Obama's Chances in Four Months
Since my May post, the misery index has remained at 9.6%, and the annualized growth of the S&P 500 since November 1, 2008 has dropped to 9.53% (far better than the annualized decline of -6.8% during Bush's second term). With these factors taken into consideration, Obama has a 76%-85% probability of being re-elected.
We are in unchartered territory when it comes to some of the data. Only twice in presidential history did an outgoing (as in did not run for re-election) president leave the economy in tatters with a misery index well above 10%. In 1896, Grover Cleveland exited office with a misery index in the neighborhood of 12.5% and Woodrow Wilson left office with a misery index of 21.1%. In both cases, the successor administrations, McKinley from 1896-1900 and Harding/Coolidge from 1920-1924 saw improvements in this metric to well below 10%. In the subsequent election cycles, McKinley was re-elected by a margin of 6.2% and Coolidge by 25.3%.
McKinley's misery index in 1900 was 5% and Coolidge's misery index in 1924 was a ridiculous 1.2%. It is important to point this out, because it is inconceivable to believe that Obama's misery index will approach those levels, and the improvements in the ML under Obama's watch (10.2% to 9.6%) are marginal at best. Given this, it is important to look at the data in another fashion.
Nine times in election history did a sitting president running for re-election see improvements in the ML during his tenure. His average margin of victory was a significant 10.6. Only once, with Taft in 1912, was a president running for re-election who saw in improvement in the ML no re-elected. One can assume that Teddy Roosevelt's presence in that election had much to do with Taft's failure to win.
The power of incumbency and improvement in the ML weighs heavily in favor of an Obama re-election.