‚Bread and Peace™Voting in US Presidential Elections: What … · 2014-02-26 · Voting is mainly retrospective (V.O. Key, 1966). I Growth of per capita real disposable personal

‘Bread and Peace’Voting in US Presidential Elections:What Impact Rising Inequality?

Douglas A HibbsDeakin University Melbourne, March 2014

Bread and Peace in History

I “The people have been promised more than can be promised;they have been given hopes that it will be impossible to realize... The expenses of the new regime will actually be heavierthan the old. And in the last analysis the people will judge therevolution by this fact alone —does it take more or lessmoney? Are they better off? Do they have more work? Andis that work better paid?” —comte de Mirabeau (HonoréGabriel Riqueti, moderate French revolutionary), 1791

I “Two questions now take precedence over all other politicalquestions– the question of bread and the question of peace.... Peace and bread, the overthrow of the bourgeoisie,revolutionary means for the healing of war wounds, thecomplete victory of socialism —such are the aims of thestruggle.” —V.I. Lenin (leader of the Bolsheviks), 1917

Bread and Peace in History

I “The people have been promised more than can be promised;they have been given hopes that it will be impossible to realize... The expenses of the new regime will actually be heavierthan the old. And in the last analysis the people will judge therevolution by this fact alone —does it take more or lessmoney? Are they better off? Do they have more work? Andis that work better paid?” —comte de Mirabeau (HonoréGabriel Riqueti, moderate French revolutionary), 1791

I “Two questions now take precedence over all other politicalquestions– the question of bread and the question of peace.... Peace and bread, the overthrow of the bourgeoisie,revolutionary means for the healing of war wounds, thecomplete victory of socialism —such are the aims of thestruggle.” —V.I. Lenin (leader of the Bolsheviks), 1917

Bread and Peace in Postwar US Presidential Elections

I “I don’t think Mitt Romney is the President’s opponent. Theeconomy is.”—Rahm Emanuel (President Obama’s 1st termchief of staff; Mayor of Chicago)

I “We’re killing [the enemy] at a ratio of ten to one.”—GeneralWilliam Westmoreland, a US supreme commander in Vietnam.

I “Westy, the American people don’t care about the ten. Theycare about the one.”—Senator Ernest Hollings, during a visitto his fellow South Carolinian in the field.









A Two Factor Model Based on Objectively MeasuredPolitical-Economic Fundamentals: Bread and Peace

I According to the Bread and Peace model, postwar Americanpresidential elections can for the most part be interpreted as asequence of referendums on the incumbent party’s recordduring its four year mandate period. In fact aggregate votesfor president during the postwar era are well explained by justtwo objectively measured fundamental determinants:

I (1) Weighted-average growth of per capita real disposablepersonal income over the term, and

I (2) Cumulative US military fatalities (scaled to population)owing to unprovoked, hostile deployments of American armedforces in foreign wars.

I No other objectively measured exogenous factor systematicallyaffected postwar aggregate votes for president.
















Factor 1: Bread

I Economic performance is generally the dominant factor. Theincumbent party is rewarded for good real income growthperformance and punished for poor performance, with growthrates closer to the election date receiving more weight thanoutcomes earlier in the term. Voting is mainly retrospective(V.O. Key, 1966).

I Growth of per capita real disposable personal income isprobably the best single aggregate measure of changes in theelectorate’s economic wellbeing available over the wholepostwar period in as much as it includes cash and in-kindincome and income supplements from (almost) all sources,includes transfer payments to persons, and is adjusted forinflation, taxes levied at all levels of government, andpopulation growth.

Factor 1: Bread

I Economic performance is generally the dominant factor. Theincumbent party is rewarded for good real income growthperformance and punished for poor performance, with growthrates closer to the election date receiving more weight thanoutcomes earlier in the term. Voting is mainly retrospective(V.O. Key, 1966).

I Growth of per capita real disposable personal income isprobably the best single aggregate measure of changes in theelectorate’s economic wellbeing available over the wholepostwar period in as much as it includes cash and in-kindincome and income supplements from (almost) all sources,includes transfer payments to persons, and is adjusted forinflation, taxes levied at all levels of government, andpopulation growth.

I Some limitations are that personal disposable income ismeasured only for geographic areas and not persons, takes noaccount of benefits people perceive from government suppliedpublic goods, and does not include increments to income fromrealized capital gains while at the same time deducting fromgross incomes taxes on such gains (thereby potentially givingan inaccurate picture of personal savings rates).

I My research indicates that electorally relevant economicperformance is best measured by a weighted-average of(annualized, quarterly) growth rates of per capita disposablepersonal income, computed from the election quarter back tothe first full quarter of each presidential term.

I Some limitations are that personal disposable income ismeasured only for geographic areas and not persons, takes noaccount of benefits people perceive from government suppliedpublic goods, and does not include increments to income fromrealized capital gains while at the same time deducting fromgross incomes taxes on such gains (thereby potentially givingan inaccurate picture of personal savings rates).

I My research indicates that electorally relevant economicperformance is best measured by a weighted-average of(annualized, quarterly) growth rates of per capita disposablepersonal income, computed from the election quarter back tothe first full quarter of each presidential term.

Factor 2: Peace

I The second factor systematically influencing postwaraggregate votes for president is US military fatalities owing tounprovoked, hostile deployments of American armed forces inforeign conflicts —namely the military interventions in Korea,Vietnam, Iraq and the second Afghanistan campaign (underObama).

I My research shows that the electoral penalties exacted by suchunprovoked wars affect the presidential vote of party initiatingthe commitment of US forces — the Republicans for Iraq, andthe Democrats for Korea, Vietnam and most recentlyAfghanistan —and those vote penalties are proportionate tothe cumulative number of American military fatalities (scaledto US population size) over the presidential term.

Factor 2: Peace

I The second factor systematically influencing postwaraggregate votes for president is US military fatalities owing tounprovoked, hostile deployments of American armed forces inforeign conflicts —namely the military interventions in Korea,Vietnam, Iraq and the second Afghanistan campaign (underObama).

I My research shows that the electoral penalties exacted by suchunprovoked wars affect the presidential vote of party initiatingthe commitment of US forces — the Republicans for Iraq, andthe Democrats for Korea, Vietnam and most recentlyAfghanistan —and those vote penalties are proportionate tothe cumulative number of American military fatalities (scaledto US population size) over the presidential term.

I My research also shows that Presidents inheriting unprovokedforeign wars are given a 1-term grace period before USfatalities begin to negatively affect the incumbent vote sharein presidential elections. Hence Nixon’s vote in 1972 was notsignificantly affected by US fatalities in Vietnam during hisfirst term because the Vietnam war was inherited fromKennedy-Johnson, and Obama’s vote in 2012 was notsignificantly affected by fatalities in Iraq because the Iraq warwas inherited from GW Bush. (Evidence: see Hibbs, PublicChoice, 2000 and 2008)

I The Bread and Peace model regards American fatalities inAfghanistan under GW Bush following September 11 2001 asowing to a provoked commitment of US forces and, therefore,unlike Iraq, fatalities in the first US campaign in Afghanistandid not detract from Bush’s vote in 2008.

I My research also shows that Presidents inheriting unprovokedforeign wars are given a 1-term grace period before USfatalities begin to negatively affect the incumbent vote sharein presidential elections. Hence Nixon’s vote in 1972 was notsignificantly affected by US fatalities in Vietnam during hisfirst term because the Vietnam war was inherited fromKennedy-Johnson, and Obama’s vote in 2012 was notsignificantly affected by fatalities in Iraq because the Iraq warwas inherited from GW Bush. (Evidence: see Hibbs, PublicChoice, 2000 and 2008)

I The Bread and Peace model regards American fatalities inAfghanistan under GW Bush following September 11 2001 asowing to a provoked commitment of US forces and, therefore,unlike Iraq, fatalities in the first US campaign in Afghanistandid not detract from Bush’s vote in 2008.

I However US fatalities in Afghanistan beginning underPresident Obama’s prolonged “war of necessity”against theTaliban more than seven years later are treated as owing to anunprovoked foreign war, and as a result under the Bread andPeace model those fatalities will negatively affect theDemocrat party’s presidential vote in the 2012 election.

I Fatalities exert no systematic influence on aggregatecongressional election outcomes.

I However US fatalities in Afghanistan beginning underPresident Obama’s prolonged “war of necessity”against theTaliban more than seven years later are treated as owing to anunprovoked foreign war, and as a result under the Bread andPeace model those fatalities will negatively affect theDemocrat party’s presidential vote in the 2012 election.

I Fatalities exert no systematic influence on aggregatecongressional election outcomes.

Other FactorsI Other factors of course influence presidential voting;potentially so dramatically that the persistent signal ofobjective bread and peace fundamentals may be obscured.However such events are transitory/idiosyncratic rather thanpersistent/systematic. They randomly from election toelection, and they defy ex-ante objective measurement.

I The accounts of Talking Heads and journalists (and, alas,some academic analyses as well) of election results arefrequently populated with stories revolving aroundelection-specific idiosyncratic factors, whose true influence canbe assessed scientifically only by statistical conditioning onpersistent fundamentals.

I My ex-post reading of polling data suggest that partisancleavage over immigration reform and reproductive rights werethe main idiosyncratic factors helping President Obamaovercome the fairly poor 2012 reelection prospects implied byrelatively weak economic performance during his first term.







I I believe immigration will prove to be transitory because in thewake of 2012 a widely accepted resolution of the issue willattract enough Republican support to pass on a bipartisanbasis in Congress before the 2016 presidential election,removing immigration tensions from the national politicalarena.

I The partisan cleavage over reproductive rights may prove tobe more enduring, but I do not know how to measurequantitatively this “social factor”objectively and ex-ante.

I Of course if every election were dominated by transitoryidiosyncratic issues – and there is no reason in principle whyevery election could not – we wouldn’t observe the strongrelationship of incumbent vote shares to Bread and Peacefundamentals shown ahead.







Objective of the Bread and Peace Model

I The Bread and Peace model is designed to explainpresidential election outcomes in terms of objectivelymeasured political-economic fundamentals, rather than topredict optimally election results, or to track them statisticallyafter the fact. The objective is to pin down quantitatively theimpact of persistent fundamental determinants on theincumbent party’s aggregate vote.

I For those reasons the model includes no arbitrarily codeddummy, count, trend, and related time-coded variables, whichare not objective measurements of policies and performanceaffecting voters.

Objective of the Bread and Peace Model

I The Bread and Peace model is designed to explainpresidential election outcomes in terms of objectivelymeasured political-economic fundamentals, rather than topredict optimally election results, or to track them statisticallyafter the fact. The objective is to pin down quantitatively theimpact of persistent fundamental determinants on theincumbent party’s aggregate vote.

I For those reasons the model includes no arbitrarily codeddummy, count, trend, and related time-coded variables, whichare not objective measurements of policies and performanceaffecting voters.

I Likewise the Bread and Peace Model makes no use ofpreelection poll readings of voter sentiments, preferences, andopinions. Attitudinal variables are endogenous: they areaffected causally by objective fundamentals and consequentlysupply no insight into the root causes of voting behavior, nomatter how much they may enhance accuracy of prediction.

Bread and Peace Model Mechanics

I The Bread and Peace model is written:

Votet = α+ β1

(14

∑j=0

λj ∆ lnRt−j ·(1�

14∑j=0

λj

))+ β2 Fatalitiest

where:

I Vote is the percentage share of the two-party vote forpresident received by the candidate of the incumbent party.

I R is per capita disposable personal income deflated by theConsumer Price Index, ∆ lnRt is the quarter-to-quarterlog-percentage change expressed at annual rates and iscomputed ln (Rt/Rt−1) · 400, λ ∈ (0, 1) is a lag weightparameter determining the electoral effect of real incomegrowth rates just before the election as compared to growthrates earlier in the term, and the reciprocal of the sum of the

lag weights

(1�

14∑j=0

λj

)scales the real income growth rate

sequence∆ lnRt + λ∆ lnRt−1 + λ2∆ lnRt−2 + ...+ λ14∆ lnRt−14 sothat the coeffi cient β1 represents the effect on the incumbentvote share of each log-percentage point of weighted-average,annualized, quarter-to-quarter real income growth sustainedover the presidential term.

I Note that as the weighting parameter λ approaches a value of1.0 the incumbent party vote share is affected by a simpleaverage of per capita real income growth rates over the wholeterm —growth at the beginning of the term has the sameelectoral impact as growth just before the election:

At λ = 1⇒(14

∑j=01j ∆ lnRt−j ·

(1�

14∑j=01j))

=14

∑j=0

∆ lnRt−j

/15 = ∆ lnR

I As λ approaches zero only the election quarter growth rateaffects votes for president:

At λ = 0⇒(14

∑j=00j ∆ lnRt−j ·

(1�

14∑j=00j))

= ∆ lnRt

I Values of λ between 0 and 1 reveal the relative effects of realincome growth rates just before the election as compared togrowth rates earlier in the term.

I Fatalities denotes the cumulative number of American militaryfatalities per millions of US population the in Korea, Vietnam,Iraq and Afghanistan wars during the presidential termspreceding the 1952, 1964, 1968, 1976 and 2004, 2008 and2012 elections.

Bread and Peace Equation Estimates

Dependent variable: incumbenttwo-party vote share (%)

N=16 elections, 1952-2012

Coeffi cient estimate std. error | p-value

Constant (α) 47.1 1.1 | .00

Weighted-averageper capita real incomegrowth rate,% (β1)

3.1 0.55 | .00

Lag weight (λ) 0.87 0.07 | .00

US military fatalities permillions population (β2)

-0.05 0.01 | .00

Adj .R2 = .81 SER = 2.4

Interpretation of Coeffi cients

Votet = 47+ 3

(14

∑j=00.9j∆ lnRt−j ·

(1�

14∑j=00.9j

))− 0.05 Fatalities

Real income growth rate effect, ∆R

I β̂1 ' 3 implies that each percentage point of growth in percapita real disposable personal income sustained over apresidential term boosts the in-party candidate’s vote share byabout 3 percentage points above a benchmark constant ofapproximately 47 percent.

Votet = 47+ 3

(14

∑j=00.9j∆ lnRt−j ·

(1�

14∑j=00.9j


Lag weight (electorally relevant political memory)

I The weighting parameter estimate λ̂ ' 0.9 implies that thereal income growth rate in the last full quarter before anelection (quarter 3 of election years) has almost four times theelectoral impact of income growth in the first full quarter ofthe term: .9/.914˜4.

Votet = 47+ 3

(14

∑j=00.9j∆ lnRt−j ·

(1�

14∑j=00.9j


Fatalities effect

I The fatalities coeffi cient estimate β̂2 = −0.05 means thateach 100 US military fatalities per millions of populationowing to hostile deployments of American armed forces inunprovoked wars depresses the incumbent party’s presidentialvote by 5 percentage points.

The Relation of Vote Shares to Real Income Growth

The Relation of Vote Shares to Real Income Growth andFatalities Combined

Data and Model Fits

Bread

I The graph depicts a strong connection of major-party voteshares received by incumbent party candidates toweighted-average per capita real personal disposable incomegrowth rates at postwar presidential elections 1952-2012.

I Notice that even the two elections regarded as the most“ideological” in postwar American presidential politics —1964and 1980 —are explained perfectly by real income growth overthe presidential term.

1964

I In 1964 the Democratic Party incumbent Lyndon Johnson,the most important agent of American welfare-state liberalismsince Franklin Roosevelt, faced Barry Goldwater, thegodfather of modern American conservatism. Johnson wonwith 61.2% of the vote, one of the biggest margins in USpresidential election history.

I The result was widely viewed as a popular rejection ofGoldwater’s alleged right-wing views on the FederalGovernment’s proper role in society and economy and hisbellicose posture on America’s Cold War rivalry with theSoviet Bloc.

I Yet one need not appeal to such grand ideological themes toexplain the 1964 election result —Johnson’s landslide victoryconforms exactly to the historical connection betweenpresidential voting outcomes and real income growth.

1980

I In 1980 the incumbent Jimmy Carter faced Ronald Reagan,Goldwater’s successor as the icon of the Republican Party’sconservative wing. Unlike the Goldwater-Johnson contest in1964, this time the arch conservative Reagan trounced theliberal Democrat Carter. The election was commonlyinterpreted in the media as signaling a fundamental “shift toright”among American voters.

I Yet again one need not appeal to grand ideological themes:As shown by the graph, Carter’s big loss (he received only44.8% of the vote — tied for the worst election showing by anincumbent party presidential candidate during the postwarera) was the predictable consequence of poor real incomegrowth over the 1977-80 term.

Peace

I The elections of 1952 and 1968 exhibit the biggest deviationsfrom the statistical prediction line based on weighted-averageover the term real income growth performance.

I Those deviations are explained by the second fundamentalsystematic determinant of votes for president: Americanmilitary fatalities in unprovoked foreign wars.

Korea and Vietnam

I High cumulative US military fatalities in Korea at the time ofthe 1952 election (29,260 or 190 per millions of population),and in Vietnam at the 1968 election (28,900 or 146 permillions of population), most likely caused Adlai Stevenson’sloss to Dwight Eisenhower in 1952 by depressing theincumbent party’s presidential vote by almost 10 percentagepoints, and it almost certainly caused Hubert Humphrey’s lossto Richard Nixon in 1968 depressing the incumbent party’svote by more than 7 percentage points. Absent America’sinterventions in the Korean and Vietnamese civil wars, thestrong real income growth record prior to those elections(particularly in 1968) should easily have kept the Democratsin the White House.

Inherited Wars

I Recall that in the Bread and Peace model presidents get aone-term grace period when unprovoked foreign wars areinherited from the opposition party.

I Hence the 1956 vote for Dwight Eisenhower (who inheritedAmerican involvement in the Korean civil war from HarryTruman) was unaffected by the relatively small number of USmilitary fatalities in Korea after Eisenhower assumed offi ce in1953.

I In like fashion the 1972 vote for Richard Nixon (who inheritedAmerican involvement in the Vietnamese civil war fromLyndon Johnson) was unaffected by the large (but declining)number of US fatalities in Vietnam after Nixon assumed offi cein 1969.

Inherited Wars




Inherited Wars




Iraq and Afghanistan

I Cumulative fatalities in Iraq preceding the 2004 and 2008elections (4 and 14 per millions of population, respectively)were to small to depress significantly the vote shares of theincumbent Republicans, and the cumulative fatalities inAfghanistan at the 2012 election (5 per millions ofpopulation) were too small to detract much from Obama’svote share in 2012.

Big Errors in 1996 and 2000

I The postwar presidential election results least well accountedfor by the Bread and Peace model are 1996 and 2000. In1996 the vote received by the incumbent Democrat Clintonwas almost 4% higher than expected from political-economicfundamentals, whereas in 2000 the vote for the incumbentDemocratic Party candidate Gore was almost 5% lower thanexpected from fundamentals.

I One might conjecture that idiosyncratic influence of candidatepersonalities took especially strong form in those elections —with the ever charming Bill Clinton looking especiallyattractive when pitted against the darkly foreboding Bob Dolein 1996, and with the unfailingly wooden Al Gore paling bycomparison to an affable George Bush in 2000.

I That line of reasoning is of course entirely ad hoc and withoutscientific merit.









Rising Income Inequality and Aggregate Vote Models

I Models of aggregate voting outcomes driven by average realincome developments may be undermined by the allegeddramatic increase in income inequality (in the US especially,but elsewhere as well).

I Indeed Gerald Kramer —whose ground-breaking 1971 APSRarticle launched modern macro-quantitative analyses ofeconomics and voting —believes that concentration ofincreases to income in the very highest income classes duringrecent decades invalidates macro-quantitative models ofincome-driven voting. (Reported by Rosenthal, APSR 2006)

Rising Income Inequality and Aggregate Vote Models

I Models of aggregate voting outcomes driven by average realincome developments may be undermined by the allegeddramatic increase in income inequality (in the US especially,but elsewhere as well).

I Indeed Gerald Kramer —whose ground-breaking 1971 APSRarticle launched modern macro-quantitative analyses ofeconomics and voting —believes that concentration ofincreases to income in the very highest income classes duringrecent decades invalidates macro-quantitative models ofincome-driven voting. (Reported by Rosenthal, APSR 2006)

Time-wise Stability of the Bread and Peace Equation

I The data graphed below indicate that the magnitudes ofunmeasured factors (idiosyncratic/transitory shocks?) seem togrow somewhat over time implying that Bread and Peacefundamentals are less important during the last couple ofdecades (last 5 presidential elections).

Rolling Regression ExperimentsReal income growth coeffi cients from eight-election rollingregressions from the Bread and Peace model

Votet = α+ β1

(14

∑j=0

λj ∆ lnRt−j ·(1�

14∑j=0

λj

))+ β2 Fatalitiest

and from Bartels’Myopic Economic Voting model (Bartels,Princeton UP 2008, Table 4.1)

Votet = α+ β1 (∆R/R)t + β2 Incumbent Party Tenuret (years in offi ce)

imply some decline in the response of aggregate incumbent voteshares in presidential elections to real income growth ratesbeginning in 1970s and 1980s:

Some Headline-High Drama Facts on US IncomeDistribution Trends: What’s All the Buzz About?

I Below I reproduce some famous ‘Piketty-Saez’graphs on themarket income shares of various quantiles of the sizedistribution.

I Note that essentially all of the much heralded growth in USinequality, which begins in the late 1970s/early 1980s, occursat the higher percentiles of the size distribution.

I Consider first the shares going to the top 10% income class:









Decomposition of the top 10% shows that most of action in USmarket income distribution trends occurs within the top 1% of thesize distribution:

And about half of the growing share of the top 1% has beencaptured by the top 0.1%, that is, the top 10% of the top 1%, andmaybe even in yet higher reaches of the distribution (about whichwe cannot speak very authoritatively because of weakness in thedata):

I In the Piketty-Saez graphs above note the sharp declines inthe income shares going to the top 1 percenters, andespecially the top 0.1 percenters, following the “dot com”market crash in the spring of 2000, and again after the realestate bubble market meltdown in the autumn of 2007. Thelatter decline prompted Robert Frank’s catchy-titled 2011book The ‘High-Beta’Rich.

I The reason is that a lot of the income of the very highestincome groups is from business profits, dividends and capitalgains, rather than from employee wages and salaries:

I In the Piketty-Saez graphs above note the sharp declines inthe income shares going to the top 1 percenters, andespecially the top 0.1 percenters, following the “dot com”market crash in the spring of 2000, and again after the realestate bubble market meltdown in the autumn of 2007. Thelatter decline prompted Robert Frank’s catchy-titled 2011book The ‘High-Beta’Rich.

I The reason is that a lot of the income of the very highestincome groups is from business profits, dividends and capitalgains, rather than from employee wages and salaries:

Finally, note that the upward trend in income shares going to thetop income classes in the US are mimicked (to lessor degree) inother English-speaking countries:

But the rise in market income inequality in English-speakingcountries is perhaps less pronounced in Europe and Japan:

WealthI Concentration of wealth is everywhere much greater thanconcentration of income.

I World-wide it is estimated the wealthiest 1% of worldpopulation holds nearly 50% of world total wealth ,and thetotal wealth of just 85 of the world’s richest people equalsthat of the poorest 1/2 of world population. (Credit Suisse2013 and Oxfam, 14 January 2014; however consider the scaleof “dead capital” featured in Hernando de Soto’s The Mysteryof Capital, Basic Books 2000)

I Today the top 1% of the US wealth distribution holds ~ 35%of total US wealth, whereas the top 1% of the incomedistribution commands ~ 20% of total income. Bothconcentrations are around 10 percentage points higher than inEurope.

I The income-wealth copula — the joint distribution —exhibits amoderately strong relation across time and countries, whichhas become more pronounced in recent decades (Aaberge,Atkinson, Königs, and Lakner, forthcoming).













If US Incomes Have Become So Concentrated at the TopEnd of the Distribution, Why Haven’t Macro EconomicVoting Models Based on Average Real IncomeDevelopments Broken Down Completely?

I The incomes graphed are pre-tax and pre-transfer, and theyexclude untaxed fringes and in-kind benefits. As we shall see,“comprehensive” family-size-adjusted incomes (particularlywhen inclusive of accrued rather than realized capital gains towealth) do not exhibit the increasing inequality that GerryKramer (2006) thought had invalidated macro-quantitativeeconomic voting models.

I The most important "fringe" factor over the past 3 decadesare the really big increases to employer supplied health careinsurance, which are tax deductible for firms and untaxedimplicit income to employees.

I The mildly progressive US tax system makes a significantcontribution to post-tax income equality.









I Even more effi cacious in leveling market income distribution isthe US income support system —social security retirementpensions, medicare, medicaid, nutrition assistance (“foodstamps”), disability income, unemployment compensation,housing assistance, and more — some of which were launched,and all of which were strengthened, in the 1960s and 1970s.

Income Measurement: Haig-Simons-Hicks Income

I Haig-Simons-Hicks income (Y ) is the maximum amount thatcould be consumed (C ) in a given time period while keepingnet real wealth (W ) unchanged:

I Y = C + ∆WI The Congressional Budget Offi ce (CBO) has constructedannual series, currently available for annual cross-sections form1979 to 2010, on “comprehensive”household incomes whichare intended to approximate Haig-Simons-Hicks incomes atvarious fractiles of the size-weighted household distribution.



I Y = C + ∆W

I The Congressional Budget Offi ce (CBO) has constructedannual series, currently available for annual cross-sections form1979 to 2010, on “comprehensive”household incomes whichare intended to approximate Haig-Simons-Hicks incomes atvarious fractiles of the size-weighted household distribution.



I Y = C + ∆WI The Congressional Budget Offi ce (CBO) has constructedannual series, currently available for annual cross-sections form1979 to 2010, on “comprehensive”household incomes whichare intended to approximate Haig-Simons-Hicks incomes atvarious fractiles of the size-weighted household distribution.

I Two disadvantages of the CBO calibrations are:

(1) ∆W is measured by (taxable) realized capital gains each year,rather than by accrued gains which theoretically is the moreappropriate concept.(2) CBO income measurements —based on Census Bureau’sCurrent Population Survey (CPS) and IRS tax return data — takeno account of state and local taxes, which vary by jurisdiction butcan run as high as 1/2 the magnitude of federal tax burdens onmiddle income households.

I On the other hand postwar data on aggregate personaldisposable income from the National Income and ProductAccounts (NIPA) take no account of capital gains income,and because the data are for geographic aggregates they canonly be size-adjusted by population (per capita), as opposedto adjustments based on numbers of individuals in varioushousehold consumption units made by the CBO.

I Two disadvantages of the CBO calibrations are:

(1) ∆W is measured by (taxable) realized capital gains each year,rather than by accrued gains which theoretically is the moreappropriate concept.(2) CBO income measurements —based on Census Bureau’sCurrent Population Survey (CPS) and IRS tax return data — takeno account of state and local taxes, which vary by jurisdiction butcan run as high as 1/2 the magnitude of federal tax burdens onmiddle income households.

I On the other hand postwar data on aggregate personaldisposable income from the National Income and ProductAccounts (NIPA) take no account of capital gains income,and because the data are for geographic aggregates they canonly be size-adjusted by population (per capita), as opposedto adjustments based on numbers of individuals in varioushousehold consumption units made by the CBO.

I What are most directly relevant for macro-quantitative modelsof aggregate voting outcomes are not trends at the top of theincome distribution but trends in the gap between mean andmedian incomes —a gap that becomes larger the greater is theright-skew of the distribution.

I The next two graphs of CBO size-weighted householdcomprehensive real incomes show that although gaps betweenmean and median tend to grow larger after the mid-1990s, theBread and Peace per capita disposable personal incomevariable closely tracks median household comprehensiveincome over the entire 1979-2010 overlapping period.

I What are most directly relevant for macro-quantitative modelsof aggregate voting outcomes are not trends at the top of theincome distribution but trends in the gap between mean andmedian incomes —a gap that becomes larger the greater is theright-skew of the distribution.

I The next two graphs of CBO size-weighted householdcomprehensive real incomes show that although gaps betweenmean and median tend to grow larger after the mid-1990s, theBread and Peace per capita disposable personal incomevariable closely tracks median household comprehensiveincome over the entire 1979-2010 overlapping period.

First look at CBO comprehensive incomes, currently available forthe 1979-2010 period, in perspective of the full postwar range ofper capita disposable personal income (the Bread and Peacemodel’s income variable):

I Now let’s take a close-up view of the overlapping 1979-2010period alone.

I Note the ‘high-beta’surges and declines of meancomprehensive incomes during the dot com and real estatebubble cycles beginning in early 2000 and early 2008,respectively.

I Now let’s take a close-up view of the overlapping 1979-2010period alone.

I Note the ‘high-beta’surges and declines of meancomprehensive incomes during the dot com and real estatebubble cycles beginning in early 2000 and early 2008,respectively.

I Two conclusions from the previous graph:

I Developments in comprehensive/disposable incomes areclearly superior to developments in pre-tax and transfermarket incomes for models of economy-influenced votingbecause the former embody the effects of government policy.

I Macro-quantitative models of aggregate voting outcomes arenot undermined decisively by the disproportionate gains tomarket incomes enjoyed by the very highest fractiles of thedistribution.

I Two conclusions from the previous graph:I Developments in comprehensive/disposable incomes areclearly superior to developments in pre-tax and transfermarket incomes for models of economy-influenced votingbecause the former embody the effects of government policy.


I Two conclusions from the previous graph:I Developments in comprehensive/disposable incomes areclearly superior to developments in pre-tax and transfermarket incomes for models of economy-influenced votingbecause the former embody the effects of government policy.


Armour, Burkhauser and Larrimore: ComprehensiveIncomes with Accrued Capital Gains

I A weakness of the CBO comprehensive income calculations isthe use of realized capital gains as opposed to accrued capitalgains —the former being used only because the data on capitalasset sales are more readily available from federal tax records.

I However wealth holders have discretion in the realization ofasset gains, and realized gains may be (and of coursefrequently are) drawn from asset accumulations that are yearsor decades or, in the case of dynastic wealth, even generationsold.

I Hence in principle a much better measure of the ∆W factor incomprehensive/Haig-Simons-Hicks income are changes in themarket values of capital assets in each evaluation period(typically yearly), not the values realized by (taxable) assetsales in any period.









I Armour, Larrimore and Burkhauser (NBER W.19110 June2013; AER 3:2013) calibrated such accrued changes (alongwith other enhancements to the CBO measurementprocedures) and the results were quite startling, prompting afire storm of controversy about the validity of their variousimputation procedures from which the dust has yet to settle.

I Contrary to all the hullabaloo about growing inequality inAmerica and the solidification of a “New Gilded Age” rivalingthe 1920s, Armour et al.’s computations undertaken over theperiod 1989-2007 imply an inverse relation between incomequintile and changes in quintile income shares:

I Armour, Larrimore and Burkhauser (NBER W.19110 June2013; AER 3:2013) calibrated such accrued changes (alongwith other enhancements to the CBO measurementprocedures) and the results were quite startling, prompting afire storm of controversy about the validity of their variousimputation procedures from which the dust has yet to settle.

I Contrary to all the hullabaloo about growing inequality inAmerica and the solidification of a “New Gilded Age” rivalingthe 1920s, Armour et al.’s computations undertaken over theperiod 1989-2007 imply an inverse relation between incomequintile and changes in quintile income shares:

Assortative Mating

I Building on earlier research by Cancian and Reed (Rev. Econ.& Stat. 1998) and Schwartz (Amer.J. Soc. 2010),Greenwood, Guner, Kocharkov and Santos (2014 NBERW19829) find that the rise of assortative mating has hadmajor impact on the rise of household labor income inequality.In fact had couples been randomly matched over 1960-2005the household income Gini index would have exhibitedbasically no change at all, as opposed to the rise from around.34 to .43 observed in Census survey data.

I The rise of female entry to high-pay professional employmentis a major underlying force in this striking finding.

I I do not know of parallel studies for other countries.

Assortative Mating




Assortative Mating




What Implications Have the Foregoing for Voters’RationalAssessment of Government Culpability for DistributionalTrends?

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‚Bread and Peace™Voting in US Presidential Elections: What … · 2014-02-26 · Voting is mainly retrospective (V.O. Key, 1966). I Growth of per capita real disposable personal