It’s Not Just the Economy, Stupid!

Moody's Chief Economist Mark Zandi debated with political commentator Charlie Cook about whether financial or emotional concerns will determine the outcome of the 2020 election.

“It’s the economy, stupid” became an axiom in American presidential politics when Bill Clinton defeated President George H.W. Bush in the 1992 election. But the effectiveness of that model is now debatable.

Moody’s Analytics chief economist Mark Zandi and political scientist Charlie Cook squared off at a panel this week at the 36th Annual National Association for Business Economics Economic Policy Conference, arguing whether the 2020 election will be decided by economic or cultural issues. 


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Moody’s presidential election forecast model, heavily weighted on economic conditions, forecasts that Trump will win easily if there is a typical voter turnout, but Zandi said a Democrat could win a close race in the event of a high-turnout election with motivated Democratic voters. With many states not competitive, the key to the election will be the results of swing states such as Pennsylvania, Michigan and Wisconsin, he said.

Moody’s Analytics Chief Economist Mark Zandi Photo via Wikimedia Commons

By historical standards, the performance of the economy and commercial real estate market would favor an incumbent. Unemployment is at decade-long lows, job growth remains healthy, wage growth is moderate and consumer confidence and the stock market are high. Commercial real estate values are also at all-time highs in most segments, while rents and occupancies continue to grow 10 years into the economic cycle. While most commercial real estate fund managers remain positive on the outlook, there are reasons for concern, especially given the shifting global unknowns.

Cook, co-founder of the closely followed Cook Political Report, however, said that the economy became less correlated with presidential politics when Barack Obama was president. “Right now, the economy is not driving American politics,” he said. “Whether you like Donald Trump or whether you hate his guts has nothing to do with economics.”

Cook said cultural issues have become central to political identity. Trump’s base of support comes from working class whites who believe that coastal elites look down on them. “This election is about culture more than anything else,” he said.

Deciding Factors

Zandi pointed out that the global financial crisis was a turning point in the way many voters see the world. Noting that 40 percent of Americans basically live paycheck to paycheck, he said that visceral anger at the establishment led to the Tea Party movement that led to the Trump movement.

While elections with incumbent presidents normally are referendums on the incumbent, whom the Democrats select to oppose Trump is a key issue this year. Current Democratic frontrunner and Vermont Senator Bernie Sanders is a self-described democratic socialist, and people who might have misgivings about Trump might still be reluctant to vote for someone who embraces socialism.

That attitude is especially prevalent in the commercial real estate market, where many executives take issue with some Trump policies—reducing immigration, for example—but still prefer him to a candidate like Sanders that would likely raise taxes and impose more regulatory burdens.

A wild card in the election is the coronavirus. If the impact of the virus remains confined to Asia, then, Zandi and Cook agreed, it will have little effect on the election. Zandi said a pandemic could push the European economy into recession, and a drop in trade from Asia could impact the economies in the middle-America swing states such as Wisconsin, Pennsylvania and Michigan and damage Trump’s chances. “If the virus becomes a pandemic, and the market says there is a reasonable chance it can become pandemic, a recession globally is likely,” he said.