Yale's Fair Predicts Republican Win

An economic formula developed by Yale University's Ray Fair suggests Republicans will take the House by a narrow margin

(Bloomberg) — Democrats may lose control of the U.S. House of Representatives in the November elections after midterm contests that will be closer than polls suggest, according to Yale University economist Ray Fair.

Fair, who has developed a formula using economic data that would have correctly predicted all but three presidential elections since 1916, projects that Democrats will get 49.3 percent of the national vote in this year's congressional elections.

"They're going to get less than half of the two-party vote in the House," the professor at the New Haven, Connecticut-based university said in a telephone interview. "It looks like the election will be relatively close." Fair's assessment contrasts with polls that show Democrats trailing Republicans by as many as 13 percentage points when voters are asked which party they plan to support.

A Gallup survey of 1,540 registered voters Aug. 23-29 found Republican candidates preferred by 51 percent to 41 percent who favored Democrats. The 10-point lead held by Republicans is the largest in the history of Gallup's mid-term congressional election polling.

In a Washington Post-ABC News poll conducted Aug. 30 to Sept. 2, 53 percent of registered voters said they would vote for the Republican candidate, compared with 40 percent who backed the Democrat.

Economy and Elections

Republicans, who need a net gain of 39 seats to take control of the 435-member House, are ahead of Democrats by a little less than 1.5 percentage points, according to Fair's model. "That could translate into a loss of the House," he said.

Fair links the decline of Democrats' fortunes to U.S. economic growth that has been less than 3.2 percent at an annual rate for all but one quarter since the start of 2009. In January, Fair's model projected a 51.6 percent share of the vote for Democrats as the economy showed signs of improvement.

"It looked like in January we were maybe going to have some strong growth," he said. 'Noticeable Drop' Sluggish growth "knocked off a few percentage points," Fair said. "That's a noticeable drop." The world's largest economy expanded at an annual pace of 1.6 percent in the second quarter, the Commerce Department reported on Aug. 27, down from an initial estimate of 2.4 percent, reflecting smaller gains in inventories and a wider trade deficit. "The economy obviously has an effect on votes," Fair said.

Fair measures that effect by plugging the U.S. inflation rate and the number of quarters preceding the election that economic growth was greater than 3.2 percent at an annual rate. For the current congressional election, Fair counts one quarter of good growth. To track inflation, Fair uses a measurement that adjusts gross domestic product for inflation, which has averaged .77 percent since the beginning of 2009.

Under Fair's equation, low inflation benefits the incumbent party. Fair, 67, wrote his first paper on an equation to predict election outcomes in 1978. He refined the theory before revamping it in 1992 after failing to predict that year's presidential election.

Accurate Predictions

Since then, Fair said, "the presidential vote equation has done reasonably," accurately predicting each election. In 2008, he came within 1.1 percentage point of Barack Obama's victory margin over Republican John McCain. During the 2008 elections, Fair also developed his congressional vote equation.

Low presidential approval ratings in opinion polls can translate into big congressional losses. Former President Bill Clinton's Democratic Party lost 54 House seats in the 1994 congressional elections when his public approval rating was 39 percent two months before the election. Ronald Reagan's 42 percent approval rating was followed by Republican losses of 26 seats in 1982.

Democrats in 1982 beat Republicans in the national vote cast in congressional elections by 12 percentage points. In 1994, Republicans bested Democrats by 7 points.

Obama's Rating

Obama's approval rating has hovered around 50 percent for much of this year in Gallup's three-day average. It was 46 percent as of Sept. 6; the record low was 41 percent last month. White House Press Secretary Robert Gibbs dismissed the opinion surveys. "The American people are not concerned about the president's poll numbers," Gibbs told reporters at a White House briefing yesterday.

Though Fair's latest figures are from July 30, he said he doesn't expect his final pre-election estimate at the end of October to shift his prediction for the outcome of the midterms. It's unlikely economic growth in the third quarter will be strong enough to give Democrats a bounce and inflation won't change enough to effect his formula's result. Voters may respond to worse economic news.

"What happens between now and the election on the economy obviously does have some effect on the vote, it's just that it's too fine of changes for me to pick up," he said. Non-partisan analyst Charlie Cook yesterday predicted that Republicans would gain at least 40 seats and take control of the 435-member House.

Fair doesn't try to figure out what his vote breakdown would mean seat-by-seat in the House. He said the vagaries of individual House districts make that difficult. Still, the overall percentage can be useful. "The percent of a two-party vote of the House is not a bad measure of what I'm after," he said. "It's an indication of what people think of the two parties."

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE