Sunday, October 2, 2011

Florida Does It Again, Obama's Income Problem, Of Light Bulbs and American Manufacturing

Why Can't Florida Just Behave?  Maybe It Shouldn't.
Our process for nominating candidates for President is one of the oddest features of our Democracy.  This is, in part, because of traditions which seem to run contrary to common sense and, in part, because the parties have struggled to decide what exactly they want the nomination to be: either a process by which the party faithful select a candidate that best represents their views or a more democratic (small d) process by which voters pick the best candidate to win a general election.

Presidents are nominated by convention delegates.  In the Republican party, delegates are all selected by either caucuses - processes for the party faithful in which people must publicly declare the candidate support and primary elections, processes open to either registered Republicans or all voters (depending on the state), in which the choices are made privately.  Democrats add the additional layer of complexity of "Super Delegates", elected members of the party faithful.

Even the details are confusing.  Territories that have no representation in the general election such as Guam and Puerto Rico, get to select convention delegates.  On the GOP side, some primaries are winner-take-all, similar to the electoral college in the general election and some are proportional to the vote (all Democratic primaries are proportional.)

Because of the complex and distorted nature of the process, I'm often loathe to criticize a detail about the process without first talking about the problems with the process in general.  So, let's view the news this week about Florida moving its primary date in that broader context.

First, let me start with some grounding facts.  The SEQUENCE of the primary and caucus calendar is critically important.  You see, it is highly unusual for a race to go all the way through the calendar and still be competitive (the 2008 Democratic nomination fight being a very rare exception to this rule.)  It's hard to stage a late rally because once the early results come in, the money flows only to the candidates that have performed well in the early states.  So, except in the rarest of circumstances, it is much more important that New Hampshire's primary is EARLIER than California than that California has a lot more delegates than New Hampshire.

Iowa and New Hampshire have, for a long time, been afforded the "right" to go first on the primary and caucus schedule, the Iowa Caucuses being the first nomination contest of any kind and New Hampshire being the first primary.  There isn't a lot of logic behind them getting to go first, other than that they always have.  Proponents of the Iowa / New Hampshire gestapo argue that small states allow more obscure candidates the opportunity to build a retail campaign against bigger, better funded candidates, and they are right to a point.  But why Iowa and New Hampshire?  Why not Rhode Island and Hawaii?  Why not Montana and Nevada?  Iowa and New Hampshire aren't very representative of the country as a whole, except for both being somewhat swing states.  They are not particularly diverse in any sense of the word, being heavily white and both having very focused economies.  They largely exclude large urban hubs and have very specific political interests that tend to get too much focus because of their status.

So, I understand the state of Florida's desire to leapfrog the artificial calendar by moving up its primary date to January 31st next year.  It is trying to have more stake in the game.  Florida is certainly a meaningful state in a general election, it has diverse points of view (southern, urban, coastal all wrapped into one) as well as being ground zero for a whole host of political issues.  The problem is, Florida's attempt won't work and will only serve to vastly accelerate the calendar.  New Hampshire will leapfrog Florida by going earlier in January and Iowa will leapfrog New Hampshire by a week, pushing the first caucuses into early January or possibly even late December.

The GOP rules will "punish" Florida for its move by stripping it of half of its delegate votes at the convention.  But, as I said, timing is far more important than delegate count, so Florida is likely willing to make that trade-off and be happy.

What this all means practically is that the GOP nomination fight just got put into overdrive.  We are probably only two and a half to three months from the first nominating contests.  This leaves only a couple of weeks for would-be candidates like Chris Christie (who has said "no" at least 100 times to a run, but keeps getting asked anyway) or Sarah Palin (who has said "maybe" at least 100 times and few care about at this point) to decide.  It also means that polling, which has been not very relevant up to this point will suddenly become very meaningful.

How could we solve this for future races?  It will only come with true national nomination reform.  A system that I favor would consist of 4 sets of primaries spread over 5 months.  Month 1 would consist of a rotating, random selection of 2 of the 14 smallest states.  Month 2 would consist of the remaining of the 14 smallest states.  Month 3 would have the next 12 smallest states and so forth.  This would allow underfunded candidates to practice retail politics early on to build their campaigns, but would also assure that the nomination doesn't get decided until the last month, since the majority of delegates would be selected on the last nominating contest.

So far the parties have shown little willingness to do real electoral reform, so expect more fireworks this cycle and next.  I'll keep you posted on where the Presidential calendar sits as states react, but the likely calendar at this point looks as follows:

Iowa Caucuses - January 9th
New Hampshire Primary - January 17th
Florida Primary (1/2 delegates) - January 31st
Minnesota Caucuses, New Jersey and and Missouri Primaries - February 7th
Nevada Caucuses - February 18th
Wisconsin Primary - February 21st
South Carolina, Arizona and Michigan Primary - February 28th
Super Tuesday (8 primaries) - March 6th

Income Growth, THE Critical Metric
In terms of statistical significance, there is no more predictive statistic of Presidential election outcomes than income growth in the Presidential election year.  The equation is pretty simple (derived by simple linear regression of the results of all elections since World War 2):

Incumbent Parties Percentage of the Two-Party Vote = 45% + 3.3% * real disposable income growth in the election year

This equation, since World War 2, has been wrong by an average of only 2.5% across all the elections and has been predictive within 1% in half of the elections.

The wild swinging 1988 3-way race between the first Bush, Bill Clinton and Ross Perot?  The equation was right within 1%.

The famous Gerald Ford 33 point comeback that fell just a touch short in 1976?  The equation was perfectly predictive.

John Kerry's anemic candidacy versus a weakened George W. Bush?  The equation was within 1%.

There have been some notable outliers to this equation.  In 2000, by the equation, Al Gore should have received just over 53% of the two-party vote.  In actuality, he received just over 50%, ultimately tipping the balance of the election to George W. Bush.

In 1952, Thomas Dewey radically underperformed versus Harry Truman, getting only 44% of the 2-party vote when he should have received 54%.

But, by and large, the rule holds.

Income growth is hoovering around 0% right now.  Granted, it isn't the election year yet, but if the economy doesn't improve, history would tell us that President Obama would be headed towards a range of 42.5% - 47.5% of the popular vote, a range that would have him losing the electoral college in virtually any model that I can discern.

Of course, the GOP could nominate another Thomas Dewey.  But if I were President Obama, I wouldn't bank on it.

Why Are Things That Make So Much Sense So Hard?
Okay, light bulbs are a minor issue in the grand scheme of things, but it is symptomatic of the larger scary right-ward turn of the GOP since the Tea Party started gumming up the primary works.

In 2007, a bi-partisan majority passed the Energy Independence and Security Act, signed into law by President George W. Bush.  The law, over a period of several years, required light bulbs to become at least 30% more efficient than traditional incandescent bulbs.

30% was a very modest increase - there are at least 3 sets of existing technology that easily meet that standard - Halogen Filled Incandescents, Compact Fluorescent Lights and Light Emitting Diodes.  The law was technology agnostic -- in other words, any lighting technology that met the standard for efficiency was equally acceptable.

This is a common-sense law and one that is very much in line with how government can support good energy policy.  It is very similar to car efficiency standards (which have existed since the 1970s), water-use standards for toilets and faucets (in place since the 1980s) and a whole host of other things that the government regulates in order to drive improved efficiency.

The case for government involvement is simple -- it is one of accounting for externalities.  A externality is an effect that is caused by an individual's actions that have impact on something other than the individual.  In the case of a light bulb, I may make an economic choice to use incandescents instead of CFL bulbs based on the cost of the bulbs and the cost of energy.  But the cost of energy doesn't reflect the environmental impact of the sulfer and CO2 generated when the coal my power company uses in burned.  In an ideal world, things would be priced based on their total effect, but they are not.

Even without the ban, CFL and LED sales have been on the rise.  The economics for CFL's are compelling, to the point that virtually every private business have replaced most incandescent light fixtures with CFL's with no incentive (try finding a hotel that isn't 100% CFL these days.)  LED's are still very expensive, so they have not yet had broad adoption, but their costs are rapidly coming down and I have no doubt that in 10 years, they will be the common-use standard, given their extremely low energy consumption and their long-life.

CFL's have their drawbacks still.  They are not cost-effective for short-use applications like closets, since, like incandescents, they burn out faster with rapid on/off cycles, but are more expensive per bulb than incandescents.  They don't work well in highly vibratory environments, such as light fixtures on ceiling fans.  And many CFL's have a warm-up time before they reach full light output, making them disadvantaged in applications such as bathroom fixture lighting, where you generally want immediate light output.

In my house, we use CFL's everywhere where it makes sense to do so, such as the bedrooms, the living room and the family room.  We use halogen incandescents primarily in the bathroom and closets, although I will be looking to upgrade everything to LED's when the economics get there (LED's do not have a warm-up time.)

The whining by Michelle Bachmann and others in the Tea Party about the government regulating light bulbs is non-sensical.  She has said that Thomas Edison had a pretty good invention with the incandescent light.  That's true, the same way the typewriter was a great invention.  But nobody is advocating buying typewriters now that technology has moved on.  And her claim that American manufacturing is hurt by the law is equally ignorant.  First off, incandescents will still be available - halogen incandescents easily meet the standard.  Secondly, incandescents have largely moved overseas for manufacturing for exactly the same reason that CFL's are largely manufactured overseas: labor is still cheaper in China than the US.

Technological advance is something to embrace, not to fight.  We should be figuring out how to be competitive in making CFL's and, more importantly, LED's (which will be the future) not trying to keep people using old technology that is inefficient.

It's amazing how advocates for the free market have no clue how markets actually work.

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