Why President Obama is a Liability AND an Asset in November, The Fake Ground Zero Issue

President Obama -- Popular Except Where He Is Popular
The national numbers on President Obama's approval are ugly. There is no other way to put it. Not George W. Bush in 2008 ugly. Not George H.W. Bush in 1992 ugly. But Bill Clinton in 1994 ugly, for sure.

The aggregate of the last month of polling is below. You see the President in a narrow range from about -2% to about -4% in his approve minus disapprove. This is indicative of a President who will have negative coattails with the general population come November.



The monthly numbers show a continued, slow decline. The President was negative for the first time in July, finishing at a negative 0.7% average, a 2.3% decline from June. With two thirds of August completed, he is on track for his worst numbers yet, at an aveage of -2.3%, a further 1.6% decline.



So is the President a liability for Democrats? With the general population, absolutely. In the GOP-leaning districts that Democrats won in 2006 and 2008, his national unpopularity certainly puts those seats in play. In swing states like Pennsylvania and New Hampshire, the national mood certainly hurts Democrats.

But President Obama is hugely popular with the Democratic base. He can still raise huge dollars...in fact, despite all the negative polling and national press, the DNC is still destroying the RNC in terms of fundraising, in part due to President Obama's ability to secure big donor checks and in part because of Republican disgust with Michael Steele and his frequently off-message remarks.

President Obama can also rally voters that don't typically turn out in large numbers in mid-terms, most specifically, African-American voters. The President still holds a greater than 80% approval rating with black voters and getting them to turn out in close races could tip the vast number of very close Senate and House races.

So what's the net of all this? Democrats are going to lose significant seats in both bodies in November, that is a certainty in my mind. There isn't time enough to turn the national mood around. But the post-Labor Day period where campaigns really kick off and how the Democrats best leverage the President will determine whether the result is a modest erosion or a blow out. Still way to early to call control of either body.

The "Mosque" Non-Issue
It must be a slow news month. Sure, Congress is in recess, but do we really want to spend more than a month debating the location of an Islamic cultural center in New York City?

Sure, passions run strong after 9/11 and rightly so. And there is no question that radical Islamic Jihadists were responsible for the attacks and that religion was at the very least, a strong contributing factor in motivating the attacks.

But let me run through the reasons why this is a ridiculous issue.

(1) There is no legal question to be decided
The group seeking to build the cultural center has a right to do so. Period. Even the most extreme voices on the right don't dispute this fact. There is nothing for the rest of us to decide.

(2) Islam isn't radical Islam any more than Catholicism is child molestation
Just because you have a religion that shares the same name and prophet as a group of radicals, doesn't make you a radical. There is absolutely zero tie between the builders of the community center and the attackers from 9/11.

(3) It's New York City, not Ground Zero
The proposed community center is two blocks from Ground Zero. How many churches, temples, etc. are located within that radius? A bunch.

(4) Nobody Cared Until They Did
This story has been around until December. Up until a month ago, nobody objected, including voices on the right.

Let me criticize the left a little on this issue...you don't have to be a racist or Islamophobe to a have a certain degree of inherent discomfort with "Mosques" after all we have learned about the trappings of radical Islam since 9/11. But the facts simply do not support this issue warranting any debate. It is an invented story, plain and simple.

Incidentally, President Obama was foolish to inject himself in the debate...and spineless for walking back his 100% correct remarks once he did.

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Some Open Questions for the Parties & Candidates, Birthers: Ignorant or Just Dumb?

I spend a lot of time on this site looking at the statistics, numbers, forecasts and projections that show how our election cycle is shaping up. I thought I'd take a break from that today to put the election and its issues in context. The questions below are largely not being addressed by either party, but they are critical questions if we are going to confront the real challenges that our country faces. Take note when you vote this November as to if and how the candidates answer these questions:

(1) Presently, federal taxes run at about 15% of GDP. Spending this year on the military, social security, medicare and unemployment benefits will total about 21% of GDP. Do you favor dramatic tax increases or dramatic spending cuts in one of those categories to balance the budget? What specifically?

(2) Presently, almost half of Americans pay no federal income tax. Do you think that is a good thing or a bad thing? What, if anything, would you change?

(3) Starting in 2015, Social Security will permanently pay out more in benefits than it takes in in taxes. The majority of current Social Security recipients will receive far more in benefits than they ever paid in in taxes. What combination of tax increases, benefit reductions and changes in retirement age do you favor to make social security solvent again?

(4) We presently spend about 4.5% of our GDP on the military. China spends 2%. The rest of the developed world spends under 3%. Our GDP is the largest in the world. Do you think our current level of defense expenditure is appropriate?

(5) Unemployment for those without a college degree is currently running over triple that of the rate of college graduates. In our inner cities, less than half of students graduate High School, yet alone attend College. What would you do to address this issue?

(6) In the United States, we currently pay almost three times the amount the rest of the developed world does, on average, for the exact same prescription drugs. Are you okay with this? If not, what would you do about it?

Are your candidates answering these clearly? Don't you think they owe it to us to provide clear answers to these tough questions to earn our vote?

A Third of Our Country Is Stupid or Ignorant
Americans love our conspiracy theories, whether they are from the left or from the right. For over a generation, theories have abounded surrounding the Kennedy assassination. The far fringe of the left was obsessed after September 11th with theories about the governments participation. Conspiracy theories from the right abounded after the awful killings in Waco and Ruby Ridge.

Conspiracy theories are not always wrong. The Watergate scandal, the Iran-Contra affair and many others demonstrate that sometimes conspiracy theorists have the facts on their side. I have no problem with people who have doubts in their government or those who ask the scary or sometimes crazy questions.

But to have any legitimacy, a conspiracy theory has to have at least some factual plausibility. When it does not, it is merely a crazy ranting from wing nuts of one political persuasion or another.

Which brings us to the so called "Birther" movement, those who do not believe that President Barack Obama is truly a native-born US citizen and is therefore not a legitimate President. Questions about the President's citizenship status first emerged doing the 2008 campaign and persist to this day. A recent survey showed that 35% of Americans have doubt about Obama's citizenship legitimacy. Those 35% are either ignorant or stupid.

Let's examine the facts and ask the question about what you would have to believe to buy into the Birther theory.

(1) On August 13th, 1961 in the Honululu Advertiser and on August 14th, 1961 in the Honolulu Star-Bulletin, a birth announcement ran stating that "Mr. and Mrs. Barack H. Obama, 6085 Kalanianaole Highway, son, August 4th". Copies of both papers are readily available on microfiche.

In order to be a birther, you must believe either:
a. That Obama's parents, knowing that a mixed race child born in 1961 would someday run for President, deliberately inserted a false announcement in Honolulu's two major papers in the two weeks after his birth (by the way, both papers state that received birth announcements from the Department of Health, not the parents).
or
b. That the Obama campaign was so powerful that it managed to falsify microfiche copies of the old papers in every library in the country without anyone noticing.

(2) In 2008, Dr. Chiyome Funiko, director of the Department of Health stated "I, along with the registrar of Vital Statics, have personally seen and verified that the Hawaii State Department of Health has Sen. Obama's original birth certificate on record in accordance with state policies and procedures." Republican Governor Linda Lingle confirmed that the record existed and had been handled properly.

In order to be a birther, you must believe that:
a. The director of the Hawaii Department of Health, the registrar of vital statics and a Republican Governor who campaigned heavily for Senator John McCain all conspired to provide a false birth record for then-candidate Obama.

(3) The "native born" clause of the constitution doesn't necessarily require that an individual be born in the United States anyway. Here is a little known fact...Senator John McCain was born in a military hospital in Panama. He was deemed eligible for the Presidency by several lower court rulings, as he was born to American citizens and was legally a citizen from birth. There is no dispute that Barack Obama's mother was an American citizen.

To be a birther, you must believe that:
a. Not only was the President born outside the United States, but that he was somehow ineligible for citizenship at birth. To date no theory has ever been offered as to why this would be the case.

So, let's summarize. To be a birther you must believe that the Barack Obama's parents conspired with the Department of Health in 1961 to falsely insert birth announcements, knowing in 1961 that their mixed-race child would someday run for President, in order to commit fraud to claim that he was born in the US, a fact that probably wouldn't have been relevant to his capability to run for President anyway. 47 years later, a Republican Governor conspired with the two state departments in Hawaii to further this fraud. Finally, you must believe that the President was somehow ineligible for citizenship if he was born abroad, a theory substantiated by no facts.

Is there anybody out there who things the 35% know something I don't? Let me know. For now, I'll just keep calling them idiots.

Elena Kagan and a Reminder of the Consequences of Elections, A Checkin on Obama's Scorecard, Still Stimulating?, My Apologies to Arthur Laffer

What Elena Kagan's Confirmation Reminds Me Of
This afternoon, the Senate confirmed Elena Kagan to serve on the Supreme Court by an unambiguous vote of 63-37, with 56 of 57 Democrats voting in favor (moderate Ben Nelson voted "no"), both Independents (the sometimes liberal Joe Lieberman and the always liberal Bernie Sanders) voting in favor and 5 of 41 Republicans voting in favor (moderates Collins, Snowe, Graham and conservatives Lugar and Gregg.) It was not a particularly close vote, even by the defacto 60 vote threshold that we have come to know and hate in the US Senate.

Her joining of the court will not much change the ideological make-up, given that she replaces the most liberal member of the court, John Paul Stevens.

In Kagan, the country gets a great legal mind, but one with limited judicial experience. Depending on your perspective and the year, that is either a good thing or a bad thing.

I was reminded by a liberal friend of mine the other day just how much Supreme Court seats punctuate how much consequence each Presidential election holds. He reminded me of the closeness of the 2004 Presidential race (3 points nationally, less than a hundred thousand deciding votes in Ohio) and the fact that the seat, in effect, decided two Supreme Court seats, those now held by Samuel Alito and John Roberts, probably for at least a generation.

How different would the nature of court decisions be if there were a solid 6-vote liberal majority versus a moderate/conservative 5-4 majority?

Is He Keeping His Promises?
There's been a lot of discussion in the space lately about President Obama's declining approval ratings, but I haven't updated in a while how he is tracking on actually doing what he said he would do, that is, keeping his campaign promises.

From our friends at politifact, here is their latest accounting:
Promises Kept: 120
Promises Partially Kept (aka compromises): 38
Promises Broken: 20
All other promises (ones in the works, not yet rated or "stalled" - meaning that they are not progressing at the moment): 327

So, of the 505 things that President promised to do in the 2008 campaign, if I give him full credit for kept promises and half-credit for partially-kept promises, he has completed 27.5% of his promises, or given that his term is 38.5% completed, he would be on pace to fulfill 71% of his promises. Not a bad average, except that the promises get harder the further you get along, since early on you generally get all the early stuff done.

In terms of the promises in which he has taken definite action (the 178 rated), he has been 78% true to his word.

All of this leads me to conclude...we largely got what Obama said he would be. If we are disappointed, it is largely because we took it upon ourselves to believe he might be something he never said. I included myself in the deluded.

How About That Stimulus?
Quietly, having faded from public attention long ago, the American Recovery and Reinvestment Act continues to return tax dollars and spend money on infrastructure and entitlements. This is the problem with 3-year economic programs, like the stimulus bill -- people forget they are working long before their full effects are known.

By the latest government accounts,
Tax Cuts: $223B out of $288B spent (77% complete)
Spending: $268B out of $499B spent (54% complete)

The tax cuts largely expire at the end of this year, so those will be 100% complete by December. The infrastructure spending will certainly extend into 2011.

The ARRA, combined with the balance-sheet actions of the fed, have largely shaped economic policy in this country for the first Obama term. The results in 2012 will largely reflect whether these policies ultimately succeed or fail.

There have been some great pieces published of late that show just how closely Presidential results track to election-year income growth. I'll publish a recap of this work in my next blog, but suffice it say, it shows the Clinton campaign of 1992 was right, "it's the economy, stupid"

I Was Wrong on Laffer
In a recent blog about the history of the Laffer curve, I stated that Arthur Laffer now supported raising taxes as he believe that we were not past the optimal revenue point for taxation. My remarks were based on my recollection of a Newsweek article from several months ago. As I have been unable to locate the original source, and Mr. Laffer has made it clear in a subsequent Wall Street Journal commentary piece that he does not support raising top marginal tax rates, I apologize for misconstruing his views on present taxation.

I stand by my belief that tax rates need to be increased, but did not mean to misrepresent Mr. Laffer's view as being supportive of mine.

Latest 2010 Projections and My Unofficial Advance Guide

2010: No GOP Senate Control Yet
As the candidate fields are largely set in the Senate races, we've seen the polls somewhat stabilize, so only a few rating changes to report from the past month of polling. Here they are:
Nevada -- a major change here, as for the first time since I started tracking the races back in November 2009, this state is not projected a Republican pick-up. The race moves from Lean GOP Pick-Up to Toss-Up as Sharron Angle's somewhat unorthodox views and poorly run campaign cost the GOP ground. Last two polls have Reid at +1% and +2% respectively.

Wisconsin -- apparently Russ Feingold is not as beloved in Wisconsin as I once thought. The seemingly safe, then very much at risk (when Tommy Thompson appeared to be running), to safe again Senator is once again at risk. This race moves from a Lean Democratic Hold to a Toss-Up and could move further right with more polling. Last two polls have Feingold at even and -6% respectively.

New Hampshire -- the race for retiring Sen. Judd Gregg's seat tightens up a little as Ayotte is only up +3%, +8% and +12% in the last 3 polls. The race moves from a Likely GOP Hold to a Lean GOP Hold.

Lots of other new polls that don't facilitate rating changes:
Pennsylvania -- even and Toomey +6% in last two polls. Stays Lean GOP Pick-Up.
California -- Boxer +5%, +7% in last two polls. Stays Lean DEM Hold.
Washington -- Murray +2% in one new poll. Stays Lean DEM Hold.
Delaware -- Castle +11% in one new poll. A marked decline in lead but not enough on its own to move from a Likely GOP Pick-Up.
Indiana -- Coats +21% in one new poll. Stays a Likely GOP Pick-Up.
Oregon -- Wyden +16%, +18% in two new polls. Stays a Likely DEM Hold.
Connecticut -- Blumenthal appears to have stabilized from the damage he suffered from his false war vet stories. He is +13%, +17% in two new polls. Stays a Likely DEM Hold.
New York (Gillebrand) -- Gillebrand +22% in one new poll. Stays a Likely DEM Hold.
West Virginia -- Gov. Manchin is at +16% in one new poll. Stays a Likely DEM Hold.
Arkansas -- Boozman +19% to 25% in four new polls. Stays a Safe GOP Pick-Up.
Illinois -- Gianoullis +2% in one new poll. This remains a Toss-Up and continues to be the most competitive race of the year.
Missouri -- Blunt +6% in two new polls. Stays a Lean GOP Hold.
Kentucky -- Paul +3%, +3%, +8% in three polls. Stays a Lean GOP Hold.
Florida -- Crist is +6%, +7%, -2% in three new polls. Stays a Lean Independent Pick-Up for now, but it is getting close to a toss-up with Republican Rubio (Democrat Meeks continues to trail badly.)
North Carolina -- Burr +10%, +15% in two new polls. Stays a Likely GOP Hold.

All of which leaves us with:
Projected Democratic Holds (10)
Safe Holds (4)
Hawaii, New York (Schumer), Maryland, Vermont

Likely Holds (4)
Oregon, Connecticut, West Virginia, New York (Gillebrand)

Lean Holds (2)
California, Washington

Potential Democratic Pick-Ups (1)
Toss-Up - GOP Controlled (1)
Ohio

Potential GOP Pick-Ups (9)
Safe Pick-Ups (2)
Arkansas, North Dakota

Likely Pick-Ups (2)
Delaware, Indiana

Lean Pick-Ups (2)
Colorado, Pennsylvania

Toss-Up - DEM Controlled (3)
Nevada, Wisconsin, Illinois

Projected GOP Holds (16)
Safe Holds (9)
Kansas, Louisiana, Iowa, South Dakota, Alabama, Idaho, Oklahoma, South Carolina, Utah

Likely Holds (4)
Arizona, North Carolina, Georgia, Alaska

Lean Holds (3)
Missouri, Kentucky, New Hampshire

Potential Independent Pick-Ups (1)
Lean IND Pick-Up (1)
Florida

Projected Senate: 48-52 Democrats, 45-49 Republicans, 3 Independents
Central Projection: 50 Democrats, 47 Republicans, 3 Independents

My Guide to the 5 Most Interesting Races to Watch:
1. Illinois -- the race for President Barack Obama's old Senate seat is likely to be among the closest in the country and a bellweather of election night. If the DEMs win it, we are probably looking at modest losses of 6 or so Senate seats..if they lose that one it could be a close Senate.
2. Ohio -- the DEMs best chance for an actually pick-up in a classic large swing state that Obama won handily in 2008.
3. Florida -- Marco Rubio's epic battle with Charlie Crist is sure to entertain. A Crist victory could make him a kingmaker in a closely divided Senate and would be a win for moderates. A Rubio win would make him the biggest star in the GOP and immediately start talk of Presidential ambitions (probably not in 2012, although you never know, but certainly a contender in 2016.)
4. Washington -- the so called "51st Senate Seat", this is likely the one the GOP needs to win to regain control of the Senate, this erstwhile blue state could be the decider of Senate control for the next two years.
5. Kentucky -- is even dark red Kentucky ready for Rand Paul's brand of extreme libertarianism? We shall see.

In the House,

The GOP is WAY up in the generic ballot question, with our average of averages now at GOP +5.8%. This leads to:

My Projection: Republicans 228, Democrats 207
Realclearpolitics Projection (evenly splitting toss-ups): Democrats 218, Republicans 217
The Cook Political Report (evenly splitting toss-ups): Democrats 238, Republicans 197

Clearly either the race-by-race dynamics are a lot different on the ground or individual race analysis hasn't caught up to the national polls as we haven't seen this kind of divergence between the national generic ballot polls that I use and the race-by-race analysis that other sites use until now.

Either way, here are the races to watch:
(1) Louisiana's 2nd -- the most liberal district that elected a Republican in 2008 at Democrat +25%, Joseph Cao is the second most at-risk Republican in the House (the Hawaii special election silliness, sure to be reversed in November, doesn't really bear watching.) This might be the only 2008 GOP seat that the DEMs pick-up in 2010.

(2) Washington's 3rd -- a dead neutral district (it mirrors national voting patterns with neither party favored), it is also an open seat. Well worth attention as a national bellweather.

(3) Texas' 17th -- Chet Edwards is a Democrat in a very conservative (Republican +20%) district, precisely the kind of seat that has the GOP licking its chops.

(4) Ohio's 15th -- Mary Jo Kilroy won one of the closest races of 2008 in the Democratic sweep. She's under fire this time around.

(5) Arizona's 8th -- this race is somewhere around the seat that the GOP would need to take to regain control, both in terms of closeness in 2008 and in terms of early polling this time around. Gabrielle Giffords is at risk in this swing district (Republican +1%)

The Misunderstood Laffer Curve, How Deep a Recession?

How Conservatives Misunderstood Arthur Laffer
The story is one of conservative economic lore. At some unnamed cocktail party, Arthur Laffer drew an inverted parabola on a napkin that became the foundation for modern supply side economics. The concept of the Laffer curve shaped Reaganomics, was the basis for the Bush tax cuts and continues to be the foundation from which Republicans argue against allowing them to expire. The Laffer curve is also completely misunderstood. Laffer himself is on record opposing extensions of the Bush tax cuts and supporting higher taxes generally to reduce the deficit. So how does the Laffer curve work and why is it so misunderstood?

The concept behind the Laffer curve is fairly simple. The horizontal axis represents the effective tax rate in a country. The vertical axis represents that amount of tax revenue that a government receives. The curve basically portrays that revenues rise from zero as you begin to impose taxes, but that the rate of growth in revenue gradually slows as rates get higher and at some point, governments hit an inflection point, where raising taxes actually depresses revenue. By the time you reach 100% taxation, revenues are again at zero.

Intellectually, the notion is actually fairly easy to agree with. It's hard to argue with the fact that government revenue would be zero if we had no taxes. Likewise, it's pretty easy to see if we had 100% taxation on all income, how economic activity would grind to a complete halt and we would once again have zero revenue. It's also inarguable that there are points in between that produce positive revenue. Therefore, some sort of Laffer curve MUST exist.

The devil is in the details, as Laffer himself would later admit. The going assumption that Ronald Reagan and George W. Bush ran with was that we were past the apex, that is, that cutting taxes would actually increase government revenue. This was a heck of an assumption, when, in both cases the total federal tax burden was about a fifth of the economy. George H.W. Bush famously called Reagan's scheme to boost revenue by cutting taxes "Voodoo Economics" -- he later got with the program as Reagan's VP, but clearly was never a true disciple of Reagonomics, as he famously cut a deal to raise taxes and close the deficit with congressional Democrats. Us cynics would call it "free lunch" economics.

Did revenue rise after the tax cuts in the 80s and 00s? Depends on how you measure them. Tease out inflation and revenues went up in the 80s and down in the 00s. The problem is that it is very difficult to know what the baseline of economic activities would have been without the changes in tax policy. But, by far the most compelling proof that we are nowhere near the apex of the curve is the explosion in government revenue and economic growth that took place in the 1990s, after Bill Clinton signed the largest tax increase (on a dollar basis, not on an absolute percentage basis) in U.S. history. Clearly, revenues shouldn't have shot up by double digits year after year if we were truly past the apex.

These days, Arthur Laffer, if you can find him, will tell you that we need to raise taxes to close the deficit. Yet Congressional Republicans are still clinging to the notion that we cannot raise any taxes because of the Laffer curve. I invite them to show me their list of Defense and Entitlement cuts that will get us to a balanced budget without allowing the Bush cuts to expire.

How Bad a Recession?
The second quarter GDP report from the Bureau of Economic Analysis came out Friday and confirmed a couple of things:
1. The recovery has continued -- GDP grew at 2.4% in the second quarter, marking a full year of economic growth, following a deep recession.
2. The recovery is still painfully slow -- 2.4% GDP growth is not going to cause a rapid drop in unemployment...the economic conditions of 2007 aren't coming back anytime soon.

Prior to this recession, the most severe recession that a lot of us had lived through was the 1990-1991 recession that threw George H.W. Bush from office and vaulted Bill Clinton to national prominence. Sure, a lot of us were alive for the nasty double-dip recession of '81-'82, but those of us who were in the workforce then and are still in the workforce now, were just starting out then and probably couldn't appreciate the full impact of what was unfolding. There was also that mini-recession associated with the tech crash in 2000, but it scarcely bares mentioning next to this one, other than for the damage it did to our 401K balances.

So, I thought I'd take one more look at the severity of both recessions in terms of GDP and job losses.

In terms of loss of economic output, this recession has been 3 times as severe as the 1990-1991 recession, with a peak-to-trough economic contraction of 4.2% versus 1.4%. In the 1990-1991 recession, the economy was back to its starting point in terms of size 16 months after the start of the contraction. We are now 33 months in and the economy is still 1.1% smaller than when we started.



In terms of job losses, the effect is even more profound. Peak-to-trough job losses in 1990-1991 were 1.6 million jobs. In this recession, we lost 8.4 million jobs. In 1990-1991 it took 32 months from the start of the job losses to when employment was back to the starting point. We are 30 months in and still 7.5 million jobs in the hole, not to mention the added jobs that would be needed just to make up for population growth.

It's a long, sobering road back. I drastically underestimated how long and how painful this recession would be. It may not yet be morning in America, however the sun IS starting to peak out.

Next up...back to the 2010 races.