(Article changed on October 18, 2012 at 14:55)
With the election approaching, it's impossible to get through any day without hearing multiple times the "It's the economy, stupid" mantra. The expression, famously coined by Clinton's strategist James Cargill for the 1992 race, singles out economic conditions right before a Presidential election as the only factor capable of determining winners and losers.
Political scientists and economists have repeatedly found that the historical evidence actually supports this view. A well-regarded Presidential election forecasting model by Yale Professor Ray Fair, for example, is built on the finding, discussed in his book "Predicting Presidential Elections and Other Things", that the state of the economy in the nine months right before the election date outperforms all other variables in helping to predict the Presidential vote shares.
But is it wise to choose a President this way?
The implicit reasoning behind voters' behavior presupposes that Presidents have considerable power to influence the economy.
Politicians themselves are often responsible in creating such perception. They are quick in claiming merit for economic booms. Former President Clinton likes to remind Americans about the "peace and prosperity" he was able to deliver in the nineties, by creating, among other things, more than twenty million jobs over his terms. A weak economy, on the other hand, is usually an insurmountable obstacle for a President. Carter lost to Reagan in the midst of double-digit inflation, high oil prices, and a sharp downturn. In the 2008 election, Presidential candidate Obama jumped at the opportunity to blame the emerging financial crisis on President Bush's failed policies and was immediately rewarded in the polls.
The importance of the economy for the current election has always been obvious. If we look at data from http://www.intrade.com, a prediction market in which it's possible to buy securities with payoffs tied to the realization of various events, the probability of the event "Obama winning the election", extracted from the price of the corresponding security, has been moving inversely with the price of the security betting on "the U.S. entering a recession in 2012".
The sensitivity of voting choices to economic conditions, however, vastly exaggerates the influence of Presidents.
Economic studies attribute the expansion in the Clinton years to the euphoria about productivity gains, either realized or simply anticipated, connected to the dot-com bubble. The President himself never surfaces as a relevant factor. Monetary policy mistakes are largely to blame for the rise in inflation in the 1970s; the recession between January and July 1980 is almost exclusively attributed by economists to the severely contractionary, and entirely independent from government, monetary policy under Fed's Chairman Volcker, freshly appointed in August 1979. The financial crisis itself has numerous causes and cannot realistically be imputed to any single President or policy (the wave of deregulation has spanned four Presidents since 1980).
Nowhere is the influence of Presidents more illusory than with regards to oil prices. President Obama has been criticized during each juncture of rising oil prices. In the recent presidential town hall debate, Romney cited gasoline prices in Nassau County, NY, which rose from $1.86 to $4 during Obama's term in office, as evidence that the President's energy policies have failed. But economic studies show that oil prices are driven by unrelated forces: in the past, they mostly responded to supply shocks, associated to wars and general turmoil in the Middle East, while more recently, they appear increasingly driven by shocks to demand, intended as shifts in global real economic activity. The direct role of U.S. Presidents, drilling or no drilling, is minor at best.
If Presidents did have the power they are often credited with, as rational self-interested individuals, they would have strong incentives to manipulate the economy before elections, by engineering expansions every four years. Political economic theories based exactly on those ideas did become popular after the Nixon years, but empirical studies mostly failed to accumulate favorable evidence on the existence of such electorally-timed economic cycles.
To be fair, one of the few cases in which Presidents matter more than usual is in response to a deep recession as the recent financial crisis. The crisis gave the opportunity to governments to intervene much more deeply in the economy, and given the dire situation, President Obama had the possibility of having a more substantial impact.
Yet, one cannot omit the constraints imposed on the President by his relationship with Congress. The debt ceiling fight with Congressional Republicans in 2011 led to renewed uncertainty, which pushed consumer sentiment indicators to levels last seen in late 2008, during the most dangerous months of the Great Recession.
Yes, "It's the economy, stupid". But Presidents are judged on something for which they don't deserve that much merit or blame in the first place.