PredictWise Blog

This is not where the Romney campaign wanted to be three weeks after Tampa.

The bounce in the polls that President Barack Obama netted coming out of the Democratic National Convention might have vanished by now, as those postconvention bumps tend to do, if not for the bad press that has pelted Republican challenger Mitt Romney nearly every day since the Democrats returned from Charlotte. First, Romney's response to the death of the American ambassador to Libya was widely viewed as inappropriate, even within his party. Just as he was recovering from that stumble, Mother Jones magazine released a leaked video of Romney disparaging the work ethic of 47 percent of Americans.

What everyone wants to know, of course, is whether historians will look back on these episodes as the effective end of Romney's chances at the presidency, to which we answer: Of course not. This is not just because the news media will tire of this story line by the end of the week, though that's part of it. ("Assignment editors: Now is the time to order up those 'Romney's coming back' pieces," one columnist quipped on Tuesday.) Mostly, it is the fact that new information and new story lines will relentlessly pile on for the next 47 days.

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Hidden video moves Obama 2.5% closer to reelection

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The effect of the hidden video of Mitt Rommey addressing fundraisers about the 47% of Americans that do not pay federal income taxes was about 2.5 percenage points. We are not sure if the polls will really be affected in the short-run, but the prediction markets anticipate a long-term cost to Romney. The video will play in advertisments, dominate the debate over the next few days and weeks, and may play a major part in debates. Even if it does not move polls tomorrow, it will, likely, make a difference on Election Day.

The headline would not surprise regular followers of the election; both aggregated polls and expectations created from polls have been telling that story. What is impressive is the trend and magnitude of the movement in last few weeks (i.e., since the end of the Republican National Convention). Below I have charted the likelihood of victory for Obama from my forecast that uses a combination of fundamental data, polling data, and prediction market data.

Sources: Betfair, Intrade, HuffPost's Pollster, RealClearPolitics, etc ... The values are updated in real-time for both state-by-state and overall presidential predictions.

As an incumbent candidate with mediocre economic indicators, Obama's likelihood of victory hovered at just over 50 percent likelihood a year before the election. A full year before the election the uncertainty in the prediction rests in a year's worth of events: from the nomination of the Republican candidate, to economic indicators, to any of the multitude of unforeseen events that can occur in a year's time.

Obama's rise during the first few months of the 2012 occurred for two reasons: Romney's vulnerability and strong economic indicators. First, my model always had Romney as the most likely Republican nominee, but struggling to secure his party's nomination made him appear weak heading into the general election. Second, economic indicators were surging during this period, 275,000 jobs were created in January, inviting the possibility of a quick and decisive economic recovery.

The economic indicators took a turn for the worse in the spring and Obama's numbers collapsed along with them. Research that I conducted with Patrick Hummel makes three key observations about economic indicators and elections. First, it is trends not levels that are important; if economic levels were key, than Obama, or anyone who took over in January 2009 when we lost 818,000 jobs, would have no chance at reelection. Second, the impact of economic indicators crescendos around the second quarter of the election year; they continue to be meaningful after that, but there is a diminishing return to their impact. The storyline created by the first and second quarters was a tepid recovery and unless something shocking happens in the next few indicators, that story is hard to shake. Third, state-by-state indicators are of paramount relative to national numbers; thus, it is very relevant that key states such as Ohio and Virginia are doing much better than the national average.

As the summer turned towards Labor Day, Obama gained ground every day that Romney did not. Time is kind to incumbents and leading candidates. For example, Romney continues to struggle with historically low favorability and every day that he does not turn that around is one less day for him to make it happen.

The conventions and the nomination of a vice-presidential candidate are a key opportunity for the trailing candidate to shake up the race. The Republicans did not exceed expectations and the Democrats did not fall below expectations. That juxtaposition alone is sufficient for the Democratic nominee to trend upward and gain in likelihood of victory.

The remaining uncertainty in my prediction is not what will happen if the election were held today, but in what will happen over the next few weeks that could impact the election. The burden is now completely on Romney and/or Ryan to move the needle in their four debates, or orchestrate some other major event. If nothing major happens, than Obama will be reelected.

Where does this leave the overall election for me as we head into the Republican National Convention -- I have Obama with a 58.9 percent likelihood of reelection, or the exact same likelihood as his chances in the pivotal swing state of Ohio.

This article is syndicated on the Huffington Post.

There are four trends to consider when thinking about the general election so far:

As Romney encountered stiffer-than-expected resistance in his march to the nomination, he began to appear vulnerable as a general election challenger. Economic indicators were looking up in the first quarter of 2012, fortifying Obama's position. If that trend had continued into the second quarter, this would not be a close election.

The jobs numbers, released the first Friday of every month, hit the skids in the second quarter. Obama's re-election likelihood tumbled with them. April, May and June were the three lowest job growth months this year.

From early July to the present, we see the influence of Father Time, who is unkind to challengers of either party. By definition, an election is the incumbent's to lose, and his or her opponent has a finite amount of time to successfully make the case for a change in leadership.

Last, we see that the conventions were a net boost for Obama. Romney netted a historically low poll bounce in an average convention and the unfortunate presence of Hurricane Isaac. Obama gained a modest bounce in the polls from his own convention highlighted by President Clinton's policy-oriented address.)

Click Here for the Full Text on Yahoo!'s The Signal

While the purpose of the political conventions was to draw clear distinctions between President Barack Obama and challenger Mitt Romney, the two men remain identical in one key respect: When they open their mouths before a national audience, their odds of winning in November suffer.

As you see here, the likelihood of Obama's re-election jumped about 1 percentage point immediately after Romney's address last Thursday evening, and fell slightly after Obama's turn last night. (The model for predicting the outcome of presidential elections relies on many contemporary and historical factors, but the fine-tuned reactions you see here are driven by prediction markets.)

Click Here for the Full Text on Yahoo!'s The Signal