Saturday, October 31, 2009

The Great Recession Ends with Great Damage, Headwinds and Tailwinds, Is the Stimulus Enough?

The Recession is Over, But What Has it Left Us With?
While the "official" declaration of the start and end of a recession comes months later after economic analysts have poured over reams of data on economic performance, the 3.5% growth in Real Gross Domestic Product in the 3rd quarter of this year is sufficient to declare with a very high probability that the so-called "great recession" has ended in the United States.

As a reminder, Gross Domestic Product is a measure of the value of all goods and services produced in the United States in a given time period. It is the most comprehensive measure of the health of the economy essentially because the value of everything produced equates to the value of goods and services that Americans will receive in that quarter -- in other words, we get something for the value that we generate. You can see the last 3 years of GDP growth in the chart below, with the negative quarters, where the economy was actually shrinking, in red.

With a total economic contraction of 3.8%, this ranks right up there with the worst recessions of the Post-World War II era, trailing only the Great Depression, but trailing it by a massive margin (we are talking greater than a 5:1 ratio.) There is a legitimate debate about whether this recession was worse than the double-dipper in 1981-1982 that saw unemployment surge above 10% and mass inflation to go with the economic stagnation (something that we fortunately do not see today, at least yet.)

So if the recession is over, when do things get back to normal? Depends what normal is and what happens going forward.

Keep in mind that the chart above talks about TOTAL GDP. The wealth-generation that people feel in their wallets relates to PER CAPITA GDP, or the total GDP divided by the number of people in this country.

Our population grows by about 1% per year. Therefore, just to keep the same standard of living, the total GDP has to grow by 1%. Any less and our standard of living is slipping. Any more and it is improving, as it historically has.

Think of it this way: if there were 2 people in the country and we made 2 cars in a year, that's 1 new car per person per year. If the population grows to 3 people, we now have to make 3 cars in a year for those 3 people to maintain the same standard of living that the 2 people previously had.

The recession, with all its quarters of negative growth have driven a significant gap in per capita GDP versus its high in the 4th quarter of 2007, when the recession began. The chart below shows the trend in Per Capita GDP.

If we were to maintain the 3.5% annual GDP growth rate that we had last quarter (which is a tall order in and of itself -- more on that later), it would take until the 3rd quarter of 2011 just for per capita GDP to get back to where it was before the recession.

That's a long time to suffer through high unemployment and declining wages. And there is no assurance that this growth rate will continue. The economy faces significant short-term headwinds, although also some long-term reasons to be optimistic.

Head and Tail Winds
There are many reasons to be concerned in the short-term:
  • A large portion of the growth in the third quarter was created by government stimulus. Cash for clunkers is now gone, the first-time home buyer tax credit may or may not get extended and other stimulus spending and tax cuts will end eventually. Essentially we've grown through government leverage, but that can't last forever
  • Unemployment is still very high, at 9.8% and predicted to rise further (although it feels like we are nearing the peak.) High unemployment squashes consumer spending, which in terms impacts growth in the near-term.
  • Consumer confidence is still sagging. After recovering from downright scary levels in the winter, when it was 20% of the 1985 benchmark it is measured against, it rose throughout the spring, but still now stands at just 47.7% of its 1985 level, having declined each of the past two months. If consumers aren't confident, they aren't likely to spend.
  • Productivity is surging -- worker productivity rose 6.6% in the 2nd quarter of 2009. Productivity is the single best indicator of long-term economic growth, because the more an individual outputs per hour of work, the more that there is to go around, once you get people working.
  • Stimulus is not over -- we have a lot of stimulus money left to spend -- more on that later
  • History is on our side -- double-dip recessions are actually very rare -- 1981/1982 was the exception not the rule. In the modern era, Americans have shown the capability to buckle down and grow the economy after a recession. Consider the boom that followed the 1990/1991 recession, where we saw some of the best economic growth in the countries history.
  • Innovation could be the key -- just as the internet unlocked productivity and output in the past decade, new technology will be the key if we are going to launch into a new era of prosperity. We have still not fully leveraged the internet. Green energy could be a whole new economic boom segment. Upgrading and rebuilding the nation's infrastructure could be a growth industry.
In total, I admit I underestimated the severity and the impact of this recession from the output. I'm still very optimistic about the long-term economic prospects in this country. We still have a highly educated, talented, productive workforce, we still have a spirit of innovation and experimentation and we still have natural resources and infrastructure to benefit us long term.

The short-term is a little more dicey and harder to call. Will the economy sink back down as stimulus pulls out? Will consumer confidence drag on the economy for some time to come? Economists are split. I think we will continue to grow, but the question is how fast -- will it be enough to solve massive unemployment and consumer confidence or just enough to maintain our now-reduced standard of living?

More Stimulus? Too Much Stimulus?
The second quarter growth numbers have ended debate among serious economists about whether the stimulus had an impact on the US economy -- every credible financial news source cites stimulus funding as one of the major factors behind the return to growth in the second quarter. Clearly, programs like Cash for Clunkers and the Home Buyer Credit helped spur spending and growth.

Critics on the right argue that this a short-term bump up and that we will face negative longer-term consequences as government debt rises and the stimulus abates. They say that any benefit from the stimulus is not worth the long-term cost.

Critics on the left, on the other hand, argue that this simply proves that we didn't do enough stimulus, that the original bill should have been larger, that we probably need a second stimulus shot in the arm.

The White House won't dare to propose that we do something called a second "stimulus" bill, but as I noted a few weeks ago, has been quietly moving to make some small moves, such as extending unemployment benefits and the first-time home-buyer credit.

But there is still a lot of juice left in the first stimulus bill too. As of the latest reports:
Spending -- $123.5 billion of the $499 billion allocated has been paid out as of last week or 24.7%
Tax Cuts -- $83.8 billion of the $288 billion in tax cuts have been paid out or 29.1%
In total of the $787 billion stimulus package, about $207.3 billion has been paid out or 26.3% of the bill's total.

While I had argued that the money needed to go out faster to give the economy a quick shot in the arm, the good news in these numbers is that there are a lot of legs left in the existing stimulus package. If we spent about 26.3% of the bill's allocation and we managed to achieve 3.5% GDP growth for a quarter, it stands to reason that if that money is spent appropriately, we should be able to maintain that growth rate for several more quarters as the balance of the funds are paid out of the course of this year and next year.

The risk is that the most "stimulative" programs, such as Cash for Clunkers may have past and whether the bill continues to drive economic progress will depend on the effectiveness of the remaining programs.

All in all, not only would it be political suicide, it would seem to me to be fool-hardy to propose another stimulus when there is so much left to go on the existing bill.

The economy is a complex beast and if anyone understood all the twists and turns that it takes, that person would probably be able to get very wealthy and might not share that information with the rest of us.

However, the recent news is, on balance encouraging. We aren't on the verge of financial collapse anymore, the economy is growing and unemployment will eventually peak. But there will be more pain along the way.

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Friday, October 30, 2009

Latest Calls for Election Day, Finally Primetime for Health Care, The Middle Path on Afghanistan?, More Can Kicking, Presidential Approval

New Jersey, Virginia & New York-23
I will make my final projections in the 3 major November races on Monday. I don't project "ties" in my predictions, so at this point, I've eliminated the toss-up category -- every race will have a prediction, however close it is. As I still don't know what to do with Rasmussen polling data, I've elected to average the "Rasmussen" and "non-Rasmussen" averages, essentially giving the Rasmussen polling 50% weight. This is a departure from my Presidential Approval tracking where Rasmussen is given full weighting. I will make future calls on inclusion or exclusion of Rasmussen polls based on their accuracy in predicting these races. As always, polls sponsored by partisan groups are excluded from the analysis. For prediction purposes, only polls conducted within the past 7 days are included.

I have not been covering the New York mayoral races, as I generally cover only races for federal offices (House, Senate, the President) and Governor's races, but suffice it to say that Mayor Bloomberg appears to be extremely safe for a third term.

Let's get down to the races I'm covering:
New Jersey
Including Rasmussen
Weighted Average: Corzine +0.5%
Unweighted Average: Even
Median: Christie +0.5%
Average of Averages: Even

Excluding Rasmussen
Weighted Average: Corzine +1.3%
Unweighted Average: Corzine +0.6%
Median: Even
Average of Averages: Corzine +0.6%

My Projection: Lean DEM Hold, Corzine +0.3%
This one is ever-so-close and will depend on many factors: Democratic turn-out, the Daggett factor and late-breaking undecideds. It could obviously move in either direction in the last few days. The Corzine surge appears to have died out for now and we have settled in at about as close as they come.

Including Rasmussen
Weighted Average: McDonnell +13.7%
Unweighted Average: McDonnell +14.3%
Median: McDonnell +14.0%
Average of Averages: McDonnell +14.0%

Excluding Rasmussen
Weighted Average: McDonnell +13.9%
Unweighted Average: McDonnell +14.5%
Median: McDonnell +15.5%
Average of Averages: McDonnell +14.6%

My Projection: Likely GOP Pick-up, McDonnell +14.3%

This one isn't close -- not even remotely. The GOP is back in Virginia. McDonnell beats Deeds.

New York-23
I like an adequate polling base to make a statistical projection, so I will share what is available. The one non-partisan poll conducted in the past week, a Research 2000 poll, showed Owens, the Democrat at 33%, Hoffman, the upstart Conservative party candidate at 32%, and Scozzofava, the "official" GOP candidate at 21%.

In the R2000 poll, Hoffman has gained 9 points in the past week, picking up almost all of them from Scozzofava after receiving high-profile endorsements from the likes of former Alaska Governor Sarah Palin and current Minnesota Governor Tim Pawlenty.

This is a race Hoffman SHOULD win. Owens is stuck in the low 30s and the only way he can hold on to win is if Hoffman and Scozzofava more or less split the 60%+ of voters who intend to vote for some sort of Republican and Conservative.

In spite of the one non-partisan poll showing Owens in the lead,

My Prediction: Lean Conservative Pick-up

Showtime on Health Care Reform
With the unveiling of the House version of Health Care reform by Speaker Nancy Pelosi and the implicit promise that it will hit the floor sometime late next week, after months and months of debate, town halls, hand wringing, Blue Dogs, liberals, Republicans, lobbyists, speeches and the like, it is FINALLY showtime.

The Pelosi bill is more liberal than the proposed Reid bill in the Senate, including a public option without an opt-out provision for individual states, but is less liberal than those on the left had hoped, allowing only for the public option to negotiate with providers versus perscribing that reimbursement rates be tied to Medicaid.

Many issues remain unresolved in the House version: what kind of public options survives, what to do about abortion coverage opposed by a group of pro-life Democrats (as well as Republicans), etc. But it appears highly likely that some kind of reform will pass the House.

The path through the Senate continues to be far less clear. It is obvious that moderate Republican Senator Olympia Snowe is not on board with the opt-out public option, although she might support a "trigger mechanism" for a future public option. Independent Joe Lieberman has agreed to vote to begin debate in the Senate, but has threatened to support a fillibuster if the public option isn't pulled. As no other Republican has indicated any inclination to support the bill, the Democrats will need one of those two, along with moderate Democratic Senator Ben Nelson in order to pass a bill.

Clearly Harry Reid doesn't have this all figured out yet and the plan appears to be to let things develop on the Senate floor, which will likely lead to some high drama.

I'll be tuned in, bag of popcorn in hand when the Senate debate finally begins. No word yet on when this hits the Senate floor, although it would be logical for them to follow the House, where Democrats should have an easier (although not easy) go of it.

More Than 0, Less Than 40K?
Inside reports out of the Obama Administration indicate that the President is leaning towards sending additional troops to Afghanistan, but something less than the 40,000 requested by General Stanley McChrystal. This is not too surprising, given the history of the President's rhetoric on the subject..."war of necessity" and all, but what is still not clear to me is what the
mission objective will be for those additional troops.

I hope the President decides soon (taking your time is fine, but this is getting ridiculous) and that whatever he decides that he articulates a clear objective for the troops over there. We owe our brave soliders that.

Another Continuing Resolution
The federal government will keep its doors open until December 18th, assuming the President, today or tomorrow, signs the Interior Department appropriations bill. The conference report on that bill had another continuing resolution tacked on to it which gives the vast swath of agencies (see below) that still don't have a budget for the year, the capability to continue operating for another 7 weeks.

As the Senate has not yet even taken up several of the appropriations bill, we may again get deep into the budget year before the Fiscal 2010, which started October 1st, gets settled. It also appears likely, given the delay, that several of those bills will be combined into a so called "minibus" appropriations bill covering multiple agencies.

Think having a State and Defense department budget might be important during the middle of two wars? Apparently congress doesn't.

President Obama -- Scraping the Lows
I don't want to overplay a one-day drop, but today President Obama hit his second-lowest aggregate polling of his Presidency at an Approve minus Disapprove of +8.8% (his all-time low was on September 11th, when he was at +8.7%.) Still just slightly better than his November vote total of +7.2%, but his numbers took a turn down in the past week. Whether it is a bump in the road or a start of a new trend remains to be seen.

The President's monthly numbers don't show the same decline, primarily because he actually bumped up in approval early in the month before dropping late. October is almost over, so these won't change much...we'll see how November shapes up.

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Sunday, October 25, 2009

Why the President Doesn't Have Much Time, 2010 Projection Update, The Bizarre World of NY-23, Hate Crimes Take 2

The Clock is Already Winding Down
President Obama has precious little time left if he is going to get major legislative accomplishments in his term.

That seems an odd statement to make just looking at a calendar in the abstract. Today is only day 279 of the Obama Presidency, a mere 19% of his term having expired. But, let's think about how the calendar shapes up.

  • In 2010, the focus will shift to the mid-term elections. If you think Blue Dog Democrats in the House and at-risk Democrats in the Senate are nervous now about making major legislative change, this will increase exponentially as the mid-terms near. The White House has as much as admitted that major accomplishments won't happen in the 2010 congressional sessions.
  • The congress that convenes in 2011 and 2012 will likely be significantly less favorable to bold policy changes. It will almost certainly be more Republican (more on that later) and a narrowly controlled Democratic-majority congress isn't likely to be willing to make big waves.
  • In what is left of 2009, congress still has to deal with a fair amount of routine appropriations legislation (as covered here), in addition to debating the President's proposals. There are also several holidays -- Thanksgiving, Christmas and New Year's to work around.
So, in reality, the President has only about the 67 days left this year to get his biggest changes done -- and that's including the holidays and appropriations bills mentioned above.

Enough to make one wonder if he can really get health care and energy policy done, isn't it?

Intrade (the internet gambling site), rates the odds against health reform with a public option at 2.8 to 1 (it does not have a separate bet for whether health reform without a public option will pass.) The odds on cap and trade? 1.2 to 1 against.

Still breathing, but the deck is against the President getting both of his stated policy priorities done.

The 2010 Mid-Terms
(1) The Senate
Major changes in ratings from the polling of the past month:

Nevada -- the last 3 polls have shown Senate Majority Leader Harry Reid (D) trailing by very small margins, but consistently trailing. This one, at least for now, moves from toss-up to Lean GOP Pick-up.

California -- Barbara Boxer is comfortably up by double digits in a couple of recent polls, despite the high profile run of Carly Fiorina. This one moves from Lean Dem Hold to Likely DEM Hold.

Louisiana -- Vitter still leads comfortably, but two polls that put the lead at around 10% indicate that he is not 100% safe. This seat moves from Safe GOP Hold to Likely GOP Hold.

New Hampshire -- New polls are split and the aggregate is right around the zero line, therefore this one moves back from Lean DEM Pick-up to Toss-up.

Ohio -- the Democrats have been slipping in the rust belt the last month and this one is no different. Recent polls show small GOP leads...not quite enough to move this one back in the GOP column, but certainly enough to take it from a Lean DEM Pick-up to Toss-up.

So where does this leave us?
Safe DEM Holds (7)
Hawaii, Maryland, New York (Schumer), Oregon, Vermont, Washington, Wisconsin

Likely DEM Holds (4)
California, Indiana, North Dakota, Massachussetts*

Lean DEM Holds (2)
Arkansas, New York (Gillebrand)

Lean DEM Pick-ups (1)

Toss-up -- DEM Controlled (2)
Illinois, Pennsylvania

Toss-up GOP Controlled (2)
New Hampshire, Ohio

Lean GOP Pick-ups (4)
Colorado, Delaware, Connecticut, Nevada

Lean GOP Holds (3)
Kentucky, North Carolina, Georgia

Likely GOP Holds (6)
Alaska, Arizona, Iowa, Kansas, South Dakota, Louisiana

Safe GOP Holds (6)
Alabama, Florida, Idaho, Oklahoma, South Carolina, Utah

Current Senate: 58 Democrats, 2 Independents, 40 Republicans

* Special election to be held in January, not November

Projection: GOP +3-7 Seats, central projection of GOP +5 Seats
2010 Senate with all toss-ups to GOP: 51 Democrats, 2 Independents, 47 Republicans
2010 Senate with all toss-ups to DEM: 55 Democrats, 2 Independents, 43 Republicans
2010 Senate with all LEANERS to GOP: 48 Democrats, 2 Independents, 50 Republicans
2010 Senate with all LEANERS to DEM: 62 Democrats, 2 Independents, 36 Republicans

Still no path to GOP control (even in the all leaners to GOP case, Lieberman and Sanders caucus with the DEM's and Joe Biden breaks the tie to retain Democratic control), but the most favorable reading on 2010 yet for the GOP.

(2) The House
The generic polling has as wide a range as I've ever seen it. Rasmussen shows GOP +5%, whereas CBS News has DEM +13%. That's an 18% spread between non-partisan polls (although some might question the partisanship of both the organizations mentioned there), an extremely rare circumstance.

My aggregation of all the polls puts the average at DEM +1%.

This puts my projection at GOP +17-22 seats.

If you believe the Rasmussen poll, that would imply a GOP pick-up of approximately 34 to 41 seats, enough to nearly seize control of the House. I don't see that yet.

So, in total, the GOP stands to gain in the mid-terms, but control of either body still looks unlikely.

Many have looked for a repeat of the Gingrich revolution of 1994. At this point, the structure of the election looks unfavorable to such a large swing for several reasons:
  • Democratic majorities are much more sizeable, particularly in the Senate
  • The rotation of Senate seats that are up in 2010 is unfavorable to the GOP, unlike in 1994. 2012 will be a much better map for potential GOP pick-ups than 2010.
  • There are far less projected House vacancies in 2010, a key opportunity the GOP seized in 1994.
New York 23 and the Divided GOP
The 23rd district in New York is a moderately pro-GOP district (approximately 4% more Republican than the nation as a whole, based on the Presidential election results in November.) The President's popularity is down significantly. The GOP nominated a moderate for the seat. The GOP should be in good shape to retain this seat in the upcoming special election to fill the seat vacated by Army Secretary John McHugh, right?

Not so fast.

A splinter in the GOP has led to an indepedent / conservative party candidate that is receiving the endorsement of major national GOP figures such as Sarah Palin, splitting the GOP vote and creating a scenario where a Democratic win seems likely.

Congressional district level polling is a dicey exercise with limited accuracy, but two different independent polls show the same story -- Doug Hoffman (C) is stealing support from Dede Scozzafava (R), leading to a 4 to 5 point lead for Bill Owens (D).

This is close enough to shift, but Hoffman, currently in third by a fairly wide margin, is picking up money and endorsements, all of which probably plays into Owens' hands.

More an exception case than a bellweather because of the strange circumstances, it looks like the DEM's might be poised to add another seat to their House majority.

Hate Crimes Follow-up
Sometimes I write things that provoke a lot of repsonse. My posting on my opposition to hate crimes laws certainly was one of those times.

A lot of the feedback I found uncompelling. Yes, I'm aware that the historical reason for these laws was white juries in the South in the civil rights era that would not convict white of attacking blacks. Yes, this is a noble reason for wanting such a law. No, it does not change my view that this is the wrong solution to a real problem.

One piece of feedback that gave me pause though, was a point made by a reader. "You state that what is in a person's mind shouldn't be the basis for the severity of punishment. But isn't that exactly the difference between a first degree and second degree murder? An interpretation of a person's intent?" I must admit, this is a very strong point. We do use this distinction, based not inherently on the act itself, but based on evidence on what someone was thinking as a basis for the severity of punishment for murder. There is a legitimate parallel between that and a hate crimes law.

I still fear hate crime laws are a slippery slope towards thought policing and open the door to a more restrictive view of free speech. But I am not as confident in my opposition as I was 24 hours ago.

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Friday, October 23, 2009

Crunch Time in NJ & VA, Why Hate Crime Laws Are Bad for Democracy, Obama Approval and Appropriations Updates

Down to the Wire in NJ and VA -- One Toss-up, One Almost-Sure GOP Gain
As the campaigns wind down in a flurry of ad spending, we are getting a clearer picture of the two Governor's races this November: New Jersey still looks like a down-to-the-wire Democratic Hold, Virginia a sure-thing GOP pick-up.

Let's look at the numbers:
New Jersey
Including Rasmussen (Excluding Rasussen)
Weighted Average of Polls = Christie +0.4% (Corzine +0.2%)
Unweighted Average of Polls = Christie +0.2% (Corzine +0.4%)
Median of Polls = Christie +1.0% (TIED)
Average of All Averages = Christie +0.5% (Corzine +0.2%)

Anyway you dice this one, this is still damn close. My only reason for continuing to predict a Corzine hold is my sense of history in New Jersey. Maybe it will hold this time, maybe it won't. Officially, this is still a toss-up.

Including Rasmussen (Excluding Rasussen)
Weighted Average of Polls = McDonnell +11.6% (McDonnell +13.6%)
Unweighted Average of Polls = McDonnell +12.0% (McDonnell +13.7%)
Median of Polls = McDonnell +11.0% (McDonnell +14.0%)
Average of All Averages = McDonnell +11.5% (McDonnell +13.8%)

Craigh Deeds is toast. Mark this a Likely GOP Pick-up.

Hate Crime Laws Are Un-American
Long-time readers of this blog know that I am a tireless advocate for the rights of LGBT Americans (that's Lesbian, Gay, Bisexual and Transgendered for those of you less familiar with the group.) I have called the ban on gays in the military "the worst law in the land". I've forcefully advocated for the right of marriage for gay couples. I've argued for increased employment protections for LGBT's.

So it may surpise many of you to learn that I fervently oppose the hate crime measure attached to the Department of Defense construction appropriations bill which makes crimes against gay people a hate crime.

It is not because I in any way shape or form advocate, appreciate or sympathize with violence against LGBT's. Attacking someone for their sexual orientation is abhorant and if there is a god, I hope there is a special place in hell reserved for those who commit such crimes.

Having said this, ALL hate crime laws are dangerous, on face.

Let's consider what exactly the laws do. They separate crimes such as assualt and murder into multiple categories of punishment. The severity of that punishment is based on your motivation to commit the crime -- that is, what we believe was in your mind and motivated you to commit the crime. As evidence of what we think is in your mind, we take your stated biases, your words as evidence of your higher order crime.

Once we start punishing crimes based on what people THINK veruss what they DO, we are all in trouble. Who decides what thoughts are motivators deserving of higher punishment and which ones deserve only the ordinary punishment?

Attacking a person for being gay is obviously wrong. But attacking people without provocation is always wrong. The nature of the punishment should depend on the severity of the crime, period. What you were thinking has nothing to do with it.

Presidential Approval -- Still About the Same
In a consistent theme of the past few weeks, President Barack Obama's approvals continue to hover just above his election result in November. The country is just about the same amount divided it was back then. Conservatives hate his policies, liberals, for the most part, approve of them. Moderates are split. Same as 2000, same as 2004, same as 2008.

On a monthly basis, President Obama continues to show more or less constant over the past 3 months. He still has some political capital left, but no longer inspires any fear in the GOP, which has continued to be emboldened by the prospect that Obama is not immune to public disapproval.

Ever-So-Slight Progress on Appropriations
The President has signed the Agriculture bill, making it only the second bill of the new fiscal year to become law. Three other bills -- the Energy Bill, the Homeland Security Bill, and the DOD Construction bill, which also included the LGBT hate crimes measure are on his desk awaiting signature. All are expected to be signed. As late in October as it is, we are all but assured of another continuing resolution at month's end. At least one more month without a real federal budget. Sloppy, sloppy, sloppy.

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Sunday, October 18, 2009

Governor's Race Spotlight, Appropriations Malaise Continues, Countdown to a Healthcare Deadline

Down to the Wire in New Jersey and Virginia
We are 16 days from the elections for governor in New Jersey and Virginia, two races that because of their off-year nature (these are the only two states that elect their governors in odd-numbered years) always receive a disproportionate amount of attention.

So let's check out where we stand;
In, New Jersey, we now have an extremely close race.

I'll break down the numbers a few different ways.

The most commonly used average in political circles is the "RealClearPolitics" or RCP, an average generated by the site which uses a pure average of recent polling data. I personally think there are potential issues with this average as there are vast differences in the polling sample of different polls and therefore their accuracy. In the New Jersey race for instance, there is a current New York Times Poll that sampled 475 voters and a Quinnipiac poll that sampled 1,264 voters. Clearly, in my mind, the Quinnipiac poll should be given more weight because they talked to more people. So my methodology has always been to combine the poll results into one "megapoll" by aggregating the responses. The effect of this is that the Quinnipiac poll has 2.66 times the weight in this example. If the poll numbers are all similar, this is an academic point, but if the poll numbers vary widely, this becomes an important distinction.

The second set of numbers I'm going to look at are with and without polling results from the firm Rasmussen Reports. My practice has always been to look at polling results from all non-partisan polling firms (I exclude results from partisan-affiliated firms such as Strategic Vision for the Republicans and PPP for the Democrats as they inherently run the risk of polling bias). Rasmussen Reports has been a respected, independent polling firm. Their results in the 2008 election were in line with those of other polls as well as relatively close to the final results. However, it is difficult to ignore that their methodology has deviated significantly this year from that of other polling firms. Their Presidential Approval polls have been regularly showing a 10 to 20% gap versus all other Presidential Approval polls. To me, this calls into question the sampling methodology that they are using. Now, we don't have emperical results to validate this -- it is possible that Rasmussen has it right and everyone else has it wrong, but we won't know, at least until we get some election results. So, for completeness, I'm looking at numbers with and without the Rasmussen results.

Finally, we'll look at the numbers both way based on the "median" poll. This theory is to throw out high and low outlier polls until we get to the poll that is "in the center" of the numbers. If there are two polls, in the center, we will take a pure average of the two, as is typical in median calculations.

Averaging all three of these methodologies is how we did the Presidential prediction model last year, which had some pretty darn good results.

So, based on all of this, NJ stands as follows:
All Non-Partisan Polls Without Rasmussen
Weighted Average Christie +1.1% Christie +0.2%
Pure Average (RCP) Christie +0.8% Corzine +0.3%
Median of Polls Christie +1.0% Christie +1.0%
Average of Averages Christie +1.0% Christie +0.3%

So, with or without the Rasmussen polls, any way you slice and dice the data, this one is extremely close. Christie holds a tiny lead over Corzine, but Corzine has been closing fast with a huge spending blitz, and as we've discussed before, New Jersey tends to tilt blue at the very end. This one rates a Toss-Up going into the final 16 days.

As a reminder, I endorse Independent Chris Daggett in this race. His current polling shows as following:
All Non-Partisan Polls Without Rasmussen
Weighted Average 13.6% 15.0%
Pure Average (RCP) 13.6% 15.0%
Median of Polls 14.0% 14.0%
Average of Averages 13.7% 14.3%

Okay, so Daggett is extremely unlikely to win. 14% is a pretty respectable showing against two well-funded, establishment candidates.

In Virginia,

Utilizing the same methodology:
All Non-Partisan Polls Without Rasmussen
Weighted Average McDonnell +8.7% McDonnell +9.3%
Pure Average (RCP) McDonnell +8.8% McDonnell +9.3%
Median of Polls McDonnell +8.5% McDonnell +9.0%
Average of Averages McDonnell +8.7% McDonnell +9.2%

Note that in this case, the Rasmussen Reports poll actually helps Democrat Craigh Deeds.

Any way you cut it, this is a Likely GOP Pick-up.

As a side note, I'd like to endorse moderate Democrat and likely loser Craigh Deeds for the post. Deeds is a reasonable guy who will pursue the same type of centrist policies that the Virginia Democratic Party of Mark Warner, Tim Kahne and Douglas Wilder has long been known for. Regrettably, it does not appear that he will get the change.

I'll keep up with regular updates as the races progress over the next couple of weeks.

Why Is This So Hard and Who Is to Blame?
Job number one of Congress is to pass a budget for the federal government each year. Why else do we have a Congress but to determine the size and spending priorities for the executive branch?

So why can't we seem to get this done in anything resembling an on time fashion?

Okay, I admit that this is better than last year, when the Democratic Congress and President Bush couldn't find any common ground and kicked the can down the road for 6 months until finally passing a pork-laden omnibus spending bill that President Obama signed. But we have a Democratic Congress and a Democratic President. Nobody is even hinting that Obama is picking any fights or threatening any vetos. So why are we almost three weeks into Fiscal 2010 (which started in October) and we still don't have most of a budget?

The chart below shows the current status of all the major appropriations bills:
As you can see, the only bill to actually become law so far has been the legisilative branch appropriations bill, which also contained a continuing resolution, which kept the government open by extending Fiscal 2009 spending policies for one month (through October 31st.) Beyond that, two bills have been passed by congress and are expected to be signed by the President shortly. Still, massive chunks of the federal budget remain an unknown.

So who is to blame? Harry Reid and the Senate Democratic leadership. As you can see from the chart above, the House of Representatives (where all the bills have to start out, per the constitution) passed every major appropriations bill by the end of July. This left all of August and September for the Senate to pass its versions, the conference committees to get together and iron out the differences and both houses to pass the conference report.

The Senate simply didn't get the job done. There are STILL 8 major cabinet departments for which the Senate has not passed a version of appropriations. At this pace, we are sure to have another continuing resolution for some departments while the Senate continues to work at a snails pace.

How sad and incompetent. Can you imagine running a household budget without knowing what your paycheck is going to be? That's what we are asking of the cabinet secretaries at the moment. Think about how many poor decisions, large and small are probably being made as a result of this.

Health Care Looms Large
The wide consensus in Washington is that for health care legislation to happen during this congress, it would need to pass this year, as the session in 2010 will undoubtedly be difficult to navigate with mid-term congressional elections looming large.

Congress has a "targeted adjournment" date of October 30th, meaning that they were originially shooting for October 30th to be the last day that the chambers met for the year. Clearly, this isn't going to happen, as there is a ton of unfinished business to deal with this year. However, even using December 31st as the marker of the end of this year's congress, there isn't much time left to pass a health care bill.

There are 74 days left in the year, during which congress would have to:
(1) Pass health care bills through both the House and the Senate
(2) Iron out differences in a conference committee
(3) Pass the conference report in both houses
(4) Pass all the remaining budgetary items (a ton as you can see from above)

This is to say nothing of dealing with Cap and Trade, which has passed the House, but still must be dealt with in the Senate and a conference report passed, if something is to happen this year.

Recall, that President Obama articulated three goals for this year:
(1) Legislation to stabilize the economy
(2) Universal healthcare
(3) Environmental reform including cap and trade

#1 was accomplished early, at least as the administration defined it (we have and will again debate how effective the stimulus has been), with the American Recovery and Reinvestment Act signed into law on February 17th.

#2 and #3 both seem very elusive. The odds of getting Cap and Trade done this year seem like they are less than 25% and health care still seems a 50/50 shot at best.

The trouble for the Obama Administration is that if the can gets kicked down the road, not only will it be tough to do something in 2010, it will get even harder in 2011 and 2012, where, if my projections hold, he will face a congress that, while still a Democratic majority in both houses, is to the right of the existing congress.

Tall hills to climb. Time for some leadership, Mr. President.

Stimulus Update
To date, $288.5 billion of the stimulus funds have been authorized (57.8%) and $116.0 billion spent (23.2%). The tax cuts, which took effect in May, will automatically roll through December, 2010.

The adminsitration's figures show a ton of jobs "saved or created" by the bill -- almost 16 million. All of this is pretty fuzzy math and I would pay it much credence.

The real measure of the effectiveness of this bill, which was as much an investment and reshaping of the US economy as it was a stimulus bill, will be in the economic growth rates over the next 3 years. We will need time to assess whether the bill worked or not.

President Obama's Promises
Today is day 272 of the Obama Administration. He is 18.6% of the way through his elected term as President.

So how is he coming against the long list of promises he made?

According to the tracking at, President Obama had 505 documented promises during the campaign.

Of those 505, he has kept 47 of them, partially kept 12 of them and broken 7 of them. This means that about 13% of his promises have been acted on in some way and giving him half a point for the partially kept promises, a full point for kept promises and no points for broken promises, of the ones he has acted on he is doing what he said 80% of the time.

Not bad. But those were the easy promises. The hard ones are still in the unacted column. And, with almost 19% of his term gone and only 13% of his promises acted on, he is falling significantly behind schedule if he is going to do everything he said in his term.

Of course, you could look at those promises as 8 years worth of promises rather than 4. But that would be rather presumptuous. We are a long way from understanding the dynamics of the 2012 elections yet.

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Friday, October 16, 2009

Erstwhile Health Care Advocate Olympia Snowe, The $1.42 Trilliion Deficit, The New Old Obama Numbers

Next time: NJ and VA Governor's race update (not much new to say since my last blog on the subject anyhow) and Fiscal 2010 Appropriations updates (regrettably, the same is true there)

For now:
Finance Committee, Check, On to the Senate with....Something
After a somewhat over dramatized debate, the Senate Finance Committee passed its version of Health Care reform by the exact margin that I had projected, with every Democrat voting in the affirmative, joined by lone Republican Olympia Snowe of Maine.

The real debate now begins, with Senate Democratic leadership having a mess of a job of combining the more moderate bill passed out of the finance committee, which does not contain an employer mandate or a public option, with the more liberal bills passed out of other committees.

It seems highly likely that the bill debated on the floor will look a lot more like the Finance bill than those other bills. While liberals hate the thought of excluding a public option, I can't see another conceivable path to 60 votes in the Senate.

House Democrats won't like this solution, either, but at some points, Democrats will have to decide between a bill that is less than they would like or no bill at all. Blue Dogs in the House and moderates such as Ben Nelson and Joe Lieberman in the Senate are probably not going to vote for the more liberal bill and it is tough to see a path to passage without their votes.

$1.42 Trillion -- This Is Actually Good News!
Okay, I know that I sound like a nut saying that I'm happy that the deficit for the fiscal year that just ended on September 30th is ONLY $1.42 trillion, but as depressing as this figure is, it is actually far less than we had feared only months ago, when a $1.7 trillion figure was projected.

In Fiscal 2009, the Federal Government collected $2.10 trillion in taxes and spent $3.52 trillion. It sounds bad to have 40% of government spending and 10% of GDP being charged on the credit card, but when you strip out the extraordinary spending -- including both rounds of TARP, much higher unemployment costs and the stimulus bill and add back in more ordinary tax revenues from individuals and corporations, we aren't as far off as it looks -- or wouldn't be if we didn't have a Medicare nightmare headed our way.

Unfortunately, it doesn't look from what is likely to materialize in the health care bills that we will get serious cost containment of medical inflation. The Democrats have shown little will to unite to take on private insurance companies or big pharma. So, as I wrote before, we may get expanded coverage, but we won't solve the other really big problem -- cost inflation that will carry health care to more than 20% of our economy by 2020. And that's the one that will bankrupt us.

Obama -- Near His Lows, Still Above November
In the last week, President Obama's numbers have slipped back a bit, with his latest figures showing his approve minus disapprove at just over +10%, still a few points north of his November vote totals, but revealing a continued division in the voting public.

His monthlies have also slipped somewhat since the last posting, with his numbers now showing a slight decline versus last month.

More to come soon.

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Saturday, October 10, 2009

President Obama Wins Nobel Prize, Still (Relatively) Popular, A Look at the Job Loss

What Did He Do to Win It?
Let's be honest here...President Obama has a pretty thin list of accomplishments to be deserving of a Nobel Peace Prize. He has been in office less than 9 months and frankly, was non-existent on the international stage prior to taking office. That isn't a knock necessarily, it's just a product of circumstance -- you aren't likely to have made major progress towards world peace in 9 months. Plus, as many on the left have pointed out -- we are still in Iraq, we are talking about elevation of troop levels in Afghanistan and Guantanimo Bay remains conspicuously open.

So this obviously isn't about Barack Obama's accomplishments as President of the United States. This ultimately, in my judgement comes down to two facts.

One, President Barack Obama is not President George W. Bush, a man so hated on the international scene that anyone who sounds halfway like a diplomat would be a massive upgrade in the eyes of the rest of the world. I traveled a fair amount to Europe during the Bush Presidency and the persistent questions I got while I was there was how a seemingly intelligent people could have elected such a man and how soon we were going to come to our senses and get rid of him.

Two, the story of a country that once kept black men as slaves rising to elect a black man as President is virtually unprecedented in world history. Can you name all the racial minorities running European countries? There are none. Sure, Nelson Mandela became President of South Africa, but that was a majority black country that was bound to elect a black President once black South Africans had full voting rights. The notion of a majority white country with a history of racism and opression rising up to elect a black man is an inspiring story to the world and one that at this point in world history, could only happen in America.

So whether you hate, love or feel somewhere inbetween about President Obama, let's acknowledge the olive branch that the world is trying to extend to us. The world wants to thank us and re-engage with us and that is a good thing. And, yes, let's admit as President Obama basically did, that he probably isn't very personally qualified for the award. It isn't like this is likely to diminish the significance of the Nobel Prize -- certainly President Obama is a more worthy winner of the award than Yasar Arafat was when he won.

Ebbs and Flows But No Real Trends
For the past two months, President Obama's approve minus disapprove has stayed in a pretty narrow range. For the most part, it has been somewhere in the range of +10% to +15%. He had 4 low days at the end of August where he dipped below +10% and a few other spotted days slightly below +10% or slightly above +15%, but for the most part, we've been stable within that range. As of today, President Obama is towards the low end of that range (+10.9% today). Whether this is the start of another trend of poll deteriorization or just an ebb within a longer-term stable trend remains to be seen.

The monthly numbers (that level out some of the daily polling noise) show a similar story. President Obama was +12.3% in August, +12.3% in September and +13.0% month to date in October. Since his daily numbers are below his month-to-date numbers, his October numbers seem likely to drop slightly further -- if today's numbers held for the rest of the month, President Obama would finish the month at around +11.5%.

A Review of the Recession's Job Carnage and the Economic Stimulus
7.2 million. That is the total number of jobs that have been lost in this country since the job numbers started heading south in January of 2008. This number is actually worse than it sounds, if you can believe that. Since the size of the population and the workforce continues to grow, we need to create somewhere around 150,000 jobs every month just to keep the employment rate stable. If you factor this growth in with the 7.2 million jobs that have been lost and we have something like a 10.4 million job hole -- that is, we would have to create 10.4 million new jobs to bring employment back to where it was in late 2007.

The chart below shows the trend of job gains and losses since January 2007 along with major events in the recession.

As you can see from the chrt, the recession started slowly in early 2008 with job losses that were noticeable, but mild enough to not really capture the national attention. Then Lehman Brothers failed, the financial industry locked up and things got very bad, very quickly, with job losses peaking in January of 2009 at an astonishing 741,000 jobs destroyed. Job losses stayed very bad, but started to decline slightly early in the year, then declined significantly shortly after the stimulus bill was signed. We are still negative through last month, which means that unemployment is still getting worse, but it is getting worse less fast.

So what does this tell us about the stimulus? It depends on your interpretation. There is clearly a correlation between the stimulus going into law and job losses declining. But correlation doesn't necessarily mean that one caused the others. Conservatives would argue that this is just a natural recovery in the business cycle and that the stimulus did not contribute to it. No one can know for sure, but I, for one, firmly believe that injecting more money into the economy has been helpful.

As of this week, $110.7 billion has been paid out of the stimulus spending funds (22.2% of the total) and $256.3 billion has been authorized (51.4% of the total), plus the tax cuts as part of the bill, which have been in place since May.

Clearly the evidence indicates that some aspects of the bill -- Cash for Clunkers, the First Time Home Buyer Credit are having an impact in recovering the languishing auto and home industries. Other aspects are less clear, but obviously road construction projects require road crews, school construction requires construction workers, etc., so it seems obvious that the short-term impact on employment is a net positive.

So when will we swing to net positive job creation? It's hard to say for sure, but an X^3 polynomial that is the best fit (and the highest order that passes statistical tests for significance) to the employment trend would project that we will reach positive job growth in approximately December and cross the 150,000 rate that would begin to drop the unemployment rate around February. Obviously a mathematical model doesn't project all the things that could change in our economy. And even if it is right, that's still a lot of pain before we get back to normal.

My final conclusion: the stimulus appears to be working, but not nearly fast enough. The spend was not structured to be impactful enough quickly enough. Let's get moving on getting people back to work.

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Thursday, October 8, 2009

A Tale of Two Governor's Races, Health Care Finance Comittee Vote Tuesday, Budgeting Rolls On, Don't Call It a Stimulus!, Tracking Site Visits

The Only Legal Left Turn in New Jersey, Right Turns on Red Allowed in Virginia Those who live or visit my home state of New Jersey know full well the odd road design that persists throughout the state. In many places, left turns are simply not allowed on New Jersey roads. In their place, New Jersey has designed a series of "jug-handles", right lane off-ramps that loops around to take traffic to the left.

While left turns are not legal on the roads in my state, they are all the norm in statewide races over the course of the past 20 years. The cycle goes thusly: New Jersians get mad every cycle about high property taxes, government corruption and runaway spending. They flirt with Republican candidates who surge out to double digit leads in early polls. The media swarms around how "blue" New Jersey may elect a right-winger to a major statewide office. Slowly as the election approaches, the Democrat runs a series of ads portraying the Republican as an enemy of education, a token of the social right and an incapable leader. Everyone is suddenly shocked as the polls tighten to break even. Then, on election night, the Democrat wins by a solid margin.

Is the cycle repeating? You betcha.

New polling in the New Jersey Governors race? My average: Christie +1.7%. RCP average: Christie +1.8%. Both the closest the race has been all year.

A Corzine win in November? I sure wouldn't bet against it.

Virginia, by contrast, was one of the first states to legalize right turns on red. And right turns in politics are the norm, although the state has certainly had a purplish hue of late, with wins by Barack Obama, Mark Warner, Tim Kahne and Jim Webb as proof of a new, sudden, Democratic dominance.

It is not to be this year. The latest in the Governor's race there? My average: McDonnell +9.6%. RCP Average: McDonnell +8.5%.

Put this one in the bank for the GOP. Deeds is toast, barring a major, late-breaking scandal.

The Baucus Bill -- It Saves Money and Will Get a Vote on Tuesday Maybe Max Baucus is crazy like a fox. After being scorned by the left for dropping a public option and shunned by the right, who universally turned their back on Baucus' compromise Health Care proposal, it may ultimately be proven that he has successfully threaded the needle to navigate a health care bill out of committee.

The CBO analysis of the amended Baucus bill gave it two major talking points: it's new expenditures are well below the $900 billion over 10 years that President Obama had set as a target in his address to the nation. And, perhaps more importantly, the CBO projects that the Baucus bill will REDUCE the deficit by $80 billion over that time period while covering 94% of Americans.

Now will these points cause Republicans en masse to endorse the bill? Absolutely not. There are 1, maybe 2 Republicans in the Senate that appear "gettable", our favorite moderate Senators from Maine, Olympia Snowe and Susan Collins. But it does give cover for the 58 Democrats and 2 Independents to support the bill with less fear of reprecussion about runaway spending.

Now, this debate is obviously still far from over. Assuming the bill survives the committee vote (I predict it will pass with all Democrats voting "aye" and Sen. Snowe joining but no other Republicans), it will have to be "melded" with the other bills coming out of the various Senate comittees and then brought to the floor where it will be ammended, attacked and fillibustered. But make no mistake about it, this is a big step towards getting a bill through the Senate.

No word on when a bill will make it to the House floor, although Speaker Pelosi still says "soon", whatever that means.

Still Working Through a Budget
The Senate and to a lesser extent the House and the conference committees continue to slowly make progress on appropriations. The latest bill to move completely through the congress, the Agriculture bill, passed in a slightly less partisan fashion (although still not particularly bi-partisan) than the first bill, the Legislative Branch appropriations bill.

The meat of the spend (Defense, DOD/DOE Construction, etc.) are still moving through the process. I'd be hopeful that congress gets done by the time the first continuing resolution expires October 31st, but given the pace so far, I'm not counting on it.
A Stealth Stimulus?
The Obama Administration is walking a tightrope on the stimulus. On the one hand, the White House is feeling the heat of needing to show more progress on job creation. On the other hand, proposing a second stimulus would be tantamount to admitting that the first stimulus was either a failure or insufficient, something the President has been unwilling to do.

So what is the White House doing? Quietly proposing small "stimulating" activities -- continuing to extend unemployment benefits, extended the first-time home buyer credit. This kind of small ball stimulus is a play straight out of the Clinton playbook -- do small, managable initiatives that you can tout the success of if conditions improve and are small enough not to draw public outrage if they fail. It is, frankly, a very un-Obama strategy, as the President has thus far shown a preference for the big, bold and splashy. But it might be a wise move until unemployment starts dropping.

Extending unemployment has hit a snag, however, as Senators from states with higher unemployment rates argue with Senators from states with lower unemployment rates. The key issue is whether all unemployment benefits should be extended for a shorter period of time or benefits in states with high rates be extended for a shorter period of time. Obviously which state you are in drives your opinion there.

I've received a number of e-mails on my relative lack of coverage of the debate within the White House around the strategy in Afghanistan. I HAVE written previously about the choices facing President Obama and the need to commit, one way or another, to a clear strategy of either "all-in" or "all-out". I don't really have a lot more to say on the topic until the President reaches decision, which I will critique in full. Two options, Mr. President, you need to choose one.

Who's Reading This?
1,581 people since February, according to the tracking. I initiated tracking of site visitors in late January, which was largely just as the political season was slowing down, post-innauguration. From there, the number of visitors held relatively constant from February-May, spiked up in June when I did some advertising on (still one of the best political sites on the web) and has slowly declined since then, to a low of 140 visitors in September.
So is the readership drying up for this site? Not really. It's the political slow season, I haven't advertised, and as you can see from the green line, a lot of the decline has been driven by my posting less as I have been busy with the business of life and traveling a lot.

For those of you who read frequently, thanks for reading. And let people know about us. There is never a charge and I try very hard to bring you analysis that you won't find anywhere else on the web, at any price. From innovative poll-aggregation techniques (which I believe are provably more accurate than sites like realclearpolitics) to tracking of the budgeting process (which is scarcely mentioned on many political sites) to commentary, I think people will like what they find here, regardless of their political stripes.

As always, I welcome your thoughts and suggestions.

Saturday, October 3, 2009

Stimulus Ends Fiscal Year at 21.4% with Surging Unemployment, Presidential Approval Holds Ground, 47% Tax Free?

Stimulus Is Spending, But Is It Stimulating?
The American Recovery and Reinvestment Act ended the 2009 Fiscal Year for the Federal Government with $106.9B in money spent (21.4% of the $499B total in the bill) and $250.6B authorized (50.2% of the bill's total.)

This is more or less on track with the projections from when the bill passed -- a sizable, but not overwhelming chunk spent in Fiscal 2009, the bulk of the money spent in Fiscal 2010 and some trailing expenses in Fiscal 2011. This structure, as you will recall, was the subject of a lot of debate while the bill was moving through congress, with Republicans claiming the impact wasn't nearly fast enough to be truly stimulative.

So the bigger question for this large investment is, is it working?

It's a tough question to answer, since we will never know what the economy would have looked like without the bill. On the one hand, we have obviously seen a stabilization in the economy. The GDP shrunk at only a 0.7% in the second quarter (after crashing around 6% in the prior two quarters), and is expected to have grown in the third quarter "officially" ending the recession. However, unemployment (as it often does in a recession), continues to raise, climbing to 9.8% in September, a new high-water mark for the past 25 years. And wasn't this supposed to be a jobs bill, after all?

I don't know the ultimate verdict on the stimulus, but when I look back to where we were earlier this year, I know action was necessary. And I know a lot of the structural projects funded were very necessary. While I would have liked to see less temporary tax cuts, which are of marginal effectiveness at stimulating the economy in my experience, and more of the programs that seemed to work very effectively, like cash for clunkers and infrastructure spending, on balance, I still believe the stimulus as it happened is far superior to having done nothing.

But it will be all for naught if employment doesn't improve eventually. People are still suffering a lot and not too many feel a lot of "recovery" yet.

President Obama -- A Narrative by the Numbers
Looking at President Obama's monthly averages for his approve minus disapprove.
I. The Honeymoon Wears Off
Almost all Presidents are very popular when they start. It's a natural thing -- we want to root for the new guy to be successful. But, generally in the first few months of the Presidency, as the new President starts to take action, those on the opposite side of the aisle remember why they voted against him. This happened to President Obama as he dropped from +48% his first month in office to +33% in March. Still very popular, but not the near-unanimous support he enjoyed upon taking office.

II. The Stable Spring
President Obama appeared to be holding his own. His numbers slipped slightly during this time period that saw the economy bottom out, but largely people continued to like the new President and believe that he was doing the right and necessary things to fix the economy and country for the long term. He averaged +31% from March-May.

III. Wheel Come Off Health Care
Tea parties, town hall protests and a White House under fire. President Obama had a very bad summer. His numbers went into free-fall, crashing all the way to +12% in August.

IV. Back to November 2008
In a theme, I've been following, President Obama's numbers appear to have stabilized at near his November vote margin. He was +12.3% in August, an identical +12.3% in September. He is showing better in October at +15.0%, but this is a very small data set, based upon two days (although all of the averaging and weighting techniques give that number some credence.)

These phases are illustrated on the chart below.

The President's daily average as of today stands at +14.8%, still comfortably ahead of his margin in November. In fact, at this margin, if an election where held today, he would win all the states that he won then, plus Georgia and Montana.

Of course, the election is not being held today or anytime soon. But the point is simply that the President's political capital has stabilized.

Where it goes from here depends a whole lot on the economy and the fate of health care reform.

47% Pay No Taxes?
CNN / Fortune report recently showed that 47% of American households will have either a zero or negative (due to refundable tax credits) total income tax liability in 2009. That is a staggering number on face and has led many conservatives to question a tax system that does not require contribution from almost half the population.

There is some merit to the conservative argument, but let's first heavily caveat the situation. Saying that 47% of Americans pay no taxes is not an accurate statement. Everyone who has made a dollar of income will pay payroll taxes. Social Security taxes stand at 6.2%, Medicare taxes at just over 1% and both of those have an equal "employer side" tax, which effectively means that a workers pay is reduced by twice that amount. So, let's start by agreeing that everyone who is working, is actually being taxed at close to 15% right off the bat.

In addition, we all pay federal taxes on all sorts of federally taxed goods, from gasoline to alocohol to cigrettes (okay, non-smokers and non-drinkers that don't own cars don't pay these, but you get the point.)

Having said this, I find this trend disturbing. Income taxes are still the federal government's largest source of revenue. The middle and upper middle class are the ones who are most scorched by our tax burden -- people rich enough to pay a 28% marginal income tax rate, but not rich enough to hit the caps on Social Security taxes. In total taxation terms, the bottom quarter pays the smallest percentage of their income, then the top quarter the next smallest and the middle half the greatest.

I propose we fix both problems. Let's establish a good, progressive tax structure that is all encompassing. There are several ways to do this. One would be to reform income and payroll taxes so that we have one all-encompassing income tax that has fewer write-offs and a clear structure (say 0% of poverty-level income, 25% of income above poverty level and 40% of income about $250K.) Another alternative would be to use a VAT or National Sales Tax as a substitute for the income/payroll tax structure, but exempt essentials such as food and clothing from the tax to prevent if from being regressive.

Neither of these options are politically likely, so let me propose one that might actually fly:
(1) Eliminate the cap on social security and roll back the Bush tax cuts on upper-income individuals (fixes the upper-income problem)
(2) Slowly unwind the refundable tax credits for those making more than poverty level income
(3) Raise the minimum wage so that fewer people operate below the poverty level

I realize raising the minimum wage while unemployment is still high is dicey. But there is no credible emperical evidence that minimum wage hikes in the past have led to conservatives' worst fears, increased unemployment and lower hiring. I'd actually argue that a deflationary cycle such as the one we are in now is the IDEAL time to raise the minimum wage, since the primary risk of rising wages is inflation.

At any rate, whether these options or others are taken up, eventually congress will have to tackle the mess of our tax code. President Bush appointed a blue-ribbon commission, whose findings where promptly ignored. Perhaps President Obama can do better. Although recent experience with Health Care doesn't inspire much confidence.

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Friday, October 2, 2009

2009/2010 Updates, Budgeting Slogs On, Obama Loses in Copenhagen

The 2 Governor's Races
With less than a month to go, the Governor's races in Virginia and New Jersey are drawing to a close and the GOP continues to lead in both races.

(1) Virginia -- tilting back to the red
Last week it appeared that the race had significantly tightened, with 2 separate polls showing that Deeds had cut the race to a 4 point battle, certainly a margin that he could hope to overcome down the home stretch.

This week, however, the task looks more daunting for the DEMS as McDonnell holds 9% and 14% edges in Rasmussen and Survey USA polls. Now, Rasmussen polls are fairly suspect at this point as they have been consistently showing a more favorable view to the GOP than other independent polls (although, they could well be right and everyone wrong.) No one has raised any questions about Survey USA polls, although their auto-dialing system has produced exaggerated margins in the past.

Regardless, McDonnell takes a 7.2% edge in our weighted average of non-partisan polling, wheres the RCP average shows an identical 7.2% edge.

(2) New Jersey -- Corzine still not surging
As I've written previously, I have been half-way expecting this one to flip left at the very end (although if Corzine gets it done, it will be without my vote.) The polls are beginning to bear this out, with 3 different polls showing this one much closer than it was a few weeks ago.

Christie's led is down to 4.3% in my numbers, 3.8% in the RCP average.

Incidentally, my vote in the race, Independent Chris Daggett, is averging 9.1% in my numbers and 8.8% in the RCP average.

I think Corzine is probably better than even money to take this one in the end, with the history in New Jersey of a late-race DEM surge and the race being this close at the end. Some Daggett supporters (I suspect he draws disproportionately from the left) may also gravitate back to Corzine as the race tightens. Not me.

The 2010 Congressional Races
Not a lot of new news in this race. Only two changes:
Florida -- moves from Likely GOP Hold to Safe GOP Hold. With Gov. Charlie Crist (R) up as much as 20% in some polls, this one is a lock for the GOP.
New York (Gillebrand) -- moves from Likely DEM Hold to Lean DEM Hold -- Pataki is within 3% in a new poll, showing he is well within striking distance...assuming he runs, which looks more and more likely.

Other updates that did not alter ratings:
Connecticut -- new polling confirms Dodd is behind by 5+% -- this one remains Lean GOP Pick-up
Pennsylvania -- Arlen Specter looks to be in good shape to take the Democratic nomination -- general election polls are all over the place -- anywhere from Specter -1% to Specter +8% -- this one is close to moving back in the DEM column, but the data are so scattered I'm leaving it as a Toss-up for now.
Ohio -- a lone Rasmussen poll shows Portman +2%, but others are showing Brunner up by 4 to 5% -- this stays Lean DEM Pick-up for now, but I'll keep an eye on it.

All of which leaves us with the following:
Safe Dem Holds (7)
Hawaii, Maryland, New York (Schumer), Oregon, Vermont, Washington, Wisconsin

Likely Dem Holds (3)
Indiana, North Dakota, Massachussetts*

Lean Dem Holds (3)
Arkansas, California, New York (Gillebrand)

Lean Dem Pick-Ups (3)
New Hampshire, Ohio, Missouri

Toss-ups (3)
Nevada, Illinois, Pennsylvania

Lean GOP Pick-Ups (3)
Colorado, Delaware, Connecticut

Lean GOP Holds (3)
Kentucky, North Carolina, Georgia

Likely GOP Holds (5)
Alaska, Arizona, Iowa, Kansas, South Dakota

Safe GOP Holds (7)
Florida, Alabama, Idaho, Louisiana, Oklahoma, South Carolina, Utah

* Massachussetts special election is in January, not November

Which Projects:
GOP Pick-up of 0 to 3 Sets With all toss-ups going DEM, we'd have the exact same 58-40-2 make-up in the Senate we do today. If they all go GOP, we'd have 55-43-2.

If the GOP were to take ALL the LEAN seats (best case), we'd have a 49-49-2 Senate which would still be Democratic controlled thanks to independent Senators Joe Lieberman and Bernie Sanders caucusing with the Democrats.

If the DEMs were to take ALL the LEAN seats (best case), they'd have a 64-34-2 advantage.

In the House, it is very hard to call again, I show a Dem +0.2% edge, RCP hs a Dem +3.3% edge and the polls go all the way from Dems -2% to Dems +8%.

With what we have, I centrally project:
GOP Pick-up of 17 to 22 Seats
Still significantly shy of what they would need to retake the House, but as I said, this one is dicey to call at this point.

Appropriations Slog
The budgeting process slogs on, with congress attaching a continuing resolution to the Legislative Appropriations Bill that extends current budgetary policy until October 31st, a necessary step since they failed to get a single other bill through the process in time for the start of the government's fiscal year October 1st. The Legislative Bill was pretty sharply partisan (see below.)

I'm very disappointed that with a single party in control of congress and the white house that we didn't do better than this. This practice has long been far too accepted by both parties. Doing budgets ahead of time is pretty necessary if we are going to have any kind of fiscal discipline. Let's hope this continuing resolution is the last and Congress finishes its work on the budget this month.

Rio De Janiero Stomps the US
No, not in a soccer match, in its bid to get the 2016 Olympics. President Obama had put a lot of political capital on the line to try to get the games for Chicago, even flying to Copenhagen to pitch the city. It was all for naught as the US wasn't even a finalist, edged out by both Rio and Madrid.

Congratultions to Rio De Janiero. And sorry about the PR black-eye, Mr. President.

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