Inflation and incumbency

 Many people say that inflation was a major cause of the Democratic loss on Tuesday.  But inflation hasn't stopped governing parties from being re-elected in the past.  The figure shows margin in the popular vote and inflation in the previous term.

Under Biden, inflation averaged 5.0% a year, and the Democrats trail in the popular vote by 3.0 (47.7% to 50.7%), as I write this (it will probably get a little closer as more votes are counted in California).  In Richard Nixon's first term, inflation averaged 5.0%, and he won in a landslide.  The correlation between average inflation and margin is just -.22.  

What if people consider the trend--is inflation higher or lower than it was in the past?  I tried average inflation in the administration minus average inflation in the previous administration, and found a stronger relationship:  a regression coefficient of -2.25 with a standard error of 1.04.  After a little experimentation I found an even stronger relationship with inflation in the past year minus average in the previous administration*:  

The correlation is -.65 and the regression coefficient is -2.8 with a standard error of 1.0.  There are two big outliers:  1964 and 1972.  Apart from that, all of the elections are close to the predicted values.  Of course, inflation isn't the only important economic condition.  I added per-capita GDP growth in the first three quarters of the election year (from Ray Fair) and a dummy variable for for an incumbent president running.  The estimates:

Constant        -1.65       (2.92)
relative inf    -1.93        (0.79)
GDP               1.35       (0.65)
Incumbent      5.07        (3.35)

The current value of relative inflation is .92.  The model suggests that if it were zero (ie, the same as inflation under Trump, which averaged about 2%), Trump would still lead, but the gap would be only about half as large.  

The estimated effect of incumbency is large and the predicted value would favor the Democrats if Joe Biden had been the candidate.  The standard error is large, meaning that there's a lot of uncertainty about the size of the incumbency advantage (or even if there is any advantage).  But even if it were smaller, I don't think it should be interpreted as meaning that Biden would have done better than Harris.  A large part of the incumbency advantage comes from the ability to go on TV and speak to the nation--sometimes to try to get support for their policies, but sometimes speaking as leader of the nation rather than leader of a party (e. g., after a natural disaster).  Some presidents have been better at that than others, but they all could do it effectively at least some of the time.  Trump was an exception--it's just not the way he operates.  Biden was also an exception:  he couldn't do it very well, and for much of his term he didn't even try (or if he did, I've forgotten).  Part of that was age, but even in his prime it was a weak point, maybe because he was from a small state where personal relations mattered more than media skills. There have also been general changes that probably reduce the advantage--the fragmentation of the media means a presidential address doesn't reach as many people, and increased partisanship means it's harder to win them over.   

*This is similar to Robert Gordon's "inflation acceleration" and "excess inflation."