I was surprised that the betting markets had the Democratic Party with a 19% chance of retaking Congress. To do so, they would have to flip nearly 50 seats!
In the modern era, the Republicans have pulled this off twice (1994, 2010), while the Democrats have only reached this number in 1974 (Watergate scandal). That’s because wave elections of the magnitude needed usually occur only in midterm years when the sitting president has an ebb in popularity and the Republican party is stronger voting patterns during midterms.
Perhaps an interesting way to look at the current situation is: right now the Republicans have their largest House majority since just before the stock market crash kicked off the Great Depression.
The challenge of flipping that seems insurmountable in an electorate as polarized as this one.
The press has mostly been focused on Donald Trump dragging down the ticket and Paul Ryan’s attempt to dance with him. So the articles focusing on the chances of the House flipping have actually decreased from previous years because the conventional wisdom is the only incumbents who actually are at risk are Republican U.S. senators in blue or battleground states like (Illinois, Wisconsin, New Hampshire), and (Pennsylvania, Florida, Ohio).
But the betting markets are capturing something the press isn’t: a wave is a wave is a wave, and this year is looking to be a Democratic wave due to raw demographics, being a presidential election year, and Donald Trump. This is compounded by the fact that strategically the Trump campaign is planning on funding and running its logistics by piggybacking off the Republican National Committee. This exacerbates the problem because: 1) it siphons funds and resources from congressional elections to the general; 2) battleground states are ones with large electoral vote counts and have no correlation with contested districts; and 3) the Republicans have increasingly depended financially on large donors via Citizen’s United and outsourced most of the voter outreach and research to third party organizations, so neither the money, nor the knowledge for the republicans is actually in the RNC.
By giving 5-to-1 odds, the markets are saying, “Yeah, it’s going to be a wave, but that’s not enough. But hey, we could always be wrong!” My instincts say it should be closer to 25% than 19% — akin to saying, “It’s possible the wave will be big enough, but it’s still far more likely it’ll take another election year for this wave to crest.”
That’s because I think betting markets have not (yet? ever?) correctly priced in the non-linear impact of gerrymandering. Right now everyone is saying that gerrymandering favors the Republicans. This is certainly true: through gerrymandering, Republican state houses in 2010 has acted as a deep red firewall against a Democratic demographic wave and districts are more partisan than ever because of it. Evidence certainly backs the power of gerrymandering up as, nationally, there were more votes for Democratic congressional candidates than Republican ones in 2012 and 2014, and yet the Republican party gained seats.
Continue reading about the double-edged sword of gerrymandering after the jump