Presidential candidates will go into the 2016 election with a “fairly even playing field” if the economy keeps growing as forecast, according to Goldman Sachs Group Inc.
But history suggests an uphill battle for the Democratic Party following two terms under President Barack Obama, given the difficulty that political parties have had in winning a third straight term, the New York-based bank said.
Vice Presidents George H.W. Bush in 1988 and Martin Van Buren in 1836 were the last two candidates to win a third presidential term for their incumbent parties.
“Considered in isolation, our current economic forecast implies a virtual tie,” Goldman economists Jan Hatzius and Alec Phillips said in a Sept. 1 report
. “However, political variables could shift this in either direction. Candidates whose parties have already controlled the White House for two terms have typically underperformed the popular vote share suggested by economic variables by several percentage points.”
Those political wild cards include which candidates are in the final race for the White House and how the electoral college selects a winner, the report said. Businessman Donald Trump is the leading Republican while former Secretary of State Hillary Clinton is the Democratic front-runner, according to polls this week
“The current concentrations of partisan support going into the 2016 election could favor the Democratic candidate by one to two percentage points,” Goldman’s report said, citing a Washington Post analysis
. “There is normally a small ‘bias’ toward one party in the electoral college, so that one party could lose some of its popular vote without actually losing any electoral votes.”
That bias typically has an effect of less than 1 percentage point of the popular vote, which is enough to swing the result in a close election like in 2000 and 1888, according to the bank’s analysis.
Goldman studied the effects of gross domestic product, job trends and personal income on voting patterns, and found that those economic measures won’t help to make better predictions until the second quarter of 2016 as the election comes into focus.
The U.S. economy expanded by a 3.7 percent annualized rate in the second quarter of this year, driven by gains in business investment including inventories, construction and research and development.
Goldman last week cut its GDP growth forecasts for the next three quarters by 0.25 percentage point to 2.5 percent for the fourth quarter of 2015, and to 2.25 percent for the second and third quarters of 2016.
Meanwhile, the stock market’s direction up or down doesn’t help to forecast a presidential winner, according to Goldman.
“The most notable is the crash in October of 1987, which was followed a little more than a year later by the election of then-Vice President George H.W. Bush,” the bank's report said. “That election was even more notable in light of the historic difficulty parties have in winning a third term in office.”
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