Analyzing the Presidential Election

Analyzing the Presidential Election

Underwriting loans is largely an effort to predict the future. We cannot predict the future perfectly, but we can create a bounded rationality in which a likely outcome is expected to occur. It is like predicting the weather. We can’t guarantee 100% of the time it won’t snow in September, but we know the likelihood is relatively low, so it is okay to plan travel and outdoor events then.

We can look at the possible outcome of our next election with predictive tools too. Again, we cannot make a perfect prediction, but we can describe what the likely outcomes look like. The first big mistake people are likely to make is looking at national polls to see which presidential candidate is getting the most potential votes. In the United States, candidates are not elected by a national popular vote, but rather by the electoral college. While it seems counterintuitive to ignore national polls, someone can get elected by having a majority in the electoral college, and not having a majority of the popular vote.

The electoral college is comprised of 538 votes, and a candidate needs to win a majority of those votes, which is a minimum of 270 votes. Each senator and representative counts as 1 electoral vote. As you may know by now, South Dakota and North Dakota each get 3 electoral votes. So looking at the electoral college, which candidate or political party is winning?

CNN has done a great job at summarizing the current state of the electoral map. Based on current polling and historical data, the Republican party has 158 safe votes and 33 votes from states likely to vote for them, to total to a predicted 191 votes. This means the Republicans will need to win 79 votes from battleground states, which are states that show the candidates in equal standings or have a history of switching political parties.

On the other hand, the Democratic party has 201 votes in safe states and 35 votes from states likely to vote for them, for a total of 236 predicted votes. This means the Democrats would only need 34 votes from battleground states, which is less than half of the amount the Republicans need from battleground states.

So what is going on in the battleground states? Based on the highly predictive blog, Clinton would win 293 electoral votes as of today, and Trump would win 244 electoral votes. Compared to previous elections, George W. Bush won his first election with 271 electoral votes, and with 286 electoral votes in his second election. Obama won with 365 electoral votes in his first election, and 332 electoral votes in his second election. suggests the current split in electoral votes gives Clinton a 60.2% chance that she will be elected, and Trump a 39.7% chance. This means if we need to establish a bounded rationality, there is still significant odds that Trump could win, despite having to capture 79 battleground votes.

If I were asked to underwrite the outcome of the election, I would honestly tell people there is no strong front-runner. This election will be unlike the wide margins in Obama’s elections, but it is hard to say if it will be a nail-bitter like the George W. Bush elections. We can say it is clear that Clinton has the advantage so far, but there are still three more months to go.