Campaign prognostications

I must admit to being much more interested in this particular presidential campaign than I would normally be for three reasons. First, everything is so up in the air. Second, I know the Huckabees personally (Janet worked with me on JBU's Academics Committee of the board of trustees). Third, the parties have espoused such differing positions that I believe this will be a more important election than usual (though Washington gridlock will likely blunt the eventual impact of whatever choice is made).

Before I give my current predictions, I should add the prediction that I should have made in July. Back then, I was looking at prediction markets such as Intrade, and I considered seriously putting $100 on Huckabee back when he was trading at 2% to win in Iowa. Normally, you shouldn't "bet" on any market unless you have "information asymetry" on your side, but because I knew Huckabee personally, I felt that I had such an advantage, and I figured that if he ever could break through into some kind of public limelight, he would catch fire, particularly with Evangelicals in Iowa. That's exactly what's happened. And if I'd actually made my bet, which I didn't, mostly out of laziness, I'd be looking at a 3500% increase in my Huckabee "portfolio" (which is currently trading at 70% to win in Iowa). So much for that extra Christmas cash!

So where does the Republican nominating campaign go from here? The conventional wisdom has been that Huckabee (earlier it was Thompson) is battling with Romney for the social conservative wing of the party while Guliani is battling McCain for the economic/political/foreign policy wing of the party. The winner of these two semi-final rounds will face off on Super-Duper Tuesday (February 5) for all of the marbles.

I've been saying for awhile, however, that this analysis is misguided. The real race is between Huckabee and Romney on the Republican side. The only writer who seems to be on the right track, from my perspective, is David Brooks of the NY Times who seems to "get" why Huckabee is doing well and why he's plausible (most conservative writers, such as Lowry, Will, etc. are looking down their elitist noses way too much for my tastes). His take has been that this is shaping up to be a "postwar" election, which is why "nice guy" centrists who focus on domestic issues and are "fresh faces" are doing well. On the Democratic side, that's Obama (and witness his recent uptick in the polls), and on the Republican side, that's Huckabee and (maybe?) Romney (it should have been Thompson, but he blew his chance). Guiliani, McCain, Edwards, and Clinton fail on two or more of these counts, so in the long run, they'll fail.

That's the overarching narrative. How does this work in practice? Huckabee and Obama win Iowa. Obama is already close in New Hampshire and South Carolina, and his Iowa victory gets him over the hump in these two states as well and from there to the eventual nomination. Huckabee's Iowa victory solidifies later wins in South Carolina and Florida. But Romney still wins New Hampshire and maybe Michigan (edging out Huckabee). At that point, Thompson, McCain, and even Guliani are knocked out. Romney and Huckabee then duke it out the rest of the way. The vitriol of the Republican establishment against Huckabee, however, eventually undoes him, and Romney wins a close race. But with Romney being seen as the less genuine of the two, Obama cruises to victory.

That's my scenario, at any rate. Of course, with Romney trading at 22.4% and Obama trading at 36% to win the Democratic nomination on InTrade, if I bet $100 on each today, and my scenario came true, I would increase my portfolio by about 350% in six months. Or maybe I'll stick with being lazy and not actually bet anything but just say "I told you so" if I turn out to be correct.