This is the first piece in a series of Special Reports we will be writing on the 2020 US Elections. The first part of this report is a primer on US election cycles – if you are familiar with how the bicameral Congress and President are elected in the United States, please feel free to skip ahead to the second section of this report where we get into our detailed forecasts for this election cycle.
Background on US Elections
Every four years, the United States convulses in an extraordinary spectacle – a mixture of high policy disagreement (economic, foreign policy, national defense, taxation), frantic door-to-door canvassing, speeches at any podium a candidate can find, private appeals to donors both large and small, and the proverbial baby-kissing at every parade or state fair. For all that the process appears artificial or contrived and sometimes downright ridiculous and pandering, elections, as President Obama explained to the Republican Senate after declining to adopt any changes they proposed to his ObamaCare Act, “have consequences,” and these consequences can be serious for investors. As a result, we begin with a primer on the American federal election cycle.
Direct Elections (every 2 or 6 years)
Let’s begin with the most straightforward federal election cycle – the House of Representatives and Senate. There are 435 Congressional Representatives and 100 Senators.[i] The number of Representatives each state sends to Congress is a function of population size determined every ten years by a national census.[ii] The Senate is easier – each of the 50 states simply elects two senators. The number of Senators, as among the states, was intended to guard against the potential oppression resulting from population differences between any two states, like Montana and New York.
Both Congressional Representatives and Senators are elected the same way: by voters casting votes directly, either in-person or by absentee or mail-in ballots in each state, but the election cycles differ. The term of office for members of the House of Representatives is two years, with elections held both at the same time as the Presidential elections and halfway through the presidential term, in “mid-term elections.”[iii] This is a Constitutional requirement.[iv] Congressional Representatives are elected from districts in each state and are elected according to the count of the popular vote. Alternatively, senators serve for six years instead of two, and one-third of that body (Class I, II, and III) stands for election every two years, as per the Constitution.[v] Senators are also elected according to the results of the popular vote in each state. Since there are no federal term limits on elected service in Congress, and most incumbents, enjoying name recognition and franking privileges, are more likely to be re-elected, there is less turnover than one might expect in both houses.
One unfortunate effect of the short election cycles in the United States is that the election cycle has become dominated by the need to raise money. Congressional Representatives are widely understood to be in constant fundraising mode. This makes them susceptible to the corrosive effects of corruption and influence peddling, despite the strict laws that govern fundraising. Theoretically, the Senate, often termed the “millionaire’s club,” is less susceptible given the longer terms and that its members have traditionally possessed significantly greater wealth.
Indirect Elections (every 4 years)
The President of the United States (POTUS) is elected every four years, and this, by contrast to the direct elections decided by popular vote, is an indirect process. The votes to elect the POTUS are cast by the Electors of the Electoral College. The presidential election is held every fourth year on the first Tuesday after the first Monday in November.
Before we attempt to explain the Electoral College process, let us first review how one becomes a mainline presidential candidate. Candidates are selected in primaries that take place in each state and territory. Each party puts forward a slate of candidates for consideration by the voters registered as members of the said party – this year saw a particularly large number of potential Democratic Party candidates, ultimately resulting in the Biden-Harris ticket. The Republicans, holding the presidency, simply put forward the incumbent, President Trump, as a candidate for November 2020. Each party holds state-specific contests by which each candidate competes to win delegates who will then, theoretically, be pledged to vote for the selected candidate at the convention held by each party, usually in the summer before the November election. With the main party candidates selected by delegates at the convention, we can move on to the general election.
The selection of the POTUS is ultimately the task of the Electoral College. The Electoral College is not a physical place – it is a process overseen by the Office of the Federal Register, which coordinates certain functions of the Electoral College between the States and Congress. The Electoral College was created as a compromise in the United States Constitution between having a direct popular vote and a vote solely by the members of Congress. The College is made up of 538 Electors. The Electors are appointed from every state and from the District of Columbia in the same number as each state’s number of members of the House of Representatives and Senators (the census count thus becoming important again).[vi]
The vote cast by each person for President is actually a vote cast for a party’s slate of Electors on that first Tuesday following the first Monday of November every four years (or is a vote for the independent candidate’s Electors), even if it doesn’t appear that way on the ballot. Most states have a winner-take-all approach to the selection of the Electors, meaning that the competing Electors are selected according to the popular vote and the Electors associated with the winners of the popular vote become the Electors for each state (other than for Maine and Nebraska, which allows appointment according to the winner of each Congressional District and gives two electors to the winners of the state as a whole – allowing for split Elector distribution).
Each Elector is, without getting into the details, generally then going to vote for the candidate to whom that Elector was selected for. They are often required, either by state law or because of a pledge they made to the party when selected by the party as an Elector, to vote for the popular-vote candidate. Historically, over 99% of the pledged or promised Electors have voted as they had promised or pledged.
The popular election takes place, et voila, the media then reports (sometimes too early based on exit polling[vii]) who the next POTUS is. Formally, the world actually doesn’t know who the next POTUS is until January 6, after the Electors actually meet to cast their votes and after the Senate and the House of Representatives meet in joint session to count those Electors’ votes.
And that, in a nutshell, is how the Presidential election works in the United States. It may be confusing, it may result in legal challenges, it may even result in confusing explanations in major newspapers about the Electoral College and how it functions, and it may result in anguished cries about how the popular vote is disenfranchised, but you at least now have the facts to know how it works. Elections have consequences, but so do electoral processes. One thing that is helpful to understand about the United States’ process is that it has not, so far, resulted in riots or armed insurrection. Hopefully, that streak continues.
Norbury’s Presidential & Senate Forecasts
To arrive at our presidential election forecasts, we’ve split the states into three categories: one-party states where election history and recent polls point to a given win for either party, states generally regarded as “swing” by observers where we have assigned a 100% probability of either candidate winning based on our own analysis, and the remaining handful of battleground states where we have assigned various probabilities. With these projections, we are forecasting a 94% chance of a Biden presidency.
There are a handful of states on both sides of the aisle that nearly always vote a certain way. Two of the most obvious states are California and New York, where Democrats hold supermajorities in both state legislatures, and each of the past seven (eight in NY) presidential elections have gone blue. On the other side, there are historically red states with large poll disparities like Mississippi and South Carolina, where in each of the past 10 elections, both states have voted Republican. Altogether in this set of states, we count 20 states for President Trump totaling 126 electoral votes and 19 states for Vice President Biden, totaling 219 votes. A detailed list of these states can be found in Table 1 below.
The next set of states requires a more careful assessment to assign to any one candidate. The first of these states is Michigan, where we have assigned a win to Mr. Biden. Our first step was to find and assign a base rate for the probability of either candidate to win this state. We start from an understanding of the history of voting in that state. When looking back at the past twelve presidential elections, we see that the state has voted Republican 50% of the time and Democrat the other 50%. In 2016, the state voted Republican, electing President Trump by a margin of around 10,000 votes, which corresponds to 0.24% of voters. Before 2016, Michigan had voted Democrat in six straight elections. Secondly, we aim to understand how new information can change our base rate. At the time of writing this letter, a weighted average of polls based on the quality of polls shows a 6.9% lead for Mr. Biden over President Trump in Michigan. This poll difference corresponds to more than two standard deviations beyond the margin of error. Combining this information, we are calling Michigan and its 16 electoral votes for Mr. Biden. A similar case can be made for nearby Minnesota, where the state has voted Democrat in each of the past 11 elections. To win the state, President Trump would need to turn approximately 45,000 voters (1.66% of voters1), but currently trails Mr. Biden by over three standard deviations (9.1%) in the aforementioned polls, and thus we are pledging the state of Minnesota and its 10 electoral votes to Mr. Biden. The last of the Midwest regional states in this part of the analysis is Wisconsin; in the previous election, President Trump carried Wisconsin by just under 23,000 votes or 0.82% of voters1. Like Michigan with whom they share a border, Wisconsin had elected seven straight Democrats before electing President Trump in 2016. At present, Mr. Biden enjoys a 6.7% lead in a weighted average of polls by quality, more than two standard deviations beyond the margin of error, and for this reason, we are calling Wisconsin and its 10 electoral votes for Mr. Biden. In New Hampshire, where Hillary Clinton won by 2,700 votes in 2016 (0.39% of voters1), Mr. Biden currently has a 9.5% lead in the aforementioned polls and the state has voted blue in each of the past four elections. With this in mind, we are forecasting New Hampshire and its 4 electoral votes to former Vice President Biden. Finally, we look at Texas, where polls have been historically tight between the two candidates. In 2016, President Trump carried the state by over 800,000 votes (9.43% of voters1) and the state has voted Republican in each of the past ten presidential elections. In the most recent weighted average of polls by quality, President Trump leads Mr. Biden by 2.3%, within the margin of error but gaining ground. Given the disparity in voter turnout in the last election and the historical significance of Texas’ Republican election history, we are currently assigning Texas and its 38 electoral votes to President Trump. Summing the results of our swing state convictions, the count is as follows: 40 additional electoral votes for Mr. Biden, adding to 259 total votes including the states from the first section, and 38 additional electoral college votes for President Trump, totaling 164 votes, including his states from the first section.
The seven remaining states totaling 115 electoral votes are: Arizona, Florida, Georgia, Iowa, North Carolina, Ohio, and Pennsylvania. Of these electoral votes, Mr. Biden only needs 11, a single-state win anywhere but Iowa, to assume the presidency while President Trump needs 106. In Arizona, former Vice President Biden would need to swing over 90,000 voters (3.78%1) from the 2016 election to win the state and while he currently leads in the weighted average polls, Republicans have been elected by the state of Arizona each of the past 5 presidential elections. This includes the last election cycle, where Hillary Clinton enjoyed a 3% lead in pre-debate polls and ultimately lost by 3.5% in exit polls; this is an indication that polls are not sufficiently reflective of the electorate in Arizona and as such, we are assigning a 15% probability of a Biden win in Arizona. Next is Florida, where Mr. Biden currently has a 2.9% lead in the polls, up from 2.2% last week; the last six elections in Florida have been split evenly between Democrats and Republicans. With President Trump having won by slightly more than 110,000 votes (1.24%) in 2016 and the electoral history of Florida, we are assigning a 50% probability of a Biden win in Florida. Onto Georgia, where polls are historically tight (current polls show a 0.6% Biden lead), but President Trump won by over 200,000 votes the last election. For Mr. Biden to win in 2020, he would need to swing over 5% of last election’s voters in a state that has voted Republican in each of the past 7 elections. Given historical precedent in the Peach State, we are assigning a 6% probability for Biden to win Georgia. In Iowa, where President Trump won by an astounding 150,000 voters (10.1%) in 2016, polls are showing him gaining ground. He is now 1.4% ahead of Mr. Biden in weighted average polls by quality, up from 0.4% last week. Although the past 6 elections have been split 50/50 between Democrats and Republicans, former Vice President Biden has a significant amount of ground to make up in 2020 and thus, we are assigning a 10% probability of a Biden win in Iowa. In North Carolina, where changing demographics are making a once-Republican stronghold an important battleground state, Mr. Biden currently enjoys a 1.4% lead in weighted average polls. Last election, President Trump carried the state by over 170,000 votes (3.81% of voters), but one of the two Democrats North Carolina has elected in the past twelve elections was President Barack Obama in 2008. With this in mind, we gave the chance of a Biden win slightly more weight and are assigning a 26% probability to Biden winning North Carolina. Next is Ohio, where like its midwestern neighbor Iowa, President Trump won in a landslide in 2016 (450,000 votes or 8.54%). Mr. Biden’s lead in weighted average polls has shrunk from 1.3% to 0.6% in the past week and the margin he needs to overcome is so wide that we are assigning a 15% probability to Biden winning Ohio. Finally, there is Pennsylvania, where before electing President Trump in 2016, the state had elected six straight Democrats. His margin of victory in Pennsylvania was less than 1% (about 45,000 votes) and Mr. Biden’s margin is currently 6%, twice the margin of error for polls. With this in mind, we are assigning a 75% probability of a Biden win in Pennsylvania.
By combining these probabilities, we arrive at a 94% probability that Mr. Biden wins the presidential race in 2020. Consequently, this means President Trump has a 6% chance of winning.
Turning to the Senate, where there are 35 seats up for election, the Democrats need to win 15 seats for a majority in the case of a Biden win (given the Vice President is the tiebreaker in the Senate) and 16 seats for an outright majority in the case of a Trump re-election. Using a similar framework to the presidential analysis, we use polls and historical data to make our forecasts and arrive at a result where 17 seats remain Republican and 11 Democratic. Interestingly, the leftover seats at the center of our election analysis all belong to incumbent Republicans and are from the following states: Iowa, Maine, North Carolina, Montana, Georgia (Class 2 seat), Colorado, and Arizona. By using data from the Good Judgment Project, we find that Democrats have: a 50% chance to win in Iowa, a 73% chance to win in Maine, a 66% in North Carolina, a 35% in Montana, an 83% chance to win in Colorado, and an 81% chance to win in Arizona. For the Class 2 seat in Georgia, incumbent Republican David Perdue finds himself in a historically tight election by Georgia standards and we see a 23% chance of a Democratic win.
Traditionally, the popular vote tends to be a good indicator of the composition in the House of Representatives. Given the current Democratic majority, consistency with which Representatives are re-elected, and Mr. Biden’s large lead in national polls, we are confidently forecasting a Democratic majority in the House.
Combining the senate probabilities with the presidential probabilities, we arrive at a 71% probability that Democrats achieve majority if only 15 seats are required, and a 37% probability if 16 seats are required. As it stands now, the combined probability of a Blue Wave, where the Democrats win control of Congress and the presidency, is 66.2%. Put in context, since 1972 (the past 12 presidential election cycles), the same party has controlled the House, Senate, and presidency only 25% of the time. Surely, the implications from a policy and governing perspective can be huge. We will be continuously updating these numbers in our weekly Special Reports on the 2020 US Election.
Possibilities Beyond Election Day
While we are forecasting a Biden win and a Blue Wave at the polls on Election Day, we are not ruling out the possibility of litigation or other issues past the day votes are cast; this particular election carries with it an enhanced risk of legal challenge. For different reasons, both parties are primed to think anything other than a clear landslide result will be something that may be tainted by fraud/suppression and will challenge that result. Under the circumstances where we are seeing problems with mail-in ballots and in-person voting due to the pandemic, it seems clear that we are at risk for a potentially sharp legal battle.
The most recent legal battle to look to for lessons is Gore v. Bush, when Albert Gore and the Democratic Party challenged the voting results in Florida which voted, apparently, in favor of George Bush. Voting laws are primarily creatures of state law and anyone who wishes to challenge the fairness of an election would start by filing in state courts in the state in which the challenge is to be lodged. However, and this is what we saw in Gore v. Bush, an aggrieved party at the state court level can apply to the United States Supreme Court for injunctive relief and to stay the state court proceedings. The Supreme Court has to first grant certiorari – in other words, accept the case. What may be different now is that liberal Justice, Ruth Bader Ginsburg, has recently died and the Court has not seated a replacement. This leaves the Court with 8 voting justices and while the Court could grant cert with just four votes, it may be deadlocked (4-4) on an eventual resolution of the full application. The deadlock would result in an effective denial of the application as the Court would not have a majority opinion.
This may be solved by quickly seating the current nominee – Amy Coney Barrett. The problem there is that the Senate must confirm her first and Republican Senators are currently testing positive for Covid-19, which may preclude their in-person attendance at the Senate to vote for her nomination. The margin for confirmation, assuming it goes by party vote, is narrow to begin with only 53 Republican Senators and 47 Democratic Senators (counting the two independent Senators who vote with the Democrats). Losing the attendance of four senators from the Republican side of the aisle could very well doom the Barrett nomination or at least delay it at a critical moment. This consequence of the pandemic – the inability to seat a judicial nominee – may have profound electoral consequences in ways no one could have imagined.
We appreciate you taking the time to read what we hope is the first of many commentaries on what we are seeing and learning. If you have any questions, please don’t hesitate to get in touch with one of us.
The Norbury Partners Team
Table 1: “One-Party” States
|Trump (Electoral Votes)||State||Biden (Electoral Votes)|
|District of Columbia||3|
Table 2: Current Norbury Projections
|Trump (Electoral Votes)||State||Biden (Electoral Votes)|
Table 3: Norbury Battleground State Probabilities
|Trump (Probability)||State (Electoral Votes)||Biden (Probability)|
|74%||North Carolina (15)||26%|
 that voted either Democrat or Republican (e.g., excluding Independent candidates)
[i] See https://www.thoughtco.com/members-in-the-house-of-representatives-3368242 for an explanation of why the number of Congressional Representatives is stuck at 435.
[iv] Article I, Section 2, provides: “The House of Representatives shall be composed of Members chosen every second Year by the People of the several States. . .”
[v] Article I, Section 3, provides that: “[O]ne third may be chosen every second Year …”