Do elections affect economic activity?

Summary

We wrote reports in 2016 and again in 2019 to determine if election periods had a significant impact on U.S. economic activity. With the 2024 presidential election right around the corner, we revisit that analysis.

Initial theories suggested that elections positively impact the economy through the actions of politicians, who may try to stimulate it as a part of their re-election campaigns. More recent theory, however, implies the opposite, suggesting that elections weigh on near-term economic growth, as individuals and businesses may delay large purchases or investments in the face of political uncertainty.

Our analysis in 2016 and again in 2019 did not find evidence of weaker economic growth in the 18 presidential election years that occurred between 1948 and 2016. In fact, we found that growth rates of real GDP, real consumer spending and real business investment spending were stronger during presidential election years than non-election years.

Did elected officials “juice” the economy via stimulative fiscal policy to improve their electoral prospects? Apparently not. Our 2016 analysis did not find a statistically significant difference between growth in real government spending in election years compared to non-election years.

We forecast the U.S. economy will continue to expand in 2024, albeit at a sluggish pace due to the current restrictive stance of monetary policy. Given the findings of our previous analyses, we suspect that this year’s election will not have a material effect on the U.S. economy in 2024.

Download The Full Special Commentary