Americans saw their real disposable personal incomes grow by a fairly average two percent over the past year. With that mediocre rate of income growth, a “normal” President would have had an approval rating around forty-eight percent at the time of the election. Donald Trump’s forty percent favorability probably cost his party at least four percent of the popular vote, or about half the Democrat’s popular-vote margin of just over eight percent.
The state of the economy was considered one of the few items on the positive side of the ledger for Congressional Republicans in 2018. The stock market accelerated after Trump’s election in 2016; the new tax bill was expected to put cash in peoples’ pockets; and, incomes overall continued to rise as they had since 2010. All of these should have helped Republicans this year. The question is how much.
The effect of the stock market rise is somewhat easy to dismiss as only half of American adults own stocks. And the market has experienced considerable volatility this year compared to the steady march upward during the first year of the Trump Administration. So while the half of Americans with stock portfolios are certainly better off today than they were in November of 2016, the future looks more dicey.
However the evidence for a relationship between stock prices and presidential popularity is, at best, mixed. Back in 2009 Gallup found little correlation between the Dow-Jones Industrial Average and the popularity of recent Presidents. Nate Silver at FiveThirtyEight also expresses skepticism about a stock-market effect.
The benefits of the Republican tax cut also have had limited effects when it comes to the broad voting populace. Some forecasts expected the cuts to stimulate investment and consumption and grow the overall economy. However, even supporters of the plan do not expect those broader benefits to appear for some years to come. Meanwhile, critics of the plan focus on how most of the gains from the tax cut have been funneled into stock buy-back plans that boost companies’ share prices and executive compensation instead of investments in the real economy. “Perhaps that’s why voters aren’t enthusiastic about the tax cuts,” writes a columnist in Forbes. “People just aren’t getting any real economic benefits from the tax cuts and they know it.”
As I’ve discussed here before, political science research often treats changes in real per-capita disposable personal income as a useful shorthand for the economic welfare of an “average” American. That measure turns out to have a weak, though measurable, influence on Presidential popularity. This chart presents Gallup’s job-approval measure in the week or two before an election and the one-year change in real per-capita disposable income as reported by the Bureau of Economic Affairs. I use the third-quarter figure since it covers the period closest to an election.
The scatter around the line in this chart testifies to the weakness of the relationship. The R2 value measures the percentage of the variance in approval that can be accounted for by income changes; here it is about eleven percent. The slope of the regression line, two, suggests that a one-percent increase in real disposable personal income is associated with, on average, a two-point improvement in a President’s popularity.
One thing made immediately clear by this chart is that average Americans saw no extraordinary growth in their incomes over 2018. Real per-capita disposable income grew from $42,866 in the third quarter of 2017 to $43,718 at the end of September. That gain of $852 was just short of a two-percent increase over the year before, and a bit below the 1944-2018 historical average of 2.25 percent.
Still, the chart shows that Trump was less popular than economic conditions would predict. Approval for a “typical” President presiding over an economy showing two-percent in growth should run a bit over 48 percent, not the 40 percent for Trump reported by Gallup in the week before the election.
Earlier this year I presented some results that tied together Presidential popularity and support for the President’s party on the so-called “generic-ballot” question.* We can use that model to imagine how the election might have transpired had Trump been a “normal” President and an economy with two-percent personal income growth. In that model a one-percent change in “net approval,” the difference between the percent approving versus that disapproving of the President, improves the Democrats’ margin on the generic-ballot measure by about 0.3 percent.
Trump’s net-approval rating just before the election stood at 40-54, or -14, according to Gallup. A President with 48 percent approval will likely have an identical disapproval rating, 48-48, after accounting for the four percent or so who report having no opinion. That makes the net approval for this hypothetical President zero, meaning Trump’s net approval is fourteen points below a normal President’s. Trump running fourteen points behind a normal President on net approval probably expanded the Democrats’ margin in the popular vote for the House by about four percent (4.2 = 0.3 X 14). That accounts for half the Democrats’ margin of victory in November, 2018.
*The generic-ballot again did a pretty good job of predicting the actual margin of victory in the election for the House of Representatives. The RealClearPolitics average of generic-ballot polls showed the Democrats with a lead of 7.3 percent. Omitting the obvious Rasmussen outlier, which predicted a one-point Republican victory, brings the average up to 8.2 percent, nearly identical to the actual margin of 8.5 percent.