Everything I'm hearing and seeing suggests that Democratic Utah Rep. Jim Matheson's announcement that he will vote "no" on the health care reform package was done after Speaker of the House Pelosi released him to do so.
Matheson apparently was ready to vote "yes" on the legislation if his vote was necessary to put the Democrats over the top. Because such a vote would hurt Matheson in the upcoming November elections, however, he and the House Democratic leadership agreed to delay finalizing his vote until it was clear whether or not they needed a "yes" from him. Hence the late timing of his decision. (This is exactly what I suggested might happen in this article earlier today.)
We'll get a sense if this scenario is true or not based on at least two things.
First, if the vote goes for the Democrats with more than just one or two votes in their favor, that will be a pretty strong tipoff that Matheson was released.
Second, it will be useful to keep an eye on what Matheson does over the course of the next 24 hours. I doubt we'll see it, but if there's clear evidence that he's been out and about persuading other fence-sitting Dems to vote "no," we'll know that my sources were feeding me dogfood.
Saturday, March 20, 2010
Stupak coalition and several other fence-sitting Dems key to health reform's demise
Let me begin this article by making something clear: Despite the currently pervasive optimism among Democrats about the prospects of their party’s health care reform package, the deal is not yet sealed. It is still much more than just theoretically feasible for the package to be defeated.
Halting the passage of the bill, however, will require some key individuals to step forward and vote according to their principles rather than the principles of President Obama and the Democratic House leadership.
Although I had not hoped it would be the case when I started pulling together the information for my last article, what I wrote ended up making it clear that reform’s prospects rest in the hands of two critical groups of Democrats.
First, defeating the reform package will require the members of Rep. Bart Stupak’s group to quickly decide that they simply cannot get from the broader House the abortion-related language that the group wants.
I realize that Rep. Stupak and his colleagues are holding out hope that some sort of Presidential executive order will satisfy their concerns, thus allowing them to vote for the health care bill in good conscience.
Unfortunately, this just isn’t possible. There is no way the language of the proposed executive order can be sufficiently close to the language the Stupak coalition has been demanding without the language simultaneously sending a large number of pro-choice House Democratics into a tizzy that President Obama and House Speaker Pelosi simply will not allow..
Moreover, the Stupak coalition cannot be fully certain the President will follow through and sign the proposed executive order in the form they desire.
So, in the end, the decision by members of the Stupak coalition about how they vote will reflect exactly how sincere they have been in their opposition to the abortion language in the reform bill. If they vote “yes” claiming that a promised executive order addresses their concerns, we (and their constituents) will know they were never sincere in their opposition to the bill’s language.
If the Stupak coalition sees the light and comes out soon in opposition to the reform package’s passage, it still will be necessary for a number of key Democrats to vote “no” as well.
Who are those key Democrats?
One of them, Rep. Zack Space (OH), apparently has just announced his intention to vote “no” on the bill. That’s a very positive development – at least on the surface – since Space voted “yes” last year on the original House version of the reform package.
Another “no” vote that also has just been announced – much to my surprise – is Rep. Jim Matheson (UT). Matheson was a “no” when the House voted last year on health reform, but most of my sources were telling me he would vote “yes.”
Other key Democrats who might still vote no include Reps. Lincoln Davis (TN) and Earl Pomeroy (ND), who will face reelection challenges in November if they end up being the key “yes” votes on the reform package.
Opponents of the package also should continue working hard to bring Rep. Paul Jankorski (PA) into the fold. Although Kanjorski voted “yes” on the original House reform bill last year, he, too, is facing a tough reelection battle. He is said to be leaning “no,” in part because the education bill the Democrats have attached to the health care reform package could negative impact his district.
Finally, those working to defeat the health care package need to make certain Glenn Nye (VA) comes out sooner rather than later against the Democratic legislation, There also may still be a genuine opportunity to have retiring Rep. John Tanner (TN) announce a “no” vote.
Looking at these scenarios and opportunities, it should be clear that defeating the Democratic health care package is still more than just a minor possibility. But, as I also concluded at the end of my last article, the key votes will be the ones announced and cast by the Stupak coalition.
Sources: Reps. Matheson and Kind likely to vote "yes" on Democratic health plan; Rep. Nye a likely "no"
We are getting a lot of information from a variety of sources – some very good, some so so – about how the voting for the Democratic health care reform package is likely to play out. We’ll provide in this posting some of the most definitive information that we have, then lay out additional information in the next one or two postings.
Here’s what we know. We’ll start with the likely “yes” votes.
First, even though it hasn’t been announced, it seems almost certain that Rep. Jim Matheson (UT) will vote for the Democratic plan. His vote against the plan last year was intended to strengthen his position in the election he’s facing in November. Likewise, he’s been given the option of delaying his announcement of how he’ll vote this time in case it becomes possible for him to vote “no” (because enough other Democrats have voted yes).
Thus, unless there’s something very soon from Rep. Matheson indicating that he’s actually going to vote “no,” it can be safely assumed that he’s either going to vote yes, or he’s going to wait until it’s fully clear that a “no” vote won’t affect the outcome.
We also have solid information from reliable sources that Ron Kind (WI) will vote “yes”. We understand that he voted earlier this week against the reconciliation package in committee mainly to help his reelection chances in November, but he has basically been on board with the plan for some time. (He voted yes on the House version of the plan last year.)
Rep. Kind has been delaying the announcement of his vote decision for at least two reasons. First, the delay is meant to communicate to his constituents that his decision was not an easy one. Second, the delay was planned to help the Democratic House leadership spread out the “yes” announcements, thus giving the appearance of continuous momentum in favor of the Democratic plan.
We also have more sketchy information suggesting that Rep. Brian Baird (WA) is likely to vote “yes,” and also some minor indications that Rep. John Tanner (TN) is also leaning in that direction.
On the “no” side, we unfortunately have less information at this time.
We do have firm grounds, however, for believing that freshman Rep. Glenn Nye (VA) will be voting “nay” again on health care reform. He has been delaying announcing his vote for as long as possible, however, in deference to the House leadership. The leadership recognizes the tough reelection campaign Rep. Nye will face this fall, but it has not wanted his “no” announcement to come out too early for momentum reasons.
We’ll discuss more about these vote decisions and the decisions of other representatives in our next posting.
Our quick take at this point, however, is that what we know so far indicates that the Stupak group -- and a handful of other Democrats – is likely to be the key to whether or not the Democratic reform plan passes.
Update (3/20/2010 07:15 pm): Jim Matheson has announced that he will vote no on the health reform package. This could be interpreted as a sign that the Democrats have the votes that they need to pass the health care package. That would fit with what my sources were telling me. We'll just have to see.
Update (3/20/2010 11:30 pm): As we expected, reports indicate Rep. Kind has announced he will be a "yes" on the Democratic health plan.
Update (3/20/2010 07:15 pm): Jim Matheson has announced that he will vote no on the health reform package. This could be interpreted as a sign that the Democrats have the votes that they need to pass the health care package. That would fit with what my sources were telling me. We'll just have to see.
Update (3/20/2010 11:30 pm): As we expected, reports indicate Rep. Kind has announced he will be a "yes" on the Democratic health plan.
The fog of war and the health care reform battle
In the midst of a battle as all-consuming as the one being waged over health care reform, it is easy to forget why the phrase “fog of war” merits an entry of its own in Wikipedia.
The phrase, of course, is shorthand for “the uncertainty regarding own capability, adversary capability, and adversary intent during an engagement …” The concept is such a fundamental part of actual conflict that it is purposely simulated in popular computer war games.
We are seeing a vivid example of misperception and uncertainty as we enter the end game of the health care reform battle.
We hear numerous explosions as House member after House member holds a press conference and announces they will vote for reform.
We catch scattered radio reports that the Democrats are building almost insurmountable momentum.
We even get casualty reports – in this case, prediction market results – that suggest that the battle is almost lost.
Nevertheless, as we receive and process all of this seemingly useful information, we have to step back. We need to ask ourselves: What does the information that is particularly relevant and meaningful tell us about our situation? What does it tell us about our opponent's position and expected course of action? And what should we do given our opponent’s likely plans.
When it comes to the health reform battle, the data that are most relevant – reliable whip counts of who intends to vote for and against the Democratic reform package – clearly indicate that the Democrats do not have the votes they need.
Indeed, when you strip away the fog of war and focus on the most important events and outcomes of the past day or so, here is what emerges.
The Democrats have reached the point where, to get the votes they need, they must negotiate with Rep. Stupak and other House members who oppose the abortion-related provisions in the Senate version of the reform package.
These negotiations, in turn, have made it necessary for the President and the Democratic House leaders to seek ways of meeting the needs of the Stupak group without losing the support of the pro-choice Democrats.
We do not yet know the details of the strategy the Democrats will pursue. (We should learn more at 11:00 a.m. this morning when Rep. Stupak holds a press conference.) It appears, however, that the Democrats will pursue a strategy that allows for separate votes on, on the one hand, the broad Senate reform package, and, on the other hand, the abortion-related provisions in the Senate language.
Now, it is not clear that House or Senate procedures will even allow separate votes of the kind being planned, or that there will be enough votes to pass the changes in the abortion-related language desired by the Stupak group. In addition, even if procedure and voting in the House plays out as the Stupak group would like, it will be almost impossible for the Stupak language to pass the Senate. There are simply too many Democratic Senators opposed to the Stupak abortion language.
All of this may not matter to the Stupak group. They may be so worn down by negotiations and pressure from the President that, at this point, all they want to do is vote publicly against the Senate’s abortion language without actually ensuring the language makes it into a bill signed by the President.
Alternatively, the Stupak group may want an arrangement that truly ensures that the bill reaching the President’s desk has the language they desire. If this is the case, the President and the Speaker of the House have a truly daunting task on their hands, given the resistance they will face from pro-choice House members.
There is a real possibility that this second scenario is playing out. Members of the pro-choice House caucus already have expressed anger at the deal being negotiated with the Stupak group. In addition, the fact that President Obama is meeting today with the entire Democratic House membership suggests that there is a need for his persuasive powers to iron out important rifts in the group.
How should those opposed to the Democratic plan to react to the current state of battle?
First, if it becomes clear that the Stupak group is only interested in publicly voting against the reform package without actually ensuring their abortion language becomes law, opponents need to quickly and vocally make it clear that doing this will be far from enough. This “just let me have my vote” strategy has to be depicted clearly and unequivocally as an abandonment of pro-life principles and a capitulation to President Obama and House Speaker Pelosi.
Only by swiftly and loudly reacting to this strategy can there be any hope that some in the Stupak group will change their minds by the time the vote takes place.
Second, if the Stupak group is, instead, truly interested in requiring their abortion language to be in the final reform bill, pro-choice groups will have to swing into high gear and pressure numerous like-minded House Democrats to vote “no” on the package that includes the Stupak language.
While all of this is going on, every effort – and I mean every effort – has to be made by Republican leaders across the country to quickly and visibly gain additional “no” votes from undecided Democrats.
Republican leaders have to start thinking about what is best for the country in the long term, rather than what is best for the party in the next election. They need to reach out to House members such as Reps. Nye (VA), Matheson (UT), Dahlkemper (PA), and Bishop (GA), who are still undecided and in the more conservative wing of their (current) party. Reps. Kanjorski and Carney (both PA), and perhaps Davis (TN) and Kind (WI), also still may be amenable to creative overtures.
The health care reform battle is far from lost. The situation is much better than most observers recognize. It is time to sweep away the fog of war and put in place a strategy that ensures final victory.
Update (3/20/2010 9:30 a.m.) - This report at The National Review suggests that the Democratic deal with the Stupak group may be collapsing. If so, it could mean that the Democrats have enough other votes to pass the reform package. It's hard to see how that would be possible, however, without many of the Stupak group voting yes despite the lack of a deal (which seems improbable). Thus, a likely alternative conclusion is that the reform package is in trouble. We'll get a better insight into things at Stupak's 11:00 a.m. news conference this morning.
Update (3/20/2010 10:15 a.m.) - Multiple reports are coming in that the Democrats will not be making a deal with the Stupak group. There are also a small number of reports that Stupak has cancelled his press conference scheduled for 11:00 a.m.
Update (3/20/2010 10:50 a.m.) - Rep. Stupak has apparently cancelled the press conference he was going to hold this morning at 11:00 a.m.
Update (3/20/2010 02:30 p.m.) - There are conflicting reports on what's going on in regard to Rep. Stupak and his group's discussions with the House Democratic leadership. My sources indicate, however, that it is increasingly likely that the Stupak group will hold the key to whether or not the reform package passes. I'll discuss this further in my next posting.
The phrase, of course, is shorthand for “the uncertainty regarding own capability, adversary capability, and adversary intent during an engagement …” The concept is such a fundamental part of actual conflict that it is purposely simulated in popular computer war games.
We are seeing a vivid example of misperception and uncertainty as we enter the end game of the health care reform battle.
We hear numerous explosions as House member after House member holds a press conference and announces they will vote for reform.
We catch scattered radio reports that the Democrats are building almost insurmountable momentum.
We even get casualty reports – in this case, prediction market results – that suggest that the battle is almost lost.
Nevertheless, as we receive and process all of this seemingly useful information, we have to step back. We need to ask ourselves: What does the information that is particularly relevant and meaningful tell us about our situation? What does it tell us about our opponent's position and expected course of action? And what should we do given our opponent’s likely plans.
When it comes to the health reform battle, the data that are most relevant – reliable whip counts of who intends to vote for and against the Democratic reform package – clearly indicate that the Democrats do not have the votes they need.
Indeed, when you strip away the fog of war and focus on the most important events and outcomes of the past day or so, here is what emerges.
The Democrats have reached the point where, to get the votes they need, they must negotiate with Rep. Stupak and other House members who oppose the abortion-related provisions in the Senate version of the reform package.
These negotiations, in turn, have made it necessary for the President and the Democratic House leaders to seek ways of meeting the needs of the Stupak group without losing the support of the pro-choice Democrats.
We do not yet know the details of the strategy the Democrats will pursue. (We should learn more at 11:00 a.m. this morning when Rep. Stupak holds a press conference.) It appears, however, that the Democrats will pursue a strategy that allows for separate votes on, on the one hand, the broad Senate reform package, and, on the other hand, the abortion-related provisions in the Senate language.
Now, it is not clear that House or Senate procedures will even allow separate votes of the kind being planned, or that there will be enough votes to pass the changes in the abortion-related language desired by the Stupak group. In addition, even if procedure and voting in the House plays out as the Stupak group would like, it will be almost impossible for the Stupak language to pass the Senate. There are simply too many Democratic Senators opposed to the Stupak abortion language.
All of this may not matter to the Stupak group. They may be so worn down by negotiations and pressure from the President that, at this point, all they want to do is vote publicly against the Senate’s abortion language without actually ensuring the language makes it into a bill signed by the President.
Alternatively, the Stupak group may want an arrangement that truly ensures that the bill reaching the President’s desk has the language they desire. If this is the case, the President and the Speaker of the House have a truly daunting task on their hands, given the resistance they will face from pro-choice House members.
There is a real possibility that this second scenario is playing out. Members of the pro-choice House caucus already have expressed anger at the deal being negotiated with the Stupak group. In addition, the fact that President Obama is meeting today with the entire Democratic House membership suggests that there is a need for his persuasive powers to iron out important rifts in the group.
How should those opposed to the Democratic plan to react to the current state of battle?
First, if it becomes clear that the Stupak group is only interested in publicly voting against the reform package without actually ensuring their abortion language becomes law, opponents need to quickly and vocally make it clear that doing this will be far from enough. This “just let me have my vote” strategy has to be depicted clearly and unequivocally as an abandonment of pro-life principles and a capitulation to President Obama and House Speaker Pelosi.
Only by swiftly and loudly reacting to this strategy can there be any hope that some in the Stupak group will change their minds by the time the vote takes place.
Second, if the Stupak group is, instead, truly interested in requiring their abortion language to be in the final reform bill, pro-choice groups will have to swing into high gear and pressure numerous like-minded House Democrats to vote “no” on the package that includes the Stupak language.
While all of this is going on, every effort – and I mean every effort – has to be made by Republican leaders across the country to quickly and visibly gain additional “no” votes from undecided Democrats.
Republican leaders have to start thinking about what is best for the country in the long term, rather than what is best for the party in the next election. They need to reach out to House members such as Reps. Nye (VA), Matheson (UT), Dahlkemper (PA), and Bishop (GA), who are still undecided and in the more conservative wing of their (current) party. Reps. Kanjorski and Carney (both PA), and perhaps Davis (TN) and Kind (WI), also still may be amenable to creative overtures.
The health care reform battle is far from lost. The situation is much better than most observers recognize. It is time to sweep away the fog of war and put in place a strategy that ensures final victory.
Update (3/20/2010 9:30 a.m.) - This report at The National Review suggests that the Democratic deal with the Stupak group may be collapsing. If so, it could mean that the Democrats have enough other votes to pass the reform package. It's hard to see how that would be possible, however, without many of the Stupak group voting yes despite the lack of a deal (which seems improbable). Thus, a likely alternative conclusion is that the reform package is in trouble. We'll get a better insight into things at Stupak's 11:00 a.m. news conference this morning.
Update (3/20/2010 10:15 a.m.) - Multiple reports are coming in that the Democrats will not be making a deal with the Stupak group. There are also a small number of reports that Stupak has cancelled his press conference scheduled for 11:00 a.m.
Update (3/20/2010 10:50 a.m.) - Rep. Stupak has apparently cancelled the press conference he was going to hold this morning at 11:00 a.m.
Update (3/20/2010 02:30 p.m.) - There are conflicting reports on what's going on in regard to Rep. Stupak and his group's discussions with the House Democratic leadership. My sources indicate, however, that it is increasingly likely that the Stupak group will hold the key to whether or not the reform package passes. I'll discuss this further in my next posting.
Whip counts for the Democratic health care reform package
Here are the whip counts tracking how the House vote on the health care reform package is likely to play out. I am including only counts that give the expected votes of all House members, rather than -- for example -- just the most recently announced vote decisions. The links are in alphabetical order based on domain name.
FireDogLake
The Hill
Hotline On Call / National Journal
National Republican Congressional Committee (info on individual House members)
This list will be updated regularly, as necessary, so that the links are as fresh as possible. Let me know in the comments or via email if I've forgotten a useful count that should be included, or if the URL for a count has changed.
FireDogLake
The Hill
Hotline On Call / National Journal
National Republican Congressional Committee (info on individual House members)
This list will be updated regularly, as necessary, so that the links are as fresh as possible. Let me know in the comments or via email if I've forgotten a useful count that should be included, or if the URL for a count has changed.
Thursday, March 18, 2010
As health care reform's chances improve, Democratic party election prospects for 2010 and 2012 drop
As I predicted a few days ago, President Obama is now telling Democratic members of the House that, instead of being hurt by a vote in favor of the party's health care reform package, they actually will benefit from passage of the proposed legislation.
He is quoted as having said "all Democrats would benefit from a health care win." He also argued that his Presidency would receive a significant boost if the health care reform package is passed.
This is a narrative that party liberals, sensing a unique opportunity to balloon the government's role in health care, desperately want their more moderate and conservative House members to believe.
But trading at the prediction market Intrade, where investors make or lose real money if their bets are wrong, are telling a story completely opposed to the one being told by President Obama and senior House Democrats.
It's generally well known that the Intrade contract tied to the passage of the health care reform package has gone up noticeably over the course of the last month. This is clearly evident in the price history graph below. It suggests that the chance of the health care bill becoming law by June 30th has increased from 30 percent to about 70 percent.
He is quoted as having said "all Democrats would benefit from a health care win." He also argued that his Presidency would receive a significant boost if the health care reform package is passed.
This is a narrative that party liberals, sensing a unique opportunity to balloon the government's role in health care, desperately want their more moderate and conservative House members to believe.
But trading at the prediction market Intrade, where investors make or lose real money if their bets are wrong, are telling a story completely opposed to the one being told by President Obama and senior House Democrats.
It's generally well known that the Intrade contract tied to the passage of the health care reform package has gone up noticeably over the course of the last month. This is clearly evident in the price history graph below. It suggests that the chance of the health care bill becoming law by June 30th has increased from 30 percent to about 70 percent.
If President Obama's story is correct, and passage of the bill will be good for all House Democrats -- and for the Obama Presidency -- then the bill's improving prospects over the past month should have been reflected in at least two key ways.
First, there should have been an increasing likelihood that the Democrats will be able to hold on to their majority in the House after this fall's elections.
Oops! The Intrade contract on that subject shows exactly the opposite (see below).
While the chances of health care reform becoming law increased, the chance of the Democrats holding on to the House dropped from 58 percent to 52 percent.
Second, for the President's argument to hold water, the chance of the Democrats retaining the Presidency through the next election also should have increased over the course of the last month.
Oops again! The Intrade contract for this topic once again shows trends going in exactly the opposite direction (see below).
A month ago, the chances of a Democrat -- presumably President Obama -- winning the next Presidential election were about 58.5 percent. At the end of the day yesterday, the chances were down to about 55.5 percent.
There are, of course, all kinds of caveats one should make about these numbers. I've argued in my previous article, for example, that the health care reform Intrade contract probably overstates the chances of the Democratic billl becoming law.
But, even with all those caveats, the story is pretty transparent. If health care reform passes, it will be bad for House Democrats overall, and it will be bad for the Democrat's chances of holding on to the Presidency come 2012.
These numbers may not fit with the left-wing, Big Government objectives of President Obama -- who (moderate and conservative House members note!) made it very clear he'd rather be a "good" one-term President instead of a "mediocre" two-term President.
But the numbers do reflect actual bets made by people wagering their own hard earned dollars.
And, besides, remember what what House Speaker Nancy Pelosi said earlier today: "I love numbers. They're so precise."
Update (3/18, 8 pm) - Don't buy what I've just written? Consider this. Over the past few days, the health care reform ("Obamacare") contract at Intrade has been at its highest level ever. And today, for the first time ever, President Obama's average net approval rating turned negative at the polls tracked by RealClearPolitics.com.
Update (3/18, 8 pm) - Don't buy what I've just written? Consider this. Over the past few days, the health care reform ("Obamacare") contract at Intrade has been at its highest level ever. And today, for the first time ever, President Obama's average net approval rating turned negative at the polls tracked by RealClearPolitics.com.
Tuesday, March 16, 2010
Intrade's "Obamacare" contract: how much does it really tell us?
I am generally a big fan of prediction markets like Intrade. I find them to be a great way to get a quick read on how future events are likely to play out.
My feelings on this subject are one reason I have been following Intrade's health care reform ("Obamacare") contract over the past few months.
Lately, though, I have started to question the information value of the contract's trading prices.
The contract currently suggests that there is about a 75 percent chance that the Democratic health care reform package will be passed by June 30th of this year.
Frankly, this seems quite a bit at odds with a wide range of estimates ("whip counts") currently out there about who is likely to vote no and who is likely to vote yes on the reform package. (See, for example, this detailed whip count .)
Now, don't get me wrong. I am not saying that the various whip counts predict the imminent demise of the current reform package. But most counts of definite "yeas" and "neas" have the "neas" noticeably exceeding the "yeas," and even counts that allow for a more subtle assessment of the situation suggest that passage of the package is far from a done deal.
Why the disconnect?
Well, one obvious reason might be that those of us not intimately involved in the current reform package negotiations simply cannot fully appreciate how far along those negotiations are. Individuals closer to the process may recognize that the package's chances are quite high, and may be leveraging this information by buying the contract (and thus causing its price to go up). In fact, Intrade's CEO has been quoted as saying that a lot of the recent trading volume in the health care reform contract is coming out of Washington DC.
But I wonder if there are other explanations which tend to diminish the value of this contract as a predictor of what's going to happen with the Democratic plan.
First of all, note that volume in the contract is not particularly high. There have been only a few days where volume reaches into the several hundred contracts.
The low trading volume, however, means that it doesn't take much to move the contract's price in one direction or the other. And I think there are at least two factors that might be causing the volume in recent weeks to support upward exaggeration in the contract's price.
One factor is, I believe, that the White House and Congressional Democrats have made a concerted effort in the past few weeks to convey the impression that the reform package's chances are much higher than they actually are. I will write more on this strategy and its objectives in a later posting. I think many observers will agree, however, that Democratic publicity in favor of the reform package has been much more extensive in the past few weeks, without any commensurate increase in publicity opposed to the package. This publicity may well be causing Intrade traders to overestimate the likelihood of reform's chances of passing.
This first factor has been amplified, I suspect, by a second factor, which is that buyers and sellers of Intrade contracts are -- I suspect -- more likely to be supporters of the President and his reform efforts than opponents. I assume that Intrade traders have noticeably higher incomes and education levels than the average American, and people with that demographic profile supported the President quite strongly in the last election.
If my assumptions are correct about Intrade buyers and sellers and their political leanings, the recent Democratic publicity campaign may have had a particularly amplified impact on the health care reform contract, as Intrade traders allowed their investment activity to be influenced by their desire to have the President and House Democrats succeed.
Now, I realize that I am, in essence, arguing that Intrade traders are making irrational investment decisions. And that's not an argument one should make lightly if -- as I do -- one believes that market participants tend to act in accord with their economic and financial best interests.
But I think there is relevant precedent when it comes to Intrade and contracts tightly associated with President Obama. Consider the Intrade contract for whether or not the 2016 Summer Olympics would take place in Chicago (North America). The image below (hat tip ) shows the last month of the contract's price and volume history.
President Obama made a strong public commitment to Chicago and its campaign to be the 2016 host city. This public commitment may have influenced Obama-friendly Intrade buyers and sellers, who had the contract trading at levels as high as 65 in the days leading up to the site city selection decision. Nevertheless, the decision ended up going against President Obama, causing the contract to lose all of its value.
Note, as well, that this contract was traded even more heavily in its final days than the current Intrade health care reform contract.
There is, of course, one final possible explanation for a disconnect between the current trading prices of the Intrade health reform contract and the actual chances of health reform passing. It is possible that the contract's value is being manipulated to make it seem that support is building for the Democratic plan. There is no public data, however, on who is buying and selling the contracts, so we can only speculate as to whether or not manipulation is taking place.
Anyone willing to call up Intrade and ask whether George Soros has an account with them?
(For what it's worth, this posting argues that it is unlikely the Intrade contract is being affected by either insider trading or manipulation. To be honest, I'm not fully convinced by the arguments.)
My feelings on this subject are one reason I have been following Intrade's health care reform ("Obamacare") contract over the past few months.
Lately, though, I have started to question the information value of the contract's trading prices.
The contract currently suggests that there is about a 75 percent chance that the Democratic health care reform package will be passed by June 30th of this year.
Frankly, this seems quite a bit at odds with a wide range of estimates ("whip counts") currently out there about who is likely to vote no and who is likely to vote yes on the reform package. (See, for example, this detailed whip count .)
Now, don't get me wrong. I am not saying that the various whip counts predict the imminent demise of the current reform package. But most counts of definite "yeas" and "neas" have the "neas" noticeably exceeding the "yeas," and even counts that allow for a more subtle assessment of the situation suggest that passage of the package is far from a done deal.
Why the disconnect?
Well, one obvious reason might be that those of us not intimately involved in the current reform package negotiations simply cannot fully appreciate how far along those negotiations are. Individuals closer to the process may recognize that the package's chances are quite high, and may be leveraging this information by buying the contract (and thus causing its price to go up). In fact, Intrade's CEO has been quoted as saying that a lot of the recent trading volume in the health care reform contract is coming out of Washington DC.
But I wonder if there are other explanations which tend to diminish the value of this contract as a predictor of what's going to happen with the Democratic plan.
First of all, note that volume in the contract is not particularly high. There have been only a few days where volume reaches into the several hundred contracts.
The low trading volume, however, means that it doesn't take much to move the contract's price in one direction or the other. And I think there are at least two factors that might be causing the volume in recent weeks to support upward exaggeration in the contract's price.
One factor is, I believe, that the White House and Congressional Democrats have made a concerted effort in the past few weeks to convey the impression that the reform package's chances are much higher than they actually are. I will write more on this strategy and its objectives in a later posting. I think many observers will agree, however, that Democratic publicity in favor of the reform package has been much more extensive in the past few weeks, without any commensurate increase in publicity opposed to the package. This publicity may well be causing Intrade traders to overestimate the likelihood of reform's chances of passing.
This first factor has been amplified, I suspect, by a second factor, which is that buyers and sellers of Intrade contracts are -- I suspect -- more likely to be supporters of the President and his reform efforts than opponents. I assume that Intrade traders have noticeably higher incomes and education levels than the average American, and people with that demographic profile supported the President quite strongly in the last election.
If my assumptions are correct about Intrade buyers and sellers and their political leanings, the recent Democratic publicity campaign may have had a particularly amplified impact on the health care reform contract, as Intrade traders allowed their investment activity to be influenced by their desire to have the President and House Democrats succeed.
Now, I realize that I am, in essence, arguing that Intrade traders are making irrational investment decisions. And that's not an argument one should make lightly if -- as I do -- one believes that market participants tend to act in accord with their economic and financial best interests.
But I think there is relevant precedent when it comes to Intrade and contracts tightly associated with President Obama. Consider the Intrade contract for whether or not the 2016 Summer Olympics would take place in Chicago (North America). The image below (hat tip ) shows the last month of the contract's price and volume history.
President Obama made a strong public commitment to Chicago and its campaign to be the 2016 host city. This public commitment may have influenced Obama-friendly Intrade buyers and sellers, who had the contract trading at levels as high as 65 in the days leading up to the site city selection decision. Nevertheless, the decision ended up going against President Obama, causing the contract to lose all of its value.
Note, as well, that this contract was traded even more heavily in its final days than the current Intrade health care reform contract.
There is, of course, one final possible explanation for a disconnect between the current trading prices of the Intrade health reform contract and the actual chances of health reform passing. It is possible that the contract's value is being manipulated to make it seem that support is building for the Democratic plan. There is no public data, however, on who is buying and selling the contracts, so we can only speculate as to whether or not manipulation is taking place.
Anyone willing to call up Intrade and ask whether George Soros has an account with them?
(For what it's worth, this posting argues that it is unlikely the Intrade contract is being affected by either insider trading or manipulation. To be honest, I'm not fully convinced by the arguments.)
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