Re-Introducing the Electoral Forecasting Model

In 2004, I introduced a model that I built to predict presidential elections. More specifically, it predicts the outcome of the electoral college, which is all that matters, after all. So far, the model has worked out pretty damn well: in 2004, it hit the electoral count on the nose, and in 2008 it got the winner right, missing the actual count by only 21 votes, or roughly the value of an Arizona swinging from one candidate to the other.

The model is built on "prediction markets," like intrade.com, where they have real-world betting on each state's outcome. Betting is continuous, and from it we may infer a real time, state-by-state, probability. I then multiply this probability times the number of electoral votes available in that state for the probablity-weighted outcome. It is understood that one cannot win part of a delegation (excepting Maine and Nebraska), it's all-or-none. Still, for predictive purposes, you don't want to hand 100% of, say, California's electoral votes to Obama just because he has a 95% of winning those votes. You give him 95%. It's effectively a small hedge against something dramatically unexpected happening.

It's time to roll out the 2012 model. Right now, it has Obama winning comfortably, 312 to 226. In 2008, he won 365 to 173.

There are caveats.

First, since the election is eight months out, the data is pretty thin (i.e. the state-by-state markets are very thinly traded right now - some haven't even traded at all, in which case I relied on the closing data from 2008).

Second, when I cited the model's accuracy, what I was really referring to was the last snapshot before each election. During the months-long run-up, there will be plenty of fluctuation, but it will still tend to be the best indicator at any point in time. Obviously, as circumstances change, so does the forecast.

Why does this work better than polls? Because it's real people betting real money, not people answering polls on the phone where their responses could be shaded for any number of reasons.

I will start to graph all this and post more frequent updates as the election draws nearer. Personally, I think the forecast is way, way off, at this point. As you know from my previous post, the math for Obama's re-election is highly problematic. If you agree, you should be placing bets on intrade!

Why Obama Will Lose

There is general fretting going on in Republican ranks that Obama is looking like a sure bet for re-election. Well, don't lose sleep over it, he's not. Unless the Republican nominee runs the worst campaign ever (always possible), Obama is toast.

The prediction markets currently say Obama's odds for re-election are 60%. As much as I am a fan of these markets, they've got it wrong. I'd say more like 30%.

There are many reasons why. Let's go through them:

• Do you personally know a single person who didn't vote for Obama last time but plans to this time? No? Me, neither. And I've asked a lot of people. This sets a hard ceiling for his vote count, from which he can only lose support. Last time, he won by 5 ½ percent.
• Of the people you know who voted for Obama, how many did so out of a sense of moral fashion, a desire to seem sophisticated and "with it?" A lot? Me too. And most of the ones I know feel like they were had. They feel that Obama ran a "post partisan" and middle-of-the-road campaign. He did, and he isn't. These voters won't get fooled again. If they are only 3% of the voting population, Obama loses. And 3% seems low to me. America is a center-right country, and Obama has not tacked to the middle, Bubba-style.
• People always forget turnout in these discussions. 2008 was a perfect storm - the good kind - for Democrat turnout. Not only was there massive Bush fatigue after eight years, but world markets fell out of bed right before the election. Plus Obama was a charismatic candidate with almost no voting record to criticize. He spurred record turnout from Dems while McCain inspired almost none in the Republican ranks.
• Of the 5 1/2 percent winning margin, fully three percent was from increased black turnout. Even though blacks are only 11% of the population, they turned out in such numbers they added almost 4% to Obama's margin. Blacks will still vote 95% for Obama, but with excitement levels down, and with history already having been made, look for black turnout to ebb. It probably costs Obama 2 points.
• With Latinos, the picture is even worse. Last time, Obama won Latinos by 36 points. To put this in perspective, Kerry only won Latinos by ten. Right now, Obama's favorability rating with Latinos is a mere 44%. Let's be generous, though, and say he actually wins Latinos by 55-45, that's still a 26 point drop in the margin. But it's worse than that, because turnout will be lower. If you assume a 10% drop in turnout, combined with a 26% drop in the vote margin, that translates into roughly a 1.5 point drop overall for Obama’s margin. This, combined with the decline in black turnout, is enough to reverse 2008’s result.
• The youth vote is another issue. Once again, Obama enjoyed a huge turnout and overwhelming support from this demographic. And while he still enjoys a slightly positive skew in their support, it is way, way off from 2008, when he won this demographic by 33 points. If we assume the youth turnout reverts to 2004 levels, and we assume a ten point drop in the margin, it costs Obama another 3.75% That’s enough of a margin to swing the election right there.
• Conservatives, the biggest single voting philosophical block, will turn out in droves. Last time, the combination of a dreary moderate, McCain, and Bush fatigue suppressed conservative turnout. Not even another moderate like Romney will have that effect this time. Anti-Obama sentiment is just too high. The Tea Party will hold its collective nose and vote.
• The economy, I don't need to point out, stinks. Gas prices are at record highs, etc. 
• Obama's net approval rating (Rasmussen) has not been positive since June 29th, 2009. That's pushing 3 years. Presidents simply don't get re-elected with numbers like that.

So, barring a remarkable turnaround in the economy, which, given Obama's own job-killing policies seems unlikely, it's difficult to see how he comes anywhere close to winning. (Of course, we've only addressed the popular vote here. We'll get to the electoral college in due course. I will roll out my electoral college model, which has been extremely accurate, this spring.)

In the meantime, won't you take my little poll?

Ever Hear of Dunbar's Law?

So, as you probably know, I have recently started a social polling app and website, www.wayin.com). In fact, the poll you see above is from the site. One of our brand new capabilities is being able to take those polls (we call them "wayins") and embed them anywhere.

Anyway, this has had me thinking a lot more of late about social media and its impact. While researching a talk I gave at Yale this week, I stumbled on an academic theory known as "Dunbar's Law," which states that the human animal is capable of sustaining only about 150 personal relationships. I'm not talking about people you say hi to at the post office, I mean actively maintained relationships.

Think about that. There are seven billion people in the world and you only get to have 150 relationships. One in every 46 million people. Those are special spots. You should allocate them carefully!

I can see being at a party and meeting someone fun or interesting but having to say, "You know, you seem really nice, but right now I'm at my cognitive friend limit. Maybe if you send me your resume, we can talk."

Of course, the 150 aren't static. In particular, as we transition through life's stages, some friends fade away and others appear. Think about the post-college years. Gotta leave some friends behind to make room for all the new ones.

Not anymore. I know there's lots of ways to waste time on things like Facebook, but social media allow us to violate Dunbar’s Law. No one ever has to lose track of anyone ever again. This is a very big deal, because you never know who in your life will change your life.

Think it’s one of your best friends? Think again. Research shows that when people hunt for new jobs, more often than not, they find one through a loose acquaintance, not from someone in their inner circle. Friend #137, not friend #2.

So my advice is not just to use social networks, but be social. Go to parties, make new friends. Keep in touch with those that you have. Serendipity, it turns out, is really just making probability work in your favor.

Mitt Romney: the Last Republican President?

There's a very provocative piece in the American Thinker about Romney (here) that suggests Mitt Romney may be the last Republican president, ever. Here's a takaway:


This is the last hurrah of the Republican establishment. The conservatives and libertarians will vote for Romney in November, but only because he is not Barack Obama. There will be no enthusiasm, which will hurt the down ballot contests for the U.S. Senate, the House and state governorships. Despite the factors weighing against Obama in this upcoming election, it will be a much closer contest that it should be; perhaps a razor thin victory for Romney.

If Romney were to lose the election, there will be a grass-roots revolt against the Republican Party which will spell its demise. If he wins and the nation, through the mis-directed policies of Romney and the Republicans in the Congress, continues on its current path of compromising and nibbling around the edges of the nation's problems, then Romney will be the last Republican president and the specter of the Democrats re-assuming power will be a reality.

So, here's a straight-up fact: there are more conservatives than there are Republicans. 40% of America is conservative, a number that holds quite steady over time. 30%, more or less, is Republican. This means many will hold their noses and hope for the best with Romney.

Conservatives have a very uneasy alliance with the Republican Party. Often, when Republicans make the mistake of nominating a moderate (Ford, Bush the Elder, Dole, McCain...), conservatives stay home and Republicans lose (giving lie to the conventional wisdom that Republicans need to win the middle to get elected). But this election may be different. Antipathy towards Obama's imperial liberalism runs so deep that conservatives will likely rally around anyone, even Romney.

The Tea Party is the manifestation of conservative displeasure with the Republican establishment. For now, they realize that splintering into a new political party would be self-defeating. But if Romney loses the general, you will either see a wholesale attack for control of the Republican party or, perhaps more likely, a wholesale defection. "Never again," they will cry. Never again will they trust the establishment.

If Romney wins, conservatives will be united in the hope that Romney is the conservative he claims to be. The problem is, all the evidence is that he's more of a George H.W. Bush, who, if you recall, pretended to be Reagan's conservative heir to get elected in 1988, and then was thrown out on his ass when he turned out to be the squishy moderate conservatives always thought him to be. 

Temperamentally, Romney reminds one of HW, too. One of HW's great flaws was that he wanted everyone to like him, a very bad trait if one wants to be a great leader. Ronald Reagan went to sleep every night knowing a third of the country hated him, and he slept like a baby. Churchill was much the same. 

Romney, on the other hand, wants to be liked, and here's the issue: the great problems that need fixing will require great wars to fix. The left will fight with everything they have to protect the status quo, and anyone who reaches for the big, game-changing fixes will be crucified in their circles as well as by their hand puppets, the media. Does anyone think Romney has the stomach for that?

Which leaves us with the second scenario: Romney wins and turns out to be HW, leaving conservatives feeling had. It is unlikely they give the the establishment any more chances. Look for a new party - the Constitution Party? - to be the result. This will consign the Republican Party to the ash heap and open the door for Democrats to run the table for years.

Not pretty either way.

Obama's Coming Debate Problem

Many have commented on how they'd love to see Newt debate Obama. The Naked Dollar concurs, but not at the cost of having Newt as the nominee.

What has gone unremarked is how much of a problem Obama will have debating any of the Republicans.

Debating is a skill that comes with practice. The first time you're up there, it can be terrifying. Witness poor Rick Perry, who improved markedly, but not enough to overcome his opening night gaffe. Look at Mitt Romney, who is far more skilled and disciplined (if uninspiring) this time than four years ago.

Barack Obama has never really had to debate anybody. McCain? Sorry, no. He was terrified to lay a glove on Obama for fear of being labelled a racist or a mean old man. And Obama, at the time, was a complete unknown with virtually no legislative record in the Senate or the Illinois House, so he had nothing to defend. He could say whatever he wanted, attack without being attacked.

Now, he is the 100% owner of three years of miserable performance. It is a target rich environment, to say the least, and I don't think any of the Republicans will be shy about going after him. The racist charge won't hold water this time, and whomever the nominee is, he will have spent six months in the toughest debating boot camp ever. He will be ready.

But let's think further back. Can you think of a time in his life when Obama has ever been seriously challenged, about anything? His political races, pre-McCain, were largely cake walks, and his years in academia would have provided him with full immunity from argument, given his race and political persuasion. If a faculty member at Occidental, Columbia, Harvard, or Chicago had ever taken issue with him, concerns for political correctness would have been more than enough to ensure their silence.

No, Obama has spent his life in a pleasant echo chamber, one where conclusions can be glib and rarely challenged, where knowing nods are exchanged in the faculty lounge. In my experience, this makes for people who wilt easily when confronted with rational arguments that don't conform their belief systems. The result is usually petulance and name calling.

Looking for a good debater? Look for a conservative who went to a northeaster college (see: Ivy League) or a liberal who grew up in the South. When you're always on the defensive you learn that you must understand issues deeply. Take Bill Clinton. He spent much of his life negotiating the conservative waters of Arkansas, so he knows a thing or two about how conservatives think and what their arguments are. Obama? He still doesn't. In fact, he recently said he prefers watching the TV show Homeland to the Republican debates.

Does Obama have enough self-awareness to know any of this? No. The narcissism runs too deep. But The Naked Dollar predicts that his staff knows enough to be worried every time he speaks without a teleprompter. They will fight for the minimum number of debates possible. The other prediction: a flinty, defensive performance with at least one major gaffe.

Newt Has Lost It

I love Newt as a debater, I really do. And I once loved him as speaker. And I can even hold my nose enough to believe he is a changed man. But I cannot forgive either his attacks on Bain Capital and the Ryan Plan. He has lost the Naked Dollar.

Newt was the one running a positive campaign, the happy warrior for for small government conservatism. But no more. Paul Ryan's plan was the best anyone's done to date in terms of solving the entitlement mess. Perfect or not, it took political courage to step on politics' "third rail." You expect to by demonized by Democrats, but other Republicans? As they say, with friends like these...

Then there's Bain. Does Bain Capital ever fire people? Of course they do, but these are ailing companies that they buy. The drill is you nurse them back to health so what's left can prosper and, yes, employ people. Bain and other private equity firms plays a vital in our free enterprise system. Would you rather these companies go under? Or be socialized? Once again, we fully expect Democrats to distort the facts in order to score cheap points with an ill-informed electorate (assist to teachers unions).

But Republicans? Newt? He was supposed to be free enterprise's most ardent defender. Instead, he comes off like a political hack looking for the easy score. Shame on him.

Is the Naked Dollar for Romney, at this point? No, not yet. There's still Santorum, whom people seem to overlook. He is reliably conservative and has blue collar appeal, having won many times in Pennsylvania. What he lacks is charisma and the "look" of a president. Right now, those deficiencies are far surpassed by the deficiencies of others.

Mitt Romney and the Threat to the Conservative Brand

One recurring problem conservatives have is that the general public keeps getting them confused with the Republican Party. Oh, occasionally, the two act in concert, and this was most true during the Reagan years. But there's a reason the Tea Party exists, and a reason that 40% of the country calls itself conservative and yet only 30% call themselves Republicans. The alliance between conservatives and the Republican Party establishment is, and always has been, an uneasy one. Suspicion runs deep.


But the public, as we know, is not terribly informed about, well, anything. We don't need to see any more of Jay Leno's Man in the Street segments to figure this out. (My favorite...Jay, pointing to an American flag: "How many stars on that flag over there?" Woman: "I can't tell, it's waving.") The public tends to equate the Republican Party with conservatism, which is rarely the case. Thus, when a Republican president does something stupid and non-conservative, conservatives get blamed, too. This was a problem with Nixon, Ford, and both Bushes. (Think...wage/price controls, ADA, prescription drugs for seniors, Bush 1 tax hikes, etc., etc.)

What happens then is that a Democrat gets elected in response to the "conservative" mistakes, and then we really get screwed.

(A relative of mine, a Republican, voted for Obama based on the logic that McCain would have been a terrible president (true) and would have delivered Hillary unto us. The problem with this logic, of course, is that it delivered Obama unto us.)

And so Romney. I have several friends who know him, and there's always a wink and a nod; he has to pretend to be moderate to win, but when he does, you'll see, he's a good conservative.

I have a number of problems with this line of thought:

1. Moderate Republicans don't typically win, while conservative ones do. (See a piece I wrote on this here.) BUT, antipathy towards Obama runs so high that this might just be the cycle where it doesn't matter. Still...
2. When was the last time someone went to Washington and turned out to be more conservative than you thought? (See: never)
3. There is no evidence, anywhere, that Romney has conservative values.

I will count myself as happily wrong if Romney truly has been quietly harboring a conservative soul all these years. If I'm right, though, the potential consequences are disquieting:

1. The fundamental problems we face - entitlements, the tax code, public sector unions - will require an enormous amount of leadership to solve. A president without core convictions, a president who wants everyone to like him, won't get it done, and this may be our last chance to get these things right before we turn into Greece.
2. As things get worse, "conservatism" will get blamed, and we won't have a chance to elect a real conservative for a long, long time. So long, in fact, that a socialism will be the permanent state of affairs.

Looks like Mitt has a lock on things, so here's hoping I'm wrong.

Which Candidate Fits You Best?

This a simple but clever concept. Give your view on a variety of issues and then weight the issues by how important they are to you. At the end, find out which candidate most perfectly fits your view of the world.

My 1-2-3 were Ron Paul, Newt Gingrich, and Rick Perry. The Ron Paul part surprised me. Jon Huntsman and Barack Obama brought up the rear. No surprises there.

You can try it out here:

http://www.usatoday.com/news/politics/candidate-match-game

Let us know what your results are by commenting!

Do You Have a Clue?

Hopefully, as a Naked Dollar reader, you do.

I received the following over the transom out of Pew Research:

Can You be Trusted to Vote Intelligently? 

This is a terrific multiple choice 13-question test. And it shows results in a number of ways.  It clearly indicates that the majority of Americans don't have a clue about what's going on in the world.  No wonder our politicians take such advantage of us.  It's astonishing that so many people got less than half right.

These results say that 80% of the (voting) public doesn't have a clue, and that's pretty scary.

There are no tricks here - just a simple test to see if you are current on your information.  This is quite good and the results are shocking.

*I believe it was Winston Churchill who opined that " . . . the biggest argument against democracy is a 5-minute conversation with the average voter . . ."

Test your knowledge with 13 questions, then be ready to shudder when you see how others did!

Test your news IQ - Pew Research Center

http://pewresearch.org/politicalquiz/quiz/index.php

Is It Right To Call Obama a Marxist?

Liberals love to throw around the word "fascist," so much so that it retains all the impact of calling someone a "poopy head." I've always found the word a peculiar epithet for liberals to adore, as fascists believed in top down, government-led control of the economy. If fact, the word "Nazi" stands for National Socialist Party. As economic systems, the only difference between fascism and true socialism is that fascists would allow for private ownership of industry - as long as the politicians called all the shots. Industrialists were allowed to enrich themselves as puppets of the state.

Socialism, fascism, communism...it's all splitting hairs. Socialism is nothing but communism light, with free elections, some tenuous property rights, and less cult of the state. Fascism has the tenuous property rights of socialism but also the cult of state of communism. But ALL believe in centralized control of the economy, with government consuming inordinately large chunks of a society's economic output.

There, I just cut through the confused clutter of a thousand poli sci classes.

Conservatives, of course, like to do their own name calling, with "socialist" and "Marxist" being their favorite zingers. And while these terms are often applied too loosely, they are at least generally applied to those who believe in large and dominant central governments, so unlike the liberal use of "fascist," at least conservatives are getting their insults right.


And often, it's not an insult, it's just a statement of fact. Words like "socialist" actually mean something, they're not just vague putdowns. To be precise, someone who believes an economy should be controlled by a dominant centralized government must be one the big three: socialist, communist, or fascist. I know of no other model for big government. If one of my readers does, please inform us. Liberal is not a model, for the record, it's a characterization, mostly for those who believe in the socialist model. And for those who are going to write me and say, "theocracy," I would argue that economically, these are socialist societies. With a sharia twist, perhaps, but socialist still.

So, I ask you for a moment to separate all these words from the silly insults they have become. No one, outside of the comical characters of the Occupy movement, likes to be called a socialist, because the word has been sullied. Same with the others, fascism and communism. All three have become epithets. This happens sometimes when a concept becomes thoroughly discredited by history. It's kind of like how liberals everywhere now call themselves "progressives," even though there's not a whit’s difference between the two. "Liberal" doesn't poll well anymore. 



So, if we were going to describe President Obama - as opposed to insulting him - what label best applies? I think we can safely rule out labels like "capitalist" and "libertarian." Clearly, Obama is a big government guy, so he must be one of the three, but which? As I said, as economic models the differences between the systems are not enormous, but there are a few.


A thought experiment is sometimes helpful in these exercises. A few weeks ago, I asked Naked Dollar readers to imagine Steve Jobs in a different time and place. My thinking was that the results would not have been quite so glorious (you can read it here).


Let's reverse the game. Let's take a historical figure, Lenin, and place him in modern America. What would be the result? I pick Lenin because more than any, he was responsible for the implementation of communism. Marx was an isolated theorist holed up in the British Library. Lenin was a man of action.


Well, let's start with what Lenin wouldn't be doing today: leading an armed revolt to assume power. This strategy is only effective when you are revolting against a tyrannical and corrupt power like the tzars or Fulgencio Batista in Cuba. So how to achieve Marxist ends within a benign democracy, where there are no trodden masses to support a revolt?


The answer is from within the system, for unlike 1917 Russia or 1958 Cuba, our system allows anyone to accumulate power if they play their cards right. In the U.S., growing government power is a game best played slowly, but also faster when the opportunities present. Lenin would have understood this. Do it in a way that few notice what's being imposed on them, like the proverbial frog in pot of water that slowly boils. You boil to death before you realize there's a problem.


In short, the entire liberal movement has operated by this playbook for the last 70 years, to great effect. Obama is merely the movement's apotheosis. So, intellectually, it's safe to call Obama either a socialist or a communist. The constructs of these ideologies are what he believes to his core.


But what about in practice? Communist? Sorry, no. I don't doubt Obama would like very much to rule without the inconvenience of Congress, the Supreme Court, or even voters. In a rare moment when he allowed a thought bubble to escape, he professed envy on the Chinese leadership that could just do whatever it wanted, without messy democratic constraints. But the fact is he can't, so we can't call him anything more than a communist wanna-be.


Socialist, perhaps? This is certainly closer to the mark, and Obama is especially animated by the class warfare aesthetic that adorns socialist movements everywhere. But socialists, like communists, want the government to own the means of production, particularly the biggies like banks, airlines, car companies, and so on. (Communists, on the other hand, want all those and the corner deli, too.) Interestingly, we haven't seen Obama, even in the midst of crisis, move to take over any industries. He merely wishes to control them. His levers of power are Obamacare, Dodd Frank, the EPA, and so forth. Not textbook socialism.


Which brings us to fascism. Obama certainly doesn't embrace any of the weird eugenics of fascists-past, nor is he quite so militaristic, so labeling him a fascist wouldn't be entirely accurate. But we are discussing economic models here, and, ironically, fascism may be closer to the mark than the others. Obama is willing to allow the appearance of private property but the reality is that an army of technocrats set the rules. Call it socialism by fiat.


Or perhaps we should call it Obama-ism, because anything so incredibly destructive probably deserves its very own ism.