A recent comment to yesterday’s Citibank Panic/Euphoria discussion led to this post being inserted in the weekend linkfest:

According to Tradesports, the odds of the Republican Party retaining control of each Congressional House in the 2006 Mid Term Election is mixed.

In the Senate, only one third of the 100 seats are up for re-election. Votes are staggered, so every 2 years a different third of the 6-year term seats come up. The odds strongly favor GOP retention of the Senate. The Democrats would need to capture 6 seats, something previously viewed as rather unlikely — not impossible, but unlikely.

Although several races have tightened, this remains a long shot for the minority party. The MSM is, as always, focused on the horse races but not the issues. See Race for Senate control tightens for example.   

When we go to the most recent betting on the outcomes, the senate appears to be rather safe. Using trend or technical analysis, we see the GOP retention of Senate has been consistently above 70%; It has recently dipped as Tennessee and Virginia — formerly "safe seats" — have become competitive.  But it would take a significant break of 70 to suggest this was anything but a long-shot.

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Senate Trading

Ts_senate

via Tradesports

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When it comes control of the House, however, the prediction markets present a very different picture. All 435 seats are up for grabs. 

Its also one that lends itself even more to TA:

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Ts_house

via Tradesports

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From last November til today, we see a fairly well maintained down trend. Recently, that was almost reversed on an increase in volume since hitting lows of 40% in September. That was most likely the result of a 30% drop ingasoline prices, a 20+% in Crude Oil prices, and a strong post summer rally in the stock markets.

However, the Foley/Page scandal has now reversed that. On even bigger volume, the downtrend has been maintained, and the House odds are once again near low 40s.

If the election were held today, the Senate would stay GOP, while the House would shift to the Democrats.

~~~

There 2 additional notes:  I have long complained that the relative thinness of these markets — the
number of traders and the dollar amounts at issue — can make their
results somewhat suspect. For more on this, see our 2004 critique, Iowa and Prediction Markets.   

Second, I do not want to see the comments devolve into a political shooting match. The topic at hand is the odds of a change in the Senate/House control — not the specific politics of each party. (For the record,  I am an Independent).

Category: Politics, Psychology, Technical Analysis

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

42 Responses to “Odds of GOP Retaining Congressional Control”

  1. advsys says:

    I know that you wanted to stay away from a political discussion. I just feel too strongly about the big picture here that I can not resist.

    My point is that I don’t think it matters one whit which party has a majority. I think we need to look at the system itself. Something is broken. Something that is not about what party you are from.

    What is lacking are people with a moral compass. People who actually try to make things better for America over the long haul.

    There is an inevitable part of that job that requires one to be a quide to us all for how we should live our lives.

    change the choices, so that I am not picking which party but where I get to pick between someone who will waste my tax dollars or someone who will get the budget back on track. Then I would care about what are the odds of one over the other.

  2. V L says:

    I am a republican and I am not happy about the job GOP has been doing (current GOP really suck); all of their out of control spending and pork makes me sick to hear. There is no leadership. They are not organized and not focused on the real issues. How can I make them to change and to start listening to their base? How?
    I am considering teaching them a lesson and voting for a democrat. In addition, many of the republicans just simply have to go (not only leave the Washington but also leave the party)

  3. brion says:

    Yup. House will go to Democrats…Senate will remain in the meaty paws of the “borrow and spend” Rethuglicans ;) —couldn’t resist—

  4. Tom O says:

    I follow political news pretty closely. Most of the surveys I see tell me that in the absence of some new factor influencing the election, the Dem’s almost certainly will control the House, and have a 50/50 chance at the Senate.

    I wonder if there is an structural Republican bias in the futures market, in that the great majority of participants are probably Republicans.

  5. brion says:

    “What is lacking are people with a moral compass”….

    advsys, i couldn’t -disagree- more with you.

    The answer is simple.
    You want higher caliber people representing the people? Elect the people instead of the predators.
    How? Change the Rules of the game…

    Publicly financed campaigns and
    real Lobbying reform.
    Ba Da Bing.
    It really is….that simple.

    In the meantime, fer god’ssake people, vote Democrat this Fall.

  6. wunsacon says:

    ——— INSTANT RUN-OFF VOTING (IRV) ———

    Please read about it elsewhere.

  7. V L says:

    Unfortunately GOP has become nothing more but borrow, spend, put America into debt and do nothing party. It is possible that GOP has already bankrupted the country and we do not know about it because of their “Enron-style” of reporting.

    “Washington’s Enron-style accounting is now so widespread and so deeply ingrained; the nation could be bankrupt and not even know it.”
    The Greatest Scam of All Time (by Martin Weiss)

    http://www.moneyandmarkets.com/press.asp?rls_id=427&cat_id=6

  8. ken says:

    The overall market is made of of tens of thousands of people making tens of thousands of decisions on a daily basis. This is supposed to produce an efficient market which discounts all information, speculative and factual.

    With this in mind I think it is clear that the market is discounting a Democratic win in either the House, Senate or both. That is why the market has been rallying each time it looks more certain for Democrats.

    A word of caution however: Once it becomes certain Democrats will actually win, expect a market correction. If this doesn’t take place before the election it will certainly happen following the election.

  9. brion says:

    Is Time magazine top-ticking the GOP “revolution”?
    ..or is it a contrary indicator?;)

    http://www.time.com/time/magazine/article/0,9171,1543874,00.html

    ~~~
    BR:

    Actually, they already did — April of last year!

    See this: Has Time magazine pulled a ‘New Coke’ with their ‘Ann Coulter’ cover? Since then, Presdient Bush and GOP poll rartings have been pretty much straight down…

  10. muckdog says:

    What makes the House change tougher than the poll results show is gerrymandering. Only 3 dozen House races are even contestable, and most of those are already held by Democrats. Yes, I imagine in contested races the Democrats have the advantage. But I’m not sure if most folks are even that aware of the Foley mess. Or even care. Most folks vote their pocketbooks.

  11. Fred says:

    This October surprise was sprung a bit early.

  12. RW says:

    It would take some serious regulation WRT election financing, gerrymandering, franking, influence peddling, voting, etc to make the US congressional races look anything like a ‘free’ market, of ideas or anything else. By extension that suggests, to me at least, that any kind of market approach to predicting election results would not likely work very well even if volume was adequate.

    For what it’s worth though I tend to side w/ muckdog’s analysis — the rules favor incumbents so changes are not likely to be great — current momentum appears to give Democrats a slight edge in the House, less so in the Senate; that obviously could change as November approaches. I also expect campaign tactics and rhetoric to become increasingly ugly — look for more ‘outings,’ ‘October surprises,’ character assassination, voter fraud, etc.

    IOW incumbents with strong stomachs (and an appropriate disdain for inconvenient facts) who possess a skilled PR crew, good advertising budget and well disciplined shock troops will all survive handily. JMO

  13. Kevin_r says:

    The second question that arises while honoring Barry’s request to not discuss the question of who should win, is what the outcome will mean for the markets and investors . Barry has pointed out that profits as a percentage of GNP are at a historic high and likely to revert to mean. Economists hotly debate whether this is due to factors beyond partisan politics, for example increased production in China holding down wages but generating profits, or due to policies specific to the current party in charge in Washington.
    Personally, I think that if the Democrats win the House, this will have a larger impact than expected on the psychology of the country and this may affect markets.

  14. Critic says:

    Yes, don’t vote for a Dem, whatever you do. We can’t relive the long nightmare of peace and prosperity that we had when Clinton was in office. And we’re much better off increasing our national debt by 500 Billion a year than we were with those surpluses.

    I was contributing to Republican candidates as recently as four years ago before the moderates and fiscal conservatives were all shut out of the party. Now I’m around 20K into Dem candidates this cycle as the best investment I can make in my portfolio, and as security for my kids’ future against Christian and Muslim fundamentalists.

  15. wcw says:

    I disagree; disgust with officeholder behavior is a powerful motivator. The same revulsion at GOP behavior turned me from a reliable, loony-left protest vote to a party-line (D) voter. It does indeed feel a bit like shooting my dog; it’s painful, but necessary, since he has rabies.

    On-topic, like Barry I have little respect for prediction markets. Pre-Foley, I thought both houses would move a little, tiny bit more Democratic, but not enough for either to turn. Post-Foley, I think there is now a chance the House turns, though a small one (perhaps 1/3) and still no chance in the Senate. If the Senate goes, the House will have gone already and it will be like 1994. I don’t see that.

    If the stock market is going down into Nov. 7, I shall consider buying out-of-the-money calls.

  16. GRL says:

    “I am considering teaching them a lesson and voting for a democrat.”

    I consider myself a loyal Republican, though I have not been as involved recently as in the past for a number of reasons, not the least of which is disgust, not just with Foley but with the way the Republican controlled congress has conducted itself and policy.

    While I would not vote Democratic, I probably will vote Libertarian in a number of races where I am less than thrilled with the Republican candidates (specifically, being in California, that would be for governor and U.S. senator).

  17. V L says:

    “real republicans who are dissatisfied with GOP performance (i am one) would never consider voting Dem an option”

    How can I make them to change and to start listening to their base? How?
    I am open to your suggestions.

    I voted for republicans and Bush (never liked him, but the alternatives were huge disasters) in the past.
    I had voted for an idiot in the past simply because he was a republican.

    Should I vote for idiots again simply because they are republicans?

    I really miss the days of Newt Gingrich. It seems GOP functions better when they are in minority.

    “and the new debt our govt is taking on allows us to finance American security for the next century without having to raise taxes”

    For you it is OK to borrow and bankrupt America as long as there are no new taxes.
    Can these borrowing continue indefinitely? How long can we continue borrowing and consume? We would have to stop borrowing at some point. Do you think it will be easier to stop borrowing today or a few years from now?

    What about NO to new borrowing and NO to new taxes? To bad if some special interest groups will get upset about not getting government funding – just say NO!

    “deficit spending is good … our debt-to-GDP ratio is still shrinking…”

    Really??? Debt-to-GDP ratio is not shrinking if you use real GDP (adjusted to true inflation GDP)

    You forgot to mention all time high for the Dow (a.k.a. an inflationary illusion – adjusted for the CPI the Dow’s 2000 peak should be at least 14,000 and if you take into consideration that CPI understates true inflation by 2-3% it should be at least 16,000).

    I am not a commie nor a Dem but I know this is not good (never had been in the past) when there is such rapidly growing gap between top 5% (compounding their wealth at record levels) and middle class (getting into debt at record levels).

    The gap is probably one of the main reasons as to why Dems will take over the House.
    Maybe GOP will wake up then and we will see somebody like Newt Gingrich.

  18. Pen Island says:

    I’ve been hearing more about the topic of required voting lately. Apparently Austrialia does it (you get fined if you don’t vote). Seems like a small price to pay and politicians won’t need to spend so much time digging up potential voters (ie getting the wackos all worked up). Anyone know anymore on this subject?

  19. km4 says:

    House: Dems +20 to 22 ( they get control )

    Senate: Dems +4 to + 6 ( outside chance to win control )

  20. wcw says:

    On predictions, put me down for D+12 House, D+4 Senate — but we have another month of ad buys, news flow and polling to come.

  21. brion says:

    “i would never consider voting Democrat”…..

    Really?

    Yea. Because they are commies and traitors and they RAISE TAXES!

    Taxes.

    You Rethugs want a country without taxes?
    Try Somalia…. or Haiti. Try the literally sinking island of Vanuatu perhaps?
    an oil rich shiekdom….?
    HALF of Mexico’s economy is off the books…Their wealthy AND their poor hate those damn taxes. So much so that it seems like HALF their population has moved here.

    Taxes are a hallmark of civilization. (i will now explain the obvious to all you uncivilized Republican “read my lips” readers out there) They pay for roads, bridges, rail,military,hospitals, schools,trash,parks, social security, medicare, veterans hospitals, coast guard,police and fire services, paramedics….

    or–if u r a republican–
    taxes pay for “bridges to nowhere, star wars, elective wars, corporate welfare, wealthy-fare (Donor base kickbacks), Medicare prescription drug benefits that benefit Big pharma, useless (but lucrative) weapons systems, cleaning up the environment after allowing big Corps to foul it (cost externalization) and LOTS of propaganda amongst dozens of other scams.
    When Republicans hold power this country is up for sale to the lowest bidder with a few “tax-relief” bones thrown to joe 6-pack.

    The republican party are nothing but ticks on the body politic.

  22. brion says:

    oh, and don’t forget our new beaurocracy with the strangely Nazi sounding name……

    DEPARTMENT OF HOMELAND SECURITY

    another giant scam.
    Another result of putting people who have nothing but contempt for government in charge of our government. Republicans.

    btw The 1st person to say “ALL politicians are alike” gets a cyber boot up his ass.

    The next person to say commie/liberal wins a date with Foley.

  23. ken says:

    Regarding taxes. I used to think that Senator McCain was a pretty decent candidate for higher office. Then I found out that he has served in the Senate for 26 years during which time the size and spending of the US government tripled. In all of those programs, which benefited his constituents, he never found a single one worth paying for. In other words in all that time he never once voted for any kind of tax to pay for the governments spending.

    Think about that. That is so irresponsible and just plain stupid it is beyond words.

    McCain thinks that nothing the government does is worth paying for.

    How can people like that be taken seriously?

  24. Brian says:

    It seems like PageGate is something even the Democrats can’t screw up. All the weird conspiracy theories about George Soros and the like show that the Republicans are really off their game right now. That’s not going to cut it guys. The decadent stench floating off the corpse of conservatism would make a hynea barf.

    Maybe stocks are going up because they see sweet, sweet gridlock on the way. Dems taking the house would be a start.

    Here’s what I want in an ideal world:

    1) Dem president

    2) Senate narrowly controlled by Republicans with moderate Reps being the swing votes and

    3) House run by the most kooky wingnuts available.

    Nothing would happen!

  25. Bob A says:

    What’s interesting is the apparent lack of even the slightest concern by ‘the market’, CNBC, Larry Kudlow, WSJ, etc about the possiblity of Democrats taking over congress. One might think that if that was going to happen (Democrat control, higher taxes, inquisition of administration, etc) the market would be pulling in its horns… screaming bloody murder… since we all know from Larry Kudlow that higher taxes and Democrats in power would destroy the economy if not the world.

    Perhaps Democrat house and Republican senate/President might just mean two years of gridlock the Republicans could blame on Democrats.

    Maybe they know they have other tricks up their sleeves. Or maybe they just want to suck as much new money as they can into the market before crying wolf in the last weeks before the election. Or maybe it’s just what has become typical right side thinking… bury your head in the sand and hope for something good to happen. I don’t know.. but it does strike me as odd.

  26. V L says:

    “House run by the most kooky wingnuts available”

    You will get your wish in November plus the bonus, courtesy of Incompetent Republican Party: Madam Speaker Nancy Patricia D’Alesandro Pelosi.

    If republicans will not wake up, you will get your second wish: Madam President Hillary Rodham Clinton (I am getting chills just from writing it)

  27. whipsaw says:

    per Brian:
    “It seems like PageGate is something even the Democrats can’t screw up.”

    pffft, if there is a way to choke, they’ll find it. Short of Hastert and the others being filmed engaging in cannibalism in the House dining room, there is always room for the democrats to throw everything away.

    What’s interesting is how variable the actual impact of all of this Foley related stuff is. For somebody like me who decided years ago that the gops were all just odious Targzissians whose mission is to create a Global Corporate Welfare Hegemony at any cost, nothing is surprising. For most other people, it isn’t that significant compared to all of the other things that have put Bush’s numbers in the tank. But for the Taleban Wing of the gops, the 20% who will not be denied the right to believe whatever is told to them as long as it singles out somebody different from them for attack and begins with ‘God said to me,’ this has got to be a big deal. A Sodomite has moved amongst them, perhaps even eyed the asses of their sons while accepting their monetary love offerings? And the “leadership” knew about him?

    This is the kind of thing that results in third parties, but for now it means that they probably won’t be turning out to vote. I share the general view that the democrats will win the House but not the Senate, mainly because there aren’t enough senate seats up. But when OBL’s new campaign tape suddenly appears around October 30th, the bets are off.

  28. diva says:

    “all politics are local” someone once said.
    We each get a vote for the candidate of our choice within our local districts.
    I never miss an election.
    (and, I am still happy about the 2 different times I got to vote for Ross Perot)
    Come join us independent “swing voters”….. the group that effectively decides each election.
    I’ll never understand why the media wastes so much time on the committed Dems and Repubs. The action is with the swing voters….. who the media/pollsters never do seem to get a handle on. I love it!

  29. noname says:

    not so fast there basicmath, n korean nuculear test means that the market will scream higher since now we KNOW they have them. ’cause if there’s one thing the market hates is uncertainty. I’m being facetious of course. I’d really like to see the bulls ignore this.

  30. dryfly says:

    I think these ‘investors’ on Tradesports are on drugs – med-terms are always local, regardless if there is a popular or unpopular Prez… then it comes down to how the popular/unpopular prez effects the district. Usually not at all.

    My guess is …

    No change in the Senate – maybe GOP gains one more.

    Dems gain at most 5 seats in the House – but could also see GOP maybe gains a few.

    Nothing changes.

    The economy would have had to have really come undone to have Dems win either body and that would’ve had to have happened months ago for the effects to have sunk into the mind of the public.

    My guess is there will be no October Surprise and as a result no November Surprise either. Two more years same as the last two.

  31. dryfly says:

    Okay traders on tradesports only half on drugs – I think they have the Senate right.

    But way off on House – no way the house flips Democratic even if GOP molested every congressional page that ever worked there – people think THEIR representative is an angel even if the rest are scum bags.

  32. muckdog says:

    Hey if the Democrats win the House, we’re back to gridlock in the Federal government. It worked well in the 90s. Budgets weren’t delivered on time. Couldn’t even agree on which day of the week it was.

    Gridlock is effective. Maybe it’d slow down govt spending some.

  33. noname says:

    oh btw, n korea going nuculear, for you wingnuts out there, I’m sure is all Clinton’s fault.

  34. an says:

    maybe Clinton will go off on Chris Wallace again when asked about his North Korea failures

  35. V L says:

    basicmath,

    “so you want me to compare nominal debt to real GDP? inflation cancels out in the ratio, dummy…”

    Yes, instead of comparing nominal debt to fake inflated by 2-3% GDP (inflated because CPI discounts real inflation by 2-3%)! All I am asking is to compare apples to apples and oranges to oranges (instead of apples to oranges).

    Basicmath, you are such a genius and you are not along! There are many like you math geniuses running around Washington and bankrupting America!

    Maybe your distorted math can be also used to explain the rapidly growing gap between top 5% (compounding their wealth at record levels) and middle class (getting deeper into debt at record levels).

    As I said before, Dems will regain control over the House and the main reason for it is the gap (not Foley). In addition, if GOP continues to be in denial you will see Madam President Hillary Rodham Clinton.

  36. jkw says:

    The best way to prevent gerrymandering is to have multi-representative districts. You draw each district to have 4-7 representatives and elect them all through transferable voting. With partial transferable voting, each candidate in an N representative district needs to get just over a 1/(N+1) fraction of the vote. If your first choice wins with a larger fraction than that, part of your vote is transferred to your second choice (if they needed 50k votes and got 100k, then you get a half vote for your second choice). The result is that anyone with support from 1/N percent of the population gets elected. It doesn’t make Gerrymandering impossible, it just makes it very difficult and barely effective.

    Also, since there would be about 120 congressional districts in the entire country, there would be someone retiring from almost all of them in every election cycle. So there would always be challengers to the incumbents. It is much easier to pick off the weakest incumbent out of a group of 5 than it is to win against that incumbent when it is just the two of you.

  37. Chad K says:

    C’mon Barry… You don’t represent all the other Libertarians out there well by just calling yourself “Independent”…. Say it proudly… “I’m a Libertarian”

  38. brion says:

    anyone else get the feeling that folks like sillcommies/basicmath and anon have bodies covered with ugly growths?

  39. jack says:

    RISING TOPS AND BOTTOMS = HOUSE STAYS GOP!!!

  40. Bob A says:

    WSJ chimes in with their take 08/12/06
    http://blogs.wsj.com/washwire/2006/10/12/dem-control-might-help-economy-wsjcom-survey-finds/
    … what took’em so long.

  41. Why Prediction Markets Fail

    Over the years, I have been critical of prediction and futures markets. In particular, the specific ways certain parties misuse them (i.e., politics). However, I am a big believer that markets can generate valuable economic and investing data that can …