Economist Writing Every Day

Are you better off than you were four years ago? That question was asked at the Presidential debate last night. But more importantly, we also got a massive amount of new data on income and poverty from Census yesterday. That data allows us to make that just that comparison, although somewhat imperfectly.

The Census data is excellent and detailed, but it’s annual data, meaning that the release yesterday only goes through 2023. We won’t have 2024 data for another year. Such is the nature of good data. (Note: I’ve tried to address this same question with more real-time data, such as average wages). Still, it’s a useful comparison to make. It’s especially useful right now because the new 2023 data on income are (for most categories) the highest ever with one exception: 4 years ago, in 2019.

A reasonable read of the data on income (whether we use households, families, or persons) is that in 2023 the median American was no better off than in 2019, after adjusting for inflation. In fact, they were probably slightly worse off. I fully expect this will no longer be true when we have 2024 data: it will certainly be above 4 years prior (2020) and likely above 2019 too (more on this below). But we can’t say that for sure right now.

So let’s do a comparison of “are you better off than 4 years ago” for recent Presidents that were up for reelection (treating 2024 as a reelection year for Biden-Harris too), using the 4-year comparison that would have been available at the time using real median family income. Notice that this data would be off by one year, but it’s what would have been known at the time of the election.

My quick takeaway from this chart: this measure is probably not a good predictor of who will win the Presidency! Carter was positive, but lost. Reagan was negative, but won. It looks correct for Bush Sr. and Clinton, but after that the pattern is the opposite of what you would expect again (Bush Jr. and Obama won, Trump lost). So the fact that this number is slightly negative for Biden probably tells us… not very much about Harris’ chances of winning.

What if, instead, we used the actual 4 years of a Presidency? Voters wouldn’t have had that data at the time, but maybe they could feel it, and voted accordingly. But you get mostly the same, nonpredictive pattern (I’m assuming a 2% growth from 2023 to 2024, which I think is conservative)”

The data here bunches a bit closer to zero, but still based on this data you would have wrongly predicted that Carter would win, Reagan would lose, Bush Jr. would lose, Obama would lose, and Trump would win.

Is real median family income predictive at all of Presidential outcomes? Actually yes, but only if we look at a different timeframe: are you better off than you were one year ago?

With this one-year approach, real median family income perfectly predicts the winner of the last 7 presidents up for reelection. If it’s positive, they win. If it’s negative, they lose. Now, we shouldn’t read too much into this data. Some of these increases or decreases are less than 1%, and it’s unlikely that voters could tell the difference between a 0.1% increase and a 0.8% decrease — especially since this data wasn’t available at the time of the election (if I try this analysis with the most recent year available at the time of the election, it’s once again not predictive).

Nonetheless, if the real median family income data is useful at all for predicting the outcome of the election, it seems that the most recent year is the one that matters. This finding is actually consistent with more sophisticated election prediction models such as Ray Fair, who uses the growth rate of real GDP per capita in the first 3 quarters of the election year. Admittedly Fair’s model is purposefully not that sophisticated: he only uses three economic variables! But recent growth does seem to be the factor that matters to voters.

What will growth in median family income be in 2024? We don’t know yet, and as I said we won’t know until next September. But we do have real GDP per capita growth for the first two quarters of 2024, both of which have been positive.