This was first published at NetRight Nation here.
People continue to talk about how the Republicans are tied to Wall Street and since they are fighting the bailout with the Wall-Street/Banking money in their back pocket they are going to cave in. Well, I have a better reason for why they are going to cave in. This is to save the 2008 Presidential election for John McCain.
It is a little something called the “Bread and Peace” model. The Bread and Peace model states that in a post-War time election the dependent factor of if the incumbent party person will be elected is based upon economic performance, in this case the incumbent party candidate is John McCain. The model uses two measurements. One is measured in growth in per capita income the other is the number of deaths in foreign wars that are not sanctioned by a formal Congressional declaration. Which are Korea, Vietnam and now Iraq. The model itself with the equation is a little more complicated but this is the basic idea.
According to this paper each percentage point of income growth equals bout 3.6 percent increase in votes. Of course, the last quarter of growth has a bigger effect. Every 100 fatalities of U.S. Military personnel will decrease 5 percentage points of votes. Here are the elections mapped out:
On one side of the chart we have incumbency percentage and the other is the per capita income growth. As you can see the two wars threw the economic stats off in 1952 and 1968. That means that the economic factor can be a good guide of the winner of the election except in major war times. As we would expect the war at those times lowered the incumbent vote %. This means that the 2008 election will depend upon the economy and be discounted by the deaths in Iraq.
Over the first twelve quarters of President Bush’s administration growth of personal income was 1.04%. It is below the average of 1.8%, which has been the post-War average, but it doesn’t rule the Republican Party out of being re-elected to the Presidency. Of course now the economy has weakened and the deaths of the war are somewhere above 4,000, this is obviously a problem for Republicans come November.
With the fiscal stimulus package being passed and being a short term fix for growing income per capita. Hibbs believes that we will probably see growth rates equal 0% to balance out the current mess. I think we might even see lower. So if we assume that the deaths in Iraq reach 4,300 since they have slowed since the surge, then it will still keep the election close. Here is the analysis Hibbs does:
This chart shows the different results of the Presidential election depending upon the growth rate. This basically says that if the economy grows around 2 percent and only 4,100-5,000 U.S. soldiers die in Iraq then he will win. If we grow less than two percent then John McCain is not going to be elected, but not by much. This will still be a close election. This model is a simple one and doesn’t account for much of anything else. While we say that it is important to keep in mind that it has been a good indicator of election results.
So what does this have to do with the bailout? Well the bailout like the fiscal stimulus package will also have a short-term economic boom effect. The stock market will go up and people should have more money to spend. This is not quite as direct as the fiscal stimulus package but if the Republicans continue to hold up the bill they will kill John McCain’s election. Purely based on economic factors.
Now the Republican Party is faced with a dilemma. Do they stand with their small government/fiscally conservative/capitalistic free market values and continue to oppose the bailout? Or do they stand with John McCain and President Bush at boosting the economy in the short-run in order to hurt us in the long run but will help McCain get elected and Bush keep a legacy? Since the Republican Party has been more about getting Republicans elected than standing on principle lately I would imagine when the bet is called they will fold. Of course when it is all said and done everything will be blamed on Bush, while the Congressmen will go back to their constituents and saying they voted against the bailout.
Hibbs, D.A. (2008).Implications of the Bread and Peace model for the 2008 Presidential Election. Public Choice 137: 1-10. DOI 10.1007/s11127-008-9333-7