The last eight days have been devastating for the McCain campaign. The deepening economic crisis (yesterday's historic market surge notwithstanding) is giving Obama an electoral surge that in the current environment may prove to be insurmountable. While three weeks is the equivalent of three lifetimes in politics, time is running out for McCain to turn this thing around.To fully understand the impact of the economic situation on this race, take a look at the trajectory of our regression analysis vote projection of all public polls. The current regression estimate has McCain down -7.9 points.
The McCain decline since his peak following the convention is startling. While it is unlikely that this trend will hold over the final three weeks (there will probably be some tightening - more on that later), if it did hold McCain would lose by double-digits. Again, the important point is that the McCain descent is real.
Sometimes really smart ideas come from young people and one such example is an analysis that came from a high school student named Arjun Modi, who graphed the trend of the S&P 500 with McCain's vote according to the Gallup Daily Tracker of registered voters. It shows how McCain's drop in vote share accelerated during the stock market crash of the last two weeks.Note the high degree of correlation between the two lines. The question, of course, is whether days like yesterday (when the market surged) will translate into a vote increase for McCain. Time will tell. But we tend to think that the underlying economic turmoil (job losses, slowing of retail and a weak housing market) will mitigate the upside for McCain. However any improvement that moves the economy to a page two story will be a help for the Republican.
Here is our up-to-the-minute assessment of the political landscape:
- The President just spoke (8:05 am) and announced that the Federal Government would take an equity stake in the nation's largest banks. This will help free up the credit market and it will keep the financial situation on the front pages for at least another two days.
- Yesterday's market surge (936 points for the Dow) was the largest point gain ever and the largest percentage gain since 1933. As of this writing, Japan's Nikkei index was up 14% and the U.S. market looks to open higher. This will not erase the memory of last week. The Dow Jones industrials lost 18% last week - their worst week in history. Regardless of what happens this week, the country experienced a stock market crash and there has been saturation media coverage. Its effect on this political campaign cannot be overstated.
- Last night General Motors announced that it is closing two plants: one in Grand Rapids, MI and the other in Janesville, WI, eliminating 2,700 jobs. The trickle-down effect of the economic crisis is just beginning; this is yet another blow for Team McCain.
- Obama and McCain meet for their final debate tomorrow night in NY and this is the last face-to- face between the two candidates. Obama will try not to lose and McCain has to go for the political jugular. If this is another non-event, Obama will have won all three debates.
- According to the Washington Post, Barack Obama is outspending John McCain by nearly a three-to-one margin on television time in the final weeks of the election. Team Obama's advantage in several battleground states may be even greater. Voters in key states like Pennsylvania, Virginia, Wisconsin and Ohio are seeing four Obama spots for every one McCain television commercial.
Current Political Situation and Issue Handling Measures
Without sounding like a broken record, it bears repeating that we are in one of the longest and deepest periods of voter discontent in modern U.S. history. This compares to 1992, 1979 and 1974. Below is a chart using multiple sources of public and private data over a 25 year period.
Currently more than 80% of the country believes that things are going in the wrong direction. This is an obvious change election environment and it will pervade down-ballot elections, too.
Obama benefits from this but there is more to his lead than the perceived state of the union. In the last three weeks he has taken a large lead over McCain on voter perceptions of his ability to handle issues. According to a recent NBC/WSJ poll, Obama leads McCain by 17 points on which candidate would better handle the economy. In that poll, Obama was perceived as better able to handle the mortgage and housing crisis (a 15-point advantage) and the issue of energy and the cost of gas (six points).
And there's more. According to a CNN/ORC poll done seven days ago, Obama led McCain by 21 points on his ability to handle the economy. In the same poll, Obama is also seen as better able to handle the current financial crisis (21 points) and-get this-the war in Iraq (three points). On virtually every issue (with the exception of terrorism, which McCain wins narrowly) Obama leads McCain. And remember, the economy is far and away the number one issue in the country.
EV Map and Key States
Trends in critical states are all moving toward Obama. In Colorado, a state we've followed closely as a key battleground, the tide has decidedly shifted for Obama in the past two weeks. We are now placing it in the Obama column, giving him 273 relatively safe electoral votes. If he is capable of holding serve in the states he currently leads, he will win the election handily.
Looking at other battleground states, Missouri in particular has to be worrisome for Team McCain. Not only is it the Presidential bellwether, this year it is critical to McCain's electoral math given his slides in Nevada and New Mexico. McCain should be winning in Missouri, and it's unlikely that he can win the Presidency without it.
The only positive--or, at least, the least negative--news for McCain is that Florida and Ohio, worth a whopping 47 electoral votes between them, remain within reach.
This seems like a massive hill for McCain to climb. And it is. We do believe, however, that the gap between the two candidates will close somewhat over the next 14 days. For the most part it will happen naturally (because that is the nature of the electorate in these modern times), though some of it will be driven by McCain attacks on Obama and the continued latent insecurity that many voters have with the Democratic nominee--and to a certain extent the media will latch on to the comeback narrative as well. This week will go a long way toward telling us if that swing back is going to be big enough.
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