10/23/12 – Politics Starts at the Water’s Edge

Posted by Brad McMillan, CFA, CAIA, MAI

This entry was posted on Oct 23, 2012 10:16:53 AM

and tagged Politics and the Economy

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Contrary to the old adage that politics stops at the water’s edge, last night’s presidential debate started there and headed straight into politics. The debate made the front page of the U.S. papers, unsurprisingly, but it was a bit of a surprise that there was no real consensus as to who won or lost. To the extent that both candidates had something to lose here, that makes sense. Romney wanted to avoid looking out of his depth or making some obvious misstatement, and Obama had to continue to seem tough and engaged. Both hit their marks, but neither seemed to go much beyond that.

Overall, the race has tightened quite a bit since before the first debate, and, nationally, it seems to be pretty close to a draw. Elections aren’t decided nationally, though, but in the Electoral College based on state results, and there the president still appears to have an edge. Nate Silver has a good article on page A10 of the New York Times (NYT)—“Cutting to the Chase: What Are the Odds?”—that addresses exactly that. Basically, per his analysis, Obama still has a two-thirds chance of winning, based largely on his slight but persistent polling advantages in some of the battleground states.

The question of what is driving the Romney resurgence is an interesting one. The NYT has one take—that Romney has moved to the center. There are two articles on page A11 that dig into the idea, and I have to say, based on the debates, it makes some sense. The emergence of “Massachusetts Mitt” in the first debate, which I have mentioned before, would have sunk Romney during the Republican primary, and his statement that he would not intervene in Syria reflects a less hawkish candidate than in the primary. Another interesting emerging theme is how much Romney and Obama actually agree on many issues. This is good politics, as right now, both are playing for the center.

The Wall Street Journal (WSJ) has a slightly different take on the tightening of the race. An article on page A6 fields two competing theories: the first, that the race was always going to be close and the tightening was inevitable, is better for Obama; the second, that the tightening reflects a continuing erosion of Obama’s support, is better for Romney. If the first is true, then a move to the center by Romney is not driving his improvement; if the second is true, then that move may be exactly what is causing centrist voters to move away from the president.

Not that anyone is taking anything for granted. Both sides are going after their core supporters while wooing the middle. “GOP Presses Evangelicals to Vote” (WSJ, p. A7) talks about how the focus on turnout in key battleground states may be a key driver of the ultimate result.

As this is written, the odds still favor Obama on Intrade.com (59 percent) and FiveThirtyEight (70.3 percent). The Intrade number is down, but Nate Silver’s number is holding. Overall, the race remains in flux, but Obama is still the man to beat.

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