Saturday, June 26, 2010

Obama Takes a Hit in the Gulf, The Insubordination of Stanley McChrystal, Weak Wall St Reform, Kagan Hearings Monday, Rock Star Haley

I have been somewhat derelict in my duties (such as they are) as a blogger the past couple of weeks. I've had a lot going on in my real life, having transitioned to a new job that has been consuming a large percentage of my time. To make up for my lack of coverage recently, this will be a long post to try to get caught up on the recent news. And there has been a lot.

Presidential Approval: Heading Into the Deep Sea
Gains that the President had made last month have been completely erased and he is at or near all-time lows in his Presidency. The past month has seen some interesting trending. The big one-day dip on June 14th likely has more to do with the timing of poll releases than with anything substantial (as his numbers recovered the next day), but the overall trend for the month is unmistakably down. Anger over the spill in the gulf, the White House's seeming slow response and the continued malaise in the U.S. economy is likely to blame.

After posting his first substantial monthly gain in his entire Presidency in May, President Obama is on pace to hit an all-time low in June, with an approve minus disapprove of +1.5%. One positive note for the President is that his numbers are still positive, a considerable feat given all the hits he has taken. Internals of the polls show that Democrats largely still approve of him (80% in the latest Gallup poll) and he is still holding on to about 4 in 10 Independents, while Republicans (85% in Gallup) almost universally disapprove. Obviously the Independents tend to be the ones that drive poll trends, given that the Democratic and Republican numbers seem fairly entrenched.

Good Riddance, General McChrystal
President Obama made the right call this week when he fired General Stanley McChrystal over a Rolling Stone interview where the General and his staffers mocked the Vice President, implied that the President didn't know what he was doing and mocked other civilian authority figures. The General's actions are an utter disgrace.

Let me be clear...I have no issue with criticism of the administration. Anybody who has read this space the past year and a half know that I'm not shy at criticizing President Obama and other Democrats when they are out of line, just as I took shots at President Bush and the Republicans when they were in power. I am a civilian. I am not in the government. In our great, free country, I'm free to say whatever I want about these politicians.

The military is different. Our constitution was designed with civilian leadership of the military for a very important reason: the preservation of Democracy demands that our elected, civilian officials control the machine of war, not un-elected military leaders. As such, we have created a clear divide...civilian leaders are elected to make the strategy calls, military leaders are there to execute the strategy. General McChrystal is entitled to his opinions. But he has two choices: keep his opinions to himself or leave the military and become a civilian commentator. He has no right to sit from a military office and take shots at his civilian bosses. And he did, unambiguously. He had to go.

President Obama clearly made a poor decision putting McChrystal in charge of the effort in Afghanistan. Lost in all the coverage was that McChrystal was the President's hand-picked leader. The President and Defense Secretary Gates should have done a far better job betting the General to ensure alignment, loyalty and judgement.

Kudos to Senators Lindsey Graham (R-SC) and John McCain (R-AZ) for immediately and clearly speaking out against McChrystal and in support of the President's authority. Support from the minority for the established chain of command is important and the bi-partisan support for this constitutional principle was crucial in establishing the credibility of McChrystal's firing. Their statements were principled and correct. Nice to see that for a change.

Financial Reform That Does Something, But Not Enough
I feel like a broken record. Every time a reform bill passes recently, I have the same view: there are some good things in it, but it does not go far enough. This pattern repeats with the conference report on financial reform that was released this week and will head to the House and the Senate for final votes in the coming weeks.

It places limit on banks owning hedge funds (limiting ownership to 3% of assets), establishes processes for orderly management of crises such as the financial meltdown of 2008 and establishes a consumer protection agency.

What it doesn't do is force the break-up of institutions that are "too big to fail". This situation reinforces backward incentives around risk-taking. It also does not separate commercial from investment banking, meaning that your banks deposits can still be invested in risky assets. It does not solve the implicit government backing of almost all mortgages through Fannie Mae and Freddie Mac and, in fact, leaves in place those sinkholes more or less as is.

Feels to me like we will be back to the table discussing this issue again the next time that there is a financial crisis. And there will be another. Asset bubbles happen and most recessions deal with their popping....Savings and Loans in the 90s, Technology in 2000 and Housing in 2008...we seem to have an asset bubble every 10 years or so. And since the reforms of the 30s and 40s we haven't made much progress in stopping them.

Let's hope this is a first step and not the final solution.

Kagan Confirmation Hearings to Begin Monday
The Senate Judiciary Committee hearings for nominee Elena Kagan begin on Monday. Kagan has been recently vetted by the Senate, and, barring any unforeseen new revelations, I expect relatively smooth sailing for Kagan. The days of Supreme Court nominees receiving 90+ votes in the Senate are long gone, to be sure....judicial ideology seems to be the primary source of votes these days versus qualification (this trend was started by Democrats in the 1990s and has no permeated both parties), but Kagan should easily get 65 votes or so on her final vote in the Senate. And no Republicans thus far have talked of even mounting a filibuster, although if new revelations put her ability to get 60 votes in doubt, there would undoubtedly be one.

Nikki Haley in 2012? 2016?
She came out of nowhere. A few months ago she was fourth in the polls, now she is the probable next Governor of South Carolina. Nikki Haley this week easily won the run-off for the Republican nomination for Governor in South Carolina, clearing a path for what should be a relatively easy general election victory in the heavily Republican state.

Haley's victory marks several firsts. She would be the first female governor of South Carolina. She would be the first Indian governor in the state (she is half Indian). And she is a potential rock star in the GOP.

She is female. She is attractive. She is well spoken. And she is an ethnic minority in a party that is short on minority stars (Louisiana Governor Bobby Jindal is the only other one that I can even name.)

She faced all kinds of opposition from the good old boy network in South Carolina. She faced ugly racism from within the party. She faced ugly accusations of infidelity (none proven, many clearly motivated by opposition to her candidacy and frankly, totally irrelevant to her qualifications as Governor.) She handled the heat with class.

There are already those talking about her as a potential national candidate in 2012 or 2016. While it is VERY early to make such predictions....she hasn't even won the election yet and we have no idea how effective she will be in governing, she quickly has joined a short list of potential new GOP stars that includes New Jersey Governor Chris Christie (who has stated he is not interested in national office), Florida Senate Candidate Mark Rubio (who may well lose to now-Independent Charlie Crist) and ex-Alaska Governor Sarah Palin.

Keep an eye on this gal....she may just be the real deal.

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