LESSON 8 ECONOMIC MISERY AND PRESIDENTIAL ELECTIONS · PDF filewith how well the economy is doing, ... LESSON DESCRIPTION The students examine economic data in ... picking winners

99FOCUS: UNDERSTANDING ECONOMICS IN CIVICS AND GOVERNMENT © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY

LESSON 8

ECONOMIC MISERY AND

PRESIDENTIAL ELECTIONS


INTRODUCTIONMany factors influence voters as they

decide how they will vote. The economicpolicies advocated by candidates and politicalparties are important factors in these deci-sions. No matter what policies a presidentialcandidate may propose, however, an incum-bent candidate is often blamed for or creditedwith how well the economy is doing, whetheror not the incumbent’s policies were actuallythe cause of the condition in question. Manyvoters base their decisions narrowly on howthe nation’s economy is affecting them at thetime. Therefore, in a presidential campaign inwhich an incumbent is vying for re-election,certain key measures of economic performancecan help to predict the election outcome. Thislesson shows how two economic measures, theMisery Index and the growth rate in real GDPper capita, can be used to make predictionsabout presidential elections.

LESSON DESCRIPTIONThe students examine economic data in

order to predict the results of presidentialelections.

CONCEPTS• Inflation

• Misery Index

• Real GDP

• Real GDP per capita

• Unemployment

• Voting and elections

OBJECTIVESStudents will be able to:

1. Identify economic conditions likely toinfluence voter opinion.

2. Examine economic data to make predic-tions about presidential elections.

CONTENT STANDARDSEconomics (CEE Standards)• Costs of government policies sometime

exceed benefits. This may occur because ofincentives facing voters, government offi-cials, and government employees, becauseof actions by special interest groups thatcan impose costs on the general public, orbecause social goals other than economicefficiency are being pursued. (Standard 17)

• Unemployment imposes costs on individu-als and nations. Unexpected inflationimposes costs on many people and benefitssome others because it arbitrarily redis-tributes purchasing power. Inflation canreduce the rate of growth of national livingstandards, because individuals and organi-zations use resources to protect them-selves against the uncertainty of futureprices. (Standard 19)

Civics and Government (NSCGStandards, 9-12)

• Students should be able evaluate, take,and defend positions about the roles ofpolitical parties, campaigns, and electionsin American politics. (III. E. 4)

• Students should be able to evaluate, takeand defend positions about the means thatcitizens should use to monitor and influ-ence the formation and implementation ofpublic policy. (V. E. 3)

TIME REQUIRED60 minutes, plus time for the students tocomplete Activity 8.1 as homework

MATERIALS• A copy of Activity 8.1, 8.2, and 8.3 for each

student

• A transparency of PowerPoint Slides 8.1, 8.2, and 8.3

LESSON 8ECONOMIC MISERY AND PRESIDENTIAL ELECTIONS

FOCUS: UNDERSTANDING ECONOMICS IN CIVICS AND GOVERNMENT © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY100


PROCEDURE1. Tell the students that in a future class

period they will be considering economicfactors that influence the outcomes ofpresidential elections. In order to do thisas accurately as possible, they will need tocollect information from someone who is ofvoting age (18 years or older).

2. Give each student a copy of Activity 8.1.Assign the students to collect the informa-tion called for from one person of votingage. Set a due-date for completion of thetask, and clarify the directions as neces-sary. The person from whom the informa-tion is collected does not need to be amember of the student’s household.Parents, guardians, relatives, neighbors,co-workers, friends—all can serve as sub-jects for this interview. And even if thenext presidential election is far off, it isimportant that the interviewees identifythe issues that are, will be, or have beenmost important to them when consideringwhich candidate to support for president.This activity is not intended to determinewhether or not a person has voted in anelection (or for whom she or he voted).Instead, it is designed to help studentsidentify issues that are important toadults of voting age.

3. Collect the students’ completed forms fromActivity 8.1 and organize the responses foruse during a forthcoming class period. Asyou review the responses, highlight com-mon answers and central tendencies thatstand out. When you resume work on theactivity with the class, write these com-mon answers on the board, with notationsto show the number of times each wasmentioned in responses to Activity 8.1.

4. Call on the students to comment on theelection issues you have listed on theboard. How many of these are economicissues? (Answers will vary, but several eco-nomic issues [e.g., unemployment, inflation,the federal budget deficit, income inequali-ty, tax policy, Social Security, trade policy,etc.] will likely appear on the list. Otherissues [e.g., the environment, immigration,

energy, and educational policy] also haveeconomic implications.) By reference tothe economic issues listed, emphasize thepoint that the state of the economy weighsheavily in voters’ minds as they decidewhich candidate to support. Quote the oldpolitical adage, “People tend to vote theirpocketbooks.”

5. Ask the students: Do you think theeconomy is in good shape today? (Acceptany answer.) Press further: What data doyou use to support your answer? (Manyanswers are possible, but be sure to steerthe discussion toward measures of theunemployment rate, the inflation rate, andreal GDP as important determinants ofthe current state of economic activity. Asnecessary, explain that GDP is a measureof overall production, inflation measuresthe percentage change in average prices,and the unemployment rate captures thepercentage of those who are working orwish to work but cannot currently find ajob.)

6. Display Visual 8.1. Use it to explain thatsome economic indicators are especiallyimportant in predicting election results.In particular, growth in real GDP per capi-ta—growth in the value of final goods andservices produced per person—is an impor-tant indicator of whether an incumbentpresident (or the candidate from theincumbent party) will be reelected. Thegrowth in real GDP per capita is found bydividing real GDP for each year by thecountry’s population and then finding thepercentage change from one year to thenext. A second indicator, the Misery Index,also can be used to predict an electionresult. In any given year, the Misery Indexis the sum of the inflation rate and unem-ployment rate. As the name of the MiseryIndex implies, high rates of unemploymentand/or high inflation rates can causeeconomic misery. Economic misery usuallymeans trouble for incumbent candidates.

7. Divide the class into groups of three orfour students. Distribute a copy ofActivity 8.2 to each student. Briefly

ECONOMIC MISERY AND PRESIDENTIAL ELECTIONS LESSON 8

LESSON 8 ECONOMIC MISERY AND PRESIDENTIAL ELECTIONS

102 FOCUS: UNDERSTANDING ECONOMICS IN CIVICS AND GOVERNMENT © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY

review the columns in the table. (Note:You may wish to update the table withcurrent data. If you do so, note that thistable uses annual data. Annual unem-ployment and inflation [using theConsumer Price Index] data can be foundby searching the website www.bls.gov,while annual levels of real GDP per capitacan be found at the website www.bea.gov.As noted above, the annual growth rate ofreal GDP per capita can be computed bycalculating the percentage change in thelevels of this series, using “chained dol-lars,” from one year to the next).1

8. As you review the columns in Activity 8.2,ask:

• What year since 1957 had the highestunemployment rate? (1982)

• What year had the highest inflationrate? (1980)

• What year had the highest MiseryIndex? (1980)

• How does this compare to the MiseryIndex now? (Use current data.)

9. Distribute a copy of Activity 8.3 to eachstudent. Ask the students, working intheir groups, to complete Part I of Activity8.3, using information provided in Table8.2. (Answers: 1960, Kennedy, Lose; 1964,Johnson, Win; 1968, Nixon, Lose; 1972,Nixon, Win; 1976, Carter, Lose; 1980,Reagan, Lose; 1984, Reagan, Win; 1988,Bush, Win; 1992, Clinton, Lose; 1996,Clinton, Win; 2000, Bush, Lose; 2004,Bush, Win; 2008, Obama, Lose.) Since therest of the sheet depends upon correctanswers, check the students’ answers. Asnecessary, explain which party was theincumbent and who won each election.

10. Tell the students that they will now try topredict who will win a presidential elec-tion. More than that: They will try to cre-ate a rule that can be used to make suchpredictions. They will begin by consider-ing an example. Display Visual 8.2 anddiscuss the rule that it proposes: “Theincumbent party usually wins if thegrowth rate of real GDP per capita isgreater than 0% during the year of theelection.” Call on the students to checkthis rule against Table 8.2. How well doesthe rule stand up to the data? (Not partic-ularly well. While it predicts correctly allsix of the incumbent wins, it is incorrect onsix of the seven losses that were actuallyregistered. It yields a correct prediction fora loss only in 1980; it incorrectly predicts awin for actual losses in 1960, 1968, 1976,1992, 2000 and 2008. Overall, the rule cor-rectly predicts only 7 of 13 elections.)

11. Tell the students, working in groups, tocomplete Part II of Activity 8.3. Clarifythe task as necessary. They must try tocreate two rules. One rule should be basedon the real GDP per capita growth rate, theother on the Misery Index. You may want toprovide hints—such as concentrating oncurrent-year information for the real GDPper capita growth rule, and on changesfrom the year prior to the election year forthe Misery Index. If the students havetrouble coming up with these rules, showthem the first two rules in Visual 8.3 andhave them copy these rules to Part II ofActivity 8.3.

12. Call on the students, group by group, toshare their proposed rules with the class.Ask the class to decide which of the pro-posed rules work the best. Be sure thatthe students base their evaluations on how

1 The term “chained dollars” is now frequently found in tables of macroeconomic data. This termcomes from a procedure known as “chain-weighting,” which is a means by which statistical agenciesconvert economic data to “real” measures. Therefore a reference to “chained dollars” implies thatthe data are expressed in real, inflation-adjusted form (using constant prices instead of currentprices). In most cases, it is unnecessary for students to know this, other than its use to differentiatebetween nominal and real measures.


successfully each proposed rule does infact predict winners. Also, the studentsshould reject any rules that are not basedon economic reasoning. While many suchrules have been suggested from time totime—for example, picking winners by ref-erence to the score of the WashingtonRedskins’ last home game—any successfulrule should be based on acceptable eco-nomic theory.

13. If you have not already shown the stu-dents the first two rules in Visual 8.3, dis-play them now. Ask:

• How well does the real GDP per capitagrowth rule in Visual 8.3 predict elec-tion outcomes? (The rule is correct in10 of 13 elections. It is incorrect for theyears 1968, 1976, and 2000.)

• How well does the Misery Index rule inVisual 8.3 predict election outcomes?(The rule is correct in 11 of 13 elections.It is incorrect for the years 1976 and1992.)

14. Continue the inquiry. Ask: Given the firsttwo rules in Visual 8.3, which election wasthe most difficult to predict? (The 1976election. Real GDP per capita growth was4.3 percent. Inflation and unemployment,while high, were down significantly fromthe previous year. From an economicstandpoint, these two facts make this elec-tion the hardest to predict by application ofthe two proposed rules. Non-economic fac-tors probably mattered a great deal in thiselection. The incumbent was Gerald Ford,who had been appointed by PresidentNixon. President Nixon, who had earlierresigned as a result of the Watergate scan-dal, was ultimately pardoned from crimi-nal prosecution by President Ford. It wasnot a good time for a candidate to be asso-ciated with the Nixon administration orthe Republican party.)

15. Turn to the last rule in Visual 8.3: theGuaranteed Loss Rule. Note that not alllosses would have been predicted by thisrule. Nevertheless, whenever the rule’s twoconditions have been met, the incumbent

party has always lost (in 1960, 1980 and2008). An incumbent party is in troublewhen the Misery Index has increased andreal output per person has grown by lessthan 2.5 percent in an election year.

16. Will these rules continue to perform well?If the timing is appropriate, ask thestudents to use the Misery Index rule andthe Real GDP per Capita Growth Rule topredict the outcome of a forthcomingpresidential election.

CLOSUREUse the following questions to review the

lesson:

• Based on the data you have examinedin this lesson, do you believe that eco-nomic conditions have a strong impacton presidential elections? (The answershould be yes; the economy usually doesinfluence presidential elections.)

• Is the incumbent party necessarily toblame for poor economic performancein the run-up to an election, or is itnecessarily responsible for good eco-nomic performance? (Answers willvary. Conventional wisdom holds thatthe President receives too much creditwhen the economy is doing well andshoulders too much blame when theeconomy is performing poorly.)

ASSESSMENTMultiple-Choice Questions

1. The misery index is the sum of the

A. inflation rate and the growth rate ofreal GDP.

B. unemployment rate and the growthrate of real GDP.

C. inflation rate and the unemploy-ment rate.

D. inflation rate, the unemployment rate,and the growth rate of real GDP.

2. Inflation was the highest in

A. the late 1960s and early 1970s.


B. the late 1970s and early 1980s.

C. the late 1980s and early 1990s.

D. the late 1990s and early 2000s.

3. Which one of the following growth ratesis most likely to be lowest for the U.S.economy?

A. Growth rate of nominal GDP

B. Growth rate of nominal GDP per capita

C. Growth rate of real GDP

D. Growth rate of real GDP per capita

Constructed-Response Question

1. Assume that you are the president ofUnited States. You are coming up forreelection next year. A bill that signifi-cantly increases government spending forprojects across the country is awaitingyour signature. While the increase in gov-ernment spending will lower unemploy-ment for the next year or two, you fearthat it also will lead to significantly higherinflation in two years time. Given whatyou know about the correlation betweenthe Misery Index and election outcomes,should you sign the bill?

(The students should note that by signingthe bill, the president increases his or herprobability of reelection. The policy, whilereducing unemployment, will come at acost of inflation in the future. To evaluatethe policy overall, the students need toweigh the benefits of lower unemploymentand reelection against the prospect ofhigher inflation in the future.)



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ECONOMIC MISERY AND PRESIDENTIAL ELECTIONSLESSON 8

FOCUS: UNDERSTANDING ECONOMICS IN CIVICS AND GOVERNMENT © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY106

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Directions: Ask an adult of voting age (18 years of age or older) the following three-part question.(This adult can be a family member, a guardian, a friend, a relative, a co-worker, or anyone else whomay be willing to share his or her views about important issues in a presidential election. Makesure to indicate that you are NOT asking whether the interviewee plans to vote, or has voted in aprior election. You are also NOT asking for whom the interviewee has voted in the past, or maysupport in the future.)

The question:

Please indicate the three issues that are most important to you as you decide who will getyour vote in a U.S. presidential election.

Issue 1: _________________________________________________________________________

Issue 2: _________________________________________________________________________

Issue 3: _________________________________________________________________________



ACTIVITY 8.1THE THREE MOST IMPORTANT ISSUES IN A PRESIDENTIAL

ELECTION

ACTIVITY 8.2 ELECTIONS AND THE ECONOMY



The following table includes information about three key measures (growth in real GDP per capita,unemployment rate, and inflation rate) of the annual performance of the U.S. economy since 1957.

TABLE 8.2

1957 0.2 4.3 3.3 7.61958 -2.6 6.8 2.8 9.61959 5.3 5.5 0.7 6.21960 0.4 5.5 1.7 7.2 ______ ______ Kennedy / _______

Nixon1961 0.7 6.7 1 7.71962 4.4 5.5 1 6.51963 2.9 5.7 1.3 71964 4.5 5.2 1.3 6.5 ______ ______ Johnson / _______

Goldwater1965 5.1 4.5 1.6 6.11966 5.3 3.8 2.9 6.71967 1.4 3.8 3.1 6.91968 3.8 3.6 4.2 7.8 ______ ______ Humphrey / _______

Nixon / Wallace1969 2.1 3.5 5.5 91970 -1.0 4.9 5.7 10.61971 2.1 5.9 4.4 10.31972 4.2 5.6 3.2 8.8 ______ ______ McGovern / _______

Nixon1973 4.8 4.9 6.2 11.11974 -1.4 5.6 11 16.61975 -1.2 8.5 9.1 17.61976 4.3 7.7 5.8 13.5 ______ ______ Carter / _______

Ford1977 3.6 7.1 6.5 13.61978 4.5 6.1 7.6 13.71979 2.0 5.8 11.3 17.11980 -1.4 7.1 13.5 20.6 ______ ______ Carter / _______

Reagan /Anderson

1981 1.5 7.6 10.3 17.91982 -2.9 9.7 6.2 15.91983 3.6 9.6 3.2 12.81984 6.3 7.5 4.3 11.8 ______ ______ Mondale / _______

Reagan

Year

Growth in RealGDP perCapita (in %)

Unempl.Rate(in %)

InflationRate(in %)

MiseryIndex

Real GDP perCapitaGrowthRule

MiseryIndexRule Candidates

IncumbentPartyWins orLoses?



ACTIVITY 8.2, CONTINUED

ELECTIONS AND THE ECONOMY

TABLE 8.2, CONTINUED

1985 3.2 7.2 3.6 10.81986 2.5 7 1.9 8.91987 2.5 6.2 3.6 9.81988 3.2 5.5 4.1 9.6 ______ ______ Dukakis / _______

Bush1989 2.6 5.3 4.8 10.11990 0.7 5.6 5.4 111991 -1.5 6.8 4.2 111992 2.0 7.5 3 10.5 ______ ______ Clinton / Bush / _______

Perot1993 1.3 6.9 3 9.91994 2.8 6.1 2.6 8.71995 1.3 5.6 2.8 8.41996 2.5 5.4 3 8.4 ______ ______ Clinton / Dole _______

1997 3.3 4.9 2.3 7.21998 3.0 4.5 1.6 6.11999 3.3 4.2 2.2 6.42000 2.5 4 3.4 7.4 ______ ______ Gore / Bush _______

2001 -0.3 4.7 2.8 7.52002 0.6 5.8 1.6 7.42003 1.6 6 2.3 8.32004 2.7 5.5 2.7 8.2 ______ ______ Kerry /Bush _______

2005 2.0 5.1 3.4 8.52006 1.8 4.6 3.2 7.82007 1.0 4.6 2.8 7.42008 0.2 5.8 3.8 9.6 ______ ______ Obama/McCain _______

Year

Growth in RealGDP perCapita (in %)

Unempl.Rate(in %)

InflationRate(in %)

MiseryIndex

Real GDP perCapitaGrowthRule

MiseryIndexRule Candidates

IncumbentPartyWins orLoses?

ACTIVITY 8.3 A WORKSHEET ON ELECTIONS AND THE ECONOMY



Directions: Working with others in your group, use information from Table 8.2 to answer the fol-lowing questions, as directed by your teacher.

Part I. Who Won?

1. Circle the winner of each presidential election.

2. Under the column “Incumbent Party Wins or Loses?” Write “Win” or “W” if the incumbent partywon the election. Write “Lose” or “L” if the incumbent party lost the election. In each set oflisted candidates, the first candidate mentioned is the Democratic candidate and the secondcandidate is the Republican candidate. In three contests, there was a third-party candidate whois listed as the last entry. To get started, note that the president prior to the Kennedy/Nixonelection was Eisenhower, who was a Republican. Therefore, since Kennedy won the presidentialelection, your group should enter “Lose” in the appropriate spot in the last column of Table 8.2,since the incumbent party lost the election.

Part II. Predictions

1. Create a Real GDP per capita Growth Rule based on the instructions your teacher gives you.

Real GDP per capita Growth Rule:

The incumbent party usually wins if the real GDP per capita growth

__________________________________________________________.

2. For each election, write “Win” or “W” in the column under Real GDP per capita Growth Rule ifthe rule predicts the incumbent party will win. Write “Lose” or “L” in the column if the rulepredicts the incumbent party will lose.

This real GDP per capita Growth Rule is correct ______ out of 13 times.

3. Create a Misery Index Rule based on the instructions your teacher gives you.

Misery Index Rule: The incumbent party usually wins if the misery index __________________________________________________________.

4. For each election, write “Win” or “W” in the column under Misery Index Rule if the rule predictsthe incumbent party will win. Write “Lose” or “L” in the column if the rule predicts the incum-bent party will lose.

The Misery Index Rule is correct ______ out of 13 times.

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LESSON 8 ECONOMIC MISERY AND PRESIDENTIAL ELECTIONS · PDF filewith how well the economy is doing, ... LESSON DESCRIPTION The students examine economic data in ... picking winners