53.7 Percent Chance that Democrats Could Control Washington in 2012

What’s the Likelihood that Democrats Could Control Washington in 2012?

December 31, 2011

David Rothschild, The Signal - As of December 31, 2011 the likelihood of the Democrats retaining the Presidency is 53.7 percent, retaining the Senate is 20.7 percent, and taking the House is 32.7 percent. This is compiled from Betfair, Intrade, and Iowa Electronic Market prediction market data.

The chart shows how these three main predictions have shifted during the course of the year.

Obama had a small spike when Osama Bin Laden was captured, but otherwise he's been on a slow decline for most of the summer and early fall, with a slow resurgence in the late fall and early winter.

The Senate has been relatively steady with small spikes corresponding to shifts in specific seats, including retirements and announcements of new candidates. The House has shown the most flux with a steep decline that mirrored the President's, but continued longer into the fall. Yet, it has taken a sharp turn towards the Democrats in recent weeks:

Likelihood of Democratic Victory in President, Senate, and House_Dec 31

Sources: Betfair, Intrade, and Iowa Electronic Market

Obama has been polling well against both the generic Republican and the specific Republicans (with Mitt Romney being the most likely opponent, followed by Newt Gingrich, Ron Paul, and Rick Santorum). The Real Clear Politics aggregated polling trend has him up 1.6 percentage points on Romney and down 0.5 percentage points on the "generic Republican." Other data, including approval numbers and economic indicators, have been moving in his direction, but are still far from ensuring his reelection. Key indicators, however, are still a few months away—they will come at the end of the first and second quarter of the election year.

What does that 53.7 percent mean for Obama? Not too much at this moment. With the election 10 months away, markets are going to be conservative. Still, markets are predicting that numbers will continue to move in his favor.

As for holding on to the Senate, it is not looking good for the Democrats. The Democrats control 23 of 33 seats up for election and are facing slew of retirements, including Ben Nelson from Nebraska this week.

In the House, things have been looking up for the Democrats lately, yet the Republicans are still likely to retain control. The census-induced redistricting of House seats likely helps the Republicans in the House. Yet, the recent Democratic creep forward is likely a result of record low Congressional approval numbers. It also coincides Republican squabbling over the payroll tax issue, which stemmed from lack of cohesion in the Republican-controlled House. The Wall Street Journal's editorial board called this a fiasco that could help Obama get reelected, but the reverberations for this type of event may be felt in House elections as well.

David Rothschild is an economist at Yahoo! Research. He has a Ph.D. in applied economics from the Wharton School of Business at the University of Pennsylvania. His dissertation is in creating aggregated forecasts from individual-level information. Follow him on Twitter @DavMicRot and email him at thesignal@yahoo-inc.com.