So, we rise from the rubble...
"The major news outlets have declared Joe Biden the winner of the 2020 presidential election based partly on a projection that Biden would win Pennsylvania's 20 electoral votes. Well, maybe, maybe not. Projections are not official certifications let alone final votes in the Electoral College (the composition of which will not be determined until December 8. The actual Electoral College vote for President happens on December 14).
In particular, the Pennsylvania outcome is based on counting several hundred thousand mail-in ballots that were received after Election Day. Pennsylvania state law passed by the legislature requires that mail-in ballots must be received by Election Day in order to be counted. The Pennsylvania Supreme Court (dominated by elected Democrats) ordered that mail-in ballots could be counted if they were received up to three days after Election Day.
The Constitution: But the U.S. Constitution clearly says that state election laws are to be set by the "legislature" of each state. Trump claims that the Pennsylvania Supreme Court decision is unconstitutional because it violates the requirement that legislatures set the rules. That claim is now headed to the U.S. Supreme Court. If that court agrees with Trump, then the late Pennsylvania ballots could be discarded, and Trump would win Pennsylvania.
Numerous challenges are working their way through the system. The processes and deadlines in several states could change the outcome of the presidential election. Depending on what happens in Arizona, Nevada and Georgia, Trump could still emerge a winner. That's a longshot, and I’m not holding my breath. But, we must consider all possible outcomes. Even if Biden emerges as the winner, in the end, an even more decisive political race is yet to be decided - in fact, two races.
The Fight for the Senate: Going into election night, the Republicans held control of the U.S. Senate by a 53-47 margin (counting two independents with the Democrats). As of now, the winners in the Senate races would result in a 49-48 edge for Republicans with three seats undecided. One of the undecided seats is in Alaska. The race has not officially been called because Alaska has many remote locations, and it takes time to round-up the ballots. But, the Republican candidate leads by a two-to-one margin, and all analysts agree the Republicans will hold that seat. So, that puts the score at 50-48 in favor of Republicans. But, that's still not control. The Democrats will need 50 seats for control (where Vice President Kamala Harris can break a 50-50 tie) while Republicans need 51 seats for control, an outright majority.
Georgia on Our Minds: What's up with the two missing seats? Both seats are in Georgia. That state has a peculiar rule that you cannot win a Senate race unless you get over 50% of the vote, even if you got more votes than your opponent. On Election Day, no one got 50% in either of the two Senate races. This was because of third-party candidates and some Republicans fighting each other. Georgia law says in such cases, the two top contenders face a runoff election on January 5. With only two names on each ballot, someone must get 50% and be declared the winner.
One runoff involves Kelly Loeffler (Republican) versus Raphael Warnock (Democrat). The other runoff involves David Perdue (Republican) versus Jon Ossoff (Democrat). Loeffler and Purdue are both incumbents today. If Republicans win one or both of these races, they keep control of the Senate. If Democrats win both of these races, they take control of the Senate.
Control of the Senate will be determinative of even bigger issues like the Green New Deal, statehood for Puerto Rico and Washington D.C., tax increases, packing the Supreme Court and more. These changes will affect the shape of governance in the United States in a deleterious and irreversible way. Never have two Senate runoff elections been more important. Between now and January 5, we should all have Georgia on our minds.
But there’s one clear loser in this election - pollsters.
The Same Errors: We all recall how badly pollsters performed in the 2016 presidential election. Depending on the source, the odds of a Hillary Clinton victory were set at 90%, 92% or even 93%. The results were expected to be an electoral college landslide, with Clinton keeping the west and northeast, maintaining her "blue wall" (Pennsylvania, Ohio, Michigan and Wisconsin) and even picking off some southern and mountain states expected to be friendly to Trump, especially Arizona.
None of this happened. Trump held Arizona, swept the blue wall and defeated Hillary Clinton 304 to 227 in the Electoral College. The pollsters were not even close to this result. Pollsters then promised they would mend their ways, consider their mistakes, adjust their models and deliver much more accurate results for the 2020 election. Did they? They did not even come close. In many ways, the pollsters' performance was worse in 2020.
Not Just a Little Wrong: Pollsters will defend themselves by claiming that they projected Biden would win, and in fact, he did win (subject to legal challenges and recounts that are still ongoing). But, that's no defense. The polls showed Biden winning Wisconsin by 6.7%. It was actually less than 1%. They showed Biden would win Florida by 1%. In fact, Trump won Florida by 3%. And the list of missed calls goes on state by state.
The pollster's misses were not by 1% or so. That's certainly acceptable and within the margin of error. But they were wrong by five, six or seven percent, and sometimes more, depending on the state. The claims of adjusting for the errors in 2016, such as turnout models, educational levels, rural versus urban votes, etc. were all hot air. A few pollsters did get it right, like Rasmussen, Trafalgar and Susquehanna. But the mainstream polls such as ABC, CBS, NBC, Washington Post and New York Times were badly wrong. What's the lesson for investors trying to handicap elections in the future?
Ignore mainstream polls, focus on the few pollsters who have valid methods and weigh non-poll information using other inputs and models. Markets dislike uncertainty. Polls try to add some certainty to the process. As of now, most polls are worse than useless; they are systematically wrong.
Et Tu, Fox News? Meanwhile, the mainstream media has been clearly biased against President Trump. Many of Trump’s supporters consider Fox a sympathetic alternative. But, Fox News is now being called Faux News for its fake and misleading calls from a technical "decision desk" on election night.
Fox News made a series of wrong calls on election night. Anyone can make a mistake; I've made my share. But, this was different. The wrong calls were systemic, all in one direction and not merely wrong, but statistically unsupportable. One is left with the impression that the Fox News decision desk was out to sabotage Donald Trump, and they did a pretty good job of it.
The Fox decision desk is led by Arnon Mishkin, a registered Democrat and donor to the Democratic Party. That's fine as far as it goes, but on election night he acted more like a Democratic Party mole than an objective expert. He first said the House of Representatives would remain in Democratic hands. He went so far as to say Democrats would gain five seats at 9:40 pm on election night. Really?
Did Fox’s Early Call Influence the Vote? The House consists of 435 separate races from coast-to-coast. Some were easy to call, but many were hotly contested. Going into the election, the Democrats had 232 seats, and the Republicans had 197 (there were five vacancies and one independent). The Republicans only need to capture two vacancies and flip 18 seats to take control of the House. That's a tall order, but not impossible.
Fox's "call" was made early in the evening when polls were still open in most of the country. Many of the seats the Republicans hoped to regain were in California and the call came when people there were still lined up to vote. Did voters give up and go home when they heard Fox say the Democrats would still be in control?
In fact, the Republicans have gained five seats so far, and are on track to win at least six more. That could put the House at 227 Democrats and 208 Republicans, a gain of 11 seats for Republicans. Technically the Democrats would have control, but it takes only ten moderate Democratic crossovers to force Nancy Pelosi to compromise with the Republicans.
Why on earth was Fox calling the House and suppressing Republican votes early in the evening when matters were still up in the air? Fox became more blatantly false just before midnight when they "called" Arizona for Biden. They were the only major network to do so. This broke some solid momentum for Trump at the time.
