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I have heard about the saying “It’s the economy stupid”, but I’m not sure about how true it is now.

Let’s use Trump’s approval as an example. Even though there is a “rally around the flag effect” that is typical of leaders during crises (it is a lot smaller than governors and foreign leaders and especially President Bush in 2001), it does show that despite the stock market crashing, his approval continued to rise before presumably hitting a ceiling of about 46% on 538. For more context, in the years before, at 538, his approval was hovering at around 43% despite a relatively strong economy.

I have read that the economy is not affecting people’s voting habits nearly as much as it used to. Is that true?

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    This might be a bit premature, since no one has cast any votes for or against Trump since his election. I'm not aware of any evidence that people's voting habits have actually changed, though I'm fully prepared to be proven wrong about that.
    – divibisan
    Apr 6 '20 at 16:05
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Firstly, to address the example of the COVID-19 pandemic, and its effect on the popularity of Donald Trump; the level of correlation between the performance of the economy and US presidential popularity is well studied. For example, LSE research in 2013 found that presidential approval is highly sensitive to changes in the share index:

A positive change in the index, when controlling for other relevant factors, on average produces an increase in the President’s approval. Interestingly, the effect is even more pronounced when we look at market acceleration or deceleration. When the market is growing at an increasing rate, voters reward the president, but when growth is decelerating, the president is punished.

You are right that President Trump's current opinion polls would seem to buck this trend, as the stock market has plummeted, with the Dow Jones crashing around 8000 points since the end of February, while the President enjoys record high approval ratings of 49% according to Gallup. However, I would argue that instead of an indication that these two measures are no longer intrinsically linked, they are rather an exception to the rule, precedent for which already exists.

We can, for example, consider the performance of the stock market in the wake of the 9/11 attacks, with the NYSE and the Nasdaq closing for almost a week, the Dow Jones falling 14%, and the NYSE market falling by 7.1%, a record at the time. Clearly in normal times, this would have led to a dramatic fall in presidential approval. However, as you note in your question, President Bush's approval rating soared to around 90%, the highest ever for a US president, and would go on to gradually lower over his tenure as President.

Another example might be the Gulf War in 1991. Although this took place in the middle of a recession, which had lowered the approval of President Bush Snr., his victory in the crisis gave him record approval ratings. This lead was, however, squandered over the next year, as Gallup puts it: "Americans' attention shifted from the Persian Gulf to the struggling U.S. economy". He would, of course, go on to lose the 1992 election to Bill Clinton.

It seems, therefore, that rather than this incongruency representing a break from the established conventional wisdom that presidential approval, and as a result, US political outcomes, mirrors the stock market, it is at least at the moment a reflection of previous examples of the 'rally around the flag' effect that you note in your question. Whether or not Trump's approval rating continues to stay at this high level will depend on how his response to the crisis is judged by the American public.

Secondly, to evaluate the scope of your question more generally, there is a growing body of research which seems to support your notion that the aforementioned link between the performance of the economy and the electoral outcomes of incumbent politicians is becoming weaker, at least in the US.

For example, the NYT conducted a survey (notably before the current pandemic) weighted to match the demographic profile of the population of the United States, in which public opinion regarding Trump's handling of the economy was tested. The full results can be found here. Their analysis suggests that:

Economic conditions have historically been among the best predictors of presidential elections, and models based on those patterns suggest that Mr. Trump would be favored to win re-election if the economy remains more or less on its current path through Election Day. But it is unclear whether historical lessons hold in an era of heightened partisanship.

In particular, SurveyMonkey, who conducted the poll, note that

When asked which political party in general does a better job handling the economy, the public is locked in a 45-45 deadlock. Republicans overwhelmingly (95%) favor the Republican party, while Democrats overwhelmingly (88%) favor the Democratic party. Independents are split, with 39% favoring the Democrats and 36% favoring the Republicans.

It would seem according to this research, that although "Jobs and the economy" remains the most important issue for the largest proportion (24%) of the survey participants, their other partisan beliefs are unlikely to shake their party loyalty in the wake of a change in economic fortunes.

In addition, 538 has a great article on this, which I won't go into too much detail on because this answer is already pretty long, but in particular, Silver notes that:

In particular, we don’t have enough data to make overly specific claims about the economy. That is, any time you see what you might call a “magic bullet” claim, such as that second-quarter GDP is crucial or that per-capita disposable income is the key economic variable, you should be wary.

Although he also echoes the misgivings of the NYT article, that partisanship could dull the response to a recession, he maintains that the performance of the economy is still very important to the outcome for the incumbent party - "The better off America is by November, the more likely he is to be re-elected."

In conclusion, then, although there is evidence to suggest that the conventional link between the economy and the fate of incumbent officials is weakening due to increased polarization and partisanship, the link is still undeniably extant. While in this specific case around the COVID-19 pandemic the incongruency can perhaps be explained by the 'rally 'round the flag' effect, it seems likely that the ultimate fate of Trump's 2020 campaign will be defined by his response to the pandemic and the underlying economical issues over the coming months. It is still far too early, in my opinion, to write off our conventional knowledge based on a few opinion polls conducted during a crisis.

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It's not always the economy

The problem with "It's the economy, stupid" is that it really was a snapshot in time. When it was put on a poster by James Carville in 1992, Bush 41 was in trouble with his base for having raised taxes, despite having made a major promise not to. Since then, no President has failed to win a bid for re-election.

Trump is a bad example because Trump has never polled above 50%. His ratings have typically been in the low 40s, but have gone up during the COVID-19 epidemic (when the economy has gone down).

Bush 43 also had the very divisive Iraq war

Support for the decision to use military force in Iraq had declined considerably over the course of the war and its aftermath. In late March 2003, a few days after the U.S. invasion, 71% supported the decision to use military force, while just 22% said it was the wrong decision.

Just a year later, the share saying the war in Iraq was the right decision fell to 55%. By the beginning of 2005, opinion about the use of U.S. force was divided (47% right, 47% wrong). Two years later, public opinion about the war had “turned decidedly negative.”

The Great Recession didn't help that, but the Republican candidate that year, John McCain, had been having great difficulty in keeping his numbers up anyways

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Past performance does not guarantee future performance

The economy does tend to play a role in general elections, but it's far from the only consideration. In 2016, the fitness of the two candidates was a significant player. 2020 might very well hinge on how well the country as a whole (not just the economy) recovers from the COVID-19 shutdown (i.e. if the US has multiple waves, forcing more shutdowns, there could be a political consequence).

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The Economist has an intriguing (Nov 2019) article suggesting (with concrete data/studies, but alas not beyond the doubt of confounding factors) that the economic indicators that matter, politics-wise may have shifted:

An analysis by The Economist earlier this year, for example, found that in America the correlation between consumer confidence and the public’s approval of the president had broken down. There are signs of the same trend in other rich countries, too. Boris Johnson, Britain’s Conservative prime minister, has tried to make the general election on December 12th a matter of identity by appealing to Brexit voters who want to “take back control” from a distant elite. In Dudley North, a marginal constituency in the Midlands, your columnist was struck by the Conservative Party’s confidence that it would take the seat from the opposition Labour Party. In a poor, Leave-voting area, voters support the privileged Mr Johnson because he has promised to get Brexit done. No one is talking about the country’s recent brush with recession.

The state of the economy must still matter in extremis: would President Donald Trump’s approval rating really hold up if unemployment went from 4% to, say, 20%? But the old rules of thumb about the business cycle and voting patterns are being replaced by a new narrative. This holds that ups and downs in GDP or wages matter less in elections than they used to. Instead, economic factors that shape people’s sense of identity matter more—and could help explain the shift towards populism in many places. Two are particularly important. The first is the sense of insecurity that accompanies globalisation. The second is frustration about sky-high housing costs.

The rapid growth of global trade during the 1990s and 2000s brought wide economic benefits, but also unnerved some voters, who now want to slow down the pace of change. Italo Colantone and Piero Stanig, both of Bocconi University in Milan, study election results in 15 European countries. They find that areas facing greater competition from Chinese imports were more likely to vote for nationalist parties.

Robots also make many people uneasy. A paper in 2018 by Carl Benedikt Frey, Thor Berger and Chinchih Chen, all of Oxford University, focuses on anxiety about technological change in America. The authors calculate the share of the workforce in industries that have seen increasing automation. Even after accounting for a range of other factors (including education levels and exposure to Chinese imports), areas more affected by the use of robots were more likely to vote for Mr Trump, the outsider candidate in 2016. In a flight of reasoning that only an economist could dream up, the paper suggests that if the pace of automation had been slower in the years before the 2016 contest, Michigan, Pennsylvania and Wisconsin would have plumped for Hillary Clinton.

A raft of new research, meanwhile, has drawn attention to the political consequences of the housing market. A house is most people’s biggest investment, so changes in its value determine satisfaction with the status quo. Homeowners in areas where the property market is buoyant feel richer than those where it is flat. The housing market also affects people’s perceptions of personal freedom. Those living in an area with low house prices may feel trapped, since they would struggle to afford a move to somewhere more vibrant. Such effects may well have strengthened in recent decades, since in many developed countries the gap between house prices in the richest areas and the poorest has widened.

Ben Ansell of Oxford University and David Adler of the European University Institute analysed data from the Brexit referendum of 2016 and the French presidential election the next year. After controlling for factors such as demography and pay, they found that in an area where house prices had tripled in nominal terms, the Remain vote share was 16 percentage points higher than in one with no change. Similarly, areas of France with strong house prices were inclined to choose Emmanuel Macron over the far-right Marine Le Pen. Further work by Mr Ansell and others has found that areas with falling house prices tend to see rising support for populists, such as the Danish People’s Party, the Finns Party and the Sweden Democrats. Simply put, a home-owner on a nice street in Notting Hill, Saint-Germain-des-Prés or Östermalm is very likely to support candidates of “the establishment”.

The old straightforward relationship between the economic cycle and elections could yet return. But the implication of the new research is that support for populism is a deeper-rooted feature of Western economies. People’s perception of the threat from cheap imports or robots, or of being trapped by high house prices, will not change overnight. Governments will need to find ways to compensate those who lose out from wrenching economic change, and to make housing more affordable. Voters care less than they used to about the economy’s immediate impact on their wallets. But they care more than ever about how the economy shapes their identity—their sense of security, and their freedom.■

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  • What about America? Apr 12 '20 at 14:06
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The state of the economy is a strong indicator for political outcomes because the economy is persistent in people's minds. Wars come and go, crises come and go, pandemics come and go, but the economy is always there in the background, and it's what people always return to worry about when more dramatic worries fade in their minds.

Trump presents an unusual case in US politics for two (interconnected) reasons. First, and most obviously, Trump's entire political strategy is the creation of a continuous stream of mini-crises: endless insults, attacks, and divisive speech; sudden policy reversals or spontaneous 'gut' decisions that throw planning and preparation into disarray; bald-faced lies and misstatements that create conflict and distrust; etc. This has the effect of keeping the populace in a state of constant distracted agitation that makes that natural return to concerns about economic policy difficult. Combine this continuous agitation with Trump's patronizing and self-aggrandizing assertions that 'his' economy is the 'best ever', and that may be sufficient to mute the kinds of economic problems that ultimately sank W and HW Bush's approval rating.

Second — and this is a bit more abstract and philosophical — Trump is the titular leader of what Madison referred to as a 'faction' (see: Federalist #10), but a faction on a scale we have not yet encountered in US history. In Madison's words, a faction is:

[...] a number of citizens, whether amounting to a majority or a minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adversed to the rights of other citizens, or to the permanent and aggregate interests of the community.

This 'common impulse of passion' — which in the case of Trumpism I think of as neo-colonial exceptionalism: the idea that the 'perfect union' of the original colonists has been disrupted by 'outsiders' (brown people, Jews and Muslims, Leftists, feminists...) — is an overriding factor that (thus far) has kept Trump's approval rating from dropping below the mid-30's regardless of actual government outcomes. Whether that deep factional base will survive pandemic deaths and the collapse of the economy remains to be seen, but it is a force to be reckoned with.

The economy is still, and always will be, a significant factor in political life. At the end of the day, and after every crisis, people are going to worry about their mortgages, their social standing, the food on their table and the money in their bank accounts. That will never change. The political question, however, is whether and to what extent other supervening factors can be leveraged for political advantage over and above that economic given.

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    "Trump's entire political strategy is the creation of a continuous stream of mini-crises" Um, I'm not so sure about that.
    – user29681
    Apr 6 '20 at 18:38
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    @Chipster: What would make you unsure of that claim? it seems patently self-evident to me, but then I'm a political theorist by training, so I have a somewhat esoteric understanding of these things... Apr 6 '20 at 18:43
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    @Chipster: I did give examples. Suddenly policy reversals (as we've seen with him flipping-flopping on coronavirus aid, or with random twitter comments that take his own administration by surprise); bald face lies, misrepresentations, and personal attacks on opponents, foreign leaders, etc are too common to list out individually (I'm sure there will be five more of each by the end of the week, if not the end of the day). All of these are mini-crises that Trump creates, intentionally of not. Apr 6 '20 at 18:54
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    Okay. Fair enough.
    – user29681
    Apr 6 '20 at 18:55
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    @Chipster, I have seen everyone of Trump's Daily coronavirus updates and there has been no flip-flopping. All of them have the same format of Thanking the hard work of subordinates, saying we will get through it and this is what the fed is doing. Followed by finally responding to "Gotcha" questions where he will repeat "We are doing what we can and we will get through this. The rest of Ted's example is opinion that cannot be checked. For example there was a "lie" in a fact check article: Trump - the economy is doing great; Fact Check - False, the economy is only doing pretty good. Apr 6 '20 at 21:17

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