With less than five months to go, the 2024 presidential election is close. Polls show that the race is tied across the country and in key swing states.
There are many problems that aren’t directly related to the economy that will be debated in November. However, economists and political scientists say that when the race is close, the economy can be a very important factor in deciding the winner.
In an interview with MarketWatch, Justin Begley, an economist at Moody’s Analytics who helps run the company’s presidential election model, said that political factors, like a president’s approval rating and voter enthusiasm, are very important, but they tend to be set in stone a long time before election day. On the other hand, economic factors change more quickly.
As you can see, betting odds make it less likely that Trump will win the race, even though billionaires are backing him.
Begley and his coworkers looked at decades of economic data and election results and found that the best economic indicators of an election outcome are the price of gasoline, real household income, mortgage rates, and consumer confidence.
The most recent version of Moody’s Analytics, which came out at the end of May, says that President Joe Biden will win the election, but by very small leads in key battleground states like Nevada, Pennsylvania, Wisconsin, and Michigan.
With these numbers, Biden would get 283 electoral votes, 13 more than he needs to win. However, the Trump campaign is probably worried about signs that the economy is moving in Trump’s favor.
Begley said, “As things like mortgage rates and gas prices have crept up, that has cut into Biden’s margin of victory.” He did this by comparing the rates and prices to the beginning of the year.
As he put it, “gas prices are probably the biggest risk Biden is facing right now, since it wouldn’t take much to make them go up.”
When they were at their highest point at the end of last year, rates were going down. But in the last few months, they’ve started to go up again.
Biden has tried to stop gas costs from going up. Last month, he said that 1 million barrels of gasoline would be released from the nation’s Northeast Gasoline Supply Reserve to help bring down prices before the summer driving season.
The president has suggested programs to lower the cost of housing, but since the Federal Reserve sets its own interest rates, it’s unlikely that he will be able to do much before the election to lower the cost of getting money to buy a home.
Trump hasn’t said much about how he’d lower home costs, but he was willing to try to get the Federal Reserve to lower rates during his first term. He has also promised to lower gas prices by making more oil in the U.S., even though production is already at a record high.
As shown by Moody’s Analytics, there are several economic data points, as well as third-party vote share and voter turnout, that could change the outcome of the election in Trump’s favor. If everything else stays the same, the model says Trump will win.
- Republican voter turnout is 2 percentage points higher than 2020 Democratic turnout;
- The share of voters choosing a third-party candidate hits 7.5% nationally;
- The average cost of a gallon of gasoline rises from $3.47 today to $4.09 nationally over the next three months, or
- The average 30-year mortgage rate rises to 8.65% in the next three months, up from 7% today.
Of those variables, Begley says there are two that Trump and Biden supporters should be watching most closely.
“The two variables that Biden’s vote share is most sensitive to right now are gas prices and interest rates,” he said. Significant rises in either over the next three months ”could really hurt Biden.”
