More Evidence that Obama's Victory Reflects the Economic Fundamentals (Patrick Egan, 11/08/12, NY Times)
By September, the fundamentals had improved enough to make Obama a slight favorite. The figure below plots the incumbent party's share of the two-party presidential vote against the average growth rate in the nation's GDP over the three quarters preceding the election. Separate regression lines trace the relationship for years when an incumbent was actually on the ballot (like 2012) and those when he was not (like 2008). (The steeper slope of the first line indicates that the economy affects election results more strongly when the president is actually running for reelection; the fact that it lies above the second line illustrates the advantage enjoyed by incumbents.)
The growth rate between January and September of 2012 averaged 1.8 percent. As shown in the figure, this yielded a predicted share of 51.2 percent of the two-party vote for incumbent Obama. How well did this forecast the actual outcome? Right now (as of noon on November 8th) the popular vote totals stand at 60,771,081 for Obama and 57,876,223 for Romney--exactly 51.2 percent for the incumbent.