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2012 Election

Election 2012 September Update

Only 46 days and a wake up until the general elections and that’s an eternity. With the Republican and Democratic Conventions behind us, we can still look forward to three nationally televised Presidential debates as well as one Vice Presidential debate in October. We can also expect that the September and October payrolls and consumer/business confidence reports will carry far greater weight than in previous months.

Common Sense is going to break down the numbers and analyze the prospects for the two candidates.

Voter Polls

Real Clear Politics tracks national voter sentiment from a number of polling sources and gives an average spread of +3.1% in favor of President Obama[1].

 

These numbers should be taken with caution. The September 20th Gallup poll shows the candidates in a statistical tie, as does the recent Rasmussen poll[2]. All of the other polls were earlier in September when the “lift” from the Democratic National Convention, which ended on September 6th, might still have buoyed the President’s numbers.

Common Sense believes the President does carry a slight edge over his opponent, but Mr. Romney is easily within striking distance. I’m also not so interested in the national poll numbers: the election will be decided by the electoral votes of the swing states, not by the national popular vote. Let’s focus on the top swing states by number of Electoral College votes[3]. These are:

  1. Florida (27)
  2. Pennsylvania (20)
  3. Ohio (18)
  4. Michigan (16)
  5. North Carolina (15)
  6. Virginia (13)
  7. Wisconsin (10)

As we take a look at polling in each of these battleground states, I’m going to focus only on those polls that have been taken at least a week after the Democratic National Convention. Anything before the 13th of September is too likely to be influenced by convention euphoria.

Florida: Has leaned towards Obama since February polls and the most recent polls from WeAskAmerica, FOX News and Gravis Marketing point towards a continuation of this trend[4]. Both the WeAskAmerica and FOX polls are outside of the margin of error, while the Gravis poll is not. A large population of seniors and Hispanics may be weighing in the President’s favor.

 

Pennsylvania: Obama maintains a strong lead in Rick Santorum’s home state. In fact, the gap between the two candidates has not been closer than 2.2% in Obama’s favor since June 2011. The WeAskAmerica poll is the only one which is recent enough for us to use, but it confirms the trend in the Keystone State and is well outside the margin of error.

 

Ohio: No Republican has ever become President without winning Ohio. Mitt Romney may need to be the first, given how the state is leaning. Ohioans have favored the Democratic incumbent by an average of 2.5% since June 2012. While Mr. Romney and the GOP narrowed the President’s margin to a statistically insignificant +1.4% in August, the gap has since widened to over 4% in September. The most recent FOX poll seems to confirm this trend.

 

Michigan: Mitt Romney may be Michigan’s favorite son, but the Wolverine State is trending heavily Democratic – blow out Democratic, in fact. There is no doubt that the gratitude of Motor City must be favoring the President that rescued General Motors, Chrysler and perhaps a million jobs in a reeling Michigan economy.

 

North Carolina: President Obama won North Carolina in 2008 by a narrow margin, the first Democrat to do so since Jimmy Carter in 1976. This year, however, the Tarheels appear to be returning to their Republican roots and strongly backing Mr. Romney’s campaign. Democrats have kept within 1.5% of Romney from July through August, but he gap has widened in September despite the DNC being held in Charlotte. Mr. Romney’s lead looks comfortable.

 

Virginia: The Old Dominion had backed Republicans in the last 10 presidential elections until the state swung heavily in favor of Obama in 2008. Democrats have nevertheless been much more competitive at the state level, with very popular Democratic governors and senators since 2000. This bellwether state has leaned Democratic since February 2012 by a margin of around 2.5%. Republicans briefly captured the lead (+0.8%) right after their convention, but Democrats re-established their margin almost immediately thereafter. Virginia may see heavy campaigning by both candidates in the final weeks.

 

Wisconsin: Republicans have never lead in Wisconsin polling. With the announcement of favorite son Paul Ryan as the Vice Presidential candidate in the Republican convention, the GOP narrowed the gap from 4% to 1.4%, but recent polling indicates that this gap is once again widening. The President currently holds a strong lead in the Badger State, with only the Rasmussen report being within the margin of error.

 

Of the other battleground states, Nevada and New Mexico lean towards Obama by percentages wider than the margin of polling error; Colorado, Iowa, New Hampshire are too close to call.

If we look at the Electoral College map[5], President Obama leads Mr. Romney by 247 votes to 191. A candidate requires 270 votes to win. Real Clear Politics lists 100 toss up votes. If we allocate these based on the current polling, however, President Obama would win 66 of those votes (Florida, Ohio, Virginia and Nevada) which would take him to 313 electoral votes and a second term.

 

It’s the economy, stupid

The numbers behind the polls are also revealing. Mr. Romney has made a number of gaffes in both his foreign diplomacy as well as in gender relations, but he is banking on his promotion of his economic credentials to trump all other arguments. In fact, his argument is mostly the negative one that President Obama’s Administration has failed to create jobs because “he just doesn’t understand the private sector.” Mr. Romney then touts his time at Bain Capital as evidence of his own qualification in job creation, or at least business friendliness.

Let´s leave aside for the moment the widely held but completely erroneous assumption that running a large corporation prepares one for running a nation or even an economy. Let’s also leave aside the other misleading assertion that the President or his Administration is directly responsible for creating private sector jobs, which is also (usually) untrue in a market economy. Just on the basis of the unemployment numbers themselves, do the Republicans have a valid argument?

It would seem so at first blush. Unemployment remains stubbornly at 8.1%. Everyone, Democrats as well as Republicans agree that this figure is far too high. The real question is whether a Republican Administration would have resulted in a higher or lower rate of unemployment after almost four years. Unfortunately, we can’t answer this question. But consider the following:

  • The Great Recession started 25 consecutive months of job destruction. From February 2008 until February 2010, the US economy lost 8.8 million private sector jobs;
  • Beginning in March 2010, the US private sector has had 30 consecutive months of job creation. This has resulted in 4.6 million new jobs created;
  • Even as the private sector was adding jobs, the public sector was busily shedding jobs. In fact, public sector employment at all levels has fallen by a total of 571,000 jobs.

 

What can we conclude from this? For one thing, the Republican accusations of “enormous increases” in government and of a bloated public sector are outright indefensible lies. The public sector is smaller in 2012 than it was in 2009 when Mr. Obama took office.

The loss of public sector employment parallels and precedes the economic recovery. The fall in state and local spending deepened the effects of the recession in the private sector even as the American Recovery and Reinvestment Act was being signed into law by President Obama. Republican lawmakers decried the “misguided Keynesians” of the Administration, but in fact the Federal fiscal stimulus package barely offset the fall in state in local spending.

 

Far from not working, the Federal stimulus package pulled the economy out of recession and created 3.3 million jobs in 2010 and 2011 at a cost of $423 billion in new spending and approximately $300 billion in tax cuts and credits. Once the Republicans won the 2010 mid-term elections, the House of Representatives refused to extend the provisions of the 2009 stimulus, which expired in 2011. They also refused to pass any measures that would increase Federal expenditures to spur job growth. The result: Federal spending fell by $208 billion in 2011.

Even more jobs might have been created if state and local spending had not fallen by $111 billion in 2010 and another $119 billion in 2011, while also putting half a million state employees out of work. The $423 billion federal stimulus was wiped out by the $319 billion decrease in state spending and the $119 billion decrease in federal spending between 2010 and 2011.

Why is this important? It contradicts the position of Mr. Romney and the Republicans that the stimulus failed. It demonstrates that President Obama and Democratic leaders in Congress took a bold initiative in 2009 with the ARRA stimulus. If the true size of the state government budget shortfalls had been known at that time, it is possible that the stimulus package would have been made even bigger, as many economists recommended even then.

It is also clear that Republicans in Congress bear the lion’s share of the responsibility for the continued weak performance of the US economy. Congress controls the purse, and by pursuing a contractionary spending policy, they have deliberately applied the brakes to growth. There is no need to cast aspersion on their motives: they have done so themselves by declaring themselves willing to do anything to ensure that President Obama is not re-elected.

That includes sabotaging the US economy and abdicating their responsibilities to the American people.

Another way to judge whether Mr. Obama’s economic policies have been successful is to compare the performance of the US economy with other advanced economies. Here too the Democrats can point to success. Only Canada and Germany have done better than the United States in terms of real economic growth between 2009 and 2011. The United Kingdom, which has been praised by Republicans as the poster child of expansionary fiscal retrenchment, placed a dismal 6th, barely beating out Japan and Italy. At least the latter two nations had suffered from natural disasters: one from a tsunami, and the other from Silvio Berlusconi.

 

Winning the Sound Byte War

Elections, however, are won by perceptions not by analysis. Regardless of what happened on Capitol Hill since 2010, both parties are feverishly trying to shape the voters’ perceptions of these events. Whichever candidate is most successful in winning public acceptance of their narrative, will win the election.

For the moment, it seems that President Obama retains the advantage. In one area of traditional Republican strength, that of foreign policy, Mr. Romney has been severely criticized for a number of well-publicized though relatively unimportant gaffes. Additionally, the President is buoyed by the successful operation to kill Osama Bin Laden and his withdrawal of US troops from Iraq.  A Gallup poll[6] found both parties to be tied in American’s perceptions of which would do a better job of protecting America from terrorism. This is a significant improvement for Democrats, who have traditionally trailed Republicans by up to 19 points in early 2002.

More importantly, the same poll showed Americans favoring Democrats over Republicans by 9 points as the party most likely to maintain U.S. prosperity in the future. This is enormously relevant, as Mr. Romney has very little hope of victory if he cannot win the economy debate. Even a tie might not be enough to overcome the advantages of the incumbent.

Crystal Ball

Common Sense maintains that President Obama will win the election if unemployment is below 8% on the eve of the election, barring major gaffes or a complete collapse of one of the candidates on national television during the debates. Indications are that this will be the case by the narrowest of margins, perhaps only 0.1%.

If my prediction is sound, and the economy putters along just enough to win the President four more years from the electorate, then Mr. Obama might very well owe it to the forbearance of Benjamin Netanyahu and the stiffening backbone of Mario Draghi.

The Israeli Prime Minister continues to allow sanctions and negotiations to do their work in convincing Iran to abandon its nuclear weapons program, rather than acting unilaterally.  In contrast, the Italian chairman of the European Central Bank has calmed bond markets and investors in Europe precisely because of his unilateral declaration to defend the euro at all costs. President Obama does not have to fear the economic collapse of our largest trading partner just before November 6th.



Sources and Notes 

[1] Table is reprinted from the Real Clear Politics website here.
[2] The margin of error (MoE) is 3%, so even though the poll shows Obama with a 2% advantage,  the “true” mean of the poll could be from -1% to +5%.
[3] Colorado, Iowa, New Hampshire, Nevada, and New Mexico are all battleground states as well, but have less than 10 votes each
[4] I’ve deliberately discarded the other polls as being closer to the DNC and more likely to be skewed by the positive impact from that event.
[5] Map is reprinted from the Real Clear Politics website here.
[6] Saad, Lydia, “Democrats Pull Even with Republicans as Better on Terrorism,” Gallup, 13 September 2012

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