Wednesday, March 25, 2009

The Obama Presser, Is The Worst Over?, 2010/2012 Updates, A Short Break

Obama Impressive as Usual
It really isn't news that President Obama knows how to handle the press. There is a reason he has had two primetime news conferences in only 65 days in office - doing Q&A is one of the things our new President does best. And as usual, he did not disappoint.

You can watch the details for yourself. In total, I thought the press was extremely tough, as they should be, grilling the President on deficits, the financial crisis, etc. The President, for his part, was composed and thoughtful as we have come to expect.

I, like many others, was also extremely impressed with the President's choice to call on non-traditional press outlets and include a greater diversity of questions. The most charming moment of the night was a reporter, shocked that she was being called on to ask a question. It also happened to be one of the most interesting questions of the night -- on whether the President felt his race had impacted his Presidency and his treatment in the world -- a questions that President Obama artfully (and probably wisely) side-stepped.

Heaping praise on the President's press-handling skills is boring, so let me get to the short-comings. He failed to address in a meaningful way the trade-offs that we will have to make to manage the deficit -- do you have any idea what he would cut or what taxes he would raise? Does he actually intend to run $1 trillion deficits as far as the eye can see? Or does he not know yet? Recall my advice that articulating tough choices was going to be key to his long term success. Right now, I don't know.

I am also starting to get tired of the "problems I inherited" line. We get that you got a mess, we really do. The economy was in disaster, we had wars on two fronts, an unmanageable federal budget, an entitlement mess and on and on. But I also recall that you knew all this an still applied for the job -- heck, spent half a billion dollars getting the job. So, let's get to the solutions already.

Is The Worst Over?
You read it here first -- almost a month ago, when I said that the economy, at least from a GDP growth perspective was near bottom. Since then the stock market has rallied, both new and used homes have unexpectedly risen, Citigroup has reported a profit for the first two months of the year and now, today, orders for durable goods have risen.

Are we back to boom times? Hardly. The numbers above have improved, but are still anemic. We have a long way to go and probably five or six more months of rising unemployment to face down.

But, consider this. We have seen signs of a turning point and the Fed program to buy treasuries, the Treasury program to bailout distressed home owners, insure private equity to move subprime CDO's and the tax cuts and spending from the stimulus haven't even taken effect yet.

There may be light at the end of the tunnel.

Incidentally -- the stock market jumped more on the day that Treasury Secretary Tim Geithner announced the details of the sub-prime CDO plan than it dropped the day he announced the outline. What does it mean? Nothing other than that I don't trust the short-term stylings of the market, as I've said before. Geithner is still on thin ice, but the toxic asset plan appears to have a very real chance of success, so prehaps I was premature in saying President Obama should consider replacing him (although I did say down the road, not immediately.)

2010/2012 Updates
I have been traveling for business, so I haven't had a chance to make any pretty charts, so let me give you the brief update.

If the 2010 elections were held today, I project that Republicans would gain 0 to 2 seats in the Senate and 20-25 seats in the House. The Senate seats are based on seat-by-seat analysis as well as national polls. The house races are based on the actual 2008 results, adjusted for the shift in generic preference polls, which have moved 9 points more favorably towards Republicans since the November election (from Democrats +7 to Republicans +2.) Not enough to swing control of either house, but solid gains in the House.

I'll publish a complete rundown in a couple of weeks (see my note on my vacation below) -- we have plenty of time and will see plenty of changes until November.

As for 2012, based on approval ratings (not a precise, but a pretty good measure of second-term voting intent, as those tend to be referrendums on the incumbent), if the Presidential election were held today, President Obama would win a landslide re-election, winning 45 states, all but the darkest red havens. I doubt President Obama will win 45 states (although Ronald Reagan did win 49 for his second term, as did Richard Nixon), but we have a lot of ground to cover before then.

A Short Break from Blogging
I am headed on a week vacation to Montego Bay. I don't plan to be watching much news, to have a computer with me or to be writing any blogs. Sorry -- all-inclusive drinks and beach tides are more appealing than writing about politics, at least in the short-term.

Please check back, this blog will be back with a vengance in early April.

Take care and use the time to tell all your friends about this site.

Sunday, March 22, 2009

An Olive Branch to Iran, A Really Good Republican Idea (We Need More!)

As Promised, Iranian Outreach
A story that has largely flown under the radar in the wake of the AIG hysteria this week is that President Obama sent a video message to Iranian leader Ayatollah Khameni, an unprecedented direct outreach. The message itself was very soft, avoiding specifics, but only seeking diplomacy with Iranian leaders.

What press coverage that there was of this largely missed the point and focused on the fact that there was no immediate response from the Iranian government. I suspect that this was never the point. The point was a direct outreach to the Iranian people, all of whom had access to the video, of a changed America.

The Iranian people (although not its government) have for many years been more moderate than much of the middle east and, in spite of anti-Iran governmental policies dating back to support for Iraq in the Iran-Iraq war in the 1980s, a surprisingly pro-American and pro-western attitude. This direct outreach is clearly aimed at reinvigorating those pro-American feelings and may well be effective.

We will see if this is followed up with more direct diplomacy from the likes of Secretary of State Clinton. Stay tuned.

The Revenue Neutral Gas Tax -- A Great Idea (We Need More, GOP!)
I was speaking with a friend of mine the other night and noted off-hand that the massive projected deficits in the 10-year White House budget outline were going to turn me into a fiscal conservative. My friend's response was very thought provoking...he said "you've always been a fiscal conservative, you just don't have anyone representing those ideals right now."

On reflection, he is largely right. I have always favored market-based solutions over governmental ones, except when it is clear that the market cannot be guided to the right end. I think back to all the wonderful ideas that have come from the right in the past 20 years:

* Enterprise zones -- crafted by Jack Kemp 25 years ago to create tax incentives to encourage economic investment by private industry in poor neighborhoods
* The Earned Income Tax Credit -- Republicans regrettably are calling this idea, that their predecesors helped to create, welfare now. The EITC was designed as a negative tax rate for the poorest workers to encourage work as an alternative to welfare.
* Cap and Trade -- we forget sometimes in the debate of Cap and Trade for carbon emmissions that the market-based cap and trade concept was actually a Republican idea, inserted into the Clean Air Act of 1991 to encourage market-based competition to reduce sulfur emmissions. It has been very successful -- when was the last time you heard about acid rain?

So where are these brilliant market-based solutions from the Jack Kemp's and William Buckley's of today? There aren't enough of them, but let me highlight one very good idea that noted conservative commentator Charles Krauthammer in the Weekly Standard in January that has been picked up and championed by Sen. Charles Grassley (R-IA) -- the net zero gas tax.

The proposal, very simply, is a hike in gasoline taxes of $1-$2 / gallon to encourage reduced consumption and energy conservation, offset by a payroll tax credit of approximately the same dollar amount. This would have the effect of no increased tax burden on the average American while rewarding those who conserve gas and punishing those who do not.

What a great idea! It avoids the regressive problem with gas tax increases, encourages conservation and could reduce our dependence on foreign oil.

If President Obama truly seeks bi-partisanship, he should forcefully embrace this great idea from the right.

We need more of this from the right. A lot of my frustration with Republicans as they have non-stop criticized President Obama's proposal is a lack of credible alternatives.

What are Republicans proposing to reduce carbon emissions? To provide universal healthcare? To rebuild infrastructure? To improve education? To fix the auto industry?

Ideas needed! Stop just being the opposition and bring forward some good, market-based solutions to these problems and you might do a lot better in 2010 than you have the past 2 election cycles.

As my friend so aptly pointed out, I am a natural fiscal conservative -- I just also want to solve our nation's problems and in the absence of solutions coming from the right, I will gravitate towards the imperfect solutions proposed by the left. I believe much of America feels the same.

Next Up
A blog in the next week will be devoted to the site's core purpose -- electoral predictions. This will include:
(1) President Obama Poll Tracking and some historical comparisons to past Presidents
(2) 2012 Electoral Map Discussion based on those polls
(3) A relook at 2010 Senate and House races

We've seen some major shifts since my first pass -- I certainly can't call Connecticut a "Safe Democratic" seat anymore (Chris Dodd may just implode enough to lose.)

If you like this site, tell your friends.

Friday, March 20, 2009

Stem Cell Reversal, Ron Kirk Approved, Presidential Economic Credibility at Risk, We Take John Stewart Seriously Now?

Stem Cells
I had been remiss in writing about it, but 11 days ago on March 9th, President Obama altered the existing governmental policy surrounding funding of research for embryonic stem cells. It is probably not new news to anyone, but I wanted to comment on it to clear up some common misconceptions about the action the President took and the previous government policy.

Embryonic stem cell research has always been legal in the United States, at least since Roe vs. Wade. No executive policy of President Bush or anyone previous to him altered this. Nor did President Bush's policy totally exclude federal dollars from going to research on embryonic stem cells.

Under Bush Administration policy, the federal government did restrict federal government funding to only existing embryonic stem cell lines and prohibited use on any new lines that were developed (from new embryos.) Scientists had complained that the existing lines were insufficient to conduct the necessary research to capture the full potential of embryonic stem cells, including potentially growing organ replacements or advanced gene therapy to cure degenerative diseases. Conservatives countered that adult stem cells could be used for this purpose, but in my mind, they did not have the majority of the scientific community in agreement with this assertion.

With President Obama's new executive order, research can be funded on new lines of embryonic stem cells. As a pro-choice American who believes in the potential of embryonic stem cell research, I applaud his decision.

I do not, however, agree with assertions from the left that the Bush Administration policy was a usurption of science by religion. This is an ethical disagreement and ethics always enter into policy. We ban human cloning because we think it is unethical, not because the science dictates it. Bush felt that destroying frozen embryos for science was unethical. I disagree, but respectfully.

Ron Kirk, US Trade Representative
In all the chaos with his cabinet, President Obama has filled another slot, albeit not a department head. Ron Kirk, whose nomination had been at the Senate since day 1, was finally approved by the Senate as US Trade Representative, by a decisive 92-5 vote in the Senate.

The scattered opposition came from across the spectrum with Sen. Robert Byrd (D-WV) and Sen. Bernie Sanders (Socialist-VT) joining 3 Republicans in opposition, but Kirk's nomination was in no real danger.

This still leaves 2 department heads to be approved: former Washington Governer Gary Locke at Commerce and Gov. Kathleen Sebelius (D-KS) at Health and Human Services. Both are expected to be confirmed although the timeline is unclear.

Is President Obama Credible on the Economy?
The President's credibility on economic issues has taken some serious hits this week. First, after expressing outrage at the AIG bonuses, we learn that they were legally protected in the stimulus bill because of language that Treasury Secretary Tim Geithner had Sen. Chris Dodd (D-CT) insert into the stimulus bill.

Next, we learn today that the non-partisan Congressional Budget Office estimates of the deficits under President Obama's proposed 10 year budget outline would actually be cumulatively $2.3 trillion higher than the White House had been advertising.

Plus, we have a continued lack of a cohesive plan to deal with the financial sector.

Add it all up and people's faith in President Obama's capability to steer the economy back on the right track is being severely tested.

Ironically, economic prospects themselves, as I have been writing for the past month, actually appear to be improving and we may see the economy growing again by the back half of the year.

Still, President Obama is expending a lot of capital and burning through a lot of faith and trust.

So what should he do?
#1 Be more open with owning up to mistakes. Call it like it is. Putting Tim Geithner out there early with no details was a bad idea. Inserting the language protecting AIG bonuses into the stimulus package was a huge mistake. Say so. Tell us what you are going to do to fix it.
#2 Consider a change at Treasury. Geithner has been nothing but an albatross so far. I realize it's early, but we can't give him the normal learning curve time. Bush held on to a lousy Treasury Secretary for too long in his second term. Wait until the rest of your cabinet is filled in and then move decisively. And for God's sake, fill the undersecretary roles there.
#3 Stop with the gimimcks. Enough with campaign-style rallies, the late night talk show appearences and all of that. Talk straight at your press conference next week. Then get to governing.
#4 Show some willingness to make hard choices. Let's be real. Either taxes will go up on people making less than $250K, you will have to make some scale backs to your ambitious agenda or we will get buried under debt. Quit pretending we don't have to make those choices.

Jon Stewart, of Inflated Relevance
Okay, so I joined the party and wrote about the Stewart vs. Cramer debate (Stewart destroyed Cramer incidentally, in case you missed it.) But who knew he was so important? Conservative commentators have been blasting Stewart of late. To me this is sort of like liberals blasting P.J. O'Rourke. Sure, Stewart talks politics a lot and has a decent-sized audience. But he is not a serious commentator and doesn't claim to be. He's funny and I like him, but for Tucker Carlson to be writing about him in a serious policy dissection seems crazy to me. Let me make political jokes and if we want to have policy debates, debate President Obama, Rep. Nancy Pelosi, Sen. Harry Reid, etc.

Incidentally, can we stop talking about liberal media bias now? CNN is criticizing President Obama daily (not without cause in most cases, mind you) and to my eyes, if I flip the TV to a random news channel, I'm much more likely to see a conservative voice than a liberal one. There was an argument to be made about bias surrounding the election coverage, but I think it is safe to say that the honeymoon is over.

60 Days and Counting
60 of your first 100 days are over, Mr. you feel 4 years older yet?

Monday, March 16, 2009

New Obama Poll Numbers, What Bonuses Are Supposed to Be For

Obama Poll Update

The still young Presidency of Barack Obama is a mere 56 days old (it sure feels like he has been in office a lot longer than that, but that is really all -- I double checked!), but 3.8% of his elected term, but we have tons of polls available to track the composites.

So, what are the polls telling us? More of the same from last week. President Obama continues to enjoy popularity far in excess of his margin of victory (+31.4% favorable in my latest composite average), but it continues to erode a little every week. After a 5% slide last week, the President slowed the rate of decline a little, losing just under 2% this week. He still has the wind at his back, but that wind is slowing down.The typical pattern with new Presidents is for them to enjoy a bit of a halo for their first 100 days. Starting day 101, they are generally on their own. But the early numbers also tend not to be that indicative of a President's ultimate popularity. Bill Clinton was rapidly becoming unpopular after his first 100 days as was Ronald Reagan. In both cases, their parties lost control of at least one body of congress in the midterm elections, but ultimately both easily won re-election. On the flip side, both Bushes enjoyed very strong popularity throughout their first year and the elder Bush lost re-election with an absolutely anemic 38% of the vote, while the younger Bush won a very close re-election battle with what was, by all accounts, a weak challenger in John Kerry.

So what do these numbers mean for President Obama? Just short-term political capital. He has his long-term prospects pretty well pegged -- if the economy is not significantly improved in 4 years, he will be out of work, if it is, he will likely look pretty unbeatable. But we also don't know what the critical issues will be by 2012 -- just a year ago, we all thought 2008 was going to be all about Iraq and it turned out to scarcely matter beyond the nominations.

Why Do Companies Pay Bonuses?
Bonus outrage is reaching an all time high, with President Obama today committing Treasury Secretary Tim Geithner to using all legal means possible to stop bonus payouts at AIG. I think the whole debate needs some perspective.

So let's start with why bonuses are paid. Companies pay bonuses as an incentive structure to appropriately reward the behaviors that they seek in employees -- it is a mechanism for aligning the interest of the employee with that of the employer. Any good compensation expert will tell you that the key to any meaningful bonus structure is that bonuses be tied to things that the individual receiving the bonus can control.

A typical bonus scheme in a well run corporation has multiple tiers for the multiple layers of the organization. Low level managers, who have far less control over the bottom line of a corporation, are rewarded based on intermediate metrics, such as departmental performance and individual performance. The higher up the chain you climb, the more your bonus is tied to the company's bottom line, because the more your actions and performance directly impact the companies performance. At the top, typically all of the bonus is based on company performance. I think this is fair -- an individual's bonus should be about what they control.

To that end, I have no issue with some lower level managers in AIG receiving bonuses. If there were individual standout performers or individual departments that were effective, they deserve to be compensated for that performance. Let's say for instance that the Account Payable Department reduced invoice processing costs by 30%. That department would deserve a bonus as they did their job very well and had nothing to do with sinking the ship.

What I cannot stomache is huge bonuses for top executives. Their ONLY job is to ensure the performance of the organization and they have failed about as badly as you can fail. For them to get bonuses makes a mockery of the whole system of compensation and sends the message loud and clear that for all the careful design that goes into a bonus structure, that performance doesn't really matter -- it's all about your job title and who you know.

So, go ahead, be outraged at CEOs getting golden parachutes, I know I am. But don't paint all bonuses the same -- there are probably some good people at AIG that actually deserve the money.

Site Update
Site traffic has been fairly stable. Since January 24th (when I started tracking), this site has averaged 10.9 visitors per day. Traffic was slowest in February at 8.4 hits per day, March month to date has been 10.1 visitors. The averages skew higher than this because our two busiest days since I started tracking were January 27th and 28th with 43 and 35 hits respectively.

Regrettably, one of the sites that I most enjoyed on the web,, appears to have shut down at least for now. This was (obviously from the name) a hard-left site, but they had a great database of political reference data, including the election projection database they kept of all electoral vote predicting sites. I hope that they come back, but since they haven't posted sincce January 24th, I suspect that they may not. If they do not return, I will attempt to assemble a database of projections for 2010 as we get closer to the mid-terms.

I highly recommend these other sites (I'm not receiving any endorsement dollars, these are just my personal favorites): -- a centrist site with good projection information and good basic political news -- a right-leaning site that does a good job assembling poll data and commentary stories (although mostly from the right) -- another right-leaning site, but one of the better electoral vote sites in election years

If you visit those sites, let them know that you found out about them here.

And if you like this site, don't let us go the way of -- check back often and tell your friends. And please continue to provide feedback, I really do value and try to adjust the site based on reader feedback.

Thursday, March 12, 2009

Omnibus Becomes Law, Frequent Flier Nancy Pelosi, Labor Unions Flex, Stewart vs. Cramer

Omnibus Becomes Law
Three cheers for government! For the Fiscal Year that began last October, we finally have a signed budget. The $410 billion Omnibus Spending Bill, that covers all of the governmental agencies for the balance of the year became law when President Obama quietly signed it in a private ceremony this week.

This bill has no heroes and plenty of villians. While much of the spending is routine and necessary spending, about $8 billion in the bill pays for thousands of those famous "earmarks" that Sen. John McCain (R-AZ) railed against in this past year's Presidential campaign.

President Obama noted the day he signed the bill its imperfections and vowed for earmark reform but essentially asked the public to give him a mulligan on this bill, framing it as last year's business.

While it may be true that it is partly last year's business, President Obama clearly could have still demanded that the earmarks be removed or threatened a veto. He chose not to not to "keep congress from being bogged down" as he said but for the simply expedient reason that he needs Democrats in congress in the upcoming fights over the budget, cap and trade and healthcare.

Not that congressional Republicans have a moral leg to stand on. Over 40% of the earmarks in the bill are Republican earmarks (proportional to their representation in congress) and the Republicans in congress (excepting Sen. McCain, who has been extremely consistent on this issue and has never made an earmark) passed tons of larded up bills during the Bush administration that Bush, who never once vetoed a spending bill, was happy to sign.

It is utterly insane to suggest that President Obama should be held to an instantly perfect standard after the Republican were more than happy to load in earmarks for years without complaint.

The broad reforms that the President outlined for future spending bills: competitive bids, earmark transparency and executive review are all positive. The goal shouldn't be to target earmark vs. non-earmark spending, the goal should be to target wasteful spending, no bid contracts and ill-conceived well-meaning projects. But it strains credibility to state that you are pushing hard for these reforms wihle not even putting up a fight against a bill that contains none of those constraints.

I suspect the public at this point will give the President a pass on this bill and this is a calculated non-fight. Whether I'm willing to give the President a pass depends on him following through on his broad principles with principled action going forward. This one just looks like old school Washington to me.

Maybe the Auto Execs Could Ride Share
Revelations that House Speaker Nancy Pelosi (D-CA) has frequently used governmental jets for travels abroad for herself and her family, some of which were of dubious need has prompted ire from the right and taxpayer action groups. The Speaker and Democrats in congress set themselves up for this attack with their unrelenting attacks on auto industry exec's use of private jets to come to congressional hearings about the auto bailout.

I think the same logic I stated for the auto execs applies to Pelosi. Private jets didn't bankrupt GM and Chrysler, nor did Pelosi's use drive up the national debt in any meaningful way. But images and perceptions matter and you cannot lead by asking others to sacrifice while you spend recklessly on non-essential things.

You should know better, Speaker Pelosi. Just another example of inept congressional leadership.

Union Power Grab -- Card Check
You have no doubt seen the large quantity of ads on TV these days, funded by unions, in support of the "Employee Free Choice Act". The ads aren't very clear on what the act does, so let me attempt to state it succinctly.

Basically, the way unionization choices exist today is as follows: if workers or a union organizer is interested in unionizing a business, workers begin signing union cards, signfying support for a union election or for joining the union. If a sufficient number of workers sign the cards, the National Labor Relations Board sets a union election to be held by secret ballot and if a majority of workers vote for a union, the business is unionized, if a majority do not, the business stays non-union. Alternatively, after the cards are signed, a business can elect to forego an election and simply recognize the union, in which case the business in unionized.

The Employee Free Choice Act moves the power to choose between a simple "card check" and an election from the employer to the union. Since employers virtually always choose secret ballot elections and the unions would presumably virtually always choose card check, the net effect of this is that unionization decisions would now be decided by the number of cards signed, not by a secret ballot election.

This bill appears likely to become law as it has strong support in the Democratic Congress and indications appear to be that President Obama would sign it.

This is bad law. A secret ballot is the most fair way for workers to make an unintimidated choice about union membership. Peer pressure and intimidation undoubtedly lead some to sign cards that do not want a union, as proven by the number of elections unions have lost over the years.

Unions complain that holding elections allows the companies to force workers to sit in meetings where they can actively campaign against the union. The problem with this argument are that there are very significant restrictions on what a company can say -- companies claiming that they will close factories, cut wages or lay people off as a result of a union decision face significant fines from the NRLB and trust me, the union reps know how to get those fines enforced against employers who engage in such conduct.

This is a power grab by unions, plain and simple. Unions are no longer the heroic representatives of the worker that some romantically imagine. Unions are big businesses with highly paid bosses vested only in the survival of the union. They have faced hugely declining membership in recent years as workers increasingly wonder what they are getting for forking over a portion of their paycheck to the union.

This act is simply unfair. Bear in mind that in much of the country where "closed shops" exist, if a workplace unionizes, individual workers have no choice but to pay the union dues, which go to the union bosses and to political action.

Secret ballots are a cornerstone of democracy. This act damages workplace choice and democracy. It should be defeated but will probably become law.

Jon Stewart Takes on Jim Cramer
No way I'm missing The Daily Show tonight. Talented liberal comedian Jon Stewart takes on his recent dueling partner CNBC's (actually fairly liberal, at least until recently) Jim Cramer.

It all started when Jon Stewart did a piece on CNBC's reporting, citing many shortcomings in the network's coverage of the market run up, most notably blasting Cramer for his infamous "Bear Sterns is fine" remark 72 hours before Bear Sterns collapsed. Cramer responded in the press that he had been quoted out of context and was simply saying in the piece that people's deposits were safe with Bear Sterns. Stewart responded by showing clips of Cramer a few weeks earlier urging viewers to buy the stock. This should be fun.

I feel some empathy for Jim Cramer, who seems like a decent guy. Cramer made some god-awful stock picks recently, but I could apply that to a lot of people, myself included. But Stewart isn't wrong about CNBC in general. Cozying up to CEOs, not asking the tough questions and relentlessly pushing the theory that people could outsmart the market have all been negative forces that have driven market volitility.

Incidentally -- since Republicans for the past 2 months have attempted ot peg President Obama's performance to the stock market, claiming he was responsible for all the decline, does this week's rally mean he is now doing a good job? How about an alternative -- let's wait a year before we start handing out the stock market report cards.

If you like this site, tell your friends.

Sunday, March 8, 2009

Obama Approval Update, A SIlly Electoral Map, Reader Feedback

Obama Approval Update -- Strong, But Not As Strong
I've loaded in the latest polls through March 6th (when the most recent poll was released) and we see a continued trend. President Obama continues to enjoy widespread public support with an Approve - Disapprove of 34%. This is good for him as he still has a lot of goodwill and political capital, despite tough economic conditions. But his supported has continued to slowly erode. The President's peak was an A-D of 56% just after he took office. Since then his weekly numbers have been:
Time Approve-Disapprove
Taking Office 56%
1 Week In 42%
2 Weeks In 41%
3 Weeks In 43%
4 Weeks In 39%
5 Weeks In 39%
Now 34%

What we can see is a fall off from the initial euphoria in week 1 (which you would expect), approximately 3 weeks of flat popularity and a decline over the past 3 weeks. Obviously maintaining such lofty numbers is not realistic while tackling tough issues, but the President needs to watch out -- if the economic news continues to be sour, it is very easy to envision a scenario where people quickly lose patience. If his negatives start to rise, while it won't really impact him electorally (these poll numbers are pretty meaningless relative to 2012, given how far away it is), it will impact his ability to advance his agenda on Healthcare, the Environment and Energy (his 3 stated policy priorities after the economy.)

So how does this all rate compared to other Presidents? For some perspective, it is approximately on par with former President George W. Bush's approval at this stage in his first 100 days but significantly ahead of former President Bill Clinton. President Bush came to office, despite all the controversy surrounding the election, with good will and got his cabinet settled quickly in a good economy and made few waves early. President Clinton, by contrast stirred some negative public sentiment early with controversies like nominees Baird, Woods and Elders, the Gays in the Military issue and the launch of Hillary-Care.

People tend to root for President's in their first 100 days. It will be interesting to see President Obama's numbers in his second hundred days when people start seeing him as the owner of the present circumstances of the nation. At this point, I would simply say he is widely liked, but there is some growing wariness of the size of his governmental ambitions, particularly among economically conservative people and some wariness on the part of all around whether we really have a plan to fix the economy.

Silly Electoral Map
A reader asked me to do an electoral projection based on the current poll numbers. This is a bit of a stretch since approval does not necessarily coincide to a vote for and disapproval does not necessarily coincide to a vote against, but by election day, it often tracks fairly closely, so here I go.

If the 2012 election were held today, President Obama would (unsurpisingly) win in a landslide against an unknown Republican. As of today, he would lose only 4 states: Idaho, Utah, Wyoming and Oklahoma, the 4 most conservative states in the country.

I have no expectation that he will do this well in 2012. He has a long way to go.

As of today -- he is 3.3% into his term. A lot of ground to cover between now and election day 2012.

Other Reader Feedback
Here are some quick takes on some issues readers asked me to cover:
a. Biden's Internet Gaffe
I caught a little flack for not covering Vice President Joe Biden's latest gaffe, asking an aide when he was asked for the recovery website "do you know the website number?"

Sorry I missed covering this -- Vice President Biden both during the campaign and since taking office has started to resemble the Democratic version of Dan Quayle. He actually is a pretty bright guy, but unbelieveable gaffe prone and at times seemingly disconnected from what is actually going on in the world.

From what I've seen so far, I don't know that I could ever support Biden for President. And I don't think he could ever win. The next 4 or 8 years are as high as he is going to go in government, barring a tradgedy.

b. Rush Limbaugh
I have not covered the debate over Rush Limbaugh as "leader of the Republican party" or his speech at CPAC, covered in its entirety on CNN.

I don't know what it means to be the "leader of the Republican party" or any party that is out of power nationally. Certainly Limbaugh is a though leader among the right-wing of the Republican party, as he has been for years. But there are many other voices both in government (Gov. Jindal (R-LA), Gov. Palin (R-AL), Sen. McCain (R-AZ), etc.) and out of government (Sean Hannity, Newt Gingrich, etc.) I don't think Limbaugh speaks for the entire Republican party, nor does anyone. And if he did, boy would they be in trouble. The Republicans need a leader to rally people behind them not just fire up the base and alienate the rest of the populus.

c. Michael Steele's Performance
There are already calls for Michael Steele to step down as RNC Chairman. Good lord, talk about scape-goating. What was Michael Steele supposed to have done by now? His job is to be a mouthpiece for the Republican party and to coordinate efforts in the 2010 election. He's certainly been a better mouthpiece than Gov. Jindal was in his much publicized speech. The Republican Party has a big brand problem, Steele isn't going to fix it overnight.

I doubt he is going anywhere soon.

d. Omnibus Bill Pulled from Floor
This was a late breaking one that I should've covered in my last post. The omnibus bill has been pulled from the floor in the Senate over concerns over pork barrell spending. I don't get it. If earmarks are an issue, just pull out the earmarks. Oh wait -- the leadership in both parties put them all in.

I've said it before and I've said it again -- God help us as long as Sen. Harry Reid (D-NV) is running things on that end of capital hill.

If you like this site, tell your friends.

Saturday, March 7, 2009

Economic Woes Continue, Omnibus Appropriations, MN Drags On, Cabinet Picks Stalled

Economic Woes Continue -- But Potential Hope on the Horizon
It was published today that the official unemployment rate hit a 25-year high in February at 8.1%. This is worse than the peak of the '90-'91 recession (7.8%) and far worse than the very minor mini-recession at the start of the century (6.3% in 2003.) This coincides with my declaration that the severity of the recession has surpassed either of those downturns and is now tracking towards the double-dip recession of the early 80s, when unemployment peaked at 10.8%. It appears likely that unemployment will surpass this rate before it gets better.

Unemployment has risen since March 2007, when the rate was 4.4%, but much of the loss has happened in recent months. Since May of 2008, the rate has increased by an average of 0.3% per month, with the last 3 increases in December, January and February being 0.4%, 0.4% and 0.5% respectively.

There is cause for hope, as I mentioned in my last blog, and we saw more evidence of this this week, although it was mostly drowned out by the employment data. Consumer borrowing unexpectedly rose in February -- indicating that the credit markets are starting to stabilize. Retail sales were down far less in February than was expected.

All of this plays into my theory, driven by the Council on Economic Indicators LEI index, that we appear poised for the economy to resume positive economic growth approximately August of this year. Again, this does not mean things will immediately get better. In 1991, economic growth resumed in the 2nd quarter of the year, but unemployment didn't peak until the 2nd quarter of 1992, fully 12 months later and did not drop to pre-recession levels until 2 years after that.

So, what we will likely see, is a continued rise in unemployment at a rapid rate for the next 6 months, followed by a stagnation in the labor market for another 12 months. It may be late 2010 before we see unemployment drop and near the end of President Obama's term before unemployment returns to normal.

Based on the rate of decline in employment, it appears that before my predicted August economic growth, it appears unemployment will peak in the summer at 10-11%, rivaling the economic conditions of the early 1980s.

Keep in mind that the unemployment rate only includes people actively searching for jobs that are unemployed. It does NOT include people who have stopped looking or underemployed people (people working part-time who are attempting to work fulltime), including these people would add approximately 6.5% to the already-high rate.

So, things are very bad right now, but there is some light at the end of the tunnel. I'm going to put my neck out here and say we will see:
(1) A choppy stock market for the next 3 months, followed by a partial recovery (although to nowhere near the highs)
(2) Mixed economic news and steadily rising unemployment for the next 6 months, followed by modest recover
(3) Unemployment peaking at 10-11% and staying there for 6-12 months before starting to decline and slowly declining to more normal levels by 2012

We'll see if my prediction skills are as good as the so called experts.

Omnibus Appropriations
Congress is in the process of passing what is known as an "Omnibus Appropriations" bill to finish the fiscal year. The government's fiscal year runs from October. In theory, the congress is supposed to pass and the President is supposed to sign appropriations bills for each cabinet department prior to October. Of course, this often doesn't happen and this year, rather than reach an organized agreement on the budget, former President Bush and the Democratic Congress agreed only to a series of extensions of government services, not a real budget.

So, the "omnibus" bill covers all departments and funds them through October. This is work that should have been done before President Obama got to office, but here we are. It is a $400 billion bill and Republicans have been making hay about the approximately $4 billion in earmarks that have be stuck in the bill. Surely they are right, the earmarks are largely irresponsible spending, but the President has made it clear that he doesn't intend to get into a fight over a budget that is for a year that is almost over.

It appears that the Omnibus bill will push through with little Republican support (the bill passed the House on February 25th with only 16 Republicans supporting and is now being debated in the Senate, with strong Republican opposition) and will be signed by the President.

The more interesting question is whether President Obama will take on congressional Democrats in the upcoming appropriations bills for the fiscal year beginning in October. This debate should start in April. I hope the President takes a stand but fear he will not want to spend political capital fighting with congressional Democrats he needs to pass legisliation.

Minnesota Senate Race Drags On
I sound like a broken record, but months after the new Senate took office, we still have no winner for the Minnesota Senate seat in the race between Al Franken (D) and Sen. Norm Coleman (R). Six weeks into the election contest trial, Coleman's lawyers have asked the court to set aside the results of the election and order a new election. I contend Al Franken will eventually take office, but we may not have seen the end of this.

The bottom line is that our current system is incapable of accurately determing a winner when the margin is as small as in the Franken/Coleman race.

If this can happen in our electoral systems, isn't this a glaring sign that we need serious reform? Can you imagine if this happened in the Presidential race? We might have to take on a partisan Supreme Court Decision...oh wait...

Continued Slow Treading for the President's Cabinet
President Obama is 47 days into office now, 3.2% of his Presidential term and he still does not have an approved Commerce Secretary (former Washington Gov. Gary Locke is pending), Health and Human Services Secretary (Kansas Gov. Kathleen Sebelius is pending) or a number of key undersecretary positions at Treasury filled (he had two undersecretaries withdraw this week.)

I cannot recall in my lifetime another President that had so much trouble filling his cabinet. Part of the President's problem is that the Obama Administration's vetting process is so extensive that it a. scares off some potential nominees and b. slows down the process. The other piece of this though, is that Senate Republicans have used an unprecedented number of stall tactics against appointees. In 2001, Bush had all but 1 of his cabinet heads (John Ashcroft) approved on the day he took office.

President Obama must clean this up if he is going to get things done -- he needs a capable staff under him. The lull that you now see in administration actions is largely a result of the administration runnig out of capacity -- there is simply only so much that the President can do himself.

If you like this site, visit often and tell your friends.

Wednesday, March 4, 2009

Is There Any Good Economic News?

How Bad Has It Become?
When I last looked at the severity of the recession, on February 7th -- just a few short weeks ago, it appeared to be the 12th worst recession in US History (excluding early recessions for which good data are not available.)

What a difference a few weeks make! A severe downward revision to the 4th Quarter GDP estimate has significantly escalated my projection of where the recession ranks -- and bear in mind that this only includes what has happened through the 4th quarter of last year as we don't yet have the damage estimate from the first quarter of this year.

(1) The Great Depression -- 1929-1933 -- 26.6% contraction
(2) The Post-WW2 Bust -- 1945-1947 -- 12.9% contraction
(3) The 1957-1958 Recession -- 3.8% contraction
(4) The Great Depression 2 -- 1938 -- 3.4% contraction
(5) The 1981-1982 "Double Dip" -- 2.9% contraction
(6) The 1953-1954 Recession -- 2.7% contraction
(7) The 1974-1975 Recession -- 2.5% contraction
(8) The 1980 Recession -- 2.2% contraction
(9) The Post-WW2 "Double Dip" -- 1949 -- 1.8% contraction
(10) The 2008-2009 Recession -- 1.7% contraction
(11) The 1960 Recession -- 1.3% contraction
(12) The 1990-1991 Recession -- 1.3% contraction

So far, we have the 10th worst recession in American history. We've now far surpassed the 1990-1991 recession, meaning you would have to go back to the early 80s for a comparably bad economy. A 1.7% contraction would be very recoverable if we are at the end. But we are not.

If the pace of decline we saw in the 4th quarter of last year continues through the 1st quarter of this year (and all indicators are that things are at least as bad if not worse so far this year), this recession will climb to 5th on the list -- on par with 1981-1982 and flirting with being the worst since the 1940s.

So when will it get better?

To quote a great many economists -- it has to first start getting worse.

Continued Trouble Signs
As I previously wrote, the stock market is generally thought of as a leading indicator of economic conditions. And in case you have been hiding out for the past month, the market has gone from bad to worse. All of the gains in the past 11 years in the broad market indices have been erased. And it is not clear yet that things have bottomed out. The market moved up today -- this could be the sign of a trough, or just a temporary blip in a continued downward spiral.

Auto sales are anemic. Every major foreign and domestic auto maker save Kia and Subaru are in some kind of talks to try to get a bailout from their home governments (Ford has asked for a bailout only as a contingency.) At the current rate of sales, we are on close to a 30 year replacement cycle for the automobiles in this country.

Home sales also continue to fall and inventory remains well above the benchmark 6 months that is needed for price stability. At the current sales and inventory levels, prices will continue to fall.

Wall Street earnings reports have been awful. Aside from the carnage in the auto and financial industry, a broad swath of companies are losing money and slashing or removing dividends. Everybody from International Paper to Office Max to GE is cutting payouts to shareholders by large amounts. Only Wal-Mart and McDonald's appear to be unimpacted or positively impacted by the current conditions, but this is consistent with recessionary behavior.

Finally, consumer confidence remains at record low levels, indicating a low likelihood that consumers will start spending again.

Signs of Hope?
The conference board, which tracks both current economic conditions and a leading indicator that is designed to show likely conditions six month out, released a February report that showed (no surprise) that current economic conditions continue to deteriorate (the CEI -- measuring current economic conditions declined by 0.5% each month for the past 3 months), the leading indicator actually showed a modest gains in December and January (0.1% and 0.2% respectively) after steadily falling since June of 2008. Since the LEI was pretty accurate in foretelling the collapse at the end of last year, it bottoming out and gaining slightly indicates that the contraction may end in the May or June timeframe this year.

This does not, however, mean that things will return to normal. The conference board's analysis indicates the most likely scenario is a stagnant or slow growth economy which may persist for some time, meaning that things may stop getting worse by mid-year, but not get much better for a while.

Also encouraging is that the current rate of auto sales is unsustainable. People can't make cars last 30 years. Purchases are being delayed, not cancelled altogether. Sure, some people may cut back on car ownership. But others will buy eventually, even if they trade down. It's hard to believe that the auto industry isn't near the bottom. Used car prices are spiking suddenly as people seek used cars in place of new. This will have the natural effect of moderating the market and pushing some people back into new cars.

And low interest rates and falling prices will eventually lure people back into home buying. I don't think home values (particularly in overheated markets in the West and Florida) will return to their highs, they may at least stabilize and the inventory may start to get worked off.

What's Needed
My simple plan:
(1) Spend that stimulus -- NOW! -- consumers need money in their pockets to get the economy moving
(2) Much better execution on bank stabilization -- banks must lend for money to flow through the economy
(3) Get mortgage recovery going now -- this will help the banking situation, stabilize home values and restore consumer confidence
(4) Get positive! -- consumer confidence is partly psychological -- if people think things will get worse, they probably will, if they think they will get better, they probably will

Presidential Campaign Misdirection
In 1992, Bill Clinton ran on "it's the economy, stupid!". The economy was already in recovery by the time he showed up and his administration focused largely on balancing the budget through tax increases, defense cuts and welfare reform.

In 2000, George W. Bush ran downplaying foreign policy experience. He spent the bulk of his administration waging two wars in Iraq and Afghanistan.

In 2008, Barack Obama ran on getting us out of Iraq. Now we are staying about the same length of time that we would have if John McCain had won and the issues at stake are largely economic.

Guess we should start paying attention to a candidate's entire platform, not just what we think is important today.

Sunday, March 1, 2009

Robert Gates -- American Hero, Sebelius to Head HHS, Site Update

Robert Gates -- True American Patriot
I just finished watching Defense Secretary Robert Gates interview on Meet the Press this morning, and I continue to be struck by how much of a debt of gratitude this country owes him.

Consider -- when Gates took office, Iraq was a mess. Our military strategy was failing, our troops were overextended and the entrenched thinking of Donald Rumsfeld was eroding our chances for victory there. Gates turned things around quickly, in part due to the surge, but in large measure due to leadership changes on the ground and a strategy of engaging with the communities in Iraq. By any measure, things have turned around drastically there, to the point where even Sen. John McCain (R-AZ) agrees that we can be out by next August and leave victorious.

Then, when Barack Obama defeated John McCain for the Presidency, promising an Iraq pullout, Gates, a Republican, agreed to stay on to see that the job was done right. He has helped to shape the Obama policy to one that is eminently reasonable and ensures, as best as is possible, an orderly withdrawal.

Today, Secretary Gates, ever the public servant, declined to engage in the politics or criticize either his former or present boss. Gates reminds me a lot of the kind of ethic we saw from Colin Powell over the past 20 years.

Gates indicated in the interview that the length of his service was at the President's discretion and said he did not have an end date for his service in mind at this point. He did, however, indicate that he did not intend to serve the entire length of the 4 year term.

The rumor in Washington is that Gates is slated to stay about 1 year into the new administration. President Obama would be wise to retain Gates leadership for as long as possible, preferably at least through next August to oversee the draw down in Iraq. I don't know if Gates will be willing to stay this long, but as I've written before, the President needs credible leaders heading the key departments that can be his mouthpiece. Gates is among the best he's got.

Sebelius to Head HHS
As I've been speculating since shortly after the withdrawal of Tom Daschle from the HHS job, media reports indicate that President Obama will tap Gov. Kathleen Sebelius (D-KS) for the HHS job. Unlike with Daschle, who was a Washington insider, the President intends to appoint a separate White House health care policy czar, who will help guide the push for universal healthcare. This makes sense, as Gov. Sebelius does not have the Washington connections that Daschle does, but certainly makes for a more complicated execution, having two heads on the horse. But it may be for the best to have someone separate heading the policy initiative -- the new HHS Secretary faces significant challenges, including reforming the FDA and the USDA, managing the planned reductions in Medicare and Medicaid payments to providers and heading a large, sprawling bueracracy.

At any rate, Gov. Sebelius appears to face no significant obstacles to confirmation at this point. Both Sen. Pat Roberts (R-KS) and Sen. Sam Brownback (R-KS) have expressed support for her appointment and she appears to have no major hurdles. Of course, I thought the same of Daschle, so you never know.

This leaves President Obama with no major appointments left to make. Sebelius and former Gov. Gary Locker (D-OR) for Commerce still face confirmation votes in the Senate as does US Trade Representative-Designate Ron Kirk. The major challenge in the executive now will be to get the second-tier leadership in place, particularly at Treasury and Defense to take some of the load off of the President and his Cabinet. President Obama has been a one man tour de force so far, but as I've often said, he needs additional credible voices that can speak for his administration if he wants to be successful.

Site Update
The traffic on this site has continued to remain at about the same level since I started tracking it on January 25th (actually late evening January 24th), with a total of 408 views, averaging 11.7 per day. The peak day for traffic was January 27th, which had 43 views, the date I published the first look at the 2010 Senate races. Our slowest day for traffic was February 15th, with a mere 3 page views, the day after publishing a post about the stimulus passing and the Hilda Solis appointment.

My basic read is that site traffic appears to peak when I publish polling analysis and predictive information and appears not to be as high when I have articles dedicated to political analysis and commentary. I did not have the traffic tracking tolls in place, but based on the e-mail volume I received, I imagine our readership probably peaked in the lead-up to the November election.

My goal is to build readership on this site, so I'd like your input. Please e-mail me (or comment if you choose, although I've noticed people are much more inclined to send me e-mail for whatever reason) and let me know what you'd like to see:
Do you prefer polling analysis, historical analysis (like my economic posts) or current events analysis and commentary?
What additional content would you like to see on this sites? Links? More interactive media?

I've really enjoyed building this site up and would like to take it to the next level. I would love your input. And if you like this site, as I've often said, please visit often and tell your friends. It is and will always be free of charge and for your enjoyment.