A gauge of consumers' financial insecurity that correlates with the outcome of presidential reelection races declined in March for the third straight month, signaling better odds for Barack Obama in November.
The Money Anxiety Index measures several economic factors associated with Americans' level of financial stress.
"We use GDP, unemployment, spending, savings, a whole array of economic indicators," Dr. Dan Geller, chief research officer for the MAI, told DailyFinance. "And we developed a model that is very reliable and predictable."
In the last 50 years, only those incumbent presidents who saw the MAI decline during the year of their reelection campaigns -- from January to November -- won a second term. "Conversely," MAI researchers explained in a press release, "presidents running for reelection lost when the Money Anxiety Index increased between January and November."
For March, the index stands at 90.5, which reflects a reduction of 1.3 from the previous month, and 3.4 points worth of lower financial anxiety from the same month last year. The March reading also represents the third consecutive month of declining anxiety, which bodes well for President Obama's chances in the fall. In January, the index stood at 92.2.
"The MAI is in a downward trend," Geller said, "which basically increases the probability of reelection for President Obama. However, we have to see how we end up closer to the reelection. The biggest threat is the uncertainty over gas prices, because this can derail the economy."
It's Not the Level -- It's the Trend
The last half century saw eight presidential reelection campaigns, five of them successful. And all five victorious incumbents had managed the feat of lowering the MAI in the last year of their first terms.
"Most recently," the MAI's release explains, "President George W. Bush won reelection when, during his reelection year -- from January to November 2004 -- the Money Anxiety Index decreased from 59.6 to 58.2."
In 1996, from January to November, the Money Anxiety Index fell from 69.2 to 68.8 -- and Bill Clinton was reelected.
Jimmy Carter, on the other hand, saw the MAI shoot up 18.1 points, from 80.3 to 98.4, from January to November 1980. What followed, of course, was his trouncing at the hands of Ronald Reagan, who won 489 electoral votes to Carter's 49. George H. W. Bush suffered a similar, if milder, fate, when the MAI increased 4.0 index points, from 81.7 to 85.7, from January to November 1992. He lost to Clinton, 370 electoral votes to 168.
The MAI's predictive power begins with the presidency of Lyndon B. Johnson, who won a presidential election in his own right in 1964, after serving out the remainder of John F. Kennedy's term. That year, from January to November, the MAI decreased from 63.0 to 48.5.The pattern holds for the electoral fates of Presidents Gerald Ford and Richard Nixon.
Different Economic Equation, Same Electoral Prediction
"The other interesting factor," Geller told DailyFinance, "is that even though during different reelection years there were other issues such as conflicts, at the end of the day, people vote on the economy, with their wallets and purses. That's what [the Money Anxiety Index] shows."
This conclusion matches one previously reached by Yale economist Ray Fair, who developed an equation based on economic indicators that has likewise had remarkable success predicting the winners of presidential elections. According to The Los Angeles Times, Fair's model has been correct 90% of the time. And he makes his predictions relatively early -- "way back in October 2010" for the 2012 race, "long before anyone knew who would be challenging Obama this year." (Fair predicts "another decisive Obama victory" this November.)
Fair says economic growth and inflation are the two factors that determine the outcome of a race for the White House. "Historically," he said in an interview for The New York TimesMagazine, "issues like war haven't swamped the economics."
The Richest and Poorest U.S. Presidents
Financial Anxiety Index Declines, Boosting Obama's Odds
Like his fifth cousin Teddy, FDR got most of his money through family holdings. Worth $60 million (in today's dollars) at his peak, he had residences in New York, Maine and Georgia. Then again, he didn't own his famous New York estate until after his mother died in 1941.
Hoover made his money as a mining company executive: After putting 17 years into the business, he ended up with a $75 million fortune -- and extensive holdings in various mining companies.
Few presidents came from more modest origins than LBJ, but his investments in broadcasting, cattle and private aviation left him with a net worth that topped $98 million.
Madison's 5,000-acre farm was worth a lot, but much of his money derived from his positions as secretary of state and president. And while his fortune at one point reached $101 million, he ended up losing much of it as his farm became less profitable.
JFK had little personal money, but the value of the Kennedy family fortune has been estimated at as much as $1 billion. As one of the nine Kennedy children, JFK's portion would have made him the fifth richest U.S. president in history -- had he lived to inherit it.
Andrew Jackson made his money the old fashioned way: He married into it. Between his 1,500-acre estate and his extensive slave holdings, his fortune topped out at an estimated $119 million.
Teddy Roosevelt inherited an estimated $125 million trust fund, then lost much of it on a failed land venture. Still, his earnings from his writings and his 235-acre estate on Long Island left him in good shape.
Thomas Jefferson was also land-rich: Among other holdings, he owned 5,000 acres at Monticello. But his fortune -- which topped out at an estimated $212 million -- had plummeted by the time he died, and his family had to sell much of his property to pay off his debts.
The Father of his Country was also its richest president: Estimates of his wealth range as high as $525 million. Among other things, he owned 8,000 acres of prime real estate on the banks of the Potomac River -- as well as 300 slaves.
(Wealth is relatively easy to measure: Who's poorest -- that's a tougher thing to gauge. The following presidents are in the bottom tier. But we won't try to rank them in order.)
It's well known that before he went into politics, Truman was a haberdasher, but his men's clothing store nearly went bankrupt. His 18 years in Washington didn't net him a lot of money either, but he saved carefully and was able to live comfortably after he left office. He and his wife, Bess, were the two first recipients of Medicare.
"Silent" Cal Coolidge was not known for his flamboyance. After his presidency, he made a solid living as a newspaper columnist and memoirist, but most of his money was tied up in his home in Northampton, Mass.
Education isn't a particularly lucrative occupation, and Wilson's tenure at Princeton didn't leave him a wealthy man -- even though he was for a time the president of the university. Neither, for that matter, did his stints in the New Jersey governor's mansion and the White House.
Although Chester Arthur made a reasonable amount of money as a lawyer and politician, he died with less than $1 million in net worth, putting him among the less affluent ex-presidents.
A log cabin president like Lincoln, James Garfield spent much of his life in public service. In his case, it didn't pay very well: When he was assassinated in 1881, he was more or less penniless.
One of the most colorful men to occupy the White House, Grant lost his fortune when his son's business partner, Ferdinand Ward, defrauded his investors -- among them, the former president.
Andrew Johnson started out as a tailor before rising to become a mayor, a Tennessee state legislator, a governor, a senator and a president. Along the way, he made a small fortune, but lost half of it when his bank failed.
Abraham Lincoln was famously honest, which helps explain why he took on the debts of a deadbeat business partner. The decision left him deeply in debt -- a situation that was later somewhat rectified by his successful legal career.
James Buchanan, Abraham Lincoln's predecessor, was also born in a log cabin. Unlike earlier presidents, he only benefited modestly from his years in public service: Estimates of his personal fortune place it at less than $1 million.