Thursday, October 30, 2008

Comparative trends in US presidential elections 2000 to 2008

In the final days before the election, pundits and the media will claim that the race "is tightening" and that "you never know what may happen". To be sure, there is never a 100% certainty, yet I believe the financial crisis pretty much settled the 2008 election (I'll let you decide to what extent the crisis was a surprise event). Any supporting evidence? This is what Charles Franklin (Univ of Wisconsin, Madison) wrote on Oct 6th, 2008, almost a month before election day:

"The 2008 campaign had not seen a really big move in preferences until the financial crisis hit three weeks ago today. Since that time, the Obama-McCain margin has shifted almost 9 points in Obama's favor, converting a small McCain lead into a substantial Obama advantage. This swing reversed the gains McCain made with the Republican convention and the week after during which he picked up about 4 points and took the lead for the first time since March.
I wrote earlier that we had not seen a move in 2008 as large as ones we saw in both 2000 and 2004. That is no longer true of 2004, though the current run is not yet as large as the one Gore mounted in 2000.
The Bush counter-assault in 2000, after Gore's surge, was almost eight points, and began at almost the same point in the campaign, about 57 days out. Voters are making up their minds at about the same rate as they did in 2000. If this year follows that pattern, look for some serious decision making over the next two weeks.

These are Franklin's critical graphs:

Sam Wang (Princeton Election Consortium) links to the (even clearer) electoral vote predictions for 2004 here, and for 2008 here. He also commented that:

In 2004, candidate game-shifting events were:

7/26: Democratic convention
8/5-31: Swift Boat Veterans for Truth ad campaign
8/30: Republican convention
9/30: Debate #1
The other debates (10/8, 10/13) had no measurable effect.
In 2008, the game-shifting events have been:

6/7: Hillary Clinton concedes
8/1: McCain's "Celebrity" ad campaign
8/25-9/5: Both conventions and McCain announcement of Palin
9/11-12: Palin on ABC News w/Charlie Gibson, McCain on "The View"
9/26: Obama-McCain debate #1
All of these events were shortly followed by swings.

Public funding and the 2008 election

This is George F. Will, in today's Washington Post, on some of the campaign finance lessons from the 2008 presidential election:
Call him John the careless
Thursday, October 30, 2008
(...) McCain revived a familiar villain -- "huge amounts" of political money -- when Barack Obama announced that he had received contributions of $150 million in September. "The dam is broken," said McCain, whose constitutional carelessness involves wanting to multiply impediments to people who want to participate in politics by contributing to candidates -- people such as the 632,000 first-time givers to Obama in September.

Why is it virtuous to erect a dam of laws to impede the flow of contributions by which citizens exercise their First Amendment right to political expression? "We're now going to see," McCain warned, "huge amounts of money coming into political campaigns, and we know history tells us that always leads to scandal." The supposedly inevitable scandal, which supposedly justifies preemptive government restrictions on Americans' freedom to fund the dissemination of political ideas they favor, presumably is that Obama will be pressured to give favors to his September givers. The contributions by the new givers that month averaged $86.

One excellent result of this election cycle is that public financing of presidential campaigns now seems sillier than ever. The public has always disliked it: Voluntary and cost-free participation, using the check-off on the income tax form, peaked at 28.7 percent in 1980 and has sagged to 9.2 percent. The Post, which is melancholy about the system's parlous condition, says there were three reasons for creating public financing: to free candidates from the demands of fundraising, to level the playing field and "to limit the amount of money pouring into presidential campaigns." The first reason is decreasingly persuasive because fundraising is increasingly easy because of new technologies such as the Internet. The second reason is, the Supreme Court says, constitutionally impermissible. Government may not mandate equality of resources among political competitors who earn different levels of voluntary support. As for the third reason -- "huge amounts" (McCain) of money "pouring into" (The Post) presidential politics -- well:

The Center for Responsive Politics calculates that, by Election Day, $2.4 billion will have been spent on presidential campaigns in the two-year election cycle that began in January 2007, and an additional $2.9 billion will have been spent on 435 House and 35 Senate contests. This $5.3 billion is a billion less than Americans will spend this year on potato chips.

Migration policy, Media bias, Direct democracy (new papers)

Do Interest Groups Affect U.S. Immigration Policy?
Date: 2008-10-11
By: Prachi Mishra, Anna Maria Mayda, Giovanni Facchini
While anecdotal evidence suggests that interest groups play a key role in shaping immigration policy, there is no systematic empirical analysis of this issue. In this paper, we construct an industry-level dataset for the United States, by combining information on the number of temporary work visas with data on lobbying activity associated with immigration. We find robust evidence that both pro- and anti-immigration interest groups play a statistically significant and economically relevant role in shaping migration across sectors. Barriers to migration are lower in sectors in which business interest groups incur larger lobby expenditures and higher in sectors where labor unions are more important.
Media Bias and Influence: Evidence from Newspaper Endorsements
By: Brian G. Knight and Chun-Fang Chiang
This paper investigates the relationship between media bias and the influence of the media on voting in the context of newspaper endorsements. We first develop a simple econometric model in which voters choose candidates under uncertainty and rely on endorsements from better informed sources. Newspapers are potentially biased in favor of one of the candidates and voters thus rationally account for the credibility of any endorsements. Our primary empirical finding is that endorsements are influential in the sense that voters are more likely to support the recommended candidate after publication of the endorsement. The degree of this influence, however, depends upon the credibility of the endorsement. In this way, endorsements for the Democratic candidate from left-leaning newspapers are less influential than are endorsements from neutral or right-leaning newspapers, and likewise for endorsements for the Republican. These findings suggest that voters do rely on the media for information during campaigns but that the extent of this reliance depends upon the degree and direction of any bias.
Does Direct Democracy Reduce the Size of Government? New Evidence from Historical Data, 1890-2000
Date: 2008-10
By: Patricia Funk and Christina Gathmann
Using historical data for all Swiss cantons from 1890 to 2000, we estimate the causal effect of direct democracy on government spending. The main innovation in this paper is that we use fixed effects to control for unobserved heterogeneity and instrumental variables to address the potential endogeneity of institutions. We find that the budget referendum and lower costs to launch a voter initiative are effective tools in reducing canton level spending. However, we find no evidence that the budget referendum results in more decentralized government or a larger local government. Our instrumental variable estimates suggest that a mandatory budget referendum reduces the size of canton spending between 13 and 19 percent. A 1 percent lower signature requirement for the initiative reduces canton spending by up to 2 percent.
Keywords: Direct Democracy, Fiscal Policy, Switzerland

Wednesday, October 22, 2008

Myths about the 2008 crisis

Three economists at the Federal Reserve Bank of Minneapolis, Chari, Christiano and Kehoe, point out to Four Myths about the Financial Crisis of 2008 (it's a short paper and full of graphs). 
"Clearly, the United States and the world economy are undergoing a major financial crisis. Interbank borrowing and lending rates have risen to unprecedented levels relative to U.S. Treasury Bills. Several major financial institutions have failed. These real problems have also been associated with four widely-held myths about the nature of the financial crisis and the associated spillovers to the rest of the economy. The financial press and policymakers have made four claims about the nature of the crisis:
  1. Bank lending to nonfinancial corporations and individuals has declined sharply.
  2. Interbank lending is essentially nonexistent.
  3. Commercial paper issuance by nonfinancial corporations has declined sharply and rates have risen to unprecedented levels.
  4. Banks play a large role in channeling funds from savers to borrowers.
Here we examine these claims using data from the Federal Reserve Board. At least based on data up until October 8, 2008, we argue that all four claims are false."
So yes, it looks like capitalism will survive... On the other hand, a summary of the US real estate market adjustment process  is here.

Tuesday, October 21, 2008

Undecided voters

A funny but perhaps true flowchart from

"The race for president between Barack Obama and John McCain has been going on for close to 17 years now, and yet still—still!—there are some voters who haven't made up their minds about whom to vote for. Who are these undecideds, and what could possibly be going on in their tiny, tiny brains?"

The real estate bubble and the adjustment

A summary from Calculated Risk  (check out the link to see nice graphs).
"I'm frequently asked if I'm more concerned today than I was in 2005. There are reasons for concern: the credit markets have seized up, many financial institutions are insolvent, consumer spending and investment in commercial real estate is starting to decline, export growth appears to be slowing, the unemployment rate is rising ... and the economy is clearly in a recession. There are huge and scary downside risks today, but I'm actually more sanguine now than I was in 2005. If you think back to 2005, we were standing at the precipice, and there was no where to go but over the cliff.
Housing starts have collapsed by more than half since 2005. This decline seemed obvious and inevitable in 2005, and now most of the adjustment has already happened. Which was better for the economy looking forward? To be standing at the edge (in 2005) or to be much nearer the bottom in 2008?

Just like for housing starts, new home sales have collapsed by more than half since 2005. The good news is starts of single family homes built for sale have fallen below new home sales, and new home inventory is declining (although existing home inventory is still near record levels). Once again the bulk of the adjustment is now behind us.

(House price / income ratios are back to 2003 levels.)  Although I believe there are more price declines ahead (and therefore more homeowners with negative equity and more foreclosures), prices are much more reasonable today than in 2005.

The price adjustments were inevitable, and progress is being made."

Wednesday, October 15, 2008

Throw the bums out

A nice summary on voter irrationality from Larry Bartels:

"While voters are busy meting out myopic, ­simple-­minded rewards and punishments, political observers are often busy exaggerating the policy content of the voters’ verdicts. The prime example in American political history may be the watershed New Deal election of 1936. Having swept into office on a strong tide of economic discontent in 1932, Franklin Roosevelt initiated a series of wide-ranging new policies to cope with the Great Depression. According to the most authoritative political scholar of the era, V. O. Key, “The voters responded with a resounding ratification of the new thrust of governmental policy”—a stunning 46-state landslide that ushered in an era of Democratic electoral ­dominance.24

The 1936 election has become the most celebrated textbook case of ideological realignment in American history. However, a careful look at ­state-­by-­state voting patterns suggests that this resounding ratification of Roosevelt’s policies was strongly concentrated in the states that happened to enjoy robust income growth in the months leading up to the vote. Indeed, the apparent impact of ­short-­term economic conditions was so powerful that, if the recession of 1938 had occurred in 1936, Roosevelt probably would have been a ­one-­term ­president.25

It’s not only in the United States that the ­Depression-­era tendency to “throw the bums out” looks like something less than a rational policy judgment. In the United States, voters replaced Republicans with Democrats in 1932 and the economy improved. In Britain and Australia, voters replaced Labor governments with conservatives and the economy im­proved. In Sweden, voters replaced Conservatives with Liberals, then with Social Democrats, and the economy improved. In the Canadian agricultural province of Saskatchewan, voters replaced Conservatives with Socialists and the economy improved. In the adjacent agricultural province of Alberta, voters replaced a socialist party with a right-leaning party created from scratch by a charismatic radio preacher peddling a flighty ­share-­the-­wealth scheme, and the economy improved. In Weimar Germany, where economic distress was deeper and ­longer ­lasting, voters rejected all of the mainstream parties, the Nazis seized power, and the economy improved. In every case, the party that happened to be in power when the Depression eased went on to dominate politics for a decade or more thereafter. It seems far-fetched to imagine that all these contradictory shifts represented ­well-­considered ideological conversions. A more parsimonious interpretation is that voters ­simply—­and ­simple-­mindedly—­rewarded whoever happened to be in power when things got ­better.

Stupid? No, just human. And ­thus—­to borrow the title of another current ­best­seller, by behavioral economist Dan ­Ariely—­“predictably irrational.” That may be bad ­enough."

Monday, October 13, 2008

GOTV and likely voters

Via realclearpolitics--This is what the the Washington Post wrote on Sunday:

Sen. Barack Obama's campaign intends to avoid a (2004) repeat by building an
organization modeled in part on what Karl Rove used to engineer Bush's victory:
a heavy reliance on local volunteers to pitch to their own neighbors,
micro-targeting techniques to identify persuadable independents and Republicans
using consumer data, and a focus on exurban and rural areas. But in scale and
ambition, the Obama organization goes beyond even what Rove built. The campaign
has used its record-breaking fundraising to open more than 700 offices in more
than a dozen battleground states, pay several thousand organizers and manage
tens of thousands more volunteers.

And this is what Gallup has to say regarding how this get out the vote strategy may affect its survey-weighting methods:

Likely Voter Estimates
"Obama's current advantage is slightly less when estimating the preferences of likely voters, which Gallup will begin reporting on a regular basis between now and the election. Gallup is providing two likely voter estimates to take into account different turnout scenarios.
The first likely voter model is based on Gallup's traditional likely voter assumptions,which determine respondents' likelihood to vote based on how they answer questions about their current voting intention and past voting behavior. According to this model, Obama's advantage over McCain is 50% to 46% in Oct. 9-11 tracking data.
The second likely voter estimate is a variation on the traditional model, but is only based on respondents' current voting intention. This model would take into account increased voter registration this year and possibly higher turnout among groups that are traditionally less likely to vote, such as young adults and racial minorities (Gallup will continue to monitor and report on turnout indicators by subgroup between now and the election). According to this second likely voter model, Obama has a 51% to 45% lead over McCain. "
(Click here to see how the race currently breaks down by demographic subgroup.)

And for the "registered voters" sample, the figures are 50% Obama, 43% McCain. This means that the different weighting method leads to three different forecasts, with margins of victory ranging from a 4 to 7 percent lead in favor of Obama. With sampling errors of roughly 2%, the weighting method will be crucial in predicting heavily contested states such as Virginia.

Wednesday, October 01, 2008

Populist revolts

An historical vignette from Andrew Selgman’s blog

Mavericks of the past

Phil Klinkner writes:

History doesn't repeat itself, the saying goes, but it does rhyme.

To me [Klinkner], the recent House defeat of the financial bailout bill echoes the defeat of the national sale tax in 1932. The Depression dried up federal revenues, so the Hoover administration proposed a national sales tax to raise money. Business and the leadership of both parties favored the bill, but the public was overwhelmingly opposed. Liberal Republican Fiorella LaGuardia led a bipartisan revolt against the bill. House Speaker John N. Garner (D-TX) actually left the speaker's chair to go into the well and plead with his fellow Democrats to pass the bill. Garner normally had tight control on his party, but not this time. The bill was defeated 153-223.

In both cases, an unpopular Republican administration put forward a proposal to deal with an economic crisis, supported by the Democratic leadership in the House and the vast majority of the business community. Nonetheless, a bipartisan populist revolt sent it down to defeat.

And, Phil forgot to mention, James Garner was Maverick.