Midterm Mania

The midterms are Tuesday, November 3, a month out from today. Democrats are favored to take the House, and the Senate is close to a coin flip, with a slight edge for the Democrats. While I say a Paul Krugman podcast today that suggested that the House odds were now at 99% in favor of Democrats, the prediction markets, which are the most objective source of sentiment, give Democrats about 85% odds of winning the House. Polling explains why. Silver Bulletin’s late-August generic ballot average, adjusted for likely voters, had Democrats up about 8 points. Trump’s approval was around 41% in Decision Desk HQ’s average, and the president’s party usually loses House seats in midterms. The Senate is naturally, much tighter. Republicans were trading at 51% against 48% for Democrats but the shifting momentum favors the Democrats. The map naturally works against Democrats since Republicans are defending 22 seats and Democrats 13. Even so, polls show competitive races for Republican-held seats in Alaska, Maine, North Carolina and Texas.

In Texas, Paxton faces Democrat James Talarico, and markets had that race at an even split. The race is still close as of today. Talarico has led most recent public polls by a few points, but a new Paxton internal poll shows Paxton ahead, and Cook Political Report rates it a toss-up. The most recent polls (late September) show: TPOR: Talarico 49, Paxton 44 (last month it was 48–42); Marist: Talarico 50, Paxton 44; NBC 5 Dallas/Telemundo: Talarico 46, Paxton 43; Texas Southern: Talarico 47, Paxton 46; Big Data Poll: Talarico about 44, Paxton about 39, with a Libertarian near 5%; and Pulse Decision Science (Paxton internal, released Sept. 29): Paxton 48, Talarico 45. It’s the first poll in weeks to show Paxton ahead, and his campaign says undecided voters are moving his way even though the averages from Decision Desk HQ had Talarico ahead roughly 47.4 to 43.5 earlier this week. Meanwhile those pesky prediction markets have Talarico as a clear favorite, at roughly 2-to-1 today with Kalshi: Talarico 65%, Paxton 35% as of this afternoon and Polymarket: Talarico 67%, Paxton 34%. Only about $1.9 million has traded there, so the market is fairly thin. Talarico’s odds have risen steadily over the past month. On Kalshi it was a coin flip on September 3 (Paxton 51, Talarico 49), then about 54% for Talarico in mid-September, 58% around September 24, and 60% early this week. Polymarket was at 62% just yesterday, so Paxton’s internal poll showing him ahead didn’t slow the move. The markets are more confident than the polls. A 3–5 point lead in public polling usually works out to something closer to 55–60%, especially in Texas, where polls have overstated Democrats before. Traders seem to be pricing in Paxton’s weak support among Republicans and the strong national environment for Democrats. Paxton’s weakness continues to be that 99% of Democrats back Talarico but only 84% of Republicans back Paxton. Paxton’s favorability is also worse, 43/55 against Talarico’s 47/50. In terms of money, Republicans are spending heavily. MAGA Inc. recently added $5 million, and a Senate Leadership Fund affiliate has put in close to $54 million. Texas polls have often overstated Democrats in the past. Even in Marist’s poll with Talarico up 6, most voters still expect Paxton to win.

In Alaska, The race is between Republican Sen. Dan Sullivan, who running for a third term against former Rep. Mary Peltola, a Democrat. Alaska uses ranked-choice voting, and the ballot also includes a second “Dan Sullivan” (Dan J. Sullivan Jr.), whom the senator’s side has tried to get removed. Peltola led Sullivan 49.5% to 41.4% in the August top-four primary, which is a real warning sign for an incumbent. In recent polls: NYT/Siena (out today): Peltola 50, Sullivan 43; Quantus Insights (Oct. 2): Sullivan 46, Peltola 46 (It’s the first major poll since the New York Times reported on Peltola’s alleged outbursts toward staff); and AARP (mid-September): Peltola 46, Sullivan 41 in the first round, and 53–47 after ranked-choice runoffs. She led independents by 32 points. The prediction markets even more strongly favor Peltola with Polymarket: Peltola 71%, Sullivan 29%, on about $1.1 million traded, Kalshi: Peltola about 70%, down from 74% earlier in the week after Republicans began airing ads about the staff allegations, and Trend: Before the August primary it was close to a coin flip, at about 55¢ for Peltola. She moved to about 61¢ after the primary and has stayed above 60% since. Where forecasters disagree is that Nate Silver’s main models still have Sullivan favored, because they give more weight to Alaska’s Republican lean. His polls-only model has Peltola at 57%. Markets are more bullish on Peltola than most poll-based forecasts. Alaska polling is also notoriously hard: polls missed in Sullivan’s 2020 race. Peltola is favored in the markets, at about 70%, while recent polls range from a tie to a 7-point Peltola lead. Cook rates the race a toss-up.

Maine is the closest of the Republican flip races. Polls are essentially tied, and markets lean Jackson at roughly 60/40, down from the low 70s two weeks ago. Cook rates it a toss-up. The race is between Republican Sen. Susan Collins (the disappointing bain of many of us) is seeking a sixth term against Democrat Troy Jackson, the former Maine Senate president. Jackson became the nominee after Graham Platner left the race in July. Recent polls show: CBS News/YouGov (Sept. 23–Oct. 1): tied; AARP (Sept. 20–22): Jackson 50, Collins 47 (Voters 50 and older favor Collins 53–44, while Jackson leads by 25 among voters under 50); NYT/Siena (Sept. 15–22): Collins 49, Jackson 46 (It was the first poll since July to show Collins ahead, even though 55% of respondents wanted Democrats to control the Senate. Collins is viewed favorably by 51%, against 41% for Jackson); and CNN/SSRS (early September): Jackson 48, Collins 45 (Most of Jackson’s supporters said their vote was mainly against Collins rather than for him). Again, the prediction markets disagree with the polls with Polymarket: Jackson about 60%, Collins about 41% as of today; Kalshi: Jackson at 62%, Collins at 36% as of last weekend (This is the deepest market with more than $9.7 million traded); Swings: Jackson rose to about 74% after ProPublica reported that the FBI had considered a pay-to-play investigation involving Collins and a defense contractor, which Collins disputes. The NYT/Siena poll then pushed his odds back down. The “Collins factor” is also in play as in 2020 she won by 8.6 points while Biden carried Maine comfortably. That record of outrunning both her polls and her party is the main reason skeptics think the markets may still be overrating Jackson.

North Carolina is the most lopsided of the races with Cooper leading by high single to double digits, and markets have him at about 95%. Cook rates it Lean Democrat. The race is between Former Democratic Gov. Roy Cooper running against Michael Whatley, the former RNC chair, for the open seat of retiring Republican Sen. Thom Tillis. Republicans have won every North Carolina Senate race since Kay Hagan in 2008. Cooper, though, won four attorney general races and two governor’s races statewide between 2000 and 2020. Recent polls show: Catawba College/YouGov (this week): Cooper up 10; Common Cause NC: Cooper 51, Whatley 41 (Undecided voters lean Whatley, and with them included it’s 52–44); AARP (Sept. 17–20): Cooper 53, Whatley 42 (Cooper leads independents 58–33, while Whatley leads voters 50 and older by 6); High Point University (Sept. 9–16): Cooper 50, Whatley 42; and Elon University: Cooper 49, Whatley 38 (Fifteen percent of voters said they’d heard nothing about Whatley, against 4% for Cooper). The prediction markets are even clearer with Kalshi: Cooper about 94–95%, on about $2.3 million traded; Polymarket: Cooper 96%, Whatley 5%, on a thin $211,000 in volume; and Trend: On January 2 Cooper was around 73–74% on both platforms, and he has risen steadily since. On Friday, the Senate Leadership Fund, the main super PAC for Senate Republicans, canceled $6.5 million in North Carolina ad reservations. The same day, Trump told reporters he’s “worried” about Whatley. The case for Whatley is that it’s a state Democrats haven’t won at the federal level in nearly two decades, and some analysts think 95% is too confident there. Still, every recent poll has Whatley behind, and his own side is moving money elsewhere.

Democrats’ most exposed seats are Georgia (Ossoff) and Michigan, which is an open seat where Abdul El-Sayed won the Democratic primary. Markets have both Democrats favored, but at very different levels: Ossoff looks close to safe, while El-Sayed is a solid but not overwhelming favorite. In Georgia, Kalshi: Ossoff 96%, Collins 4%; Polymarket: Ossoff 97%, Collins 3%, on a thin $205,000 traded; Decision Desk HQ’s model: Ossoff 87%, so the markets are more confident than the forecasters; Trend: About a month and a half ago Ossoff was around 87% on Kalshi and 86% on Polymarket, and he has kept climbing since. In Michigan it’s Kalshi: El-Sayed at 73% as of today, an all-time high, with Rogers at 27% (Kalshi’s margin market expects El-Sayed to win by about 3.5 points); Polymarket: about 70% for El-Sayed as of last weekend; and Trend: El-Sayed at 60% right after winning the August primary, which had caused a jump for Rogers. He has climbed fairly steadily since. Bottom line: Georgia has largely dropped off the competitive list for traders. Michigan is the Democrat-held seat where Republicans are still pushing hardest, and El-Sayed’s roughly 70% is priced well above what a 3–4 point polling lead would usually justify.

What most forecasters expect and the most common call is a split Congress, with a Democratic House and a narrowly Republican Senate. Polymarket had that at about 36%, behind a Democratic sweep at roughly 49%, so a full sweep is a real possibility. Two more economic reports land before Election Day, including the Q3 GDP advance estimate on October 29. I always prefer to believe the markets over the polls, so I am bullish.