Tuesday, September 23, 2008

Election prediction simplified

My Aussie cobber lindsaylobe has made some interesting points when he commented on the previous post - Blogger block. Some snippets:

There is currently history in the making on the NY bourse as none of the big 5 Investment Banks remain!!! Maybe there is one [left] but that will be unrecognizable very soon.

“I think it will make fascinating reading for future generations of MBA students who will discover in amazement that such foolishness could ever be perpetuated.”

I fully agree with Lindsay, but my excitement comes from another potential result of these momentous events. I have long held the belief that many election outcomes can be predicted on the basis of economic factors. Essentially the theory focuses on 3 quarters of household economic indices.

Now this works well in national elections in Australia and the UK, and to a degree in Canada. The US has been the difficult one to crack as the dynamic of the US system and electorate, particularly with the presidential component added in, is extremely complex.

Still, I proved the theory worked, in 2006 congressional elections, on an electoral district and regional breakdown.

But for reasons I don’t really understand a presidential year tends to muddy the economic message, or perhaps the signals American voters respond to. A recent article suggested that the response is more to voter optimism/pessimism or perhaps just good old fashioned consumer confidence.

The trouble is, that is a subjective measure – depending largely on consumer/voter responses to polls, though a better measure can certainly be derived from actual consumer activity. But like many other indices we have relied on in the past, governments are making such reports increasingly difficult to access.

Big swing to Democrats

But now, based on my revised theory, for the US electorate, I can confidently predict a Democrat win, presidential and congressional. You see, when consumer confidence is up Americans tend to return a conservative government; when confidence is down they return a progressive result.

This time the US administration have given us the most unambiguous report on consumer confidence we have had for years. The proposed $700-billion bank bailout is designed specifically to head off a feared run on the banks. That is, bank customers (consumer/voters) are nervous about the stability of the markets.

So it is not what the administration is reporting so much as their enormously public actions. In other countries voters tend to punish incumbent governments for economic failures. I expect the US reaction is more one of fear in the first instance and seeking insurance of an administration more inclined to socially equitable remedies.

In a country which excites incredibly unrealistic dreams of wealth on its citizens the current situation must hit heavily as a personal as well as national failure. But in the end voters will be hoping for a safety net, at the very least. Let’s hope Obama can deliver.

9 comments:

Kvatch said...

Let’s hope Obama can deliver.

Not a snowball's chance in the land down under (and I don't mean Australia ;-) ).

The bailout will go through, 70% of Americans being against it notwithstanding, and Obama's hands will be tied.

Under these circumstances, it's a wonder he even wants to be President. I wouldn't.

lindsaylobe said...

Let’s hope Obama can deliver.
Reference : Not a snowball's chance in the land down under.

The last report I heard was Obama was in front by 3% and gaining.

Now I don’t want to sound flippant, but one of our longest serving Prime Ministers Malcolm Fraser uttered these often quoted words “life was not meant to be easy:” Wouldn’t that apply to aspirants to the presidency? Get out of the kitchen if it’s too hot for you, but if you want to be leader and make a difference than you don’t throw in the towel just because the heat is turned up!

Reference :Under these circumstances, it's a wonder he even wants to be President.

I wouldn’t!

Why not?

The economy and your world standing has gone so far down I would contend, given even halfway decent policies the only way foreword in the mid term is up!!

Sure you will be saddled with an $11 trillion debt and a host of other problems, but they are no more insoluble to this generation than the horrors that had to be faced by those of previous ones.

The Democrats with their congress majority can pass the $800 billion Bail out Bill with sufficient added bells and whistles to restore integrity and confidence. Prosecute wrongdoers and bring the SEC up to date and so forth. If they do that successfully then they will enhance their electoral prospects. The whole system needs to be changed and made more transparent but there will never be a better opportunity to do that or at least make a good start and promise more!!

Sure you will have to burn the midnight oil and it will be rushed and so on but not one notable economist has suggested you do nothing.

A man with his drover’s dog should be able to win that election; given the incumbents track record.

Could you please tell me who put the sand in Obama’s saddle bags that prevent him from captivating more support as the signal of bad economic management go from an annoying static to a deafening roar. In times of trouble cream still rise to the top, it happen’s naturally given a half decent chance.

Oh, and in case I forget to mention it, a lot of the pain has already been exported very successfully all over the world, particularly to those who unwittingly purchased sizable portions of your AAA rated contagious toxic debt. The fact it’s caused severe indigestion, even the possibility of a world wide recession doesn’t mean the USA is no longer a very good friend. But it does signal its time for a change to sensible regulation and sustainability, and it seems to me there are no major road blocks preventing that from happening. It had to happen. Bloggers understandably all over are screaming and cussing no end; I can hear the shrill tones but could I also remind you that you are not the only people in the world affected.

Best wishes

Cart said...

So the big spending goes out the window and the belt tightening begins. If Obama does not start telling America he doesn't deserve to be president.
Sure it will be a tough battle, but it is not one he or the US can win without some real honesty now.

D.K. Raed said...

Listen I sure hope you are right about the election. But I've got a bad feeling we will be back at 50/50 by Nov 4th & once again our fixed/rigged voting system is biased in close elections. A blow-out is what Obama needs.

Seraphine said...

of course obama wants to be president! things are so bad, the odds are excellent they'll eventually get better. the next president will get the credit for the recovery when it occurs.
i think the best thing mr. clinton did during his persidency was stand out of the way of the economy. his greatest failure was not reining in corporate greed. greed is good, but only if it is honest with transparent accounting and enough regulation to ensure a balanced and level "playing field."
i guess the president who succeeded mr. clinton didn't heed the transparency/regulation problem either.
by the way, i don't think a snowball, in general, has any chance at all. it will either turn to ice, or melt or get covered with more snow. It will evaporate to nothingness (meaning, it will no longer be a snowball) eventually.

Seraphine said...

by the way, one of the peculiarities of american presidential elections is the electoral college.
it's possible to gain more popular votes than one's opponent, and still lose the election.
it's what makes the process so unpredictable.

Cart said...

Sera, thanks for dropping by. Yes the dynamic of the Presidential election system strain concepts of democracy. Still, on a state by state (the only head to head measure) the local economic situation, particularly consumer confidence, will effect outcomes.
I get the impression there is more concern about the fairness of the vote count – of stolen elections. Of course one reality is that most state legislatures could simply announce their own choice, but it might be a brave electoral college which would presume to overturn voter unrest.

abi said...

I agree with you, Cart. I don't see how Obama can lose this election. The Republicans and their sorry ideology has made a horrendous mess of things, and voters have to be tired of it by now.

Cart said...

Even after the debate I'm sticking with the claim. I really don't see how the theatricals can really effect the gut wrenching, arse puckering concern of the average wage earner.