The 2012 Elections & the Impact on the US Economy

Daniel PalazzoloProfessor of Political Science

University of Richmond

National Investor Relations InstituteApril 26 2012

The 2012 Elections

-Why Romney?*Lead in National Polls before IA Caucus*Money Raised*Endorsements

-Forecasting Models of the Presidential ElectionPolitical Science ModelHistorical Model

-Campaigns Matter: Four Campaign Questions-VA the Battleground

Economic Effects

Gallup Poll of National Republicans: Eve of IA Caucuses

Romney Gingrich Paul Santorum0

5

10

15

20

25

30 26%

22%

13% 11%

Source: http://www.gallup.com

Funds Raise by 4th Quarter of 2011

Romney

Gingrich

Paul

Santorum

0 20,000,000 40,000,000 60,000,000

$56,465,509

$25,901,305

$25,901,703

$2,178,703

Source: http:// opensecrets.org

Endorsements

Romney Gingrich Paul Santorum0

10

20

30

40

50

60

70

80

90

64

93 0

82

14

3 2

Pre IowaAs of Feb 9

Source: http://www.p2012.org/candidates/natendorse.html

Forecasting the 2012 Presidential Election

Political Science Models: 3 Key Factors

• State of the Economy

• Presidential Approval

• Incumbency

Mar-08

May-08

Jul-08Sep-08N

ov-08Jan-09M

ar-09M

ay-09Jul-09Sep-09N

ov-09Jan-10M

ar-10M

ay-10Jul-10Sep-10N

ov-10Jan-11M

ar-11M

ay-11Jul-11Sep-11N

ov-11Jan-12M

ar-12

0

2

4

6

8

10

12

5.1

5.6

6.1

7.3 8.7

9.5

9.8

9.9

9.8

9.4

9.5

9.4

8.9

9.1

8.9

8.5

8.2

Unemployment Rate: March 2008-March 2012(Bureau of Labor Statistics)

Ike 56 Nixon 68 Carter 80

Reagan 84

Bush 92 Clinton 96

Bush 04 Obama 12

0

10

20

30

40

50

60

70

8075

62

37

58

34

54 5348

Approval of Incumbents Running for Re-election(Gallup polls)

Historical ModelAlan Lichtman: 13 Keys to the Presidency

Key 1: Incumbent Party Mandate (midterm election results): XKey 2: No Serious Nomination Challenge: OKey 3: Incumbent Running for Re-election: OKey 4: Third Party Challenge: OKey 5: Short-term Economy (Election Year): ?Key 6: Long-term Economy (Growth better than previous terms: XKey 7: Major Policy Change (e.g. health care reform): ?Key 8: Social Unrest: OKey 9: Scandal: OKey 10: Foreign Policy or Military Failure: OKey 11: Foreign Policy or Military Success: OKey 12: Incumbent Charisma: XKey 13: Challenger Charisma: O

If incumbent party loses 5 or less keys, it holds on to the White House.(But no winner has ever lost the short term economy key.)

A very close race

Tracking Polls @realclearpolitics.com

http://www.realclearpolitics.com/epolls/2012/president/us/general_election_romney_vs_obama-1171.html

Campaigns Matter: Four Questions

(1) Where is the Party?(2) What have you done?(3) What will you do?(4) Who are you?

Candidate Preference: GOP Voters (Pew: Feb 8-12)

Santorum Romney Gingrich Paul0

5

10

15

20

25

30

35

40

45

3028

17

12

42

23

1513

19

34

18

11

Rep/Lean Rep Tea Party Not Tea Party

Candidate Preference: Conservative v. Moderate/Liberal (Pew: Feb 8-12)

Santorum Romney Gingrich Paul0

5

10

15

20

25

30

35

4036

25

17

11

20

34

1614

Conservative Moderate/Liberal

Republicans Romney voter Conservative Moderate/liberal

Tea Party Not Tea Party0

10

20

30

40

50

60

70

80

90

100

8894

9084

95

8277

83 82

66

89

65

12 128

18

6

17

Support for Romney: Certainty Among Groups (Pew Research Center April 4-18, 2012)

Support Romney Certain Support Not Certain

Democrat Republican Independent0

10

20

30

40

50

60

70

80

90

10092

7

42

6

90

48

Presidential Vote by Party(Pew April 4-15)

Obama Romney

Romney Obama

Taxes Maintain Bush tax ratesRepeal Bush tax cuts incomes above $250K

Eliminate tax on interest, dividends, and capital gains for AGI less $200K

Buffett Rule: 30% minimum for $1 million

Reduce corporate income tax rate from 35% to 25 percent

Eliminate Tax Breaks for Oil, Gas, and Coal

Spending and Debt

Reduce spending from 24 to 18-20% GDP

2.1 trillion in new gross revenues through 2022

Roll back domestic discretionary spending to 2008 levels $360 billion in health care reductions

Medicare: Supports Paul Ryan’s premium support (55 under)

$160 billion in other mandatory reductions

Social security: means tests benefits and raise the retire age $350 billion jobs package

Tax Reform: no specifics $370 billion in tax reductions

Reversal of defense cuts$270 billion new spending – mostly education and infrastructure

Who Are You?

The GOP Successor/ Businessman The Likable Incumbent

0

10

20

30

40

50

60

70

80

90

44

52

61 61

7175

78

Public Opinion of President Obama (Pew Research Center, Jan 11-16, 2012)

Economy Jobs Deficit Taxes0

10

20

30

40

50

60

48 47

38

464448

57

47

Candidate Choice by Most Important Issue(Pew April 4-15)

Obama Romney

Men Women 18-29 Hispanic HS less Less 50K Independent

-10

0

10

20

30

40

50

1

13

34 36

10

22

8

-6

13

28

40

69

-6

Vote for Obama Net % Difference Key Groups: 2008-2012

(2008 exit poll v. Pew 2012 survey)

2008 2012

Battleground States

• Link to http://www.270towin.com/The tan colored states are off for grabs, but the top 7 battlegrounds are: CO, NV, IA, OH, NH, FLA, and VA. (WI, colored blue, may emerge as a battleground)

Tracking Poll on the race in VA:http://www.realclearpolitics.com/epolls/2012/president/va/virginia_romney_vs_obama-1774.html

US

New Hampsh

ireIowa

Virginia

Ohio

Colorado

Florid

a

Nevada

0

2

4

6

8

10

12

14

8.2

5.2 5.2 5.6

7.5 7.89

12

Unemployment Rates in Key Battleground States(March 2012: Bureau of Labor Statistics)

2012 Congressional ElectionsCurrent House: GOP 242 / Democrats 193 2012 Elections: ProjectionsDemocrats Toss Ups Republican 172 49 214 Current Senate: Democrats 53 / Republican 47 2012 Elections: ProjectionsDemocrats Toss Ups* Republicans46 8 (5D/3R) 46----------------------------------------------------------------------------------------------------*FL (Nelson-D), ME (Open-R), MA (Brown-R), MO (McCaskill-D), MT (Tester-D), NV (Heller-R), VA (Open-D), WI (Open-D) Source: Real Clear Politics