is going to cut it for Mr. Obama.

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posted by Ace at 04:51 PM

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