Can Obama "break the model"

Clearly the issues facing our nation are challenging and complex. Our economic recovery has been lackluster and economic growth anemic. Unemployment has been above 8% for 42 months and underemployment is a major problem.

Wage growth, full-employment, economic growth and inflation containment should be a common goal among all Americans.

We assume this to be true and have thus created a presidential economic success model. This model aggregates economic growth as measured by GDP, the percent of Americans unemployed and the rate of inflation.

Notice the red “zero” line across the center of the chart. We call that the election line. The black line that rises and falls from the election line is the presidential economic success line.

Simply put, when an incumbent U.S. president scores above the election line, that president has always gone on to win re-election. When the incumbent candidate has a reading below the election line, that president was defeated in the presidential election that year.

Going back to 1948, those U.S. presidents with positive success lines that retained office include; Truman, Eisenhower, Kennedy-Johnson, Nixon, Reagan, Clinton and George W. Bush.

Over the same period, those that had success lines below the election line all suffered shortened careers in the White House. These presidents are Ford, Carter and George H.W. Bush.

This brings us to this year’s election cycle. What may be ominous news for the Obama Administration is that he scores below the election line.

While largely tongue and cheek, this model seriously represents those economic issues most important to Americans and as a matter of fact, NO U.S. president has ever won the presidency with an economic success line less than zero.

Perhaps the Obama administration will break this 64 year trend.

Bottom Line: This weekend we celebrate the social and economic achievements of the American worker. Through the hard work of the most industrious and innovative people on the planet, it is through their achievements that has made this country the greatest, most prosperous nation in the world.

Happy Labor Day to our clients and their Families.

Joseph S. Kalinowski, CFA