Yahoo Finance These 4 economic variables could 'easily flip' the 2024 election for Biden or Trump: Moody’s
In a new analysis, three economists at Moody’s Analytics took a deep dive on the coming election season. Their conclusion: President Joe Biden has a slight advantage at the moment both on the economy and on his overall chances of being reelected.
But it’s a tenuous edge at best.
"The election could easily flip with only small shifts in the economy’s performance," write the authors, Mark Zandi, Brendan LaCerda, and Justin Begley. There are, they add, four economic indicators that election watchers should perhaps bookmark in the months ahead.
The report details a series of economic tests that Biden’s reelection effort will face in the coming nine months. Whether the current president wins, or former President Donald Trump prevails, the result could hinge on which direction the needle moves on things like gas prices, mortgage rates, real household income, and the overall metric of consumer confidence.
Different economic variables at play
Any of those factors could flip the election results, but the price of fuel is at the top of the list with its outsized impact on voter perceptions. "All else equal, if gas prices surge back close to $4 per gallon, Trump will win," they write.
The challenge for Biden is that he has limited options to push the needle one way or another.
"Given the cross-currents in global oil demand and supply, it is very difficult to gauge the outlook for gas prices, and such an increase in prices cannot be ruled out," the economists note, but they currently project that prices will sit at around $3.50 a gallon on election day.
In 2022 during the early stages of the war in Ukraine, the Biden administration confronted gas prices directly with historic releases from the Strategic Petroleum Reserve (SPR). That option is unlikely to be on the table again with the reserve hovering near lows not seen since the early 1980s — and any move on the SPR in 2024 is sure to be attacked as a political ploy.
Other key factors isolated by the authors include mortgage rates and real household incomes.
The authors find that a surge of mortgage rates to more than 8.5% would "crush housing affordability" and could undo Biden’s chances.
On this front, the White House again has little it can do directly on mortgage rates. Yet campaign aides at the president's headquarters in Delaware will surely be closely watching the Federal Reserve as a lowering of the central bank's benchmark interest rate could move through the economy and help out homeowners. Earlier this week, the Fed maintained its current interest rate level with Chair Jerome Powell offering pushback on market expectations of a cut as early as March.
All told, the central bank has five more meetings between now and Election Day 2024.
Another key factor highlighted in this week’s report is real household income, the measure of how wage levels are measuring up against inflation.
Americans' purchasing power has made strides in recent months as inflation has declined; continued improvement on that front could be a tailwind for Biden. This week's report finds that that metric would need to "suffer a significant decline" to markedly lower Biden’s chances. The trio of economists also note that such a plummet would also be consistent with the economy entering a recession.
The authors also highlight consumer confidence — which has been surging as of late — is another key factor to watch. And one likely be shaped by the three factors above.
Other factors
The report also highlighted a variety of other things that could tip the balance — from turnout to how much interest third-party candidates receive.
The power of third-party candidates — from Robert Kennedy to Cornel West — is yet to be determined as they try to claim a spot on state ballots this November.
The report notes that if the third-party support ends up at 1.8% — as it was in 2020 — that’s good news for Biden. But "simply increasing the national third-party vote share by one standard deviation to 7.5%, flips the election in favor of Trump, all else equal."
The overall takeaway from the report — the first of a series of monthly updates that Moody’s has planned between now and Election Day — is for a hotly contested election that is far from a sure thing for either side.
Biden’s team got some good news polling this week with a Quinnipiac University poll that shows the current president ahead by 6 percentage points nationwide. But state polls of battlegrounds, which is where the election will actually be decided, offer better news for Trump including a recent Bloomberg poll that found the former president ahead in seven swing states.
The Moody’s report was a little more bullish on Biden's chances in those bellwether states and says that Pennsylvania is the key state to watch with its 19 electoral votes. The focus on the keystone state comes as Biden is perhaps on track to pick up North Carolina with that state's demographics in flux, but at risk of losing Arizona as the immigration surge weighs especially heavy on voter perceptions there.
The only thing you can probably count on for sure, the report concludes, is that the election will be close.
The authors say Biden has an opportunity to ride good economic news to a second term "but these are big assumptions in a highly uncertain economic time and given our highly fractured and contentious politics."
Ben Werschkul is Washington correspondent for Yahoo Finance.
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