8 Days and Counting With No Major Changes, What the Gamblers Say, Poll Selection 101, On Macroeconomics, Just for Fun Predictions

Projection Totals
Senate: 50+ Democratic Caucus (48 Dems, 2 Ind, VP Tie-Breaker), 50 Republicans
House: 231 Republicans, 204 Democrats




Several new polls in the past 72 hours but not a lot of new news to report. My House projection got closer, with generic polling data tightening slightly, leading to a 3 seat swing to the DEMs, but still solidly a projection for GOP control.

In the Senate, only 2 race rating changes and they are both pretty minor and technical. Ohio fell behind my magic (and arbitrary) 20 point threshold again and slips back to a "Likely Hold" versus a "Safe Hold" for the GOP, but at this point, 19 points is pretty much out of reach. Missouri also slips slightly below a threshold, with the current 9.9 point GOP lead moving it back into the "Lean" column versus the "Likely" column, but this is still a long shot for the Dems to flip this seat.

I thought rather than my normal comparison to other major political sites (our friends at electoral-vote.com, electionprojection.com and realclearpolitics.com), I'd take a break and bring back in the gambling money.

For frequent readers, you will know that intrade.com is the website that lets you bet on anything, including politics, in a stock-market style format. Gamblers tend to follow the polls pretty closely and are often pretty good at predicting election outcomes, although, I would argue based on the record of this site over the past 2 years, not nearly as good as a statistical study of poling data.

At any rate, here are intrade's odds on our closest races (all calculated based on the ratio of the contract price of one candidate to another)

California: DEM favored 3:1
Washington: DEM favored 5:2
Alaska: GOP favored 2:1 (vs. all others)
Colorado: GOP favored 3:2
Nevada: GOP favored 2:1
Pennsylvania: GOP favored 3:1
Illinois: GOP Favored 2:1
West Virginia: GOP Favored 4:3
Kentucky: GOP favored 6:1
Wisconsin: GOP favored 6:1

So, the gamblers pick the same winners as our projection, but not necessarily but the same order in terms of odds. I find a few of the odds a little surprising (how can Kentucky have the same odds as Wisconsin?), but generally not that surprising.

Why I Don't Use Partisan Polls
You may notice that in several races, my projections differ pretty significantly from those of other sites. This is partly due to the use of multiple methods of weighting and averaging, versus many sites that simply use a "most recent poll" or a simple average of recent polls. However, one issue that is pretty fundamental is the use of partisan-affiliated polls.

I do not use polls from partisan-affiliated firms such as Public Policy Polling in my averages. My reason is simple...if you are paid by or affiliated with a party or candidate, I cannot presume objectivity in your polling methodology.

In the West Virginia race in particular, there is a Public Policy Polling poll that shows Gov. Manchin leading by a whopping 10 points, whereas non-partisan polls all show him trailing by small margins. Now, it could well prove out that PPP is right and all the other polls are wrong. But PPP is a Democratic-affiliated firm, so I can't trust the sample selection and weighting, especially so close to an election.

Macroeconomic Issues
A fair criticism of my analysis of GDP growth versus parties in power (and one that I owned up to in my long list of caveats on the limits of such an analysis) is the impact of macroeconomic events far beyond the control of government on economic growth.

In that spirit, I'll commit to doing a similar analysis on three statistics that are directly in the control of government: taxes, spending and deficits. Results this weekend.

Some Just for Fun Predictions
None of these will happen (I hope), but just to have some fun in the current political environment, imagine what could happen:
(1) Alvin Greene wins the South Carolina Senate race with 76% of the vote, despite polling 30+ points behind immediately before election day. Greene attributes his wins to grass roots campaigning and then goes on to admit that he doesn't know what grass roots are or what a campaign is. Diebold swears by the unfailing accuracy of its voting machines.

(2) Christine O'Donnell pulls off a surprise upset in Delaware and immediately declares that she is, in fact, a witch and cast a spell on voters entering the booth to vote for her. She commits to making the cause of her life over the next 6 years Witch and Warlock rights.

(3) Marco Rubio wins big in Florida on Tuesday and announces Presidential exploratory committee on Wednesday. Sarah Palin criticizes his lack of experience.

(4) Harry Reid loses to Sharron Angle and declares that he will spend time with family and work on important social issues such as "breaking down barriers for negros".

(5) Rand Paul wins in Kentucky and declares that he really meant all the crazy stuff he said during the campaign (okay, this one probably will happen!)

More updates later in the week.
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Tea Party Victory in NV Primary, The Geopolitics of BP, EPA Carbon Regulation

Another Tea Party Nomination
The tea party gained its second significant candidate for statewide office this past Tuesday, when tea party loyalist Sharron Angle absolutely obliterated far better known and presumed front runners Danny Tarkanian and Sue Lowden, garnering 40% of the vote in the three-way primary. Angle had been picking up steam the past two weeks after being virtually off the map for most of the campaign season.

This sets up a fascinating showdown, with a weakened and battered Senate Majority Leader Harry Reid facing off in the general election against a little-known former state assemblywoman in what will surely be the most-watched race of the 2010 campaign.

With Rand Paul's earlier victory in Kentucky, this gives the Tea Party two of its own running for statewide office going into the general election. It also shows an interesting schism in the Republican Party, with some state parties, such as Illinois and Delaware opting for old-school moderates, some states, such as Indiana, going with establishment conservatives, some states, such as Florida, going with upstart conservatives not affiliated wit the Tea Party, and at least two states going with outright Tea Party members. Assembling all of these factions into a united, winning combination in November is no small task, even running against an unpopular incumbent and a Democratic Party that seems to be in a fair amount of disarray going into the mid-terms.

My personal view is that every Tea Party candidate that wins a Republican primary in a competitive race helps the Democrats retain control of the Senate. Kentucky shouldn't have been a competitive race, but certainly now will be with Rand Paul in the mix, although it is still probably more likely than not that he will win in November. Nevada is another case...the early polling is split to slightly favoring Angle, but my gut is that this race will probably settle down as a pure toss-up.

The sub-plots in November are getting more and more fascinating. What are the core principles of the GOP? What is the agenda of the Democratic Party? Is President Obama going to help or hurt the DEMs? Will the jobs picture look any better by November? Lots of questions to answer and a lot of campaigning to cover.

Remember, It Is BRITISH Petroleum
The chum has been almost as plentiful in the water and the oil gushing from the rig in the Gulf of Mexico for the past week, with every politician and talking head, including the President, taking shots at BP. Around their liability, around their response, their safety practices, their dividend. It has caused a huge plummet in the share price of BP, destroying almost $80 billion in value in the company, at least in the near term.

Yesterday, newly elected British Prime Minister David Cameroon appeared to jump to the defense of BP, communicating through aids his view of the importance of BP to the British economy and suggesting that the British government could, perhaps, be willing to shoulder some of the bill. Cameroon is slated to speak with President Obama this weekend and it would be safe to assume that talk of BP will consume the discussion.

BP appears slated to announce the suspension of its dividend next week, a move that may partially pacify the circling sharks, but which is very bad news for British pension funds, where BP dividend represent over 1/7th of all dividends earned in those funds.

Two thoughts from my perspective. First, I think a fair amount of the criticism against BP is quite unwarranted at this stage. It is not at all clear to me at this point how to apportion blame for the incident between BP, the construction company that built the well, the company that built the relief valve (our old friends Halliburton) and government regulators. The actual facts of the case seem to be secondary to finding someone to string up and that is a shame if we are going to learn from this incident and prevent another incident from happening in the future.

My second thought is that BP will survive and will not go bankrupt. A bankruptcy would be a disaster for the British economy, British retirees and investors and world relations. It won't happen. BP has a business that spits off tons of cash and billions will be available for clean-up. This will calm down in a few months, although the lawsuits will go on for years. But expect BP to live on, just as Phillip Morris and R.J. Reynolds survived the massive lawsuits of the 1990s. Full disclosure -- I purchased a stock position in BP this week.

EPA Carbon Regulation Lives On
An attempt by Sen. Lisa Murkowski (R-AK) to eliminate the capability of the EPA to regulate carbon emissions failed this week on a procedural vote with 53-47 voting against consideration of her proposal. All the 41 Senate Republicans voted for the proposal along with 6 moderate Democrats, including both Democrats from Arkansas (Pryor and Linclon), Nelson of Nebraska, Landrieu of Louisiana and Bayh of Indiana.

This vote essentially means that the EPA, under President Obama's guidance, will continue to have the authority to regulate carbon at its discretion. The President has said that he would prefer to have Congress act on a comprehensive bill including Cap and Trade but that the EPA would act under existing law, if needed.

Next up....latest updates on the 2010 ratings including Nevada.

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