Blog
David M Rothschild Posted on

On Thursday Mitt Romney fell below 50 percent likelihood to attain the Republican nomination for the first time since Oct. 3.

The chart shows the likelihood of attaining the nomination for the four leading candidates since Thanksgiving morning. A slight downward trend for Romney turned into a downward slide directly following Sunday’s Union Leader endorsement of Newt Gingrich, shown with the purple line:

Click Here for the Full Text.

Continue Reading
David M Rothschild Posted on

As the effective income tax rate has lessened, the payroll tax is an increasingly large share of the median American family’s tax bill and thus has become increasingly salient to many Americans. The chart, constructed from Congressional Budget Office data, shows how taxes have changed in the past few decades for the middle quintile of American households (i.e., those are between the 40th and 60th income level). In 1979, payroll and income taxes were about the same percentage of the median family’s tax burden. Now the payroll tax is approaching 70 percent of the median family’s tax burden and the income tax is closer to 20 percent.

Not only is the payroll tax increasingly meaningful to many Americans, the payroll tax rate has a very direct impact on the U.S. economy; the chief economist for Moody’s predicts that returning payroll taxes to 6.2 percent for employees and employers would shave about 1.7% percent off of GDP. The current payroll tax deduction provides about an additional $1,000 per median American family; the proposed payroll tax deduction would provide 50 percent more, or $1,500 per median American family. Since most American families do not have excess income right now, they would spend much of the extra money stimulating the economy.

Click Here for the Full Text.

Continue Reading
David M Rothschild Posted on

Nate Silver argues in the New York Times that we should not judge Union Leader endorsement (given to Newt Gingrich on Sunday) on whether the candidate wins, but on whether the candidate gains in the New Hampshire polls.

The markets tell a different story: The endorsement’s biggest benefit will not be in New Hampshire at all. It will be in helping Gingrich become the final anyone-but-Romney candidate. The right wing Daily Caller noted this possible benefit; it quotes Republican consultant Dan Hazelwood that “[the endorsement] is a blow to everyone [else] trying to be the anti-Romney.”

The chart shows the likelihood of winning the Iowa and New Hampshire primary contest for Gingrich and Romney over the last two days. The likelihood in New Hampshire moved slightly on Sunday morning, but is very flat. Romney is still in complete control with 78.1 likelihood of victory. Not shown on the chart, the race for second place in New Hampshire also is steady, with Gingrich leading with 39 percent likelihood. Yet, the likelihood in Iowa has changed dramatically, with Romney’s small lead now a large lead for Gingrich (36.0 percent to Romney’s 24.5 percent).

Click Here for the Full Text.

Continue Reading
David M Rothschild Posted on

With his polish and confidence, Gingrich looks and sounds like a much more plausible anyone-but-Romney candidate than his immediate predecessors in that spot proved to be. Yet the prediction markets still call out Romney as the heavy frontrunner, no matter what the polls may be saying today.

Click Here for the Full Text.

Continue Reading
David M Rothschild Posted on

Should the present wave of Newt-mentum crest and then flag, can anyone else in the field effectively seize the anyone-but-Romney standard? A survey of the prediction markets suggests that’s unlikely.

Click Here for the Full Text.

Continue Reading
David M Rothschild Posted on

President Barack Obama is now leading in polls against each of the individual Republican opponents he may face on Election Day. And for the first time in months, Obama is leading against a “generic Republican” opponent. It’s true that polls conducted 350 days before an election have very little predictive power–but they are a meaningful indicator of the public mood as the primary season lurches into gear.

Click Here for the Full Text.

Continue Reading
David M Rothschild Posted on

The polls have Gingrich moving towards first place with 17.6 in Real Clear Politics’ latest aggregated trend, while Herman Cain is falling fast and Mitt Romney is staying steady.

The prediction markets, such as Betfair and Intrade, have Gingrich solidifying his second place standing at 15.3 percent likelihood to win the Republican nomination, but well below Romney at 68.5 percent likelihood.

Polls describe the world as it is today and prediction markets describe the world on Election Day. The chart below shows how they vary over the last 10 days and the news over Gingrich’s involvement with Freddie Mac is a perfect illustration of why they differ.

Click Here for the Full Text.

Continue Reading
David M Rothschild Posted on

Mitt Romney remained the clear frontrunner for the nomination with a 68.9 percent likelihood of winning, but Gingrich is the latest anyone-but-Romney candidate at 14 percent likelihood. The former speaker of the house benefited as Herman Cain’s sexual harassment problems grew worse and Rick Perry had a memory failure at Wednesday night’s Michigan debate.

It is not just me, political pundits, following the recent polls, are finally agreeing that Republican voters are taking a serious look at Gingrich. Yet, his 14.0 percent likelihood of gaining the nomination says less about Gingrich and more about Romney. Gingrich is the most recent person to take the largest share of the likelihood that Romney does not get the nomination, currently at 31.1 percent. Despite his time as speaker of the house, current Republican voters have not vetted him as intensely as they they have previous Romney rivals and, at 14.0 percent, it is still unlikely that he will be propelled to victory after they do.

Click Here for the Full Text.

Continue Reading
David M Rothschild Posted on

In professional football the Green Bay Packers are undefeated half way through the 2011 season–and forecasters in the prediction markets give them a 27.8 percent likelihood of winning the Super Bowl. The new Twilight movie, The Twilight Saga: Breaking Dawn Part 1, opens next weekend–with the markets predicting a huge opening weekend box office receipt of about $152.9 million, with a running total of $318.5 million over the first four weekends the movie is out. There is about a 25-30 percent likelihood that the global energy and contracting firm Halliburton will see its stock price top $40 per share in a month’s time. (It’s currently trading at 37.21.) And in the global political arena, the markets give Ali Abdullah Saleh, the president of Yemen, a 25 percent likelihood of losing power before the end of the year.

All four of these above predictions are derived from different markets. The sports prediction from Betfair, the box office prediction from the Hollywood Stock Exchange, the stock prediction from the options market, and the political prediction from Intrade. All of these markets have different trading protocols, which can produce distinctive quirks in their prediction models. Among other things, different transaction costs shift incentives (and Hollywood Stock Exchange does not use real money) and different accounting procedures require different methods of calculating probabilities from pricing.

Click Here for the Full Text.

Continue Reading
David M Rothschild Posted on

In the Senate elections, the campaign math is not favoring the Democrats. Simply put, Democrats have many more vulnerable seats up for grabs next November than Republicans do. Democrats control 23 of the 33 seats up for election next year—and at least six senators who caucus with the Democrats are going to retire, while two more Democratic incumbents have yet to confirm whether they will run for re-election. The number of Republican senators who are not up for re-election this cycle, meanwhile, is just two.

In the House elections, the 2010 Census looms over the 2012 elections—in a way that again favors the Republicans. In the first election after every census the government reapportions the seats between the states to reflect population shifts. In general, seats were lost in the Northeast and Midwest, where Democrats have traditionally performed well; and the Southeast and Southwest—traditional strongholds for the GOP–gained seats. Republicans control most of the state legislatures in the 10 states picking up additional House seats– including 4 seats in the heavily Republican state of Texas–the new congressional districts will likely be drawn up with boundaries favoring the Republicans. That is the simplest kind of political math.

Click Here for the Full Text.

Continue Reading