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.