Transcript Slide 1

Mid-Term Election Outlook
& 2011 Policy Implications
October 2010
Daniel Clifton
[email protected]
The Recession Election
• 3rd Straight Election Voters Will Throw Out
Incumbents
• Elections Have Not Been This Volatile
Since Late 1940’s/Early 1950’s.
• Independent Voters Don’t Believe Either
Party Is Equipped To Provide Growth
• Divided Govt Is Last Shot Before 3rd Party
Challenge
Historic Convergence of
Political Party Identification
Party Affiliation (Rasmussen, Monthly)
45%
Democrats
40%
Republicans
35%
30%
25%
Other
20%
'04
'05
'06
'07
'08
'09
'10
Macro Indicators Pointing
To A Wave Election
• Macro Data Points To A Wave Election In Which
Macro, Not Local Issues
• Obama Approval Rating, Generic Ballot, Right
Track/Wrong Track Are Upside Down For
Democrats
• Republicans Energized, Independents Breaking
Republican 60-40, Democrats Demoralized
• Intrade Odds Place GOP Takeover of the House
At 90 Pct and Senate At 25 Pct
• Bottom Up Intrade – GOP Picks Up 55 House
Seats & 8 Senate Seats
Micro Data Beginning To
Catch Up To Macro Data
• 50+ Dems Behind In The Polls, Just 25
GOP Members At This Time In 2006
• Traditional Battleground States Are
Comfortable GOP, Lean Dem Areas Are
Now Tossups
• Handicappers Placing 99 Districts In
House At Risk
• GOP Senate Takeover Being
Underestimated
nd
2
Highest Unemployment
Rate For A Post WWII Election
US Unemployment Rate,
Annual Avg, Pct
12
10
8
6
4
2
0
'48
'55
'62
'69
'76
'83
'90
'97
'04
Consumer Confidence
Remains Depressed
Consumer Confidence & Unemployment Rate
160
2
3
140
'06 Election
'94
Election
120
4
5
100
6
80
7
60
8
Consumer Confidence,
Left
40
20
9
Unemployment Rate,
Right, Inverted
10
0
11
'83
'85
'87
'89
'91
'93
'95
'97
'99
'01
'03
'05
'07
'09
Economy Remains
Democrats Achilles Heal
Approval of Obama's Handling of
Economy (Washington Post, 9/2)
65
Disapprove: 57%
60
55
50
45
40
35
30
Feb-09
Approve: 41%
Aug-09
Feb-10
Aug-10
Voters Giving Little Credit To
$1 Trillion Stimulus Program
• A majority of voters oppose the stimulus as they
have not felt a direct benefit from the program.
This is the conclusion of a Democratic focus
group during the State of the Union.
Voters Aren’t Buying It
When President Obama took credit for bringing
the economy back from the ledge or pointed to
macro-level indications of economic growth,
voters turned their dials down.
National Journal, 2/6/10
Anti-Incumbent Environment
Members of Congress Deserve Re-Election
(Gallup, 10/21)
No
60
57
50
Y es
50
40
56
45
38
39
33
29
30
20
10
0
'94
'06
'10
'02
Wave Election: Step 1
Presidential Approval Drops
Obama Approval Ratings
(Gallup Daily Surveys)
70%
65%
60%
55%
Last Click: 43%
50%
45%
40%
1/21
4/21
7/21
10/21
1/21
4/21
7/21
10/21
Approval Correlated With
Lost House Seats
Presidential Approval Rating &
Loss of House Seats In Midterm Election
10
# of Hou se Seats Lost
0
-10
-20
-30
-40
-50
-60
30%
Presidential
A pprov al Rating
40%
50%
60%
70%
Wave Election: Step 2
Generic Ballot Switch Parties
Generic Ballot Pointing To
Significant Dem Losses
Generic Ballot Poll
(Gallup, Likely Voters, High Turnout)
55%
53%
51%
49%
GOP: 52%
47%
45%
43%
41%
Dems: 43%
39%
37%
35%
10/3
10/10
10/17
10/24
Gallup’s Plug & Chug
Generic Ballot Model
Gallup Historic Generic
Ballot Seat Forecast
Dem
Vote
Share
60%
59%
58%
57%
56%
55%
54%
53%
52%
51%
50%
49%
48%
47%
46%
45%
MidRange
Dem
348
337
326
316
305
294
283
272
262
251
240
229
218
208
197
186
LowRange
Dem
337
326
315
305
294
283
272
261
251
240
229
218
207
197
186
175
HighRange
Dem
359
348
337
327
316
305
294
283
273
262
251
240
229
219
208
197
Wave Election: Step 3
Dem Enthusiasm Wanes
High Level of Interest in Elections
(NBC/WSJ Polls)
2008
90
80
70
201 0
60
50
40
30
20
10
0
1 8-3 4 y ear
olds
Liberals
Obam a
Voters
Blacks
All Voters Republicans
Intrade: Near 90% Chance
GOP Takes Over The House
Intrade Odds:
GOP Control of House After 2010 Elections
100
90
80
70
60
50
40
30
20
10
0
11/26
2/26
5/26
8/26
11/26
2/26
5/26
8/26
Intrade Suggests
GOP Takes 55 Seats
Intrade Odds:
GOP to Gain 55 House Seats
70
60
50
40
30
20
10
8/1
8/15
8/29
9/12
9/26
10/1
Placing The Consensus View
In Historical Context
# of Seats Gained By A Political
Party In House Elections
80
Intrade Odds For 55
Seats Is A Large Pickup
By Historical Standards
70
60
50
40
30
20
10
0
'46
'54
'62
'70
'78
'86
'94
'02
'10
Senate Odds: Very Low
Probability of GOP Takeover
Intrade Odds:
GOP Control of Senate After 2010 Elections
90
80
70
60
50
40
30
20
10
0
11/9
2/9
5/9
8/9
11/9
2/9
5/9
8/9
Intrade Odds Saying Dems Lose
8 Seats But Hold The Senate
Intrade Odds: # of GOP Senate Seats
(10/21/10)
100
7 Seats
90
80
70
60
50
40
30
20
10
0
41
42
43
44
45
46
47
48
49
50
51
10 Senate Seat Pickups
Rarely Occurs In One Election
# of Seats Gains By A Political
Party In Senate Elections
Intrade Odds For 7
Senate Seats Is Large
But For 1 0 Seats Woud
V ery Large By
Historical Standards
14
12
10
8
6
4
2
0
'46
'54
'62
'70
'78
'86
'94
'02
'10
70 Pct Rule Would Suggest
Senate Takeover Is Possible
The 70 Pct Rule For Wave Elections
100
90
80
70
'06 = 64%
'10 @
68%
= 56
Seats
'08 = 72%
House Seats
In Pla y
60
Net House
Seats Won
50
40
30
20
10
0
'06
'08
'10
Market Has Begun
Pricing In The Election
Strategas Republican Portfolio Relative Democrat Portfolio
2 0 -O ct- 2 00 9 to 2 1 -O ct- 20 1 0 (D a il y)
2 0 -O ct- 2 00 9 =1 0 0 ; L o ca l
102
101
100
99
98
97
N ov
D ec
Data Source: Prices / Exshare
Ja n
Fe b
M ar
Apr
M ay
Ju n
Ju l
Aug
Sep
O ct
©FactSet Research Systems 2010
Election Will Bring
Book End Of Outcomes
# of Seats Held By Democrats In The Senate
80
Dem s Held 60 Seats For T he
First T im e Since '7 6
70
60
50
40
30
20
'26
'36
'46
'56
'66
'76
'86
'96
'06
Days of 2,000
Page Bills Are Over
Major Financial Legislation:
Number of Pages
Dodd-Fr a n k Bill (2 0 1 0 )
848
G r a m m -Lea c h -Bliley A c t (1 9 9 9 )
145
Sa r ba n es-Ox ley A c t (2 0 0 2 )
66
In t er st a t e Ba n k in g Effic ien c y A c t
(1 9 9 4 )
61
T h e G la ss-St ea g a ll A c t (1 9 3 3 )
37
Feder a l Reser v e A c t (1 9 1 3 )
31
0
2 00
4 00
6 00
800
1 000
Equity Markets Applaud
Congressional Gridlock
Partisan Control, S&P Performance
(1928-2009, Excl. 2001-02)
D Congress, R President
4.9%
GOP Sen/Dem House/GOP
President
7.9%
D Congress, D President
9.2%
R Congress, R President
2.4%
R Congress, D President
15.1%
0%
5%
10%
15%
20%
S&P 500 Up After Every MidTerm Election Since 1938
S&P 500 Price Return,
12 Mo. Period Following Mid-Term Election
Average Since 1950 = 17 Pct.
35%
30%
25%
20%
15%
10%
5%
0%
'50 '54 '58 '62 '66 '70 '74 '78 '82 '86 '90 '94 '98 '02 '06
Election Will Bring
“Book End” Of Outcomes
Senate Action on Cloture Motions
140
120
Motions Filed
100
80
60
40
Cloture V otes
Cloture
Inv oked
20
0
'74
'79
'84
'89
'94
'99
'04
'09
Tax Cuts Will Get Extended
For At Least One Year
Democratic Congressional Insiders:
1-Yr Bush Tax Cut Extension for Everyone
9/18/10
80%
68%
70%
60%
50%
40%
30%
26%
20%
10%
5%
0%
Yes
No
Depends
But Comprehensive Reform
Will Be Needed In The Future
Budgetary Costs of Expiring Tax Provisions, $BN
2011
2012
-394.4
-516.1
-5,959.5
-186.7
-375.4
-4897.9
-64.6
-107.7
-1404.2
...for those with incomes below $250k
-34.6
-71.7
-775.2
Estimates, Not subject to PAYGO
...for those with incomes above $250k
-30.0
-36.0
-629.0
Estimates, Subject to PAYGO
-11.0
-42.0
-576.5
-6.0
-8.7
-78.7
-26.1
-96.6
-1119.7
-14.4
-12.7
-314.6
-71.9
-31.0
-547.5
-28.8
-62.0
-587.5
-157.2
-155.4
-1330.8
Total, Expiring Tax Cuts and Credits
Total Bush Tax Cuts (2001 & 2003)
Income Tax Provisions of EGTRRA
Estate and Gift Tax Changes
Relief from Marriage Penalty
Credits and Deductions
Capital Gains and Dividend Tax Reductions
Alternative Minimum Tax
Make Work Pay Credit
Other Expiring Provisions
2011-20
Comments
Subject to PAYGO
Not Subject to PAYGO
Not Subject to PAYGO
Subject to PAYGO
Not subject to PAYGO
Not subject to PAYGO
Most subject to PAYGO
Korea & Columbia Trade
Could Be Area of Agreement
Trade Weighted Dollar
130
120
110
100
90
80
70
60
'00
'02
'04
'06
'08
'10
Federal Spending Is A
Target For GOP Congress
Federal Gov't Spending and Revenue
(Pct. GDP, OMB Proj. '10-'20)
Spending At
Highest Lev el Since
WWII
26
Spending
24
22
20
18
16
Rev enue
14
12
10
'46
'56
'66
'76
'86
'96
'06
A Renewed Focus On
Unfunded Liabilities…
Social Security Revenue and Outlays
(Pct. of GDP)
Historical
6.5%
Projected
Costs
6.0%
5.5%
5.0%
4.5%
Costs Exceed
Revenue
2015
4.0%
3.5%
Revenue
3.0%
'90
'00
'10
'20
'30
'40
'50
'60
'70
'80
…As Tea Party Members Must
Vote For A Debt Limit Increase
Federal Debt Outstanding (Monthly, $TN)
14.5
14.0
Debt Limit
13.5
13.0
Total Public Debt
Subject to Limit
12.5
12.0
1/1
2/1
3/1
4/1
5/1
6/1
7/1
8/1
9/1
Highway Spending Bill
Requires A Tax Increase
Highway Trust Fund End-of-Year
Balance or Shortfall
40
20
0
-20
-40
-60
-80
'99
'02
'05
'08
'11
'14
'17
Half of Stimulus On
Highway/Rails Has Been Spent
Federal Stimulus Provisions
For Highway & Rail Spending
Provision
Allocated
($BN)
Available
($BN)
Paid Out
($BN)
Paid Out (%
Allocated)
Highway
Infrastructure
$27.50
$26.86
$14.55
52.93%
Transit Capital
Assistance
$8.40
$7.30
$3.14
37.34%
$35.90
$34.16
$17.69
49.28%
Total
Host of New EPA Rules Coming
House Will Vote To
Repeal Healthcare Bill
Support for Repeal of Healthcare Plan
(Rasmussen)
70%
Fav or Repeal: 55%
65%
60%
55%
50%
45%
40%
35%
30%
Oppose Repeal: 40%
25%
20%
3/24
4/23
5/23
6/22
7/22
8/21
9/20