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Takeaway: The Presidential race is leaning to Obama, but he is on the ropes in terms of his approval rating.

The Republican nominee for President Mitt Romney will make his case to the American people as to why he should be the next President of the United States tonight in Tampa.  Preceding Romney will be none other than Hollywood legend Clint Eastwood.  Not to devolve our research into movie reviews, but one of my favorite Client Eastwood movies is “The Outlaw Josie Wales”.  In the clip below, Josie Wales tarnishes a gentleman’s nice suit by spitting tobacco on it:

http://www.youtube.com/watch?v=2sh0wr7HH8Y

Aside from self aggrandizing commentary from the likes of Rick Santorum, the clip above is a pretty good analogy for the strategy at the RNC – to tarnish the track record of President Obama.  In fact, the only prime time speaker who did not mention Obama specifically was former Secretary of State Condi Rice.

The problem with attacking Obama is that his numbers really can’t get much worse from here.  The most recent Presidential approval rating for Obama from Gallup, the polling firm that has data on approval going back the furthest, has the President’s approval rating at 44.  This is literally his lowest approval rating of the year and akin to the worst approval rating of his Presidency, which occurred during the debt ceiling standoff in August of 2011.

In looking at other President’s approval ratings at this juncture in their term, Obama compares very unfavorably and based on the single factor of approval he’s at serious risk of not getting elected.  We’ve outlined these numbers below:

  • Obama Approval – 44% (?)
  • Bush 2 Approval – 49% (re-elected)
  • Clinton Approval – 53% (re-elected)
  • Bush 1 Approval – 42% (not re-elected)
  • Reagan Approval – 57% (re-elected); and
  • Carter Approval – 37% (not re-elected)

Only Carter and the first President Bush had lower approval ratings and they both failed in their bids to get re-elected.

The positive for Obama, though, is that despite his low approval ratings and the Republican focus on branding him a failed Presidency, Romney has not been able to establish a meaningful lead in any of the key indicators we review.

1.   National Polls – Based on the Hedgeye Aggregate of national polls, Obama has a +1.1 edge over Romney and has led in 3 of the last 4 polls.  Admittedly, this is within the margin of error, but the edge still goes to Obama.

2.   Electronic Markets – On Intrade, Obama has a 56.2% probability of getting re-elected. This is consistent with the Iowa electronic market that shows a 58.6% probability for Obama.

3.   Electoral Map – Based on state level polls, Obama currently has 221 electoral votes locked and Romney has 191.  That puts 126 electoral votes in the toss up category as the polls are within the margin of error.   Obama only needs 39% of the tossups to get to the 270 needed to become President.

4.   Economic Indicators – Our own Hedgeye Election Indicator (HEI) currently shows a 60% probability of Obama getting elected.  In addition, Yale Professor Ray Fair’s economic model currently shows the two party vote split 49.5% for Obama and 46.3% for Romney. (Although Fair does consider this too close to call.)

So, in aggregate, Obama still has a slight edge despite his low approval ratings and the overt Republican focus on him.

The wild card will ultimately be turnout, so in effect getting the political base energized.  Clearly, the choice of Paul Ryan as Vice President was at least partially done for that reason alone. Already there is some evidence that Republicans are more energized than Democrats.  A mid-July poll from CBS / New York Times indicated that 49% percent of Republicans showed increased enthusiasm for this election and only 27% of Democrats said the same thing.

Along the same vein is a Gallup poll from July 25th that asks those polled whether there are more or less enthusiastic versus the prior election.  According to this poll, 51% of Republicans are more enthusiastic and only 39% of Democrats are more enthusiastic.  In comparison, back in 2008 61% of Democrats were more enthusiastic.

So, clearly the enthusiasm gap favors the Republicans and may not be totally reflected in many polls.  From a strategic perspective, though, the Republicans seemingly have Obama where they want him - at a place with a very vulnerable approval rating.  Conversely, Romney is not in a good position either.  According to a poll today from Gallup, only 48% of those polled have a favorable view of Romney.

Strategically, bringing Clint Eastwood to Tampa tonight may be the first step in a strategy shift to improve Romney’s favorability ratings.  Ultimately, even improving Romney’s likeability and favorability marginally may be the key to victory in a race that is leaning to Obama, but in which the President is highly vulnerable.

Daryl G. Jones

Director of Research