The Convention Timing Complication

A premise of the Trial-Heat and Economy Model is that preference polls at Labor Day of the election year, the traditional kick-off date of the fall campaign, are a stable indicator of where public opinion stands at the outset of the campaign. This appeared to be a fairly safe assumption, until recently. Before the 2004 election, the second national nominating conventions of the major parties had been held no later than mid- to late-August. This scheduling allowed short-term convention-bump effects in the polls to subside before Labor Day. In 2004 and in 2008, however, because of campaign financing considerations, the conventions were scheduled later. The Republican conventions in those years spilled over into the first few days of September. This year, the Democratic convention does not even begin until Labor Day.

Because of the new conflict between the Trial-Heat Model's forecasting schedule and the party's convention schedules, the trial-heat poll used by the model will be pushed back to September 10. This is later than normal, but only a few days closer to the election than the usual 60-day lead time. Even so, because the “Labor Day” poll is only a couple of days removed from the Democratic convention, it is likely to reflect some short-term effects of the convention bump. In light of this, it may be advisable to pay particular attention to the forecast of the Convention-Bump Model this year.

The Wall Street Meltdown Complication of 2008

The second complication involves the 2008 election. Election forecasting is premised on the idea that normal elections are predictable because we know how precampaign fundamentals affected normal elections in the past. Election forecasting models are essentially systematic ways of learning from history and applying that knowledge to future elections. Lessons from past normal elections allow the prediction of future normal elections.

The normal election premise entails an assumption that nothing cataclysmic occurs during the campaign to derail the “playing out” of the fundamentals in the campaign. The idea is that lessons learned from the general history of normal elections are not helpful to predicting elections in which a catastrophic event intervened between the forecast and the election. By the same token, we cannot learn how fundamentals affect the vote from an election in which the fundamentals were overridden by a crisis. An aberrant election may be more misleading than enlightening about how the fundamentals work.

Fortunately for forecasting, aberrant elections are infrequent. History is replete, however, with events that could have derailed forecasts had they occurred during a campaign. “October Surprises” are quite possible. For instance, suppose that the terrorist attacks of September 11 had occurred in 2000 or in 2004 instead of in 2001. Is there any doubt that the fundamentals in those elections would have been trumped by the unforeseen crisis?

In the 2008 campaign, an unforeseen crisis of a different sort, the Wall Street Meltdown, intervened between the forecasts and the vote (Campbell Reference Campbell2010a). It derailed the likely effects of the fundamentals and rendered the forecasts moot. Three pieces of evidence lead to the conclusion that the 2008 election violated the normal election assumption: (1) the financial meltdown was unanticipated, (2) it sent the economy into a tailspin during the campaign, and (3) the economic collapse had major political repercussions for the election. The 2008 election was not a normal election in which the fundamentals “played out.”

Neither economic nor election forecasters anticipated the Wall Street Meltdown, much less that it would take place during the campaign. In late August, the Bureau of Economic Analysis (BEA) estimated second-quarter GDP growth at 3.3%. This was good economic news and a number that several election forecasters used in their models. Based on the normal correlation of economic growth rates from one quarter to the next (r = .38), one would have expected third-quarter growth of about 2.8%. Well into the third-quarter, economic forecasters predicted slower third-quarter growth (1.2%) (Survey of Professional Forecasters 2008). According to analyses using the Leading Economic Index (LEI), growth of about .8% to 1.9% in GDP was expected (Campbell Reference Campbell2011). The LEI actually increased in September (Conference Board 2008). In short, to one degree or another, all signs in 2008 pointed to a preelection economy that was, at worst, sluggish. There were no signs of a collapse in the immediate offing.

Second, as table 1 documents, the meltdown of financial institutions sent the economy into a tailspin. The economy contracted by nearly four percentage points in the third quarter, much of that apparently in September. And while only about five weeks of the fourth quarter preceded the election, the economy continued spiraling downward during these weeks, contracting at a rate of nearly nine percentage points.

Table 1

The Wall Street Meltdown's Economic Meltdown, 2008

Note: The reported second quarter growth rate of real GDP was from the August 2008 release of the Bureau of Economic Analysis. The estimates of actual real GDP growth are from the Bureau of Economic Analysis as of June 28, 2012.

The financial crisis and the unexpected economic nosedive were politically devastating for the in-party. Table 2 reports the preference polls from August to Election Day. Each point examined in the campaign is based on at least a week's worth of Gallup's polling. As the table shows, Obama held a small lead over McCain through the first few weeks of August, but the race had narrowed to a virtual tie in the week before the first convention. McCain emerged from the conventions with a four-point lead. Even with the normal erosion of much of the convention bump, the election appeared on track for a very close finish with a slight edge to McCain. This was consistent with the trial-heat forecast (52.7% for McCain).Footnote ¹ Then the financial system collapsed. The public understood immediately the gravity of the situation. Forty percent of respondents to a USA Today and Gallup Poll in late September called the situation “the biggest financial crisis in [their] lifetime” (Polling Report 2008). From mid-September to the first few days of October, McCain dropped from being four points ahead to seven points behind. President Bush's already low approval ratings took a similar hit. The post-meltdown standing of the candidates is about where the election wound up.

Table 2

The Wall Street Meltdown's Political Meltdown, 2008

Because of the economic collapse in the midst of the campaign, 2008 should be regarded as an aberrant election. As such, I have excluded it from the estimation of the presidential equations. For skeptics of this decision, I also estimated the model with 2008 included (not shown). Although the 2008-included estimates reduce explained variance and increase out-of-sample errors, they leave the predictor coefficients within .02 of the 2008-excluded estimates.

The Presidential Forecast for 2012

President Obama enters the 2012 election with a significant advantage. As table 3 shows, the electorate is inclined to retain incumbent presidents, especially if the president's party has been in the White House for one term. There is a presidential incumbency advantage (Campbell Reference Campbell, Campbell and Garand2000, Reference Campbell2008; Fair Reference Fair1978; Mayhew Reference Mayhew2008; Weisberg Reference Weisberg2002). The range of the vote for incumbent races has been from landslides in their favor (Johnson, Nixon, and Reagan) to narrow or moderate size losses (Carter and G.H.W. Bush).

Table 3

Incumbency and Presidential Election Outcomes, 1900–2008

Note: Reelection includes incumbent presidents who had not been previously elected to the office (T. Roosevelt, Coolidge, Truman, Johnson, and Ford).

Beyond incumbency, however, the political climate of 2012 suggests a close election. The parties are near parity and the electorate is polarized. President Obama's approval ratings through the summer hovered in the mid- to high-40s, survivable but not thrive-able. The economy has been weak throughout Obama's term. Unemployment rates have been 8% or higher for 42 consecutive months as of July 2012. Since June 2009, when the recession associated with the Wall Street Meltdown ended (National Bureau of Economic Research 2012), there have been only two quarters (out of 12) in which real economic growth exceeded 2.6%. From the second year of his term through the first half of the election year (10 quarters), the mean quarterly economic growth during the Obama presidency has been only 2.1 percentage points. In terms of economic growth, he ranks eighth out of the last 10 presidents who sought reelection. The two presidents with weaker economies (George H.W. Bush and Gerald Ford) both lost. Six of the seven presidents presiding over stronger economies won. Carter, with a mean growth rate of 2.6 percentage points, was the exception. Growth in 2012's first quarter was an anemic 2%, and the initial estimate of second quarter growth was only 1.5%. Jimmy Carter is the only president seeking reelection in the post-WWII era who entered the fall campaign with a weaker second quarter economic number. It is difficult to see his economic record as anything but a serious liability for President Obama.

The Trial-Heat and Convention-Bump Models provide more specific readings of the historical effects of incumbency (implicit in the in-party orientation of the equations), the early inclinations of the electorate, and the latest reading of economic conditions as the fall campaign begins. Table 4 presents the trial-heat and economy equation as well as the convention-bump and economy forecasting equation. Each of the models starts with a reading of where the electorate stands at the outset of the campaign and adds adjustments for how the campaign is likely to alter those stands based on the competitiveness of the campaign (the discount of the initial poll standing), incumbency (the intercept when other factors are neutral), the second-quarter growth in the economy (itself adjusted to a neutral level and discounted for open-seat races), and, in the case of the Convention-Bump Model, the temporary portion of convention effects on the race. In essence, this is a more sophisticated reading of the polls, taking both their historical and contemporary contexts into account.

Table 4

Trial-Heat and Convention-Bump Forecasting Models, 1948–2004

Note: N = 15. Standard errors are in parentheses. These estimates differ slightly from the 2008 values because they use Gaines's calculation of the 1960 vote (Gaines 2001). The 2008 case was not included in the estimation because the unprecedented and unanticipated financial meltdown intervened between the forecast and the election. With 2008 included, the adjusted R² drops to .81 in the trial-heat model and .80 in the convention-bump model. The coefficients change by .02 or less with the inclusion of 2008.

The trial-heat and economy equation indicates that Barack Obama is likely to receive 52.0% of the two-party vote. Based on the distribution of out-of-sample errors, the likelihood that Obama will receive a plurality of the national popular vote is 83%. The forecast is based on President Obama having 52.7% of the two-party support in Gallup's preference poll released on September 10 (Gallup 2012) and an annualized real GDP growth rate of 1.7% in the second quarter (April–June) of 2012 as indicated by the BEA's second estimate released at the end of August (Bureau of Economic Analysis 2012). The growth rate is converted to an economic index by subtracting 2.5 percentage points from it. It is not halved in 2012, because the in-party candidate is the incumbent.

The convention bump and economy equation indicates that Barack Obama is likely to receive 51.3% of the two-party vote. Based on out-of-sample errors, the likelihood of an Obama plurality is 67%. This forecast is based on President Obama having 49.5% of the support of registered voters in Gallup's last preference poll before the conventions, a net convention bump for President Obama of 3.2%, and the economic variable used in the trial-heat equation.