Saturday, April 24, 2010

Can Obama Ever Stop This Slide?, Some Historical Perspective

It seems almost independent of events on the ground. Whether health care reform was stalled in committee or being signed into law, whether the news of the day was troops in Afghanistan or fines against Goldman Sachs, there seems to have been one common thread in the political landscape for the past year and half. President Obama's poll numbers have always headed down. He's had flat and near-flat months and months of big declines, but the trend is about as visually obvious as it gets when you look month to month.

The past couple of weeks have not contained a lot of new news in this regard. The President saw a very small bump, possibly tied to the news of civil prosecution of Goldman Sachs, followed by a decline back to his prior levels. And the bump was pretty tiny to begin with, so it could have just been noise.

Looking at the monthly trends, the President is on track to lose 0.4% in his approve minus disapprove this month, which would mark yet another month of declines. He has definitely been losing ground more slowly since February, but still, each month manages to come in lower than the last.

This is all about the unemployment rate, in my mind. The reason that the trend is so seemingly unlinked to news events is that people don't really care about anything else when the economy is sour. And while the stock market has recovered and GDP is growing at a healthy rate again, as is typically in recessions, the jobs have lagged. Until the unemployment rate starts falling a lot faster, expect Obama's numbers to keep getting chipped away.

So, how does Obama fare at this stage with other Post-World War 2 Presidents? Typically the shine is off the rose at this point, but the President is still in the lower tier by historical standards. Here are the Gallup approval numbers of President Obama versus other Post-WW2 Presidents in April of their second year:

(1) W. Bush - 77%
(2) Kennedy - 74%
(3) Johnson - 68%
(4) H. W. Bush - 65%
(5) Eisenhower - 60%
(6) Nixon - 57%
(7) Obama - 49%
(8) Clinton - 48%
(9) Reagan - 43%
(10) Carter - 41%
(11) Ford - 41%
(12) Truman -33%

Average of all: 55%
Average of those winning next election (W. Bush, Eisenhower, Nixon, Clinton, Reagan, Truman): 53%
Average of those losing next election (H.W. Bush, Carter, Ford): 49%
Did Not Seek Re-Election: Johnson
Not Living at Time of Next Election: Kennedy

So, you can see, we are at a point in the Presidency where an approval rating is starting to have meaning on re-election, but where there are still a lot of paths that the Obama arc can follow.

Of the top half -- numbers 1-6, 3 were re-elected (W. Bush, Eisenhower, Nixon) with 2 of the 3 (Eisenhower and Nixon) re-elected by very strong margins and 1 (W. Bush) re-elected by a close margin. 1 was killed before he could run (Kennedy), 1 chose not to run, although he surely would have been defeated had he run (Johnson) and 1 lost re-election (H.W. Bush).

Of the bottom half, 3 were re-elected by strong margins (Reagan, Clinton and Truman) and 2 lost, one fairly badly (Carter), one by a close margin (Ford).

Looked at another way, the top percentage vote-getters for re-election are numbers 5, 6, 9 and 12, hardly a strong correlation between that result and these poll numbers.

What is a lot more indicative at this point are mid-term results. The party of those in the bottom half took whippings in the mid-terms and I would wager that that trend will continue this year -- it will be a bad year for Democrats at the polls.

Next time....a look at the correlation between unemployment rates and Presidential elections.

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Cowardly Comedy Central

I've watched a lot of Comedy Central in my life. I enjoy watching Jon Stewart, Steven Colbert and I think The Sarah Silverman Show is great. Comedy Central has never been an overtly political place, although certainly Stewart and Colbert have a fairly liberal message, but they are first and foremost comedians.

I've seen many episodes of South Park. Some are fairly disgusting (watching people bounce around on cancerous testicles is a little beyond my taste), some are brilliant (their episode on Mormonism was biting and hilarious.) Almost all are offensive to somebody. But I always cut South Park creators Parker and Stone a lot of slack with the offensive material for the simple reason that they were equal opportunity offenders. They took no prisoners. There were no taboos.

Comedy Central's decision to censor the 201st episode of South Park causes me great concern. For those of you not familiar with the story, let me give you the background.

The 200th episode of South Park (which had a plot too bizarre and complex to explain simply here) contained a depiction of the prophet Mohammed. Well, not quite an actual depiction. Part of the bit was about how you couldn't depict images of Mohammed, so the episode contained an image of a person in a bear suit that the characters claimed was Mohammed. This was clearly a joke poking fun at the notion that you "couldn't" portray Mohammed. The episode was part of a two-part series, with the conclusion to be shown the following week.

Well, somewhat predictably, an Islamic group posted a fairly thinly veiled death threat against Mr. Parker and Mr. Stone the next day. What was less predictable and more shocking was Comedy Central's reaction to the threat. It's reaction was to show episode 201, but to visually censor all of the images of Mohammed, bleep all uses of his name and bleep almost the entire ending of the episode, all without the permission of the creators. Additionally, rather than rerun the episode in the normal rerun time slots in the week (they typically show each new South Park episode about 3 more times in the same week), they chose to rerun an older episode instead.

Now, I'm not opposed to self-censorship. If Comedy Central were to decide that a show were not up to their standards of taste, then they have ever right to censor it or refuse to air it. But let's examine the things that they were willing to show. They aired a South Park episode entitled "The Word of Curse" where they characters say the word "shit" almost 200 times. They aired an episode called "N-Word Guys" in which the N-Word is used dozens of times. Just two weeks ago they had the episode with guys bouncing around on cancerous testicles and, yes, they showed the testicles. So this is clearly not an issue of taste.

Nor is it an issue of religion being out of bounds. South Park has taken aim at Mormons, Catholics and Scientologists ,just to name a few. They had an episode entitled "The Passion of the Jew" that includes character Eric Cartman in a nazi uniform, leading a group of Christians in a march, while proclaiming anti-semitic rants in German. So, this can't be about religious sensitivity either.

This is clearly about the threat of violence. And censoring something not because someone is offended but because they post a threat is wrong.

I would understand if Trey Parker and Matt Stone decided they couldn't take the heat. They are people first and comedians second. If they had asked Comedy Central to pull the show because they feared for their lives, I would have understood. But Parker and Stone wanted the episode aired and were strongly opposed to the censorship. Comedy Central took this on themselves.

I generally stray away from "if we do this, the the terrorists win" kind of statements, since they are often used by politicians to pose false choices. But in this case it is true. America shouldn't be the kind of place the censors what people can watch because of terrorist threats. And Comedy Central should be ashamed.

Incidentally, if you want to see some visual depictions of Mohammed, here is a great site:

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Thursday, April 22, 2010

Why Bipartisanship Will Prevail on Financial Reform, Will Supreme Court Nominee Be a Non-Event?, The Remarkable Chris Christie

Why Bipartisan Talks on Financial Reform Will Succeed
We will get a financial reform bill and it will be bipartisan in nature. No, it probably will not be a 100-0 vote in the Senate, but there is a high probability of a 75-25 vote at the end of the day. A far cry from the long, drawn out, bitterly partisan debate over health care, Senate discussions have been downright collegial. So what gives? Several things about the dynamics of the issue and the times create a perfect bipartisan storm.

(1) No one wants to be on the side of the banks
Unlike with health care reform, where Republicans could credibly claim to be defending the 80% of Americans that have good health care, there is not much of a constituency for the financial status quo. Sure, the big banks like it. But Americans are livid about bankers taking huge risks, going broke, taking tax payer money, then paying out big bonuses a year later. Supporting some kind of reform is just good politics.

(2) Failure would be ugly for both sides
Think about it...the banking meltdown is the single biggest crisis that the country has had since September 11th. To go run for re-election saying you voted to uphold the status quo is hardly a winning formula.

(3) Everybody has taken the cash
Both the GOP and the DEMs have taken big bucks from the big banks. Do they really want this to be a campaign issue for their challengers in the fall?

(4) They aren't that far apart
Neither side, apparently, favors fundamentally changing the system by breaking up banks considered "too big to fail" and neither side is unhappy with the status quo. Unlike with health care, where there was a fundamental difference in the views on the proper role of government, the GOP and the DEMs largely agree that more regulation is needed, but not radically more.

A Supreme Court Cakewalk?
All indications point towards moderation and bipartisanship in President Obama's Supreme Court pick as well. The President has been holding bipartisan meetings to go over potential candidates, clearly looking to find someone middle-of-the-road enough to get through without a tough fight.

You know, it's an odd thing. In the aftermath of health care, the GOP was making sounds like it was armageddon for any bipartisanship. Yet, the period following that bill actually appears poised to be one of the most bipartisan in years. Lindsey Graham is even working with the DEMs to craft a compromise immigration reform bill...not that I think that it will actually become a reality this year.

I Admit, I'm Impressed
This blog is devoted to national politics, so I generally try to stay away from discussing local New Jersey politics unless it is a relevant national story. The early days of the administration of Governor Chris Christie (R) certainly fit the bill of a national story, with national conservative commentators such as George Will writing extensively about his administration.

I did not vote for Governor Christie, as frequent readers will know (I supported Independent Tom Daggett in the 2009 election.) We do not see eye-to-eye at all on social issues and in spite of the failure of ex-Governor Jon Corzine, I couldn't bring myself to vote for him.

But, I am impressed with his administration so far. Faced with over a 2 billion dollar current year deficit (9% of New Jersey's total budget) and a projected 10 billion dollar deficit next year (35% of that budget), the new Governor has taken quick, decisive and mostly correct action. He has eliminated state aid for wealthy school districts. He has cut excess services. And now he is taking on the public unions, which have incredibly generous benefit packages which cost astronomically more than their counterparts in the private sector.

Living in one of the school districts that was impacted by the state cuts, it was interesting to watch the local reaction. The school board here responded in part with budget cuts, but in large measure by proposing property tax increases. The voters responded by voting down the property tax increases in municipal elections this week and electing an anti-tax activist to the school board.

If the people behind the tea party movement want to gain real credibility, Christie is a role model. Fiscal responsibility resonates with the public, even in blue New Jersey. People are tired of government waste and high taxes. They just aren't on board with the nutsos running the tea party movement in this country. Moderate pragmatists like Chris Christie should be the role model for the new GOP. Let's hope they pay attention and remember.

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Saturday, April 17, 2010

HRC for Supreme Court?, My Worst Votes

Why Hillary Would Make a Great Supreme Court Justice and Why It Won't Happen
Supreme Court openings are fun for us political watchers. There are few decisions that a President makes that have as lasting an impact on the country as his Supreme Court picks. Supreme Court appointees serve a lifetime, which can often span 30 or more years, and are basically immune from control or criticism (a Supreme Court justice has never been impeached in our long history.)

The Supreme Court rules on the expanding and contracting definitions of our bill of corporations have free speech? Can the FCC regulate curse words? Does the second amendment prohibit outlawing semi-automatic weapons? Does equal protection require legal gay marriage? Does requiring individuals to purchase health insurance constitute regulation of interstate commerce? And on, and on.

Therefore, properly, the political world zeroes in on potential appointees when an opening occurs. Who would be right to sit on the Supreme Court?

My strong opinion of the best available candidate is Secretary of State Hillary Rodham Clinton. This may come as a surprise to regular readers, who know I have been critical of Hillary in the past. But her record speaks for itself. As a Senator, she was a hard-worker, not a celebrity. She bridged tough bi-partisan bridges. She took a pragmatic approach on national security. She was intellectual force without being an overwhelming ego.

As Secretary of State, she has shown many of the same admirable qualities. She has shown no bruised ego over not being selected as VP. She has worked hard, expressed herself clearly, and built the admiration of foreign leaders. She has been a star in Obama's cabinet, but not an overshadowing or self-centered one.

In short, in spite of all the predictions from both the right and many mainstream Democrats, every public job that Mrs. Clinton has held, she has buckled down and gone to work.

She is a lawyer, she is smart as hell and she exercises good judgement. I can't think of a better set of traits for a supreme court nominee.

Alas, it is highly unlikely that it would ever happen.

In the modern era, politicians rarely get named to the Supreme Court. Judicial experience seems value over life experience, so Court of Appeals judges get picked over lawyers who have lived in the real world. The last significant political appointment to the court was Earl Warren, the former Governor of California, who ushered in an era of court activism, so conservatives are very wary of any politician. And politicians have long public records of things people can find to disagree with or criticize.

No, President Obama will probably play it safe with an Elena Kagan or someone of that ilk. Ms. Kagan would likely win confirmation with 65 or 70 votes without a real fight from the right. Hillary would be a dogfight. And I think the President is probably tired of dogfights.

But think for a second -- wouldn't it be great to have at least one pragmatist amongst that great body of judicial theorists?

My Worst Votes
It isn't too often that I regret votes that I cast in elections, but two have come to mind recently that I wish that I had back. Neither candidate won when I voted for them, but both fall into the "what was I thinking?" category.

In 2000, I was a strong advocate for John McCain for President. I donated money to his campaign. I registered as a Republican to vote for him in the primary. I cheered on his pragmatic moderate views, his ripping of the "agents of intolerance" on both sides of the aisle and his appeal to a rational, fair America. I had every intention of voting for him in the general election against Al Gore, if he had won the Republican nomination (as it stood, I wound up voting for Gore, as Bush was a completely unacceptable choice to me.)

That John McCain of 2000 is no more. He started to disappear in 2008, when John McCain started sucking up to the very agents of intolerance that he had derided 8 years prior, including the Rev. Jerry Falwell, an architect of hate if I ever met one. It continued with his choice of Sarah Palin as his Vice Presidential running mate, when everyone knew that the choice of his heart and mind was Senator Joe Lieberman, a moderate, qualified voice.

Then he essentially abandoned his support for comprehensive immigration reform, again caving to the interests of a right wing of the GOP that never supported him anyway. He threw his support behind the Bush tax cuts, cuts he had opposed on his long-held principle that the government should pay its bills before giving money away.

Since President Obama took office, he has completely abandoned his role as a deal-maker between the left and the right, a role he used to play for perfection. I don't begrudge him opposing the stimulus plan or health care reform...he has always been a fiscal conservative and the same reason he originally opposed the Bush tax cuts, that America should pay for what it spends, are fair reasons for opposing those bills. But then he voted against a deficit commission that he had originally helped design, purely out of partisan spite. He supported filibusters against judicial nominees, a practice he had long opposed. He announced that he wouldn't work with the White House on anything the rest of the year, even issues they agree on, purely because his feelings were hurt that he didn't get his way on health care.

What a waste of a man that I used to consider principled. Shame on me for voting for a guy who would sell out his principles so easily.

But my primary vote in 2000 was not my worst vote, not by a long shot. I got it even more wrong in the 2004 primary, when I switched my party registration to vote for John Edwards on the Democratic side.

Out of fairness, I had initially supported Joe Lieberman for the nod in 2004, but Lieberman was out of the race by the time that the primary got to me, leaving me a pretty clear choice between blue-blood John Kerry and populist Edwards.

Still, John Edwards, the man who I would've had become President, has turned out to be about as offensive a human-being as you'll find. It wasn't the politics with Edwards that changed, just my knowledge that he is actually a disgusting human being, worse than the most outrageous accusations from the right would make you believe.

So, all of this is to say, we all get it wrong sometimes. But learning why and how you missed it can help you evaluate future election choices in a reasoned way. I'll keep this all in mind in 2010 and 2012.

Do you have a vote you would really like back? Write me and let me know.

Thursday, April 15, 2010

The Latest News on 2010

Tommy Thompson is out in Wisconsin, likely giving a big edge back to the DEMs to retain that seat. Other than that, not a lot of other good news for the DEMs. Here are the latest updates.

Rating Changes
Wisconsin - with Thompson out of the race, there is no GOP candidate that is polling close to incumbent Russ Feingold. This races moves from a Toss-Up to a Likely Democratic Hold.

Kentucky - Grayson is up 20 points in the latest poll. This one looks out of reach for the DEMs for now, in spite of the taint of Jim Bunning on the seat. Moves from Lean GOP Hold to Likely GOP Hold.

New Hampshire - a close call here, but with Ayotte up by 7, 8 and 15 in the latest three polls, with the 15 point spread being the most recent, it feels decisive enough to move from Lean GOP Hold to Likely GOP Hold.

Arizona - I had been expecting to move this one right for some time, but McCain had been polling in a very lackluster fashion through the winter. The latest poll shows him up by 19 points on Glassman. Moves from Lean GOP Hold to Likely GOP Hold.

Ohio - back in play - Fisher leads by 4% in 2 of the last 3 polls, Brunner by 5% in the other. The race switches from Lean GOP Hold to Toss-Up.

New Polls, No Ratings Change
Arkansas - this may move right soon, but not quite yet. The latest Rasmussen Poll shows Blanche Lincoln down by as much as 15 points against potential GOP challengers, but other polls show the race in the mid-to-high single digits. It stays a Lean GOP Pick-Up...for now.

Colorado - Bennett is trailing by 4 to 5 points against potential GOP challengers in 3 new polls. Still a Lean GOP Pick-Up.

Pennsylvania - Toomey is up 5 to 8 points in a new batch of polls. Stays a Lean GOP Pick-Up.

Nevada - another one that has been consistently straddling the lean/likely edge. Harry Reid is down by 7 to 15 points in the latest set of polling. I'll leave it a Likely GOP Pick-Up for now, but it could go left if there are some more single digit polls.

Washington - Patty Murray leads by only 2 to 8 points against GOP comers in a Rasmussen poll. If one additional poll confirms these numbers, I will move the rating right, but for now it stays a Likely DEM Hold.

Overall Senate Ratings
Projected Democratic Holds (9)
Safe Holds (4)
Connecticut, Maryland, New York (Schumer), Vermont

Likely Holds (4)
Washington, Hawaii, Oregon, Wisconsin

Lean Hold (1)

Potential Democratic Pick-Ups (1)

Toss-Ups (1)

Potential GOP Pick-Ups (9)
Safe GOP Pick-UP (1)
North Dakota

Likely GOP Pick-Up (1)

Lean GOP Pick-Up (5)
Arkansas, Delaware, Indiana, Colorado, Pennsylvania

Toss-Ups - DEM Controlled (2)
Illinois, New York (Gillebrand)

Projected GOP Holds (17)
Safe Holds (8)
Louisiana, Iowa, South Dakota, Alabama, Idaho, Oklahoma, South Carolina, Utah

Likely Holds (8)
New Hampshire, Kentucky, Arizona, North Carolina, Georgia, Alaska, Kansas, Florida

Lean Holds (1)

Net Projection: GOP Pick-Up of 6 to 9 Seats
(10 seats needed for control of the Senate)

In The House...
Our average of averages shows generic polling for the GOP is holding steady at +3.9%. This would project:

GOP Pick-Up of 44 Seats

So by my count, the GOP would narrowly take the House but narrowly fail to take the Senate if the election were held today.

While there is week-to-week variation, it is undoubtedly looking bad for the Democrats in November. They are hoping on the economic recovery to boost their prospects. The economy HAS improved greatly, as we have documented extensively in this space. But it doesn't matter until employment improves and people THINK the economy is better for THEM. Just ask George Herbert-Walker Bush how much an early-stage recovery helps the incumbent party's prospects.

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Saturday, April 10, 2010

On the President's Poll Numbers, The Catholic Church, The RNC Chairman and The Supreme Court

Presidential Approval -- DId Health Care Matter?
The statistical evidence to date would indicate that in the short-term at least, the passage and signing of health care legislation did not have a significant impact on the President's numbers either way. Democrats were hoping for a poll bounce, the GOP was hoping that their cries for "repeal and replace" would unify Independents wary of big government against the President. Neither appears to have happened.

The President's short-term polling appears to be more or less a flat line, as illustrated below in our aggregation of all non-partisan polling for the past few weeks.

The President's monthly numbers continue to show the same trend of him being just above the zero line, that is having just slightly more voters in the country that approve of his performance than disapprove. The trend, which has to be worrisome for the administration and the DEMs in general, of him losing ground slowly but surely every month, also appears to be continuing as he finished the month of March off 0.4% versus February and appears on pace to lose another 0.4% in March. These are not huge swings, but it is a statistical fact that if you never have a positive month, you are going to be in big trouble long-term.

The one thing the DEMs can take heart in is that the pace of the President's decline has been arrested somewhat. Looking back on his Presidency to date in terms of 3-month periods, his 3-month loss in approve minus disapprove spread for the first 5 quarters of his administration is as follows:
January 2009 - March 2009: -17.5%
April 2009 - June 2009: -10.9%
July 2009 - Sept 2009: -8.3%
Oct 2009 - Dec 2009: -7.3%
Jan 2009 - Mar 2009: -2.4%

All negative, but getting progressively less negative.

So can the President finally post a positive month? We'll see.

Catholic Disgrace
I have generally refrained from commenting on scandals within the Catholic Church, but as someone who was raised in the Church, I feel compelled to speak out about recent events involving the sex abuse scandal that has implicated Pope Benedict in his complicity.

Full disclosure first: I am a lapsed Catholic. I was brought up in a religious Catholic family, was an altar boy for several years and was active in church youth groups and activities up until about the age of 15 or 16, when I started to stray from the Church. My departure had a lot to do with my political and moral views becoming more progressive. The Catholic Church's views on homosexuality disturbed me greatly as did its rigid position on contraception. The Catholic Church and I have now long parted ways, but there were things that I always continued to respect about the Church.

One thing that always impressed me about the Church in the past was its willingness to hold consistent moral stands, regardless of the politics. The Church would infuriate the left with its views on abortion and gays. But the Church was not a vehicle of the right either. It supported universal health care. It opposed the Iraq war. In short, it had a very cohesive philosophy that was derived from traditional moral pillars and the value of human life above all else.

But that respect has been full-scale flung out the window. The sex scandal in the Catholic Church would be an utterly immoral disgrace for any institution, but even more pronounced for an institution which purports to be a beacon of unwavering moral certitude in changing times. The sexual abuse of young boys in one of the most disgusting crimes that I can imagine. That the church, throughout the globe, was aware of systematic abuse by Priests and not only did nothing to actively weed and prosecute those responsible, but, in fact, actively participated in a cover-up and maintained these heartless thugs in their positions of authority, undermines any claim to virtue that the Church has. You cannot condemn with certainty acts of consensual homosexuality while your leaders are practicing non-consensual homosexuality on the most vulnerable without consequence.

In short, I'm disgusted. The Catholic Church is bitterly in need of reform. But reform appears it will be slow. Pope Benedict should resign, as would be demanded of the leader of any other institution in a similar circumstance. But I did very much that he will. Which means the Church will be led by the same flawed principles, possibly for decades.

What a shame. The world still needs moral guidance. And the billion plus faithful in the Church deserve better than a gang of pedophiles, rapists and their enablers running the show.

Michael Steele, Embattled and Fighting for His Life
I was encouraged when Michael Steele was elected RNC chairman early last year. Steele has a record of being a moderate-conservative, represents a new generation and was an active symbol of the GOP's recognition of its need to be more diverse and to have new voices speak for it.

Steele further encouraged me in his early days when he took on Rush Limbaugh and the other voices that John McCain (before he disavowed everything he used to believe in) once called "agents of intolerance". Alas, Steele quickly apologized to Limbaugh and started giving interviews that were all about Michael Steele and had very little to do with helping the GOP succeed.

The revelation that the RNC paid for a trip to a lesbian bondage strip club that total almost $2,000 is certainly embarrassing to a party that tends to oppose both lesbians and strip clubs. In and of itself, it would not be a career ender for Steele, particularly being that it appeared he was not present and may have had no prior knowledge of the expenditure. But combined with Steele's seeming self-obsession that has put him at increasing odds with the GOP establishment, this may well signal the end of his reign at the RNC.

Let's hope that the GOP finds some other new voices in their ranks that can speak to new ideas. And make sure that they are the right voices that can speak to an inclusive, unifying message. In short, they need a lot more Lindsey Graham and a lot less Bob McDonnell.

The GOP will undoubtedly do well in the mid-terms in November. But the long-term health of the GOP and the two-party system in America depends on the GOP's ability to evolve as a credible governing alternative and not just a party of opposition to President Obama.

Supreme Cout Fight, Take 2
Justice John Paul Stevens, 89, has announced his intention to retire at the end of the current term has created the opportunity for President Obama to fill a second seat in his still-young Presidency. But, as with the appointment of Sonia Sotomayor last year, this pick is unlikely to significantly change the make-up of the court, as Stevens was the most-liberal member of the current court.

If the President picks a moderate-liberal, he is likely to win easy confirmation without much of a filibuster threat. After all, the Democrats still control 59 seats in the Senate and there are several GOP members who still hold the commendable position that Supreme Court picks should not be filibustered expect in extreme cases (don't expect sell-out John McCain to be among them anymore, but you'll likely see Voinovich, Snowe, Collins and Graham take that stand.)

If the President picks a farther left liberal, he could see a bigger fight. But it seems unlikely to me that that is a fight he will want to pick right now.

In my view, Michigan Governor Jennifer Granholm would be the ideal pick: a smart, moderate-liberal pragmatist who is retiring from office. I believe she would be the first Canadian-born pick if she were selected. The other finalists from last time such as Diane Wood and Elena Kagan will also surely be on the short-list.

This also fairly well puts a nail in the coffin of doing any other truly ground-breaking legislation this year. A supreme court nominee, a nuclear arms reduction treaty and a set of appropriations bills in 5 months in an election year is probably all the Senate can manage.

Next up: my regular 2010 update

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Saturday, April 3, 2010

On The Economy: 162,000 Reasons to Celebrate, Millions More Reasons to Stay Concerned, Looking Ahead to the Rest of the 111th Congress

We Are Generating Jobs...But We Have a Long Way to Go
Throughout the first part of 2010, each month when the Bureau of Labor Statistics has released employment statistics, I've found reasons to be optimistic, but also perspective on how far we have to go to get to a more tolerable level of unemployment. This month's release very much follows that vein.

As we've discussed in the past, the monthly release is actually two releases, one that surveys employers to look at job creation and one that targets workers to understand unemployment rate and participation rates in the workforce. The second survey, in my opinion, is the most critical, as it hits all workers, whereas the employer or "establishment" survey tends to miss small business hiring and firing, but both give clues to where the employment market is headed.

In the employer survey for March, there was a lot of good news. Total payrolls grew by 162,000. Of this, 48,000 where hires by the Census Bureau to facilitate execution of the 2010 census. That is a form of unintentional government stimulus, but it does still help get people back to work. But even excluding this number, private payrolls grew by 114,000, this first substantial gain since December 2007 and included gains in manufacturing, health care and temporary services. Construction employment was stable for the first time the recession began and the only major area to lose jobs was financial services. The average workweek, an indicator of future hiring and firing, was also positive, posting a 0.3% gain in the month. In short, this month was a real turning point in the establishment survey data.

In the more critical unemployment survey, the unemployment rate held steady at 9.7%, holding on to the modest gains that have brought the rate down from its peak of 10.1%. That would be modestly good news by itself, but there are more data just below the surface that provide reasons to be hopeful. The population of "underemployed", those working part time but seeking full time work increased from 8.8 million to 9.0 million but this was actually good news, because the "marginally attached" those not counted in the unemployed rate because they have stopped actively trying to find a job was down, from 2.5 million to 2.3 million, meaning that you likely had people who were previously discouraged who are now working, albeit part time, with the entire change coming from discouraged workers, who fell from 1.2 million to 0.9 million, an almost 25% decrease.

So, looking at the extended data, the "underemployment rate" was steady at 16.8%, but more of those 16.8% had jobs.

Now, for the bad news. Using 5% unemployment and 8% "underemployment" as a benchmark for a "normal" rate of unemployment, at the rate of job creation in March, it would take almost 7 years to get back to these "normal" rates. This is clearly unacceptable and if it happens, Obama and the Democrats would find themselves on the sidelines both in 2010 and 2012. But the momentum is positive and there is good reason to believe that the job gains will continue to accelerate in the coming months.

The other good news is that there is still plenty of umph left in the economic stimulus program, which was really a 3-year economic plan. The latest expenditures to date are as follows:

Tax Cuts: $99.1 billion out of $288 billion paid (34.4% spent)
Spending: $208.8 billion out of $499 billion paid (42.8% spent)
Total: $307.9 billion out of $787 billion paid (39.1% spent)

So, over three fifths of the impact of the stimulus is yet to come and to a large extent it is the portion of the expenditure that is likely to be most job-creating. A lot of the earlier spending did things like stabilize state governments to prevent layoffs of state workers and provide emergency entitlements to those in economic distress. Those things were necessary, but didn't create many new jobs. Now that we are into the phase of the bill, which essentially runs through 2011, which involves construction and infrastructure projects, we are likely to see a pick-up in the job-creating impact. The pace of spending has picked up as the cries over unemployment have become louder (note that the spending is now far outpacing the tax cuts, which was not the case earlier), but I would still argue that the money has gone out too slowly.

In other economic news, the government is continuing to retract the broad-reaching intervention in the economy that began with the financial crisis. As of now (April 1st), the Federal Reserve program of buying up mortgage-backed securities has ended. This program was artificially keeping mortgage rates low to stabilize home prices. Rates will now be allowed to drift to their natural market price, which will likely be higher. The Fed has also recently hiked its emergency lending rates to banks, which were essentially acting as a subsidy to provide liquidity to distressed banks.

The government still owns large stakes in 3 Fortune 500 corporations. It has substantial stakes in Citigroup and AIG and is the majority owner of General Motors, all three are products of conversion of debt the companies incurred on TARP money into equity positions.

On Citigroup, it appears the government is going to sell off its stake this year, and appears poised to make a good profit on its investment, as Citigroup shares have recovered a great deal as the economic criss has waned. With GM, the government is looking to make an Initial Public Offering of some of its shares as early as the end of the year, and there is optimism that the government will at least break even on this position. AIG is the most thorny and the most likely that the government will take a loss as well as the least clear as to how the government would exit, as unlike Citigroup and GM, AIG has not yet re-established a profitable business model.

But, AIG aside, the socialization of major institutions appears to be winding down and the economy largely returning to the way ti was.

What Happens When Congress Gets Back April 12th
Congress is on Easter break right now, but returns to business a week from Monday. The 111th Congress is set to adjourn October 8th and unlike last year, they will do everything that they can to stick to that date, being that it is an election year and incumbents will want to be back in their districts campaigning for re-election. So, with a little under 6 months to do work, what can we expect?

(1) The Fiscal 2011 Budgets
The appropriations process can be long and cumbersome, especially with sky-high deficits still persisting. Expect the bulk of the debate to focus on this essential function for the rest of the year.

(2) Financial Reform
Aside from the budgets, this is the only major piece of legislation that is likely to see floor votes in both houses of congress. There is chatter about willingness to work in a bi-partisan fashion on this bill, but don't count on a lot of GOP support, even if the Democrats incorporate a lot of their suggestions and ideas. The best-case scenario for the White House is probably to get a bill through with broad Democratic support and a few moderate GOP members, again targeting Olympia Snowe, Susan Collins and Scott Brown to try to establish a 60th vote against a GOP filibuster attempt (when does the GOP not filibuster at this point?)

But even building a liberal/moderate coalition will be tough as the liberals want a bill that goes much farther than the proposal that Sen. Chris Dodd (D-CT) took out of committee and the moderates still believe it went to far. Finding that "just right" compromise to keep all parties on board will be difficult and will likely lead to a pretty modest reform bill.

(3) Immigration
Don't even worry about it...won't make it to a vote this year.

(4) Cap and Trade
There is still a House-passed bill, but this won't make it through the Senate. Erstwhile bipartisan Sen. Lindsay Graham (R-SC) has sounded increasingly partisan since the health care vote and the DEMs really need him on board to push a bill through the Senate. This one will have to wait until 2011, or never, depending on how many seats the GOP gains.

(5) Don't Ask, Don't Tell
In an election year? Ha! Forget it.

(6) Jobs Bills
Probably some more little bills with hiring incentives and tax credits, but nothing that will have a major impact. The stimulus package will continue to be the economic program of 2010 and 2011.

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