What Do Markets Say About the Popularity of Health Care?

There’s a limit to how much weight you can put on InTrade numbers; the markets are pretty thinly traded, and in cases like health care reform, the people trading on it simply don’t have access to the relevant information. (You’ll be pleased to know that in regular stock markets, insider information starts showing up very quickly in prices.)

Nonetheless, they tell you what the crowds think–and on matters like elections, where the crowd’s opinion is what matters, they have decent predictive value. You can throw them off with erroneous information, like the infamous 2004 election when the markets were accurately predicting a Kerry loss until early (and wrong) leaked exit polls started showing a victory.

So I found this pretty interesting:

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.

The post goes on to note that polls seem to be saying the same thing–as it looks like Obama is succeeding in getting this thing through, his popularity has dropped sharply.

That could be a fluke, of course. And maybe Democrats are right and a flood of positive coverage will give everyone a bump. Although since no one’s ever passed this kind of legislation on such negative polling, maybe it will cause the ratings to fall further, particularly if congress ends up using something like Deem and Pass. I don’t recall Clinton getting a huge bump out of the 1993 budget. I seem to remember that it helped cost him the House.

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