Romney or Obama: How the Economy, Campaign Ads, and Swing States Will Determine the Outcome in 2012

Three important issues will determine the outcome of the 2012 presidential election: the economy, campaign advertisement and swing state sentiment.

The economy’s prospects are in flux because of impending tax increases, if Congress cannot agree with the president in extending all or part of the Bush tax cuts. Currently, this is causing companies to defer hiring and investing that are necessary for economic progress and job growth.

Uncertainty “could stifle gross domestic product growth by as much as 0.5% this year.” A proxy of uncertainty, the Chicago Board Options Exchange Volatility Index, or VIX, has risen 26 percent since April.

The combination of tax increases and mandatory spending cuts, that may begin early next year, represents a “fiscal cliff.” Neither party wants this, but agreement between the opposing forces is remote.

The tax cuts expiration will increase the liabilities of an average household by $1,750. The aforementioned spending cuts to military and domestic programs could decrease economic output by 4%, according to the Congressional Budget Office.

This dire economic landscape will greatly affect the chances of President Obama. Other barometers such as gasoline prices and the unemployment rate will not markedly improve in the final few months before the elections, and will also hurt the president.

Campaign advertising is the key method by which each presidential candidate will state his plans to improve the economy and to bash his opponent. I, and many others, have written articles on this subject, so I will not rehash the details.

The most important observations are that Romney was much more successful raising money than Obama in the last report on campaign funds. Up to this point, the Romney campaign has not been able to blitz the airwaves (for lack of funds), and Obama has made advances. This will likely turn around in coming weeks as Romney's ads increase at a furious pace. Romney also has significantly more super PAC support for his candidacy. The negative ads from these groups will undoubtedly increase Romney’s chances.

It is well documented that political ads are the most effective form of campaigning. Campaigns can focus on specific issues in specific places. This takes us to the third important issue, the impact swing states will have on the election.

The following states are considered swing states (electoral votes are in parentheses): Colorado (9), Florida (29), Iowa (6), New Hampshire (4), Nevada (6), Ohio (18), Pennsylvania (20), Virginia (13) and Wisconsin (10).

Currently, Obama leads in most of these battleground states, but the numbers are in flux and will be greatly impacted by increased ad spending by Romney in weeks to come.

Obama’s advantages are his incumbency, bully pulpit and oratory skills. His disadvantages are his record of few success and glaring failures, the economy and his inability to lead Congress.

Romney’s advantages are his business experience and success (some think these hurt his chances), financial support, business support and an improved ability to make his points. His disadvantages are his former business affiliations, an inability to connect with voters and his wealth.

From my perspective, the outcome of this close race will be dependent upon the state of the economy and who is most successful advertising in swing states. Note: We should expect ads to be harsh and denigrating.