Electoral Vote Predictor

How Fates Can Rise and Fall in a Week, Can Congress Do Anything?

2012-02-12T12:40:00.002-05:00

The Long March to the GOP Nod
Mitt Romney's nothing short of awful finishes in Minnesota, Colorado and Missouri (which didn't really count except for building on the image of a candidate suddenly in trouble, were capped by his (also symbolic, but meaningful from a perception standpoint) win of the straw poll at the hugely influential CPAC convention and his narrow win over Ron Paul in the Maine caucuses.

It seems that every week in this Republican nomination battle has a different storyline and more surprises. But one thing that hasn't changed in a long time is my belief that Mitt Romney is the strong favorite to take the nomination. His organization, money, experience and mainstream appeal (granted, this last piece hasn't been doing as well these days) make him the most likely candidate to win. And he's still the "next guy in line" and I've written extensively on the advantage that provides in Republican nominating contests.

So where are we in the process? We are now 8 states into the 50 state battles, plus the various territories (Washington DC, Guam, Puerto Rico, the Virgin Islands) that hold nominating contests or 15% of the contests have taken place. 2,118 delegates are awarded through nominating contests (168 are party leaders) and of those, 231 have essentially been awarded to date or 11%. I say essentially because in most caucus states, the caucuses are technically "non-binding", meaning that actual delegate selection won't take place until the state conventions, but similar to the electoral college, the outcome is all but assured.

Delegate counts through the Maine contest are as follows:
Mitt Romney - 105
Rick Santorum - 43
Newt Gingrich - 42
Ron Paul - 36
Rick Perry (withdrawn) - 3
Jon Huntsman (withdrawn) - 2

Note: As always, my delegate counts will differ from the counts published by major news outlets, as they generally try to include how they believe the 168 party leaders will vote. Since those endorsements are soft and can change, I don't consider them until very late in the process, when they could make the difference.

Romney has a sizable lead, primarily thanks to his win in Florida. Florida is the only contest to date that was set up as Winner-Take-All and almost half of Romney's delegates (50 in fact) came from his Florida win. The size of his campaign wallet and organization really paid off in that important contest (although made half as important as it could be by the RNC penalty for holding its contest early.

But Romney's sizable lead does have one major chink in the armor - he holds less than half the delegates and you need 50% + 1 to win a first a ballot nomination. His 105 delegates represents 45% of those awarded to date. If Romney's opponents could keep him below 50% all the way to the convention, they could broker the convention (deadlock it, in layman's terms) and force multiple voting ballots, during which anything could happen relative to the nomination. Or one of them could cut a deal for their delegates for a VP or cabinet seat, although Romney's three remaining opponents that will continue to accumulate delegates, frankly don't seem to like him very much.

From here, the race takes a bit of a break this week. After a long break from the debates (is anyone else starting to really miss those events?) there is CNN debate in Arizona on February 22nd. The next actual nominating contests are primaries in Arizona and Michigan on February 28th. Romney should win both of them handily. Michigan is essentially Romney's second home state, where he was born and where his father was Governor. Arizona has a heavy Mormon population and is far away from the rust belt appeal of Rick Santorum and the Southern appeal of Newt Gingrich. Arizona's 29 delegates are winner-take-all and Michigan's 30 are proportional, unless Romney gets 50% or more of the vote (which is possible but not a lock), in which case it would become winner-take-all.

So Romney could potentially add significantly to his lead in the next 2 contests. On March 3rd, Washington's caucuses take place, which have a significant prize, 43 delegates (awarded proportionally.) Washington could be an interesting bell weather. It is a moderate state, well outside of Santorum and Gingrich's areas of strength, but it is a caucus state, which have not been good to Romney (his win this weekend in Maine was actually his first caucus win of this cycle.) Despite its sizable delegate prize, it is not likely to see a ton of campaign, except from Ron Paul, who could do quite well there, primarily because it is so close to Super Tuesday, on March 6th.

Handicapping the Super Tuesday states, it would appear likely that if the race were held today, we'd see a split decision:
Gingrich should do quite well in Georgia, Tennessee, Oklahoma and Virginia.
Santorum will make his mark in Ohio and should fare well in the caucus states of Alaska, Idaho and North Dakota as well as competing strongly in the Gingrich states above.
Paul will likely focus his fire on the 3 caucus states above, which may get less attention from the other candidates.
Romney should do extremely well in Vermont and Massachusetts and will likely focus his fight on trying to beat Santorum in Ohio and try to show up well, if not win, in Virginia.

The big questions between now and the results of Super Tuesday are:
(1) Will Romney emerge from Super Tuesday with more than half of the delegates won?
(2) Will either Gingrich or Santorum be damaged enough after Super Tuesday to drop out (I can't see them dropping out before then)? I assume Paul will be in it for the long haul.

As the field emerges from Super Tuesday, we look ahead to nominating contests every week in March, and often multiple contests per week. The big prizes the rest of the month of March are Illinois (69 delegates), Missouri (52 delegates), Alabama (50 delegates), Louisiana (46 delegates), Kansas (40 delegates) and Mississippi (40 delegates). This looks like awful territory for Romney, so he needs a strong showing through Super Tuesday to carry him in these tougher contests.

This is the most fun Republican race I can remember in some time.

It's February 12th and I Have No Clue What Social Security Tax Will Be on March 1st
What a sorry state of affairs. I have made no bones about the fact that I am not a fan of the payroll tax cut that was passed for 2011 as part of the deal to extend the Bush Tax cuts and I was not in favor of extending it into 2012. Reducing Social Security taxes by 2% when there are already serious issues with funding future benefits is imprudent.

But putting aside the policy discussions, we have serious dysfunction with implementation of anything in Washington these days. Both sides of the political aisle agree that the payroll tax cuts should be extended. But we went all the way into the December recess before a last-second deal extended the cuts for January and February.

It is now February 12th and there is no deal in sight for the rest of the year. At issue is how the cut will be paid for. Democrats wanted to originally pay for it with a tax on millionaires, which was obviously a non-starter with the GOP. The GOP wants to pay for it with cuts to discretionary spending. Also at issue is how, if at all, to extend unemployment benefits.

What is so damaging in all of this is the uncertainty it creates. Companies don't know what to put in their payroll software for tax withholding. Individuals don't know how much money will be in the March 1st checks.

It's all so sad and embarrassing. I'm sure the tax cuts will get extended...but we are probably lucky it is a leap year with an extra day between now and March 1st.

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Will Santorum Score a Meaningful Upset?

2012-02-07T21:08:00.002-05:00

As votes start to come in, all signs point towards a Rick Santorum victory in the Minnesota Caucus. This will no doubt upset the Romney freight train and cause a lot of discussion in the political world. Santorum was unable to gain momentum out of his belatedly-declared Iowa Caucus victory. Will this prove different?

Romney is heavily favored to win the Colorado caucus, but given his 60% win in 2008, will anyone really be impressed if he wins with a plurality?

Missouri is just a beauty contest, with no delegates at stake (those get decided in a March caucus and a later state convention), but if Santorum runs the table on Missouri and Minnesota tonight, does it build his narrative as the logical and viable alternative to Romney?

Fun stuff tonight.

Why Romney Will Win the Nomination and Why It May Not Matter

2012-02-05T10:18:00.001-05:00

Mitt Romney is surging. With a decisive, although completely expected, win in the Nevada caucuses, Romney has 2 in a row. Rick Santorum has clearly faded from serious contention, finishing a distant 4th in the race with a projected 11% of the vote (all votes were not in and counted as of this writing, so it could shift still.) Ron Paul, as he always does, continues to outperform in caucus states, taking 18% of the vote in Nevada, but there is no conceivable map to him securing the nomination, although he will continue to make noise and try to pick off delegates where he can to support his cause of libertarian freedom.

And then there is Newt. Defiant to the last, Newt held a press conference last night in lieu of a rally and continued to talk smack about Romney, essentially saying that there is no real choice in November if Romney is the nominee. He has pledged to stay in the race until the end, regardless of the outcome.

The rest of the calendar for the month is somewhat quiet until the end. We will see caucuses in Colorado and Minnesota on Tuesday, as well as a primary in Missouri which doesn't count (delegates are awarded in a March caucus - I'm not even sure all the candidates are on the ballot.) Then Maine next week, then over a two week break until the bigger paydays of Arizona and Michigan.

After a Washington Caucus March 3rd, then, the real big prize, Super Tuesday, takes place on March 6th, with Alaska, Georgia, Idaho, Massachusetts, North Dakota, Ohio, Oklahoma, Tennessee, Vermont and Virginia all holding events on the same day.

The conventional wisdom is that Newt Gingrich will try to survive until Super Tuesday, since he seems very unlikely, given the demographics, to win any of the races in between. But even on Super Tuesday, while he seems sure to take Georgia and will have a good shot in Oklahoma, Tennessee and Virginia, it seems extremely hard for him to construct a map that gives him a lead coming out of Super Tuesday.

But the nature of delegate awards works to Gingrich's advantage to stay around and make hay, even if he ultimately loses.

You see, it takes 1,144 delegates to win a majority of the 2,286 that will attend the Republican convention in Tampa including 168 party leaders and 2,118 that are awarded in the 50 primaries and caucuses over the winding primary season.

To date, because of a series of penalties to almost all of the early states except Iowa for violating party rules around the timing of their contests, only 140 have been awarded - and of those 140, Mitt Romney has only won 72 (this number will probably increase by a few when the final count is in from Nevada.)

Between now and Super Tuesday, the intervening contests will award another 202. Then, on Super Tuesday, an additional 437 will be awarded.

So, while the next few weeks will award more delegates than the first 5 contests to dates and Super Tuesday will award more delegates than all contests prior to it, at the end of the night on March 6th, there will still have only been 779 awarded, a mere 37% of the ones to be awarded in primaries and caucuses and far fewer than needed to lock up a nomination.

So Mitt Romney will have to solider on...and hopefully develop some better talking points than not being concerned about the poor.

If the Economy Soars, It's 1996 All Over Again
Since his first two years in office, the question on the table of political pundits has been which other Presidency the Presidency of Barack Obama will resemble at re-election: Jimmy Carter or Bill Clinton.

Both Carter and Clinton were swept into office as outsiders at a time when the economy was sputtering and people were looking for change. Both made significant policy changes versus their Republican predecessors. And both faced public backlash for changing too much too fast, losing many seats in the mid-term elections - in 1978 for Carter and in 1994 for Clinton.

Obviously, despite the parallels in their first two years, Carter and Clinton's arc diverged widely by re-election night. In 1980, Carter was destroyed, receiving less than 45% of the two-party vote and only 41% of the vote overall (Independent John Anderson explains the difference) and lost 44 states.

In 1996, Bill Clinton was resoundingly re-elected, with the least competitive Republican showing since Barry Goldwater, garnering almost 55% of the two-party vote (50% of the vote overall, due to Ross Perot's second independent run) and winning 379 electoral votes in 30 states.

The difference between Carter and Clinton was the arc of the economy headed into the election. The Carter era economy was still stagnant, with inflation still destroying savings and a high degree of national pessimism. The economy was booming under Clinton, with the effects of the 1990/91 recession, caused by the savings & loan busts, long gone, the budget on its way to balance and unemployment falling fast.

Obama will not be at either extreme. The economy will not be as bad as in 1980, nor as good as in 1996. But how the economy does between now and November will have a profound impact on the President's re-election chances.

And on that front there is good news. On Friday, the Bureau of Labor Statistics reported far better jobs news than expected, with official unemployment falling to 8.3%, it's lowest level in over 2 years and job creation was a net positive 243,000, the best result in 3 years and made even better by the fact that private sector job growth was actually 257,000, with a 14,000 reduction in government employment offsetting this to produce the total number.

It's one month, but it's a data point that confirms a trend - the economy is healing. Job growth has been positive for almost two years now and has been accelerating. Unemployment peaked at 10.0% in October of 2009 and has been falling since.

Lots of macroeconomic events could reverse the trend - the European debt crisis could torpedo the world economy. Political conflict in the Middle East could cause a big spike in oil and therefore other commodities. So an improved economy in November is not a lock, but now appears highly likely.

In addition to the economy always being the most important issue in a Presidential election, it is doubly true this time as the GOP really has precious little else to run against Obama on.

Foreign policy? Would you want to make this the issue against the guy who got Bin Laden, killed a dozen top Al Qaeda leaders, got Qaddafi, exited an unpopular war in Iraq with dignity and is drawing down from an unpopular war in Afghanistan? Good luck.

Social policy? Obama is to the right of the American people on many social issues. A narrow majority of Americans now favor legalizing gay marriage and legalizing marijuana (views to the left of the President) and a large majority continues to favor legal abortion. Social issues may play well in a Republican primary, but running to the right of a President is a loser in a general election.

Health care? If someone other than Mitt Romney were the nominee, this might play, as a majority still opposes Obamacare. But Romney doesn't have a leg to stand on in this debate as he continues to do the tap-dance that his plan in Massachusetts, which, despite the protestations from Ann Coulter, obviously is nearly identical to Obamacare (and the model for it in many ways), was great for Massachusetts, but horrible for the rest of the country, he is just engaged in a debate he can't win.

That leaves the economy. If it continues to improve, Obama is a lock for a second term. If it falters, it might give Mitt an opening.

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Is There Any Path Forward for Anyone But Romney After Florida?

2012-01-28T16:39:00.003-05:00

It's a dangerous game to call a race before it happens. It's especially dangerous this year, where late surges in Iowa (Rick Santorum) and South Carolina (Newt Gingrich) have already led to results that would have been surprising just 72 hours earlier, but Mitt Romney sure looks poised to coast to a comfortable win in Florida, having beaten back Newt's surge coming off his South Carolina win with a couple of strong debate performances, matched by Newt's two weakest showings of the long series of debates held this cycle.

If Romney wins Florida, is there a path forward for anyone else?

Rick Santorum already intends to be in Nevada on election day in Florida, trying to build support in that caucus. And a caucus environment certainly suits him better. But I can't sketch a possible map to victory for Santorum, especially if he finishes a widely-expected distant third in Florida.

Newt would solider on, no doubt, but if he loses by 8 points in Florida, how is he going to fare in more moderate venues like Nevada and Michigan? He has no catalysts, with no debates scheduled for three weeks (and Romney not likely to agree to new ones) and will continue to get outspent and out operated by a better-funded and better-organized Romney campaign.

Ron Paul will no doubt solider as deep as his money allows him, continuing to try to amass as many delegates as he can to influence the convention and get a prime speaking spot, but he doesn't even have a state that looks like a possible win for him.

So, Mr. Romneycare, Mr. Bain Capital, Mr. 15% Tax is looking like he is back comfortably in the driver's seat, with no serious opposition, if he wins. I'm sure President Obama will be disappointed that this primary doesn't drag on, with the candidates throwing rocks at each other non-stop and leaving him above the fray. And I'm sure Mitt Romney isn't his first, second or third choice in who he will face in the general election.

But it sure looks all over but the crying, unless Gingrich or Santorum completes a hail mary next Tuesday.

Do Newts Bounce Like Dead Cats?

2012-01-25T20:55:00.002-05:00

Here Lizard, Lizard
The "dead cat bounce" is a term commonly used in the world of investing. A company, destined for the scrap heap of bankruptcy, has seen its stock go down and down. From $100 to $10 to $1, it is on a steady decline. Then, all of a sudden, it jumps up from $1 to $3. But the jump isn't real - the fundamental problems that plague the company haven't gone away, people have just forgotten about how severe they are. Before you know it, the stock is at $0 and the company is bankrupt. Those who bought it at $3 are wondering what the heck they were thinking, boarding a sinking ship. It's the same as dropping a dead cat out the window...it will bounce up when it hits the ground, but that isn't because it's coming back to life...and it ends up just as dead on the ground a second later.

Is Newt Gingrich a sinking ship? 48 hours ago, he was on top of the world. After having ridden the wave to the top of the polls earlier in the election season, Gingrich had been written off for dead. Somehow, against all odds, seemingly, Gingrich battled back to win a clear cut victory in the South Carolina primary by a wide margin. All of a sudden, he was up 9 points in some polls in Florida. The whole narrative of Romney's inevitability was fading before our eyes.

48 hours later, his poll numbers in Florida seem to be dropping as fast as the gravity that pulls down a dead cat. One poll out today has that 9 point lead diminished to 2 points, another has Romney ahead by 2 points.

So is Newt Gingrich a dead cat bouncing back to Earth or is there just noise in the polls? Are we headed towards a nail-biter in Florida or will Romney be handily in command by Tuesday?

The debate on Thursday matters. Where the torn apart conservative GOP electorate, stuck between an unelectable lizard and an unprincipled glove, finally come down on the question of whether they want the best chance to win or the best representation of their views comes down is just as critical.

Certainly no one in the GOP is happy. And President Obama's battle for re-election against a tough economy and a toxic political environment looks less like a mountain and more like a speed bump every day.

Contrasts and Small Ball
President Obama can give a speech, lest any of us forget the best political skill of our Commander-in-Chief. But the vision last night seemed a lot less ambitious, a lot more sober and a lot more political than his previous efforts at a State of the Union speech.

In reality, all State of the Union speeches are inherently political. Most SOTU proposals go nowhere. Did George H.W. Bush get his 1% across-the-board tax cut? How about Bill Clinton's Hillarycare? George W. Bush's privatization of social security and comprehensive immigration reform? Nowhere to be found.

So President Obama's goal wasn't to make a big sweeping set of policy initiatives. It was to draw a contrast with Republicans and propose some easy wins. Ban insider trading in Congress? Who would be against that but crooked Senators? Prevent the next Horizon oil spill? Yeah, I think we are all on board with that.

It was a good speech that will give the President a short-term bump in the polls but will likely soon be forgotten in the deafening noise of the campaign.

This was more a re-election announcement that a look at the state of our union.

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Updated Delegate Counts

2012-01-22T12:57:00.001-05:00

Following South Carolina, Newt Gingrich surges to a lead in delegates won. Note that the way the Republican nominating process works, there are Republican National Committee delegates (3 from each state) that are awarded to party leaders from each state, separate from the nominating contests. Those individuals are free to voice support for any candidate, and some have, but are in no way obligated or bound by their selection at the convention. I therefore exclude that "soft" support from my totals.

Iowa and New Hampshire have proportional representation rules, awarding a share of delegates to all candidates receiving more than 10% of the vote. South Carolina is district based system, with delegates awarded to the winner of the state and to the winner of each congressional district, so it tends to magnify the magnitude of a win. Newt Gingrich won in most of the districts, so he won 23 of the 25 delegates Florida has.

Florida will be a full winner-take-all state, so even a narrow win at the polls will translate into a big win in delegates.

To date, delegates won are as follows:
Newt Gingrch - 27
Mitt Romney - 15
Ron Paul - 9
Rick Santorum - 6
Rick Perry* - 3
Jon Huntsman* - 2

* Dropped out of race

With Perry endorsing Gingrich and Huntsman endorsing Romney, if you assume their delegates follow suit, the totals would be:
Newt Gingrich - 30
Mitt Romney - 17
Ron Paul - 9
Rick Santorum - 6

Note that very few delegates have been awarded so far, in part because only 3 states have had nominating contests and in part because both New Hampshire and South Carolina were penalized 50% of their delegates for holding their contests earlier than party rules had dictated (Iowa had no restriction around when it was to hold its "first in the nation" caucus.) Florida is similarly penalized as are the other early states of Michigan and Arizona - all the other states will receive their full allocation of delegates.

These early contest matter far more for momentum and money than they do in terms of the actual delegate awards.

President Obama's Scorecard - After 3 Years, The End of Stimulus

2012-01-22T10:03:00.003-05:00

President Obama - Center-Left Leader

Lost in the fervor of the primary season is the quiet passing of the 3 year anniversary of President Barack Obama's inauguration.

There is a lot of rhetoric on both sides around the President's performance. Is he a European Socialist? A moderate pragmatist? A shrinking violet or a badass Commander-in-Chief who kills terrorists? An ineffective President or a victim of Republican obstructionism?

I've made no secret over the past few years about how valuable fact-checking sites like Politifact are. It's been a long time since we've reviewed the President's 2008 campaign promises, but his 3 year anniversary seems like as good a time as any.

Whether what the President stands for is a debate for those of us of varying political philosophies to have. But whether he did what he said he would do is more or less fact.

Politifact kept meticulous track of the President's promises and were able to document 508 specific things that then-candidate Barack Obama said he would do if elected to office. Of those 508, 2 were specific to how he would respond to a national disaster, so they can only be evaluated if one occurs, therefore we will focus on the other 506 promises.

Of those 506, Politifact rates him as follows:
162 Promises Kept
50 Compromise (partially implemented based on a deal he cut with Republicans or others)
56 Broken (he had a chance to execute them but did not)
64 Stalled (the President still advocates for this position but has been unable to secure action on it)
172 "In The Works" (basically have not been acted on, but he seems to still advocate for)

If you give the President a 1 point for Promises Kept and half a point for Compromises, he's effectively implemented 190 out of 506 things he said or 38% of his promises.

There is a fair argument to be made to exclude the "In The Works" promises from the calculation. President Obama never said he would do everything in the first 3 years and it is fair to say that there are some issues he simply hasn't gotten to yet.

Excluding those 172, he gets 190 points out of a possible 334 or a completion rate of 57%.

Since "Stalled" promises for the most part represent things that Congress has blocked the President's preferred path, it would also be fair to say that of the things he has been able to influence, he gets 190 points out of a possible 270 or 70%.

So, basically, on the things the President has been able to control to some extent, he has been 70% consistent with what he's said on the campaign trail.

Frankly, that's not a bad record. By and large, we got what we were promised from President Obama.

Of the promises that he has broken, it is instructive to see that in most cases, they are basically he leaned further right than what he campaigned on. Some of the key promises he broke include:
* Increasing taxes on high income earners including repealing the Bush Tax cuts
* Signing card check
* Greater worker rights including guaranteed sick days and expanded FMLA
* Closing GITMO / trying terrorists in civilian courts
* Increasing the minimum wage to $9.50/hour
* Implementing Cap and Trade
* Introducing comprehensive immigration reform

So, ironically, the left has a whole lot more to complain about than the right. The things President Obama has done have largely either been in line with how he campaigned, or meaningfully to the right of how he campaigned.

You will hear some pretty crazy rhetoric about President Obama in the coming season. But President Obama has not acted as a liberal, he's operated as a left-center progressive, far more similar to Bill Clinton than Jimmy Carter.

The American Recovery and Reinvestment Act - Did It Work?
Not surprisingly, all of the most significant legislation that President Obama has signed into law over his term occurred during the first two years of his term, when Democrats at least nominally controlled both houses of Congress. Clearly, in my mind, the most significant pieces of legislation were:
* The American Recovery and Reinvesment Act (aka The Stimulus)
* The Patient Protection and Affordable Care Act (aka Obamacare)
* Dodd-Frank Wall Street Reform and Consumer Protection Act

Of these, the stimulus package really set economic policy for the first three years of his administration. As of today, the $741B of the $799B in tax cuts and spending set out in the bill has been spent or 93%. So, the effect of the bill is almost complete.

Republicans will rightly complain that the President projected that unemployment would remain under 8.5% with the bill, a marker that it didn't even come close to meeting. The President will argue that things would have been far worse without the bill.

The problem is, we don't have an alternative universe under which to gauge how things would have been different without the bill. Definitely aspects of the tax incentives clearly worked, such as Cash for Clunkers revitalizing the auto industry or clean energy tax credits creating a boom in the installation of energy efficient windows and solar panels. But the large quantities of transfer payments to states and enhanced entitlement spending are a lot more grey. Did they simply shift the problems of states and individuals to problems of federal debt? And how will we ultimately pay for all of this?

These are all issues to debate in the coming election. It would help in that debate if either side had a real opinion about how to rein in the deficit. President Obama seems content to talk about letting tax cuts expire while continuing to extend them. Republicans seem to want even lower taxes without a real plan to cut the kind of spending that would be required.

Third party candidate, anyone?

The Florida Firewall

2012-01-22T08:53:00.000-05:00

Newt Gingrich's dramatic comeback in South Carolina has recast the Republican race through a new lens. A week ago, we all believed that Mitt Romney won Iowa, he dominated in New Hampshire and was well on his way to winning South Carolina. The Florida race was almost an afterthought as everything would be done but the crying if he swept the first 3 contests.

We have since learned that, in fact, Rick Santorum won the Iowa Caucuses. Granted, the difference between an 8 vote win by Romney (as we thought on caucus night) and a 34 vote win for Santorum (as we have since learned) is largely psychological - they still both get 7 delegates in either scenario, but the psychology is important, because I firmly believe that the Santorum surge in New Hampshire would have been larger had people known he had won the first race.

The psychology now is that the race is 1-1-1 headed to Florida.

If we look to history in who will win this race, it does nothing but confuse us. I wrote an earlier blog showing how it has always been essential for a prospective GOP nominee to win either Iowa or New Hampshire. The other historical fact that I hadn't mentioned is that the ultimate GOP nominee has also won South Carolina every race in the past 30 years. Being that Gingrich won South Carolina but not Iowa or New Hampshire, one of those two historical trends is about to be broken.

Florida is an odd beast for the next race. The state itself is a swing state, but its primaries are closed (neither Independents nor Democrats can participate) as opposed to the open primary we just saw, so the primary electorate tends to be fairly conservative. Tea Party loyalist Marco Rubio thumped well-established moderate Charlie Crist in the GOP Senate primary in 2010.

All of the polls to date show Mitt Romney with a 20%+ lead over both Santorum and Gingrich. But if we've learned anything in the past week, it is that those numbers can shift and fast. And they will. When new polls come out early next week that are sampled after the Gingrich win in South Carolina, he will be a lot closer. Whether he can win remains an open question.

Romney will come out punching a lot harder - he has to. The negative ad money will be mind-boggling on all sides of the campaign. And, as has been the trend this year, the two debates in Florida next week will be critical to determining the fate of the race.

Mitt Romney is still the favorite to ultimately wrap up the GOP nomination. After Florida, we have the Nevada Caucus 4 days later, which would seem inhospitable turf to Gingrich (although it's a race that Ron Paul could surprise in), then 3 days after that two meaningful primaries (Colorado and Minnesota) and one primary that doesn't count (Missouri holds a primary but awards delegates based on a caucus later in the season...Gingrich isn't even on the ballot in the Missouri primary.) There are a few events over the next few weeks, including the Maine Caucus on Feb 11, big ticket primaries in Arizona and Michigan on Feb 28 and the Washington caucus on Mar 3. But the big prize is Super Tuesday, March 6, where 10 states hold nominating contests at once.

Whether Gingrich can compete on a Super Tuesday scale is directly related to whether he can show well in the states leading up, and most critically Florida. If he finds a way to pull off an upset in Florida, then I would place him at even money with Romney to win the nomination. If Romney wins Florida soundly, it will silence the Newt momentum.

As of this morning, Intrade has the odds on an ultimate Mitt Romney nomination at 72%. But they were over 90% a week ago.

Somewhere in the White House, Barack Obama is letting out a laugh.

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All Signs Point Towards a Gingrich Win and a Continuing Race

2012-01-21T18:40:00.001-05:00

It's amazing...a week ago Mitt Romney led comfortably in South Carolina. Tonight, with just a few minutes to go before the polls close, it appears not only will Newt Gingrich be the victor, but may win be a decisive, double digit margin. His late rise in the polls is nothing short of breath-taking, given how much coverage and how many debates have taken place and how little was left to be learned about the candidate.

But South Carolina conservatives just needed a reason and a clear candidate that was the alternative to Mitt. Gingrich stormed through the two debates with fire and red meat and Mitt stumbled and bumbled around tax forms and health care.

A double digit Gingrich win makes it an effective two-man race. Rick Santorum may quit if he finishes fourth or a distant third (both distinct possibilities.) And Gingrich is much more capable of attacking in a one-on-one fight versus in a multi-front campaign with a divided "not Mitt".

But Gingrich's challenges with organization and money aren't going away, and while he may be able to mount a charge in Florida, when the campaign spreads out to multiple states at a time shortly thereafter, he is still a heavy underdog to Mitt.

Expect the news networks to call it at 7:01.

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And Then There Were 4....

2012-01-19T20:22:00.001-05:00

Rick Perry's exit from the Republican field makes the race far more interesting as it will undoubtedly lead to some level of consolidation of the "not Mitt" vote in South Carolina. Perry quickly endorsed Newt Gingrich for President and Newt certainly becomes a more likely contender for a South Carolina win.

Gingrich has been catapulting in the polls as a result of his strong debate performance on Monday and he hopes for a repeat tonight. Romney is still the betting favorite, but Gingrich is closing in.

In the mix of all of this is the odd report from Newt's ex-wife that he had asked for an open marriage. I have no idea if the allegations are true and don't particularly care, but those types of liberal personal social activities are poison to social conservatives. On the other hand, did anyone actually think Newt was a classic conservative family man?

The debate tonight should be interesting.

I Quit a Cush Job in Bejing for This?

2012-01-16T09:17:00.001-05:00

And then there were 5....

Jon Huntsman will not carry his flag south to South Carolina and Florida and is instead slated to endorse Mitt Romney today. Huntsman was a good candidate running in the wrong year. His form of inclusive, moderate, globally-savvy Republicanism, which was appreciated a lot back in the days of George H.W. Bush and Jim Baker, is loved little these days. He bet the farm on a good showing in New Hampshire after bypassing the Iowa Caucuses and he had a decent showing, but third place in your best state is not going to win you the nomination, and South Carolina sure looked like hostile turf to a Jon Huntsman.

Presumably, Huntsman's withdrawal modestly helps Romney, as a I would suspect the are targeting a similar demographic of more moderate, establishment Republicans. But Huntsman's support was so small in South Carolina and Florida, this really has little impact on the landscape of those two states, although it will provide more time for the remaining candidates at the upcoming debates.

The only question left is whether Mitt Romney can close the deal in South Carolina (a win there would winnow the field a whole lot, and quickly) or will some alternative emerge to consolidate Mitt's opposition and make a race of it.

Delegate Won To Date (includes Iowa and New Hampshire, excludes "soft" endorsements from RNC delegates)
Romney - 13
Paul - 9
Santorum - 6
Gingrich - 4
Perry - 3
Huntsman - 2
Other - 0

Needed for Nomination: 1,144

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Obama versus Romney - The Big 2012 Electoral Map

2012-01-14T14:23:00.003-05:00

There is a marathon to go and then some before we pick our next President. Mitt Romney still has to quash the not Mitt crowd in South Carolina and Florida, and then there are conventions, debates, possibly a billion dollars in money to spent, an almost uncountable number of campaign stops and a 24 hour news cycle that will be blaring non-stop for the next 10 months.

Some would say it's a fool's errand to even put up an electoral college map when there is this much distance between now and the election.

I've often been called a fool and been willing to run errands. Turning our focus to the 2012 general election and the electoral map is instructive not necessarily in its accuracy at this stage in projecting a final result, but more so in how it helps us understand how the battlegrounds will develop over the coming months.

The starting point for any electoral battle is the map of the last election, and in that, President Obama should take some comfort. The President in 2008 successfully expanded the Democratic map out of the west coast, the northeast and the mid-west to create new strongholds in the southwest and the new south, bringing such states as Virginia, North Carolina, Colorado and New Mexico into the Democratic fold.

The classic battlegrounds of Florida and Ohio have been swing states for most of my life and hold large electoral prizes.

Those states are still in play in 2012, but there will be new battlegrounds. New Hampshire, once a swing state, but recently a Democratic stronghold, appears back in play this cycle, thanks to a neighboring ex-governor. Michigan, long a blue state, has been ravaged by the recession and appears to be at least nominally in play. Pennsylvania, which John McCain thought was a swing state in 2008, but really was pretty safe for the Dems, may be back in the mix, having taken a right turn, particularly outside of Philadelphia.

On the flip side, Romney is polling shockingly weakly in South Carolina and Texas (I remember being called an idiot 4 years ago for speculating that Texas might one day be a battleground state.) I doubt President Obama wins either of these, but he might force Romney to play some defense on his home turf there.

For my current map, I'm using a 50% weighting to an adjusted view of the 2008 election and a 50% weighting to available statewide general election polls, where such a poll exists for a Romney vs. Obama match-up. For categorization purposes, a "safe" state is a state a candidate is likely to win by 20% or more, a "strong" state is a state a candidate is likely to win by 10% or more, a "likely" state by 5% or more and a "lean" state is a state within 5%. The results are as follows:

Safe Obama States (68 Electoral Votes)
District of Columbia, Hawaii, Vermont, Rhode Island, Massachusetts, Maryland, Delaware, New York

Strong Obama States (115 Electoral Votes)
New Jersey, California, Illinois, New Mexico, Minnesota, Washington

Likely Obama States (40 Electoral Votes)
Oregon, Connecticut, Nevada, Maine, Wisconsin, Iowa

Lean Obama States (49 Electoral Votes)
Pennsylvania, Michigan, Colorado, New Hampshire

Lean Romney States (96 Electoral Votes)
Virginia, Ohio, North Carolina, Florida, Indiana, Missouri

Likely Romney States (50 Electoral Votes)
South Carolina, Montana, Texas

Strong Romney States (50 Electoral Votes)
Arizona, Georgia, South Dakota, North Dakota, Kansas, Mississippi, West Virginia

Safe Romney States (70 Electoral Votes)
Nebraska, Tennessee, Kentucky, Louisiana, Arkansas, Alabama, Alaska, Idaho, Utah, Oklahoma, Wyoming

Net Result: Obama 272 Electoral Votes, Romney 266 Electoral Votes
States Needed to Swing Result: 1 (New Hampshire is closest)
Current National Polling Average of Averages: Obama +2.2%

Note: Electoral map generated with the help of 270towin.com

Some observations about the battleground:
* Romney his 170 safe, strong or likely electoral votes. Obama has 223. The remaining 10 states comprise the effective battleground, with Obama needing to find 47 votes among that group for victory.
* 48 out of 50 states have "winner take all" systems for their electoral votes. In Maine and Nebraska, 2 electoral votes are awarded to the winner of the state and 1 each to the winner of each congressional district. Maine has never had a split in its electoral votes - both its congressional districts are solidly Democratic. Nebraska split for the first time in 2008, with President Obama winning 1 congressional district narrowly in this otherwise solidly Republican state. Given how close that win was, I'm assuming this time that Romney sweeps Nebraska and that Obama continues the Democratic trend of sweeping Maine. A Republican proposal to apportion Pennsylvania's electoral votes in this manner, which had a lot of backing from state Republicans, hoping to give the GOP candidate some of the votes, appears to be dead at this point.
* The battleground states can be divided into a few basic categories. Virginia and North Carolina from the new south have become swing states as their urban centers have grown and northeasterners have migrated South. They are still economically conservative places, but are becoming increasingly socially progressive. Pennsylvania, Ohio, Michigan and Indiana are rust-belt Catholic states, that tend to be very economically sensitive places, given high unemployment and are very politically bifurcated between their large, black urban centers and their more white rural regions. Colorado stands out as a western border state, with a growing hispanic population and more liberal cities, surrounded by culturally conservative Mormon and evangelical rural areas. Missouri is the classic swing state, the intersection point between the south and the mid-west, with cultural and political elements of both in parts of the state. Florida, the home of the 2000 recount, is a mix of southerners in the northern part of the state (a little counter intuitive, but true) and Cuban-dominated population in the south, with the moderate I-4 corridor in the middle. And then there is New Hampshire - a libertarian-leaning, tax-hating state nestled among the liberal states of New England.
* Whether President Obama can replicate record-setting black voter turnout could well swing many of the swing states: Virginia, North Carolina, Pennsylvania and Michigan all have large African-American populations.
* The Hispanic vote will be critical in Colorado and Florida. This is one of the reasons that freshman Senator Marco Rubio of Florida is widely considered a front-runner for the VP slot on Romney's ticket. That and his tea party credentials, good looks and strong speech-giving skills.

The polling data aren't very deep at this point and a lot of independents haven't thought very seriously about the race yet. Once Romney has wrapped up the nomination (which seems a near-certainty at this stage of the game), picks a VP and we head towards convention season, we could see big swings in the votes.

In the early going, this is a close race. It could stay that way all the way to election day or we could see a major development - economic, geopolitical or otherwise that sets the arc of the race in favor of one candidate or the other and leads to a solid victory for either Romney or Obama.

We'll all have to stay tuned.

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New Hampshire Goes According to Form

2012-01-10T20:51:00.002-05:00

Unlike last week, it is an early night in New Hampshire. Mitt Romney appears poised to win decisively, pretty precisely in line with recent polling, with around 35% of the vote. Ron Paul, as expected, will finish second, with something around 25% of the vote. Jon Huntsman managed to ride his "mini-surge" to a third place finish, possibly with something just shy of 20% of the vote. Everyone else finished far behind.

Romney has now won narrowly in the Iowa Caucuses and decisively in the New Hampshire primary. He is ahead in South Carolina, but not insurmountably so (either Santorum or Gingrich is in second in recent polling.) Still, he is gathering steam towards inevitability, if not immediacy.

I don't expect any drop outs between now and South Carolina. Newt Gingrich is betting his race on a win there. So, presumably is Rick Perry, although he is the one candidate who could conceivably drop out as he really has no conceivable path forward in the race. Jon Huntsman did probably just well enough to keep him in the race and fighting, although he certainly doesn't appear to be well positioned for South Carolina or Florida, polling in the low single digits in both places.

The biggest disappointment of the night was Rick Santorum, who may well finish in fifth place and certainly no better than fourth. Santorum, to his credit, ran hard in New Hampshire coming off his near-win in Iowa, rather than discounting it for a friendly pastures down south. But he failed to get any kind of meaningful bump in New Hampshire from his Iowa showing. I suspect that a week ago today was the peak of the Santorum campaign.

And then there was Ron Paul. Paul is not going anywhere, especially after a very solid third and a very solid second place finish. Frankly, he has no reason to go anywhere, as he will almost certainly continue to raise a ton of money and may grab increasing percentages of primary votes as other candidates drop out. But Paul, despite a recent assent that has put him in low double digits in South Carolina and Florida, doesn't appear to have a realistic shot at winning either.

So, it still sure looks like Romney at the end of the day. Conceivably, he could win the nominating contests in all 50 states if the "not Mitt" crowd doesn't consolidate their support.

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Romney Survives 2 Debates Unscathed, Appears Inevitable

2012-01-08T13:45:00.002-05:00

The other 5 candidates on stage with Mitt Romney, twice in 12 hours this weekend, needed your favorite sports analogy. The hail mary, the haymaker, the long ball, whatever. But rather than throwing for the end zone, loading up the punch or swinging for the fences, they chose to play small ball against Romney.

Newt Gingrich is looking past New Hampshire to South Carolina. But he is polling either second or third there, depending on which poll you believe. And 2nd or 3rd in his most friendly state just isn't going to cut it. He has to do big damage and now.

Jon Huntsman is praying for a New Hampshire miracle. He's currently in either third or fourth in New Hampshire. And even if he finished third or somehow surprises Ron Paul and finishes second, does he have any battlegrounds that are even remotely as friendly as New Hampshire on the horizon?

Rick Perry is...I'm not sure what Rick Perry is doing. He should've already quit this thing.

Rick Santorum is banking on a top 3 finish in New Hampshire and a win in South Carolina. He could well achieve the first half of that on Tuesday if he can pass Huntsman, but winning in South Carolina will be extremely hard unless he can steal a lot of the current Gingrich support and consolidate the "not Mitt" vote to pass Romney's surprisingly commanding lead in South Carolina. Still, Santorum has the most viable path forward of all the candidates.

Ron Paul will continue to agitate. But I don't see a single primary or caucus that he can win this cycle. And it is pretty tough to be the nominee if you don't win any of the contests.

So there you have it. It's almost certainly going to be Mitt Romney facing Barack Obama in November. Obviously, we will continue to closely watch New Hampshire, South Carolina, Florida and beyond, because if this race has taught us anything, things can be very fluid in the race.

But in the end, the GOP appears poised to do exactly what I said they would do and what they have done for my adult life - nominate the next guy in line for the nomination.

So what does a Mitt/Barack showdown look like? Could a viable third party candidate either from the right or from the center emerge?

On the first question, in a heads up match-up, the economy obviously becomes crucially important. Key swing states such as Nevada, Colorado, Virginia, Ohio and Florida are all heavily dependent on economic outcomes. The economy is now indisputably improving, with job creation picking up and official unemployment down to 8.5% (the true rate is always higher, for reasons discussed in previous posts), but it is still unlikely to be roaring come November. But an uptrend would definitely benefit the President.

General election polling this early in the season is notoriously unreliable, but still instructive as to where the battle will be fought. And my early read is that there will be more close states this time than in any election since the '88 and '92 cycles. This is a by-product first of all of a potentially very close election. But '00 and '04 were also close elections, but with relatively few key battlegrounds. This is because '00 and '04 were largely regional elections, with the Democrat taking the northeast, the west coast and parts of the mid-west and the GOP candidate taking the rest, with Ohio and Florida basically comprising the key battlegrounds. Obama redrew the map by broadening the Democratic footprint in the Southwest and the Southeast, winning states such as Colorado, Nevada, New Mexico, Virginia, North Carolina. Ohio and Florida are still in play, as are the states Obama gained in 2008, but a Mitt Romney candidacy also puts parts of the northeast in play. New Hampshire could be a real battleground again. Romney could do surprisingly well in some of the more liberal parts of the Northeast too - for instance, is it a forgone conclusion that Barack Obama would beat him decisively in Massachusetts?

Earlier, I posted some key battleground states. Statewide polling is still a little sparse to date, but I will begin to update the electoral map as the Republican race comes closer and closer to wrapping up.

Relative to the question on third party candidates, this is probably the most likely year for a major third party candidacy since 1992, when Ross Perot captured the anger of disaffected Republicans and Reagan Democrats to capture 19% of the national vote. The problem is, there isn't yet a good national candidate to fill that role. Gary Johnson has left the GOP to run as a Libertarian, but his name recognition and appeal likely aren't broad enough to do any better than Bob Barr did last cycle. Donald Trump has talked about running, but does anyone actually think he would get many votes in the final calculus? Ron Paul has been talked about as an indy, but basically denies that he will run that way, while leaving the door ever so slightly open. Americans Elect, a group formed to develop a bi-partisan ticket, and funded by some big name donors, could make waves, but only if they get a big name to head their ticket. Jon Huntsman has been talked about as has New York City Mayor Michael Bloomberg and former Minnesota Governor Jesse Ventura. Each would have an impact on the race, but we will have to wait and see if anything serious happens there.

If Romney essentially wraps up the nomination by the Florida primaries, we are in for a very long general election campaign, with record amounts of both official and third-party money spent (thanks to the Citizens United ruling.) It's going to be a wild ride.

2012 and the Fractures in the GOP, In the Real World: There Are Only 3

2012-01-05T20:47:00.000-05:00

The Republican Party, 2012
Since Ronald Reagan, the Republican Party for 30+ years has existed as a coalition of groups that have just enough in common to unite (sometimes) behind a common candidate for President. Prior to Reagan, the GOP was a Northeastern establishment party, a party of fiscal responsibility (not always low taxes, but certainly anti-deficit), but a party that was largely socially progressive. Ronald Reagan changed the game by putting forward an agenda that was heavy on defense, heavy on tax cuts and brought a new brand of social conservatism into the mix.

There have been more or less four wings to the party ever since, and we see them loudly and clearly in this primary cycle, as each has its representative members.

(1) Establishment Moderates
This wing of the party tends towards social conservatism, but not drastically so. They are more fiscally conservative than Democrats, but tend to be more concerned with low deficits than with low taxes. They are pragmatic moderates on foreign policy - they tend to be for relatively larger defense spending but are hesitant to use military force except were imminent risk to US interests are at stake. In spite of the Reagan revolution, most GOP Presidential candidates since have fit this profile.
George W. Bush was an establishment moderate. So was Bob Dole. John McCain fit this description, although at times in 2008, he attempted to shed it.
This cycle, Mitt Romney and Jon Huntsman are carrying the banner for the establishment moderates.

(2) Small Government Libertarians
This group joins the GOP because they hate government in almost all forms. They are military non-interventionists, still believe the New Deal and the Great Society social programs were a mistake and carry the banner for individual liberty, both socially and economically.
Small government libertarians have rarely done well in GOP primaries. You have to go all the way back to Barry Goldwater to find a true small government libertarian that got the nod. Arguably Pat Buchanan fit this bill in 1992.
This cycle, Ron Paul carries the banner for this group.

(3) Social Conservatives
Evangelical Christians and socially-oriented Catholics that oppose abortion and gay rights make up this group of very-active Republicans. Straight social conservatives rarely win the nomination but often make waves, Pat Robertson in 1988 being one of the most obvious members of the group to make noise in a nominating process.
This cycle, Rick Santorum runs as a social conservative.

(4) Foreign Policy Hawks
The "strong on defense" crowd focuses its efforts around pushing for American activism on the world stage, increased defense spending and an aggressive foreign policy.
George W. Bush was a foreign policy hawk. Arguably, it was Ronald Reagan's single biggest issue.
This cycle, after over a decade of war fatigue, in a stunning reversal, no one is carrying this banner.

The coalition of these 4 groups work when they find a candidate that can more or less align the 4. But when the group's key interests collide, chaos ensues.

Mitt Romney is unacceptable to Small Government Libertarians and Social Conservatives because of his universal health care plan in Massachusetts and prior support for abortion rights and gay rights.

Jon Huntsman angers everyone but the establishment moderates as he has supported civil unions, has a far less aggressive target for reducing government than other candidates and a less interventionist view of foreign policy.

Rick Santorum is loved by the social conservatives, but angers libertarians with his interventionist view of government and his support for social programs (such as Bush's prescription drug program), bank bailouts and earmarks and scares the heck out of establishment moderates with his extreme social conservative views.

Ron Paul is loved by the small government libertarians but angers social conservatives over his support for gay rights, infuriates foreign policy hawks over his non-interventionist views and is probably most scary to moderates.

Newt Gingrich doesn't fit cleanly into any category but has something for everyone to hate - past support for Cap and Trade makes the libertarians mad, his personal life angering social conservatives and his caustic slash and burn approach to politics maddening moderates.

So, can one of these candidates unite the party? If Romney gets the nod, libertarians and social conservatives may have to suck it up and vote for him, although Romney almost certainly has to fear the prospect of a third party candidate from the right if he gets the nod. The same can be said for Huntsman. The other 3 candidates have almost no hope of uniting the party, with "Reagan Democrats" likely to run for the hills and either stay home or reluctantly support Obama.

And where is the Tea Party in all of this? It's impossible to say, because the Tea Party is actually not a cohesive movement. If the Tea Party is about small government, then Ron Paul should be their guy. But a substantial wing of the informally identified Tea Party are not small government people at all but social conservatives that latched on to an anti-Obama movement.

I've said it many times, but I'll say it one more time...the Tea Party will NEVER be the path to national success for the GOP. It created noise and energy but ultimately cost the GOP several Senate seats it should have won in 2010 (Delaware and Nevada most notably) and had far more of an impact on the news discussion than it did on general elections.

It all seems like a can't win for the GOP unless the other wings fall in line behind Romney. They probably don't have another horse that can run close to a still-cagey President Obama.

New Polling Makes It Clear: Three Candidates and Some Also Rans
Mitt Romney, Rick Santorum and Ron Paul finished 1, 2, 3 in Iowa in that order, each close enough to win the same 7 delegates.

New polling indicates that they are likely to finish Romney, Paul then Santorum in New Hampshire.

If the same candidates are top 3 in those two extremely different contests in extremely different demographics, it is clear to me that there are only 3 candidates left worth talking about.

Sure, Newt Gingrich and Rick Perry are apparently going to make a go of it in South Carolina. But they can't win if they can't crack the top 3 in either New Hampshire or Iowa.

Rick Santorum could still collapse in the next week as he falls under increased media scrutiny, allowing a Rick Perry, Newt Gingrich or even a Jon Huntsman into contention. But it is also quite possible that the door is slamming shut on those other candidates.

5 short days to New Hampshire....

What Last Nights Results Mean, The Rick Perry Rope-a-Dope (That Won't Work)

2012-01-04T20:48:00.001-05:00

What Did We Learn In Iowa?
Mitt Romney's ultra-narrow victory over Rick Santorum by a historically-small 8 votes in the Iowa Caucus with Ron Paul a not-too-distant third clearly frames the race going forward.

First, it turns out my predictions were a lot better than I thought last night when I saw the entrance polling. Indeed, as I'd thought, Paul's avid supporters were not enough to overcome the mass of the less committed but greater numbered Romney and Paul supporters. And Romney's organization edged out the passion of the "not Mitt" crowd....but just barely.

We already know that Michele Bachmann is out of the race and that Rick Perry is still in (more on that later.) Let's assess the candidates chances and what they will need to do to secure the nomination.

Mitt Romney - must win New Hampshire. Not because his back against the wall for the nomination - far from it. But if Mitt can't win in the moderate neighbor of his home state, how could he possibly win in South Carolina or Florida? Assuming Romney wins New Hampshire, he can afford a second place finish in South Carolina, although it would likely prolong the race against at least one opponent.

Rick Santorum - needs to register significantly ahead of recent polling. in New Hampshire He probably needs a top 3 (maybe a top 4 if he and Huntsman are neck and neck) in New Hampshire and then a win in South Carolina. South Carolina is the most fertile next ground. If Santorum can be halfway competitive in New Hampshire and win in South Carolina, he's positioned to be a top 2 candidate going into Florida and Super Tuesday.

Ron Paul - must win New Hampshire. Paul won't drop out of the race, that's to be sure, but he has no better shot to win a primary than New Hampshire and if he fails there, he effectively is relegated back to being a protest candidate.

Jon Huntsman - must win New Hampshire. Huntsman forwent Iowa to bet the farm on New Hampshire. He might stay in the race if he gets second, but neither South Carolina nor Florida looks particularly welcoming to his brand of moderate Republicanism. If he finishes third or below, I suspect he will graciously bow out and endorse Romney.

Rick Perry - must win South Carolina. Perry has wisely already written off New Hampshire (and wisely so) and hopes to unite the "not Romney" vote in a pretty "not Romney" kind of state. This is actually more possible than it would look from recent polling. Gingrich is collapsing, Bachmann is gone and Santorum is about to get a torrent of coverage, much of it about the extreme social conservatism he has preached. I don't know how gung ho a lot of the Tea Party is going to be about a guy who wants the government to regulate adultery, birth control and sodomy.

Newt Gingrich - must win South Carolina. Gingrich won't win New Hampshire, but could reinvigorate some of his earlier magic with a South Carolina win. Gingrich is probably way past his due date, but the "not Romney" crowd may give him a second look if Santorum flames out.

So, we are down from 7 to 6 candidates. After New Hampshire, we are likely to be down to 5, unless Jon Huntsman catches some fire and fast. After South Carolina, we are quite likely to be down to 3, Romney, Paul (who may well be a protest candidate at that point) and someone else. The most interesting fight over the next 2 weeks will likely be for who that "someone else" is. Romney continues to be a huge favorite to get the nod, but if the right wing consolidates down to one candidate going into Florida, it could make for an interesting - and protracted horse race. Or Romney might run the table and shut it down early. But given the ceiling we've seen on Romney's support, I'm betting on the former, although I still believe Romney ultimately gets the reluctant nod from the GOP.

The Ol' Rope-a-Dope
Rick Perry heads back to Texas to "reassess" his campaign, then is full guns ahead as soon as competing conservative Michele Bachmann blinks and drops out? Nice.

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It's Going to Be Too Close to Call for a While

2012-01-03T22:24:00.001-05:00

The lead is just swapping back and forth as counties favorable to each of the candidates come in. With half of the vote in, it is a virtual tie between Santorum, who is the nominal leader and Romney, with both at 24%. Ron Paul is currently in third, but with less than 2% separating him from first.

It will likely be very late tonight before a winner can be called. In terms of delegates, the differences will not be meaningful. In terms of psychology, they could be huge. A Rick Santorum first place finish vaults him into the top tier going forward (probably not in New Hampshire, but certainly in Florida and South Carolina) whereas a third place finish makes him an interesting also-ran. A Ron Paul win breathes life into his campaign to make a run for independents in New Hampshire. A third place finish makes him just an interesting side show.

All there is left to do now is just sit back and watch the votes.

Have a great night...full recap tomorrow.

Returns Continue to Track a Close Race

2012-01-03T21:26:00.000-05:00

With 18% of the vote in, Ron Paul continues to lead narrowly with 24% with Rick Santorum just behind him (also with 24%) and Mitt Romney in third with 22%.

As a political-watcher, a Santorum win would be by far the most interesting result.

Big Error on CNN Poll

2012-01-03T21:07:00.001-05:00

CNN has just published a correction to their exit poll, apparently, they didn't have all the entrance poll data when they published their first set of "final" entrance poll results.

Their revised numbers for the top 3 shows a virtual tie:
Ron Paul - 24%
Rick Santorum - 23%
Mitt Romney - 23%

Actual votes with 10% of the precincts in mirror these results exactly.

This is a huge fubar by CNN - expect the betting odds on Santorum to rise significantly in the next few minutes.

A Romney Wall to the East, a Santorum/Paul Checkerboard in the West

2012-01-03T21:04:00.001-05:00

It's a tale of two states in Iowa, which is very similar to 2008. In 2008, Mitt Romney won heavily in the Eastern, more rural part of the state. That time around, Mike Huckabee consolidated the central and western parts of the state to win it. This time, it looks like a checkerboard of Santorum and Paul counties.

Will one of the two of them get enough of the Huckabee plains to win it?

Does the Firmness of Ron Paul's Support Fortell a Big Win?

2012-01-03T20:57:00.003-05:00

Ron Paul's supporters tend to be amongst the most loyal in politics. If he was slightly ahead in the exit polling, is it possible he could pull off a big win tonight?

It's quite possible I had this race pegged very wrong. I'm recalling how good Paul is at getting people to show up for Straw Polls and a caucus isn't that dissimilar. We should have a good feel for the race within the hour.

Neck and Neck in the Early Going

2012-01-03T20:54:00.000-05:00

With 4% of the vote in, which is still way too early to project a conclusion, Santorum, Paul and Rommey are tightly bunched at 24%, 24% and 22% of the vote respectively. The other candidates are behind considerably.

Full Entrance Poll Results Shows Narrow Paul Lead

2012-01-03T20:48:00.001-05:00

Well within the margin of error and people can still change their minds, but good news in the totality of the entrance polls for Ron Paul.
Full Poll Results:
Ron Paul 24%
Mitt Romney 23%
Rick Santorum 19%
Newt Gingrich 13%
Rick Perry 11%
Michele Bachmann 7%
Jon Huntsman 1%

Early returns are flowing in, but the numbers are way too small to derive any meaningful information from. Santorum leads slightly in the very early returns.

Newt and Mitt are basically even on Intrade at around 40. Rick Santorum has recovered slightly from his low of 12 to near 20.

Santorum Betting Odds Crashing

2012-01-03T20:20:00.004-05:00

Santorum's chances appear to be fading as a result of these early polls. He is down to 12% on Intrade, with Romney and Paul still showing strongly.

It stands to reason - if Santorum was going to win, he'd likely have his passionate supporters show up early.

Early Arrival Poll: Romney and Paul Out Front

2012-01-03T20:18:00.002-05:00

Early entrance poll results:
Mitt Romney 24%
Ron Paul 24%
Rick Santorum 18%
Newt Gingrich 13%
Rick Perry 11%
Michelle Bachmann 7%
Jon Huntsman 1%

Bear in mind that these are poll results of the early arrivers to the caucuses and likely represent the most passionate supporters as the weaker supporters tend to show up later. It also does not project any "night of" switchers.

Overall, obviously very good news for Romney and Paul nonetheless.

Gamblers Give Ron Paul More Credit

2012-01-03T20:06:00.002-05:00

Current Intrade odds:
Romney to Win: 42%
Ron Paul to Win: 28%
Rick Santorum to Win: 30%

I guess the betting public gives Ron Paul much better odds than I do.

No Surprises in the Top 3

2012-01-03T20:04:00.002-05:00

The doors have just closed at the Iowa Caucuses. Early entrance poll data indicate that the top 3 (in some order) are Rick Santorum, Ron Paul and Mitt Romney, in no particular order. This confirms the possible scenarios that I discussed earlier - it certainly doesn't appear we will have a dramatic upset.

Let's see how the actual results roll in.

Tonight Is The Night

2012-01-03T18:44:00.002-05:00

Tonight, for at least a while, power gets taken out of the hands of pundits and into the hands of registered voters as the Iowa Caucuses kick off the election season. I'll be posting live updates as events unfold.

First, a primer on the caucuses:
Who May Participate: Any registered Republican willing to show up on a Tuesday night, declare openly their support for a candidate and invest three hours or so in the process.

How It Works:
(1) At each caucus precinct, 15 minutes are allocated to a representative of each campaign to speak on behalf of candidates. Typically well funded campaigns have representatives at virtually every location, whereas some of the more shoe-string campaigns may focus only on more populated areas.

(2) A first ballot is tallied with the preference vote of each party member in attendance recorded. In some precincts, this is done by paper ballot, in others by a show of hands or by standing under a candidate's sign.

(3) Based on the first round results, candidates receiving an insufficient percentage of the vote to warrant a delegate are eliminated from contention and a new round of balloting ensues, with the supporters of the now-eliminated candidates free to join any of the candidates still left.

(4) The results of the second round of balloting are used to award delegates.

Obviously you can see the inherent unpredictability of these events versus a primary. Whose supporters will show up and invest the considerable commitment? What will happen with supporters of eliminated candidates? How will speeches and friends and neighbors sway the more-public voting?

Handicapping the night, there appear to be three viable scenarios that could happen:
(1) The Romney Squeaker
Mitt is able to maintain the 25%ish support that he has been steadily holding in the polls and eeks out a victory over both Ron Paul and Rick Santorum.

(2) The Momentum Play
Rick Santorum's surge from virtually nothing two weeks ago continues and he pulls of an improbable upset. This could well come into play if some of the lower-polling conservatives, such as Michelle Bachmann and Rick Perry are knocked out of contention for delegates in some precincts in the first round of balloting, freeing them up to support someone else. One would presume that they would break disproportionately for Santorum.

(3) The Passion Play
Ron Paul's avid supporters show up in far greater numbers than the lukewarm support for Romney and Paul outperforms recent polls slightly and pulls off the upset.

My prediction? I think Scenario 1 is about a 60% probability, scenario 2 about a 30% probability and scenario 3 a 10% probability. Caucuses are tough to poll for, Santorum is rising and Paul's supporter are passionate, but I'm amazed how often, in spite of all the unpredictable dynamics, these things seem to resemble the late polls in the final tally. But certainly any of them are possible.

So what would each scenario mean?
Scenario 1 portends a very high probability of a Romney nomination. He is almost sure to win New Hampshire in this scenario. Newt Gingrich would likely stay in to make a stand in South Carolina and Florida, where he is still polling more strongly and Ron Paul would stay on, but as more of a sideshow than a serious candidate.

Scenario 2 could create a real horse race. Other conservatives such as Bachmann and Perry may well withdraw from the race, consolidating the "not Mitt" vote behind one candidate. Keep in mind though, that because of his late rise, Santorum hasn't really been vetted or taken heat the way the other candidates have. I still like Mitt in all the scenarios, but this scenario is by far the most intriguing of the bunch.

Scenario 3 could well catapult Ron Paul into contention in libertarian New Hampshire, but even if he wins a one-two in the first two states, does he have any real shot to broaden his appeal in other, later venues? It's doubtful although this would not doubt leave him in the spotlight until the end and assure that Romney does not wrap up the nomination quickly.

Stay tuned...it's going to be a fun night.

Boehner's Cheap Suit, The State of the States

2011-12-24T23:25:00.002-05:00

How to Do Absolutely Everything Wrong
Extending the payroll tax holiday is a poor idea. I absolutely believe it, just as much as I believe that extending the Bush tax cuts are a mistake. And for the same reason. With a treasury leaking close to a trillion dollars this year, we can scarcely afford to be giving away revenues, especially since we lack any sort of coherent plan to get our budget back in balance.

The payroll tax holiday is an example of why "temporary" tax cuts are so insidious. We saw it with the Bush cuts and we see it again. The narrative goes something like this - someone (President Obama in this case) argues for a "temporary" tax cut, holiday, relief, you pick the name, based on the idea that returning this money to the economy will spur needed economic growth. The supporters of this "temporary" tax cut say we should ignore the negative impact on deficits because, after all, this cut is temporary, so it won't effect our structural imbalance of revenues and spending.

So we pass the "temporary" tax cut, time rolls on, it gets close to the date of expiry, and lo and behold, suddenly those who were arguing for it want to extend it because "we can't raise taxes at a time like this". Never mind that it was sold in as temporary - it's now "in the base". And the beat goes on. And so do the trillion dollar deficits.

Having gotten all that off my chest as to the policy associated with the payroll tax cut, the POLITICS of the matter are another thing. And on this count, the GOP, specifically the House GOP have managed to do absolutely everything wrong in this debate.

First, they didn't communicate their wishes to their Senate colleagues. As a matter of fact, a few weeks ago, it was John Boehner that refused to negotiate a compromise on the payroll tax cut, demanding instead that the Senate work it out. Well, they did. The agreement was a 2 month extension of the cut, paid for by increased fees associated with Fannie Mae and Freddie Mac. Essentially, higher fees on mortgages to pay for payroll tax relief.

Then, after the Senate deal had passed with massive bipartisan majorities (the Senate vote for the plan of 88-10 reflected the support of 80% of the GOP caucus), the House GOP balked. I don't think it was Boehner himself who wanted to raise a stink (as a matter of fact, I think he would have been happy to leave town), but regardless, the House was suddenly making it an issue that the tax cut didn't cover a long enough period of time (somehow 2 months creates uncertainty, but 12 months magically creates certainty) and they wanted the Senate to come back to negotiate a full year deal with them.

So, Boehner and the House GOP handed the keys to the Democrats. They managed to simultaneously portray themselves as holding up tax relief for working Americans while making the Democrats look like the defenders of lower taxes. And all for a battle that they could not possibly win. And they did not. They caved within 72 hours as Harry Reid outright refused to call the Senate back for more discussions until the House passed the plan. And pass it they did. Oh, sure, they got token concessions which change nothing about the underlying legislation in an attempt to save face.

But at the end of the day:
(1) The Democrats looked liked the heroes of lower tax rates for working and middle class Americans
(2) The Republicans looked like shills for the rich, defending the Bush tax cuts for upper income Americans at all costs but balking at more modest relief for the lower brackets
(3) The strengthened President Obama's standing in the polls by as much as 5%
AND
(4) They got no substantive policy changes in return

That's a rare perfecta indeed. I wrote earlier on how the GOP should have some concerns about the House due to its historically low popularity and the best Democratic performance in generic congressional polling since 2006 and apparently they are hell bent on making my writings come true. John Boehner better get that caucus under control or he might have to try back out the "minority leader" title.

What State is the Best?
While the candidates in Iowa are certainly not taking a break for the holidays, the debates are done until after Iowa and the polling won't really resume until after Christmas, so I thought I'd take a little detour and talk about a subject I've been meaning to write about for some time.

In this Presidential campaign on the Republican side, the principle of federalism has been raised repeatedly by the GOP candidates. It is a unique aspect of our form of government that so much of the governing is left to individual states to decide. Federalism at its best is 50 state laboratories trying out different policy approaches to see what measures up best.

But the 50 laboratories only matter if somebody is measuring the results. So, I'm pleased to present my ranking of the most and least successful states in the US.

First, let's talk about my methodology. There are many things that people would like about a state that are subjective. Measuring a state's cultural achievement or the quality of its food would make for interesting debates on message boards, but would be entirely subjective. Do you prefer blues music in Mississippi or grunge in Seattle? Do you like the lobster in Maine or the soft shell crab in Maryland? Is Texas football better than New York hockey? These questions are fun, but ultimately can't be measured.

So, I stuck to 4 very clear objective measures:
(1) Median Income
Standard of living is determined, in large measure, by how much money the average person makes. Median income demonstrates the strength of a state's economy probably better than any single metric.

(2) Educational Attainment
The percentage of adults who are college graduates is an easily accessible "end state" metric on education that allows for easy comparison. You could argue that this measure under weights the impact of primary and secondary education in a state, but I would argue that the primary purpose of primary and secondary education is to prepare students for college. Besides, rating metrics for those things get increasingly subjective.

(3) Crime
We all want to live in safe neighborhoods and crime is a clear indicator of a social problem. Violent crimes per 100 residents normalizes for population and shows how safe states are.

(4) Population Growth

An excellent measure of the quality of a state is whether people are coming there or leaving there. Granted, this metric biases positively to those states that see a lot of illegal immigration, but over time, even illegals will go to where the opportunity is, so I used 10-year population growth as the metric.

For each metric, the state with the BEST score (highest income, highest education attainment, lowest crime, highest population growth) received 50 points, the second best 49 points and so on. The total of all 4 scores were added together to give a state its total score.

Using this methodology, an AVERAGE score would be 102 points.

The states ranked as follows:
1. Utah - 162 points
2. Virginia - 161 points
3. Colorado - 159 points
4. New Hampshire - 158 points
5. Vermont - 143 points
6 (tie). Washington - 142 points
6 (tie). Massachusetts - 142 points
8 (tie). California - 141 points
8 (tie). Connecticut - 141 points
10. Hawaii - 138 points
11. Maryland - 133 points
12. Wyoming - 132 points
13. Arizona - 129 points
14. Oregon - 128 points
15. New Jersey - 125 points
16. Alaska - 123 points
17. Minnesota - 120 points
18. South Dakota - 119 points
19 (tie). Georgia - 118 points
19 (tie). North Dakota - 118 points
21. Rhode Island - 114 points
22. Delaware - 109 points
23. Idaho - 106 points
24. Texas - 105 points
25. Pennsylvania - 104 points
26 (tie). Maine - 103 points
26 (tie). New York - 103 points
NATIONAL AVERAGE - 102 POINTS
28. Wisconsin - 101 points
29 (tie). Nebraska - 100 points
29 (tie). Kansas -100 points
31. Illinois - 97 points
32. Nevada - 91 points
33. Montana - 90 points
34. North Carolina - 85 points
35. Iowa - 79 points
36. New Mexico - 77 points
37. Ohio - 76 points
38 (tie). South Carolina - 72 points
38 (tie). Missouri - 72 points
40. Florida - 68 points
41 (tie). Kentucky - 66 points
41 (tie). Oklahoma - 66 points
43. Indiana - 63 points
44. Alabama - 58 points
45. Tennessee - 55 points
46. Arkansas - 45 points
47. West Virginia - 44 points
48. Michigan - 43 points
49. Mississippi - 40 points
50. Louisiana - 36 points

Let's examine the top and the bottom five in a little more detail. First, the top 5.

Utah
Utah doesn't lead the pack in any single category, but is solid in them all. It is 6th best in crime, 11th best in educational attainment and population growth and 14th best in income. Utah has been a real boom town as Salt Lake City has grown and diversified. Far from being the stereotype of shows about plural marriages and backward ways, it is a thriving state with a broad economic base. Maybe Jon Huntsman was on to something.

Virginia
Virginia is similarly strong across the board, ranking 8th in income and education attainment, 10th in population growth and 17th in crime. Once a tale of two states, with poor Richmond at one end and the DC suburbs at the other, both completely dependent on the government (Richmond for welfare, Northern Virginia for government jobs), Virginia has diversified greatly into high tech industries and boasts arguably the best university system in the country (UVA, Virginia Tech, James Madison and George Mason are all Virginia states schools and all top flight.)

Colorado
Colorado is the 2nd most educated state in the union and the 4th fastest growing, but lags somewhat in the other categories, coming in at 13th in income and a middling 26th in crime. Colorado's strength are the core of large media and communication companies centered in Denver. It is also a regional transit hub and supports a lot of smaller manufacturing industry. Similar to many fast-growing states in the Southwest, the source of some of its population growth is also a drag on its crime and income scores - high levels of illegal immigration.

New Hampshire
New Hampshire would be number 1 if I'd stopped at 3 categories - it ranks 3rd in educational attainment, 4th in crime and 7th in income. But New Hampshire, like much of the Northeast, isn't growing much - it ranks a weak 32nd in population growth. New Hampshire's libertarianism makes it a shopping haven for New Englanders as well as a bedroom community for many commuters into Boston. It also sports a strong tourism industry...especially around this time in an election cycle.

Vermont
Rounding out our top 5 is New Hampshire's much more liberal brother Vermont which, similar to New Hampshire, ranks 3rd in crime and 7th in education but a somewhat weaker 20th in income and 31st in population growth. A popular tourist spot and organic farming hotbed, Vermont has continued to foster a stable economy, despite conservative protestations about its very liberal economic policies.

On the bottom end:
Louisiana
Hurricane Katrina could get some of the blame, but Louisiana has been in decline for a very long time, with one of the worst permanent underclasses in America. It's best ranking is in population growth, at 37th. It ranks 41st in income, 44th in educational attainment and 46th in crime. Louisiana, like many states in the deep south, lacks much of a middle class and has a very large underclass, which is mostly black. Systemically bad schools and poor social institutions carry this problem from generation to generation.

Mississippi
Mississippi scores surprisingly well on crime, 20th best in the country, which keeps it out of the basement of the ratings, but other than that, the news is abysmal. 46th in population growth, 48th in education and 50th in income. A poor, uneducated population that is leaving. I lived in Mississippi and can personally attest that there is poverty in the Delta in a way I never would have thought possible in the United States. My apologies to Haley Barbour, but this is a state failing on virtually all fronts.

Michigan
The dismal state of Detroit and the contraction of the auto industry over the past decade have not been kind to Michigan. It is 34th in income, 36th in educational attainment, 41st in crime and 50th in population growth. In other words, people are leaving in mass and the ones leaving are largely the educated ones. And who can blame them? Have you seen Detroit lately? Interestingly, it is a world away from Mississippi, but the fundamental problem is the same - lower skilled jobs (in Mississippi in agriculture, in Michigan in manufacturing) that have either moved elsewhere or gone away and a working class ill-equipped to do something else.

West Virginia
Appalachia has long been a location of heart-wrenching poverty. Only a relatively low crime rate in this low population-density state keeps it out of the cellar - it's crime rate is 12th best in the nation. Other than that, things are horrible - 49th in income, 49th in population growth and 50th in educational attainment. It's a vicious cycle - lack of education keeps industry away and lack of jobs keeps people in disbelief that an education will benefit them. The permanent underclass here is white and rural, rather than black and urban, but the problem is the same.

Arkansas
You could argue that Arkansas at least "wins the region" by ranking ahead of Mississippi and Louisiana, but things are still not great. It is 22nd in population growth, buoyed by the continued strong growth around Wal-Mart in Bentonville and industrial growth in places like Fort Smith, but 40th in crime, 48th in income and 49th in education. Bentonville is like a metropolis - Little Rock looks worse than Detroit.

So what can we learn about policy from all of this?
Using the imprecise metric of a "red" state being a state John McCain won in 2008, a "blue" state being a state Barack Obama won by more than his national average and a "purple" state being a state that Obama won but by less than his national average,

Of the 10 best states, 8 are blue, 1 is purple and 1 is red, but the red 1 is in the top spot.
Of the 10 worst states, 8 are red, 1 is purple and 1 is blue

The average ranking for a BLUE state is 17th
The average ranking of a RED state is 31st
The average ranking of a PURPLE state is 32nd

While there are certainly inherent socioeconomic differences from state to state, in my mind, this fairly well disproves the notion that conservative states are more business-friendly and drive greater growth. By and large, liberal states are better places to live by the objective metrics. Perhaps we should be paying more attention to what Mitt Romney did in Massachusetts rather than poo-pooing that experience. And maybe, just maybe, Haley Barbour should stop lecturing Governors in New England and start listening to what they are doing.

The other thing interesting is to look at the exceptions. Michigan is a rare underperforming blue state. Why? It made itself into a banana republic in the 70s by tethering its entire fate to the auto industry - an industry that has become more automated (requiring less workers), more diversified (foreign manufacturers and new entrants locating outside Michigan) and more cyclical (car sales crashed in the late 2000s.)

Utah, on the other hand, leads all states but is the only red state in the Top 10. What are they doing right? They've done tourism right, with winter sports growing in the United States and Utah being a very affordable location. They've grown the options for nightlife well beyond anything imaginable 20 years ago. And they've mined their inherent natural resources at a time when commodities are rising.

I'm a big believer that data rather than dogma tells you interesting things. Have a different take? I welcome your thoughts.

Merry Christmas and Happy Holidays, everyone.

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A Brokered Convention? Only In Our Dreams, Endorsing Mitt Romney

2011-12-20T15:44:00.001-05:00

The Fantasies of Political Wonks
In what can only be described as an unstable race for the Republican nomination this year, we have seen our share of twists and turns. New leaders seem to emerge every week as the "anybody but Romney" crowd, a collection of social conservatives mad at has prior flip-flops and Tea Party activists, who are livid that a man whose health care plan was the model for Obamacare would even be considered, gyrate from candidate to candidate, looking for their perfect match.

All this unrest has caused a growing number of political observers to questions whether the GOP may be headed for a brokered convention, that is a convention that would start with no candidate having the majority of the delegates. New rules requiring early primary states to award delegates proportionally rather than winner take all contribute to this theory. George Will, long an advocate for alternative choices to the existing field has written a full column proclaiming the possibility.

It is an admittedly tantalizing thought for a political observer - the notion of a political convention that is not a carefully put together piece of public relations, as all of them have been for almost 50 years, but rather a true meeting of party members to figure out what the heck they are going to do. And the unpredictability would be fascinating - a winner could emerge out of the current field or an entirely new face could ultimately get the nod.

The only problem is that it simply isn't going to happen. In order for a brokered convention to take place, you need at least three strong candidates that last most of the primary race. If you have two, somebody wins a majority and gets the nomination - if you need proof of this, look no further than 2008 where two strong candidates for the Democratic nomination battled to the bitter end but did not produce a brokered convention.

Who would those 3 candidates be? Clearly Mitt Romney will be one of them. Newt Gingrich might be a candidate, but only if he wins Iowa, a situation that looks increasingly unlikely. His supporters are likely to abandon en mass if he has a poor showing in the first two states. Rick Perry? It's possible if he pulls off a miracle in Iowa. He's the best funded of the "not Mitt's" and well organized. But he and Gingrich would be able to survive if they are both in the race, they will have to consolidate to one. Jon Huntsman? Can't break out of single digits. Michelle Bachmann? Been there, tried that, back down to 10% or so. Rick Santorum? Has never been above 6%. Ron Paul? He can raise money and fight to the end, but will he be a credible candidate garnering a lot of delegates? Maybe, but I have to imagine that other than his core supporters, sooner or later the GOP crowd will realize how much of a disaster he'd be as the actual nominee and shy away.

So it appears likely to be Romney vs. somebody, that somebody being whoever can consolidate most of the opposition. A three-way race coming out of the first 4 races that could lead to a brokered convention seems highly unlikely.

Mitt Romney for the GOP Nomination
For whatever it's worth, I have decided to support Mitt Romney for the GOP nomination. He is not the ideal Presidential candidate. The criticisms of his flip-flops are utterly fair, as he has been all over the map on a whole host of social and economic issues. But when I consider the alternatives, I think he is by far the best candidate, by virtue of his public and private sector experience, his strong leadership in a divided Massachusetts and the relatively low risk he would pose on foreign affairs. Consider the alternatives:

Newt Gingrich - a good idea guy but a horrible leader. Heck, nobody in Congress when Newt was leading it wants him and he was run out of town. Also a caustic, arrogant man would make a horrible GOP candidate in the general.

Rick Perry - sorry, your IQ has to be higher to ride the ride. Nice story in Texas, but he has been an utter disaster as a candidate. Pass.

Michelle Bachmann - aside from her highly radical views, she has demonstrated zero leadership capability in the house and I'd be scared to death if she made it to the White House.

Ron Paul - I respect the consistency of his conservative philosophy, but once you get over enjoying the things he's been right about (The Fed, Iraq, etc.) you realize that he is quite a radical. He would completely remove us from the world stage and cut even the most basic government programs.

Rick Santorum - the champion of right-wing social engineering is on my list of least-favorites. He has shown well in the debates, but his views would take us back 30 years of social progress.

Jon Huntsman - I thought very seriously about throwing my support behind Huntsman, but he is too far gone to have a chance. If I got to individual pick the nominee, the former Utah Governor, former Ambassador to China and politically moderate Huntsman would be my guy. But he can't win. And in the choice between Romney and the other viable alternatives, I pick Romney every time.

Only a couple of weeks until the actual votes start getting cast!

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Can Mitt Romney Deliver the One-Two Punch?

2011-12-15T12:19:00.003-05:00

In a nomination fight that thus far has been appropriately centered around the debates, tonight's debate is the highest-stakes contest yet, for a number of reasons. First, it is the last time that all of the candidates will be on stage together before the first-in-the-nation caucuses in Iowa on January 3rd (there are two additional debates between the Iowa Caucuses and the New Hampshire primary.) Second, being a weekday evening debate on Fox News, it is highly likely to get amongst the highest viewership of any of the recent debates. Third, support is still very soft among the Republican electorate for all of the candidates and so significant shifts in the polling are still not only possible but highly probable. The question is in what direction.

Mitt Romney has been quietly making headway over the course of the past week. He hasn't scored any big knockdowns against Newt Gingrich, but Gingrich's support has slowly started to soften as potential voters begin to evaluate him on his own merits rather than as simply the latest "not Romney" choice. Also, both Romney and Rick Perry have considerably stronger ground organizations and greater financial resources and are spending like crazy to unseat Newt.

We could see an epic moment that moves the polls. But if we don't, what will happen over the course of the next couple of weeks?

First, let's understand that while history doesn't indicate that either Iowa or New Hampshire individually is particularly predictive of outcomes, it is almost impossible to win the nomination without winning one of the two. Looking back at competitive GOP nomination fights starting in 1972 (when Iowa's caucus moved up to its current position), here is how the eventual nominees fared in the contests (I've excluded re-election campaigns where there wasn't meaningful competition - in those cases, the nominees obviously won both contests.)

1976 - Gerald Ford - won Iowa and New Hampshire
1980 - Ronald Reagan - lost Iowa, won New Hampshire
1984 - Not Competitive
1988 - George H.W. Bush - lost Iowa, won New Hampshire
1992 - George H.W. Bush - won Iowa and New Hampshire
1996 - Bob Dole - won Iowa, lost New Hampshire
2000 - George W. Bush - won Iowa, lost New Hampshire
2004 - Not Competitive
2008 - John McCain - lost Iowa, won New Hampshire

So of the 7 nominees in competitive races, 2 won both races and the other 5 won at least one of the two. 4 of the 7 won Iowa and 5 of the 7 won New Hampshire.

Clearly, you can afford to lose one of the two and still get the nod, but winning without at least one of the two hasn't been done in recent history.

Mitt Romney, for all of his soft support, is still a huge favorite to win in New Hampshire. He has a geographical advantage, being Governor of a neighboring state, he is popular with moderates and independents that have a huge influence on the primary race in New Hampshire's open primary system and he has an average of about a 10 point lead in the polls there.

So Mitt can clear his long-uncertain path to the nomination if he finds a way to land a knock-out punch in Iowa. But Iowa is very unpredictable at this point. Newt Gingrich still leads on paper in 2 out of the 3 polls published this week, although Romney leads the third. But Newt's ground game being week could be very damaging in notoriously hard-to-poll-for caucuses, given that getting a caucus vote involves getting someone to a meeting place and having them stay for hours at a time to be publicly counted, not simply getting them to show up to a poll to vote. And Ron Paul, darling of the Tea Party and libertarians everywhere, is lurking in the wings with his rabid supporters, consistently only a few points out of the lead. And rest assured, his supporters WILL show up. Mitt Romney, though his supporters are soft, has a fantastic ground organization to turn out the would-be supporters.

It's actually close to a pick 'em race in Iowa given all these factors. A Romney win in Iowa would probably come close to ending the race after New Hampshire, since his one-two punch would be almost impossible to overcome, even if he lost South Carolina. A Ron Paul win would make for an entertaining showdown between Romney and Paul down the road, as Paul is almost certainly in it for the distance, but few take Paul's chances at winning the actual nomination seriously, and it would likely be a complete disaster for the GOP if it happened. A Newt win in Iowa sets up a pick 'em horse race for the nod. So the outcome of Iowa is critical to the whole thing.

Can Romney deliver the one-two punch and sew up the nomination? Tonight may be our first indicator.

When You Can't Beat Mr. Generic

2011-12-07T20:08:00.001-05:00

Is Newt Gingrich the front-runner in the GOP race? It's a close call. Gingrich has healthy leads in the early caucus and primary states, with the exception of New Hampshire and leads nationally. The latest polling averages, which are somewhat in flux following Herman Cain's exit, but are trending towards Gingrich as a result of that line-up change are as follows:
Iowa: Gingrich +14%
New Hampshire: Romney +12%
South Carolina: Gingrich +21%
Florida: Gingrich +24%
Nationally: Gingrich +13%

If the primaries were all held today, I have no doubt that Gingrich would be the nominees. But, as a friend of mine is fond of saying, if the election were held today, we'd all be a bit confused, because we thought it was scheduled for later.

Romney still leads in the betting money, although the gap has narrowed. He is now 46% to win the nod on Intrade, with Gingrich up to 35%, Jon Huntsman at 8% and Ron Paul at 7%. 4% belongs to the collection of "all other" that includes Bachmann, Perry, Santorum and whatever other also rans you want to throw in the mix.

So, it's a 4-way race, but really a 3-way race if you exclude the crazy money behind Ron Paul (not going to happen...I'll give you those 15:1 odds all day long, just send your checks in), maybe a 2-way race if you don't think Jon Huntsman has a shot (I'm not ready to totally write him off, but I would consider those odds optimistic, to say the least.)

So, is Gingrich the front-runner? Not clearly yet, but he's trending that way. You can forgive the betting public for not being full believers yet - they've seen a lot of people lead the polls briefly and fade fast. Gingrich seems a little more sticky than Trump, Bachmann, Perry and Cain and he is certainly better known.

But let's play along for a second. Let's say Newt gets the nomination. He has a big problem in the general. People like him a whole lot less than a "generic" Republican.

The polls bear out the huge headwind. President Obama is at the low point of his popularity, with his approve minus disapprove floating around the -10% range. In other words, if the election were today and it were an up or down vote on Barack Obama, the President would lose by 10 points.

If you pit the President against an unnamed Republican, he fares pretty close to that 10 point margin. The latest Rasmussen tracking poll (the only recent poll pitting Obama against an unnamed Republican) shows the President trailing "Mr. Generic" by 8%.

But the President won't be running against Mr. Generic. If he runs against a different Mr. G, Mr. Newt Gingrich, he fares a whole lot better. Against Newt, the President leads by an average of 5% nationally in recent polls. He leads comfortably in the critical swing state of Colorado. He leads by healthy margins in Iowa and New Hampshire. He is ahead in Florida. He's even in John McCain's Arizona.

If this is what Newt Gingrich looks like against Obama when Obama's approval rating is this bad, how ugly would this map look for Gingrich if the economy recovers or Obama's popularity recovers?

What the heck is the GOP thinking?

Romney Needs Some Offense, Cain Exits Stage Left, A Republican President and Democratic Congress?

2011-12-03T13:15:00.001-05:00

Defense Doesn't Work When You Are Behind
Playing it safe in a Presidential primary is a great strategy when you are sitting on a big lead and simply waiting out the clock until the actual voting begins. Mitt Romney has been doing it basically since the start of the primaries. Sure, he took on Rick Perry during Perry's momentary surge on immigration. He definitely fired away at Herman Cain's 9-9-9 plan when it briefly looked like Cain might be a contender. But he never really got down and dirty, stretching Reagan's 11th Commandment to Republicans (to not attack other members of your party), because, well, up until now he didn't have to.

From the very early contenders, one-by-one, anyone approaching being able to challenge Romney has done a good job of disqualifying himself or herself. Trump didn't run. Bachmann flubbed very basic facts. Perry talked and acted downright stupidly. Herman Cain...well, more on that later, but let's just say he made a few errors. But the wily old former Speaker of the House Newt Gingrich? He's made virtually no errors so far.

Sure, he consulted for Fannie Mae. Yes, he's been twice divorced, at least once under very ugly circumstances. But he's been teflon so far. Conservatives like Romney because he is one of them, his views on immigration notwithstanding. Party elites are starting to take him seriously, because he's played the game in Washington before and presumably knows how to run a campaign. And Newt stayed above the fray in all the debates, refusing to say a negative thing about the other contenders, largely because they allowed him to get away with that and never challenged him directly. The debates, which have been probably more critical this year than in any prior election cycle, are his home field.

Romney is still the betting favorite. Intrade odds peg Romney's chances at the nomination at 49%, Newt's at 35% (Huntsman and Paul are at 6%, Perry at just under 3%.) This is largely because Romney has been a steady-Eddie, always near the top of the polls, while other candidates rise and fall. And he's been my favorite for the nomination from the get-go.

Not anymore. For the first time, I have serious doubts about Romney's ability to win the nomination. Before you think I'm one of those commentators that jump their predictions based on the latest polls, go back and read my writing when Bachmann, Perry and Cain had their surges. In all 3 cases, I stated that I strongly believed that they would fade quickly and that Romney would be back on top. But Newt is different.

First of all, we've had two debates since he surged to the lead in the national polls and, rather than start to fade, as the other short-lived leaders of the race did, Newt is actually strengthening.

Secondly, Newt is strong in all the key early states except New Hampshire (Romney still comfortable owns that one) and could very well sweep Iowa, South Carolina and Florida by decisive margins, which would make overcoming his momentum extremely difficult. At this writing, his poll averages in the 4 early states are +14% in Iowa, -18% in New Hampshire, +23% in South Carolina and +24% in Florida.

Third, time isn't on Romney's side this time. We are 31 days from the Iowa Caucuses.

Romney has to do SOMETHING to go on offense and change the trajectory of the race. And right now, he's doing all the wrong things. He turned down a chance to debate Gingrich one-on-one this month, allowing Huntsman to steal the thunder of an event that will now undoubtedly erode Romney's support, regardless of the outcome (if Gingrich performs well, he will solidify his support, if Huntsman outperforms him, he will steal moderate votes from Romney.) He was an absolute train wreck this past week in a one-on-one interview with Fox News anchor Bret Baier, one of the few he has given.

There is a full-field debate tonight and Romney really needs to push hard on offense to change the trajectory of the race. If Iowa were today, Romney would be on a path to lose.

Herman Cain, We Hardly Knew You
Comedy writers everywhere shed a tear today when it was learned that Cain would likely announce today in Atlanta that he was dropping out of the Presidential race.

It will soon be forgotten that for a brief period, Cain actually led in the national polls for the nomination.

The guy who gave us 9-9-9, comically uninformed answers to questions about foreign policy and a sordid set of allegations around his dealings with women will likely soon be gone from the race, a month before the voting even started.

As I said a few weeks ago, is there any doubt left that Tim Pawlenty is kicking himself for dropping out of this race?

Throw Out All Them Bums
President Obama's approval has dropped into the low 40s and we appear to be set up for a very competitive race for President only because of an exceptionally weak GOP field. He has some hope in the form of a slightly improving economy and the likelihood that he will face either a polarizing figure (Newt Gingrich) or a wish-washy flip-flopper (Mitt Romney) in the general. And he will have lots of money. He's still a very slight betting favorite to win re-election, but at this point the outcome of the Presidential race is anyone's guess.

The story that isn't making any headlines, but could loom large in the 2012 races is the anti-incumbent and therefore largely pro-Democratic sentiment with regards to House races. Generic polling favors Democrats (by a point or two) for the first time since 2008. The GOP has tough turf to defend, holding virtually all the swing districts. I'm not ready to say that the Democrats have a good chance to take back the House - redistricting puts them at a disadvantage, as does the large majority the GOP currently holds, but the possibility for significant gains by the Dems next November is looking like a real possibility for the first time.

The Senate still looks bleak for the Democrats, with a very tough map to defend. If they could eek out holding onto a narrow majority, it would be a huge victory for them, but that would basically mean winning almost all of the swing races.

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Forget Hillary Clinton, How to Balance the Budget by Doing Nothing

2011-11-26T11:09:00.001-05:00

It Isn't Going to Happen
It seems that not a week goes by that some journalist or political commentator finds the need to discuss the possibility of President Obama dumping Vice President Joe Biden to put Secretary of State Hillary Clinton on the ballot as his VP candidate in 2012.

The case goes something like this - Biden is flub-prone and doesn't do a lot for the ticket. Secretary Clinton is wildly popular, as evidenced by a myriad of polls that show her respect. Plus, you get the bonus of having the still-beloved ex-President Bill Clinton out, more actively fighting for the ticket.

All interesting, but it isn't going to happen. It is nearly unprecedented for a sitting President to stand for re-election with a new Vice-President. FDR did it, but it was after two full terms in office. Gerald Ford ran with a different guy (Bob Dole) than the sitting VP (Nelson Rockefeller), but that was an unusual administration, as neither Ford nor Rockefeller had stood for election for either office (Ford had been appointed VP by President Nixon after Spiro Agnew's resignation in 1973, Rockefeller was appointed by Ford after taking the reins from Nixon after his Watergate resignation.) McKinley ran for re-election with a new VP (one Teddy Roosevelt) but his original VP, Garrett Hobart, had died in office.

To find a situation where a sitting President ran for a second term with a new VP candidate when his first-term VP candidate was still alive, you have to go all the way back to Ulysses S. Grant in 1872. Simply put, it isn't done.

And with good reason. Vice Presidents have only a marginal impact on Presidential races - after all, can you name one race that was largely decided on the basis of the VP candidate? And don't say 2008 - Sarah Palin isn't what sunk John McCain, a sour economy did.

What would the upside to President Obama be? He would look disloyal and weak. And that big benefit that Clinton would supposedly bring to the ticket? Can you name a single swing state he would win BECAUSE of Clinton? Does Clinton fundamentally change the key issues or the reasons President Obama has high disapproval numbers? And does anyone really think Clinton would be as popular as she is now if she were a candidate for public office, re-subjected to the scrutiny the press reserves for politicians?

It isn't going to happen, Pete Dupont (the former governor of Delaware and one-time Presidential aspirant, who is the latest to purvey this theory), so let's just stop talking about it.

The Solution: Do Nothing!
Think the deficit problem is incredibly complex and that the failure of the super committee just shows how intractable our deficit problem is? Nonesense!

Let me show you how easy it is to balance the budget. And our politicians don't even have to do a thing.

Here's the simple math.
This year's deficit is estimated to be around $1.099 trillion.

All you have to do is the following:
1. Let the Bush tax cuts expire (all of them) - $400B per year
That's right, the Bush tax cuts (really Bush-Obama cuts at this point) cost the treasury about $400B per year. Of this, about $100B is associated with the cuts to the top bracket, the rest associated with the cuts to the Clinton bracket. By doing nothing, and allowing the "temporary" cuts to expire at the end of this year, the treasury will collect approximately $400B more.

2. Let the Obama tax cuts expire - $110B per year
President Obama's "temporary" reduction in Social Security taxes by 2% for this year is costing the treasury $110B, as general revenues are being used to cover the gap in the social security trust fund. Just allow the cut to expire, and that's $110B more in the coffers.

3. Don't extend unemployment benefits beyond statutory maximum - $44B per year
Under ordinary circumstances, people get unemployment benefits for 6 months. Since the recession started, Congress has been routinely extending those benefits for 2 full years. Stopping this practice would trim $44B in cost from the budget.

4. Allow the Iraq war to wind down - $159B per year
The Iraq war is costing us a lot of money in both direct costs to the military and costs to the contractors. The troops are scheduled to leave. This should be easy spend to wind down.

5. Don't "fix" the alternative minimum tax - $120B per year
The alternative minimum tax was created to keep the very wealthy from using loopholes to reduce their tax rate too far. The AMT amount was not indexed to inflation, but Congress routinely passes "fixes" aimed to keep the AMT focused squarely on the very wealthy. Allowing it to not index, as current law allows, would essentially take those same loopholes away from upper-middle class taxpayers. This yields $120B per year in savings.

6. Allow the Sequester Cuts - $120B per year
Since the deficit panel failed, the automatic "sequester" cuts of $120B per year are scheduled to kick in in about 14 months, with 50% applying to defense and 50% applying to non-entitlement domestic spending. These cuts happen automatically, unless Congress acts to change the law.

Total savings from doing nothing: $953B per year.

Okay, I didn't totally solve the deficit - there would still be a $146B shortfall. But $146B is a mere 1.0% of GDP, a rate at which the overall debt would decline significantly (we can expect GDP growth plus inflation to be equal about 5-6%, even using conservative estimates, meaning a 4-5% reduction in the effective debt levels.)

The approach is balanced ($323B in spending cuts and $630B in tax "increases", with all the tax increases being the expiration of "temporary" cuts.)

And all the government has to do to make it happen is nothing.

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There Will Be Blood, Why Does Every Budget Action Have to Be Such a Drama?

2011-11-18T22:06:00.001-05:00

The Guns Turn to Newt
Poor Mitt Romney. Do you remember that girl or guy that you really liked in high school? The one for whom you did sweet things. You let her (or him) copy your homework. You gave her a ride when she needed one. You were always there as a shoulder to cry on. But you were always the best friend, never the boyfriend. She liked you, but she was always falling in love with some other guy, never appreciating what was right in front of her.

Mitt Romney was a Republican that managed to win in Massachusetts. While there, he governed as conservatively as that blue state can be governed. He worked across the aisle - because he had to. He had a record of restraining spending and taxes. He was popular, with Republicans and Democrats alike. He left office with a strong economic record. He's also a well-spoken, smart, good lucking (and amazingly young looking for his age) guy who was successful in business before he was successful in government.

But it appears poor Mitt can't ever close the deal to get that elusive date with the GOP girl.

First, Donald Trump, a blow hard who was utterly unqualified in almost every way to be President led poor Mitt in the polls. That's okay, Mitt must've thought, every girl wants to date a wild man once before she settles down with a stable guy. Donald's time came and went quickly.

Then Rep. Michele Bachmann, straight out of the lunatic wing of the party surged ahead of him in the polls. That's okay, Mitt must've thought, everybody wants to date a pretty face, but that girl will come back to me once she realizes she can't carry on an intelligent conversation with the congresswoman. And leave Michele the GOP girl did.

Next, the GOP girl had a fling with Texas Governor Rick Perry. Old Mitt must surely have thought, hey, I know that southern twang is sexy, but is she every going to notice the guy right in front of her? I mean, this guy is an idiot once you get past his accent and hair! Oh well, surely she'll come around to me next.

But it wasn't Mitt next. Tired of dating politicians, the GOP girl decided she wanted a smooth talker. You know, who'd been out in the world. Someone who could turn a phrase and tell a joke. Herman Cain was boyfriend number 4, right up until he sexually harassed her. Mitt was there for the GOP girl, a shoulder to cry on. Maybe, at long last, he'd get that date.

But it was not to be, at least not yet. The GOP girl decided she wanted a father figure. The wise, intelligent guy who'd been around the block. She wanted a date with Newt Gingrich.

And Mitt waited and waited.....

Gingrich is already ahead in some national polls and only 2 points behind in New Hampshire (New Hampshire!) in one poll. Will he fall like the last 4 challengers to Romney? It's too early to tell. I said to bet on Romney from day 1 and I'm still betting on him to take the nod in the end. So are the Intrade betters, who peg Romney's chances at winning the nomination at 69%.

You see, even though Newt has been in the race since jump street, he has never really been tested. All of the other candidates have been playing nice with Newt because, up until now, he hasn't represented a threat. Don't count on that next Tuesday. Romney and company will be going for the jugular and we'll have to see how Newt stands up to the pressure. He has a checkered past, personally (some ugly divorces and infidelity), politically (remember, he was ousted from the speaker's seat in shamed disgrace) and professionally (how'd those big consulting deals with Fannie Mae go?) and we can expect to be reminded of that directly.

There will be blood....and the President is in the White House laughing about how a guy with 42% approval might be a favorite to win a second term.

Another Last Second Budget Move, Another Bipartisan Deadlock
Congress has passed another interim spending measure, attached to a so-called "minibus" appropriations bill that funds a few smaller departments (Agriculture, Transportation, HUD, Justice and Commerce) while extending funding for all other government agencies for another month, setting up yet another lovely drama for December, just before the Christmas break. The bill is called a "minibus" because it combines several departments, but not all the departments as would be the case in an "omnibus" bill.

With this backdrop, the deficit reduction Super Committee appears deadlocked, although they may reach another magical, dramatic, 11th hour compromise (sarcasm intended.) Even if they don't, the ominous sounding automatic cuts to discretionary and defense budgets won't even take effect until 2013, so Congress will have plenty of opportunity to change the law to avoid the cuts and kick the can down the road again.

The choices to solve the deficit are simple. I wish everyone involved would put just 1% of their hubris aside and actually negotiate in good faith. The GOP ISN'T going to get a deal that doesn't involve tax increases. And the Dems AREN'T going to get all the money from the rich while not touching entitlements. It doesn't work that way.

Where is that third party when you need it?

Why the CBO Won't Use GOP Growth Estimates, Red State Socialism

2011-11-09T14:58:00.001-05:00

Do Lower Taxes Mean Higher Tax Revenues?
The idea that you can cut tax rates and gain higher revenue by increasing economic growth is not a new idea. President John F. Kennedy argued for the reduction of top marginal rates in order to spur economic growth (albeit when top marginal rates were over 90%.) Ronald Reagan famously fought for lower rates, to the consternation of his eventual Vice President and Successor to the Presidency, George Herbert Walker Bush, who, in perhaps the most famous political quotation of the past 30 years, called Reagan's plan "Voodoo Economics". Economist Arthur Laffer sketched a curve on a napkin for Reagan once that showed tax revenues declining after a point when you increase rates.

I've written extensively before on this topic. But it is becoming a burning issue today. Congressional Republicans are attempting a very nuanced method of proposing a path to financial sustainability. We all know that they have been in favor of significant spending cuts (other than defense spending.) They have also opposed any tax increases. Their latest line of argument is that they are supported increased revenue by supporting decreased taxes. They have been bemoaning the fact that the non-partisan Congressional Budget Office (CBO) refuses to consider increased revenues as a result of increased economic growth from tax cuts.

At the extremes, the GOP hypothesis is easy to understand. The so called Laffer curve, which shows tax revenues going up quickly when the first few taxes are instituted, then flattening out and eventually declining makes sense in that we would all agree that a 1% tax will generate more revenue than a 0% tax, since 0% will always yield no money and 1% will always yield at least some money. Similarly, a 100% tax, I think we would all agree would crush an economy. So the question isn't if the Laffer curve theoretically works, it is if it is meaningful in the range of taxes that we are talking about in this country.

From 1934 through today federal taxes have ranged between 4.8% of GDP (in 1934) and 20.9% of GDP (in 1944). For most of post-World War 2, they have stayed in a relatively narrow range between 14.4% (in 1950) and 20.6% (in 2000). Taxes right now are right at the lowest level they have been since World War 2, at 14.9% of GDP in both 2009 and 2010.

Utilizing the tax data (from the CBO) and GDP growth data (from the BEA) I went searching for a correlation. The scatter plot of the two data series is below:

It is very hard for me to see any sort of correlation in these data, but there is a mild one. A simple regression line shows that higher taxes do, in general lead to economic growth. For every 1% increase in taxes as a percentage of GDP (approximately a 7% tax increase at today's rates), there is a reduction in GDP growth by about 0.6%. This relationship explains only about 12% of the total difference between GDP growth in the years shown.

The Pre-World War 2 and World War 2 data may distort the information for a couple of reasons. Prior to World War 2, government spending was at such a low level (keep in mind, there was no Medicare or Medicaid) and economic growth was so distorted from the great depression that the data may not be meaningful. Similarly, World War 2 itself was a period of unprecedented and unequaled government spending which would likely distort the statistics.

If I limit the data to 1945 and beyond, the scatter plot looks as follows:

As you can see from this chart, there is no correlation in the Post-World War 2 data. A regression line explains exactly 0% of the variation. In other words, there is no meaningful evidence in the range that we are currently operating in that level of taxes within that range (from 14% to 21% of GDP) has any impact on economic growth whatsoever.

I'm fully prepared for a deluge of comments from the right on this chart. I'd ask this - send me numbers not arguments. If I'm not looking at the data correctly, I'd love to discuss it. What I'm not interested in is partisan talking points. The evidence, of yet, doesn't bear them out.

No wonder the CBO won't score the GOP's budget proposals with big extra growth assumptions backed in: there is no evidence it will happen.

Why the Republican States Are Socialist Republics
Okay, I'll admit it, the headline is deliberately extreme to grab your attention. Plus, I thought conservatives would already be seeing red (no pun intended) after reading my above post on taxation that I'd just go ahead and get all the anger out of the way at once. The issue I'm bringing to light is about how federal money gets collected and how it gets spent.

You see, the dirty little secret is that most conservative states are heavily subsidized by the federal government at the expense of most liberal states. It isn't a deliberate conspiracy and there are many reasons. Firstly, conservative states tend to, in general, be a lot poorer than liberal states. Mississippi, Alabama, Arkansas, Louisiana, etc. all have very high rates of poverty and low incomes while states like California, Connecticut, New York and New Jersey tend to sport lots of high income individuals and while all have pockets of heavy poverty, it is nothing like the level seen in the deep south. Secondly, conservative states tend to be smaller (think of all the red flyover states) and due to the structure of the Senate (two senators per state) therefore get a disproportionate share of the federal dole. Finally, our system of agriculture subsidies tends to favor red states, since big ag tends to live in red states and receives big dollars from the government for growing crops (or not growing crops.)

For purposes of this exercise, I'm going to categorize states as "red", "blue" or "purple". A "red" state will be a state that voted for the Republican Presidential candidate in the last 3, a "blue" state one that has voted for the Democrat in the past 3 cycles and a "purple" state one that has split its Presidential vote.

By that measure, the following 18 states are categorized as blue:
Washington, Oregon, California, Hawaii, Minnesota, Wisconsin, Michigan, Illinois, Pennsylvania, Maryland, Delaware, New Jersey, New York, Connecticut, Rhode Island, Massachusetts, Vermont and Maine

The following 22 states are categorized as red:
Alaska, Arizona, Utah, Idaho, Montana, Wyoming, North Dakota, South Dakota, Nebraska, Kansas, Oklahoma, Texas, Missouri, Arkansas, Louisiana, Mississippi, Tennessee, Alabama, Kentucky, Georgia, West Virginia and South Carolina.

The following 10 states are categorized as purple:
Nevada, Colorado, New Mexico, Iowa, Indiana, Ohio, Virginia, North Carolina, Florida, New Hampshire

There are probably some quibbles you could make with this list. It seems weird to not have Pennsylvania on the list of purple states. It's also odd that Indiana qualifies but Missouri (a traditional swing state does not.) But minor questions aside, I think most would agree that in general this methodology generates a good breakdown of the country.

The figures below use research from The Tax Foundation, which is publicly available here.

On average, for every $1 in federal taxes paid, the states receive the following benefits by category:
Red States: $1.40
Purple States: $1.10
Blue States: $0.94

The figures don't appear to average to $1 since the blue states that pay heavy taxes relative to their benefits are much larger than the small states that receive a disproportionate share of the benefits.

The most subsidized states?
New Mexico (a purple state) because of the cost of Indian reservations and systemic poverty in rural areas plus a large number of military bases and Mississippi (a red state) because of extreme poverty - they receive $2.03 and $2.02 respectively for each dollar in taxes paid.

The most subsidizing states?
New Jersey (a blue state) due to high levels of wealth and relatively few urban areas and Nevada (a purple state) due to heavy taxation on gaming revenues - they receive $0.61 and $0.65 respectively.

So if we are going to have a conversation about smaller government, let's start with a discussion about state equality. If every state only received the level of government benefits that New Jersey and Nevada do, we could balance the budget today.

Is Cain Imploding On Purpose?, The Big Map: Electoral College 2012

2011-11-05T17:03:00.000-04:00

Could You Have Scripted This?
I don't know if Herman Cain has ever sexually harassed anyone. I'm not even sure exactly what the former head of the National Restaurant Association is accused of. Sexual harassment is a very broad charge that can mean a lot of things to a lot of people. Is Cain accused of distasteful jokes or outright blackmail? Where things he said or did unwise or illegal? Nothing is clear.

Many years later, people still have arguments about Clarence Thomas and the veracity of Anita Hill's allegations. But Anita came forward. She faced the man she was accusing. She was specific in her charges, faced cross-examination and made her case. The Thomas confirmation hearings may not have been any fun to the parties involved, but they had a fundamental sense of fairness.

Herman Cain's accusers have not stepped forward. We know no specifics of the allegations against him. There is no evidence offered, no cross examination. It is a charge that, for lack of some kind of evidence, or at least a live witness or two, probably shouldn't bear on our decision-making in the Presidential election.

Except that we live in the real world. In the real world, in a Republican primary, being charged with sexual harassment could make you look very beatable, especially by a formidable machine like the Obama campaign. And in the real world, you aren't strictly innocent until proven guilty, once a charge has been made, however thin the evidence, you have to respond.

And except for that fact that Herman Cain seems to be doing everything in his power to inflict maximum damage on his campaign from this charge. He has bungled things at every turn. He has not been forthcoming with the facts (that he was accused at one point and that the charges were settled.) He has claimed memory lapses (would you FORGET having settled a law suit about sexual harassment?) He has given contradictory accounts. It is vintage Herman Cain (see abortion, see border fences, etc.), except that none of this is cute or endearing when you are charged with something serious.

It makes me wonder if Cain is looking for a way out. He was supposed to make a few points, land a few speaking gigs and have the ear of the American people for a time. In his wildest dreams, maybe he'd land a gig at Fox News. He wasn't supposed to WIN. I don't think Cain want to be President, perhaps never did. Maybe this is his way out.

Will all of this cause the troops to rally around Romney? Probably not -- the Tea Party just can't stand the guy and some mainstream Republicans are starting to find his constant flip-flopping annoying at best and revealing of a lack of character at worst. But Romney is still what they are going to get. Perry continues to look less and less attractive the more he talks. There has been talk of a "Newt rally" but it is stalled around 12% and he comes with all kinds of baggage and not much likability. Ron Paul is way outside the GOP mainstream. The other candidates are struggling to stay even in the low single digits. It's going to be Mitt. Don't say I didn't tell you so.

The Big Map
If it is Romney, then we have an interesting race on our hands. National polling is close, but the state-by-state battles are fascinating. If it's anyone other than Romney, just color the grey states blue right now. But in Romney vs. Obama, it is a broad battleground, mostly among states that Obama won in 2008.

The map below was created with the help of 270towin.com, which is a great site that has a lot of electoral college information on it.

So, we can see that there are 190 electoral votes at this point that are reasonably firmly in the Obama column and 169 that are reasonably firmly in the Romney column with 179 electoral votes up for grabs. Note that all the swing states listed are states Obama carried in his victory in 2008, except for Arizona, which is looking closer this time since one John McCain is not on the ballot.

Let's examine these swing states one-by-one. Note that my "advantage" is often the current leader in the polls, but not always, as I consider history and trend as well.

Florida - 29 Electoral Votes
Voting History: Last 5 elections - 2 Democratic, 3 GOP (voted for Bush in '92, winners otherwise)
Vote Versus National Vote in 2008: +4.4% Republican
Trending: Republican (slightly)
Current polling: Pick 'Em
Advantage: Romney, but weakly

Pennsylvaina - 20 Electoral Votes
Voting History: Last 5 elections Democratic (voted for Gore, Kerry and 3 winners)
Vote Versus National Vote in 2008: +2.5% Democratic
Trending: Republican (slightly)
Current polling: Obama up by an average of +5%
Advantage: Obama, fairly strongly

Ohio - 18 Electoral Votes
Voting History: Last 5 elections - 3 Democratic, 2 GOP (voted for winner every time)
Vote Versus National Vote in 2008: +2.6% Republican
Trending: Republican (slightly)
Current polling: Obama up by an average of +4%

Advantage: Obama, but weakly

Michigan - 16 Electoral Votes
Voting History: Last 5 elections Democratic (voted for Gore, Kerry and 3 winners)
Vote Versus National Vote in 2008: +9.3% Democratic
Trending: Democratic (strongly)
Current polling: Obama up by an average of +6%
Advantage: Obama, strongly

North Carolina - 15 Electoral Votes
Voting History: Last 5 elections - 4 Republicans, 1 Democrat (voted for Bush in '92, Dole and 3 winners)
Vote Versus National Vote in 2008: +6.9% Republican
Trending: Democratic (moderately)
Current Polling: Romney up by an average of +1%
Advantage: Romney, but weakly

Virginia - 13 Electoral Votes
Voting History: Last 5 elections - 4 Republicans, 1 Democrat (voted for Bush in '92, Dole and 3 winners)
Vote Versus National Vote in 2008: +0.9% Republican
Trending: Democratic (strongly)
Current Polling: Romney by average of +2%
Advantage: Romney, but weakly

Indiana - 11 Electoral Votes
Voting History: Last 5 elections - 4 Republicans, 1 Democrat (voted for Bush in '92, Dole and 3 winners)
Vote Versus National Vote in 2008: +6.2% Republican
Trending: Democratic (strongly)
Current Polling: None available

Advantage: Romney, moderately

Arizona - 11 Electoral Votes
Voting History: Last 5 elections - 4 Republicans, 1 Democrat (voted for Bush in '92, McCain and 3 winners)
Vote Versus National Vote in 2008: +15.7% Republican
Trending: Unclear due to McCain's presence on 2008 ticket
Current Polling: Obama by an average of 5%

Advantage: Romney, but weakly

Wisconsin - 10 Electoral Votes
Voting History: Last 5 elections - 5 Democrats (voted for Gore, Kerry and 3 winners)
Vote Versus National Vote in 2008: +6.7% Democratic
Trending: Democratic (moderately)
Current Polling: Obama by an average of 6%

Advantage: Obama, moderately

Minnesota - 10 Electoral Votes
Voting History: Last 5 elections - 5 Democrats (voted for Gore, Kerry and 3 winners)
Vote Versus National Vote in 2008: +3.0% Democratic
Trending: Republican (moderately)
Current Polling: None available

Advantage: Obama, but weakly

Colorado - 9 Electoral Votes
Voting History: Last 5 elections - 2 Democrats, 3 Republicans (voted for Dole in '96 and 4 winners)
Vote Versus National Vote in 2008: +1.7% Democratic
Trending: Democratic (moderately)
Current Polling: None available

Advantage: Obama, but weakly

Iowa - 6 Electoral Votes
Voting History: Last 5 elections - 4 Democrats, 1 Republican (voted for Gore and 4 winners)
Vote Versus National Vote in 2008: +2.3% Democratic
Trending: Flat
Current Polling: Obama by an average of 3%

Advantage: Obama, but weakly

Nevada - 6 Electoral Votes
Voting History: 3 Democrats, 2 Republicans (voted for winner every time)
Vote Versus National Vote in 2008: +5.3% Democratic
Trending: Democratic (moderately)
Current Polling: Pick 'Em

Advantage: Obama, but weakly

New Mexico - 5 Electoral Votes
Voting History: 4 Democrats, 1 Republican (voted for Gore and 4 winners)
Vote Versus National Vote in 2008: +7.9% Democratic
Trending: Democratic (moderately)
Current Polling: None available

Advantage: Obama, but weakly

All of this would give Obama, very hypothetically a win in the electoral college of 290-248.

If you flip all the "weak" Obama states to Romney, Romney wins 293-245.

If you flip all the "weak" Romney states to Obama, Obama wins 358-180.

Bear in mind, it is WAY early...Romney hasn't even competed in his first primary as of yet. And there are signs out there that there may be swing states in New England that I'm not even considering - New Hampshire could be in play as the most moderate state near where Romney is from, so theoretically could be other states in the region. These changes could change the whole composition of the map.

But, very early on, I think we can say that we already have a horse race. Unless the GOP nominates someone else.

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The Wholly Ridiculous Perry Tax Plan, Did Tim Pawlenty Bow Out Too Soon?, Deficit Plan PR Wars

2011-10-27T19:00:00.000-04:00

A Very, Very Bad Plan
There are some things to love about the concept of a flat tax. Our current income tax system is overly complicated, causing a huge cost of enforcement, large scale fraud (or at least graying of the tax law) and places an efficient time and financial burden on tax payers. A true flat tax, that eliminated all the itemized deductions and at least carved out an exemption for the first $20K or $30K of income (so we aren't taxing working class people into poverty) would probably be preferable to our current system, particularly if it was structured to encompass existing payroll taxes. It has the drawback of, on face, making the system less progressive, but the reality is that our existing code really is regressive in many cases, because of the myriad of tax credits and deductions that distort the stated rates. Besides, by exempting, say, the first $30K in income and setting a tax rate of say, 20%, the progressive nature of the code would be preferred, since a wage earner of $30K would pay an effective rate of 0%, an earner making $60K would pay an effective rate of 10% and an earner making $150K would pay an effective rate of 16% and so on.

So shouldn't I love Rick Perry's plan that applies a flat tax of 20% and exempts the first $12,500 in income for individuals? Absolutely not. Perry's plan combines all of the worst drawbacks of a flat tax while gaining none of the advantages. His plan lets taxpayers CHOOSE between the existing system and his new system. This means that all of the loopholes and carve outs stay for those who benefit them. It doesn't get rid of the cost of enforcement, since any number of taxpayers may continue to pay under the old system, if it benefits them. It doesn't reduce the burden on taxpayers for preparing their returns, since you would need to do your taxes both ways in order to determine which one was more beneficial. Even in the "flat tax" option, it leaves carve outs to deduct state income taxes, charitable deductions and home mortgage interest.

Worst of all, it would amount to a massive decrease in federal revenue. How can I be so sure? Think about it. If I have an option between the old system and Perry's new system, which system would I choose? The answer, of course, is the one under which I pay less taxes. There would be no taxpayers that would pay more...and many who would pay less (those who would owe less under Perry's new system.) It's simple math that you can't have no one pay more and lots of people pay less and not collect a lot less.

Worse still, Perry eliminates taxes on capital gains and dividends, meaning he is effectively not taxing the investing class and relying entirely on taxes on wages. This makes the system massively more regressive than our existing system.

This is a far inferior system to Herman Cain's 9/9/9 plan, although that has flaws too, which I have previously discussed. It is completely unserious. He has absolutely zero in specific budget cuts to offset the revenue, instead only a broad statement that he wants to get federal spending down to 18% of GDP. Even if that were possible without either massive cuts to military spending or serious changes to entitlement programs (one of those two would be necessary), to get to a balanced budget at 18% of GDP, we'd need Clinton-era tax levels, not rates even lower than the ones today.

It's fine to believe in lower taxes. But lower taxes should be a byproduct of lower spending. So if you want to cut taxes by slashing Social Security, Medicare or Defense, then say so. There is no free ride.

Shame on the conservative blogosphere for embracing Perry's plan. A flat tax debate would be a great debate to have in this country. But let's debate a real plan, not a PR gimmick.

I probably shouldn't waste much more digital ink on Perry. Between this and his ridiculous identification with birthers this week, I think he is pretty well done as a national candidate. Frankly, I think GOP primary voters were done with him even earlier.

Where is Tim Pawlenty When You Need Him?
75% of the GOP seems to want someone other than Mitt Romney to be the nominee, judging by his stuck-in-neutral poll numbers. Perry has effectively flamed out. Michele Bachmann's brief surge is a distant memory. Herman Cain looks unready for the national stage on many levels.

If he were still in the race, wouldn't Tim Pawlenty seem like a logical guy to go to? Sure, he once supported Cap and Trade. But his conservative bona fides are a heck of a lot better than Romney's and Pawlenty has the credibility of a successful governor. Does anyone else think he would be a player if he hadn't dropped out so early?

A Tax Increase by Any Other Name...
The PR leaks around the deficit reduction super committee's work are coming fast and furious (perhaps a bad term to use after watching Janet Napolitano get grilled this week over the botched operation by that name.) First, the Democrats leak that they had proposed a $3 trillion deal that included significant entitlement cuts but also significant tax increases. Now the GOP leaks a $2 trillion counter proposal that contains a lot of the same cuts, but no tax increases, although it has some enhanced revenues from increased federal fees.

At least they are talking and passing specific proposals back and forth, but it seems like we are at the same log jam - the GOP simply won't accept higher taxes, no matter what.

How about some creative solutions to get to a solution that both sides can stomache?

How about a proposal that tax the cuts, doesn't raise taxes now, but includes a poison pill that would have tax increases kick in in 2013 or 2014 if the deficit isn't brought down to x% of GDP by those years? The GOP still controls the House, so they could argue that they aren't really voting for a tax increase since they won't let spending drive deficits that high. And Democrats could claim victory in that they kept tax increases on the table but just pushed them out to later to help the weak economy.

Some type of creative compromise will be necessary to get something on the table that can pass. We'll see if the super committee is up to the task.

Fireworks in the Desert -- Does It Matter That Only Romney is Credible?, Another Dictator Dead

2011-10-22T10:56:00.003-04:00

The GOP Clash Demonstrates One Thing: There Are Very Few Serious Candidates
The saying in political circles these days is that Herman Cain peaked one hour before the start of the CNN Republican debate this past weekend. Clearly, Cain did not give a great account of himself. He managed to make, what is ostensibly a very simple tax plan (9% income tax, 9% corporate tax, 9% national sales tax) into a very confusing topic for the viewer and drew fire from all sides at the start of the debate. Some of the criticism was, frankly, odd for a Republican forum. Michele Bachmann criticized the plan as being to regressive: she is right, but this is the first time that I've heard the Tea Party advocate argue the virtues of a progressive tax system. Romney criticized it as double taxation, pointing out that Nevada residents would have to pay their own state sales tax in addition to the national tax. He is also right, but his point is sort of beside the point. We pay multiple taxes at almost every level now. Income is taxed with SSI taxes and income taxes at both the federal and state level. We already have federal taxes on things like gasoline, alcohol, tobacco and firearms that are in addition to state-level sales taxes.

I was on one level very surprised to see the GOP candidates so roundly dismiss what is a pretty GOP idea -- a flatter tax code and a shift away from income-based taxes to consumption-based taxes. I guess everyone shoots for the front-runner of the week.

Cain did himself absolutely no favors in the debate, mumbling on about Apples and Oranges, rather than focusing the debate on the simplicity of his plan and the complexity of the existing plan. He also was completely backed into a corner, trying to continue to argue that this plan won't make taxes go up on lower-income Americans, when it is obvious on face that it will (a point Rick Santorum and Rick Perry made at great length.) Of course, Rick Perry is now turning around and promotion a flat income tax designed to "broaden the tax base", which is exactly the same thing, but never we mind that.

Just when it looked like Cain was going to be completely cooked and roasted, Romney and Perry turned on each other in a series of exchanges that, in a less civil day, might have ended in a fist fight. Perry accused Romney of hiring illegal immigrants (he hired a landscaping company which employed illegals, hardly a first) and Romney fumbled completely by stating that of course he asked the lawn company to fire them since he was running for public office, seemingly implying that he wouldn't have cared otherwise. Perry kept pointing his finger at Romney. Romney kept chiding Perry for interrupting him, even begging moderator Anderson Cooper to intervene at one point.

In total, it was the worst showing for the GOP field as they looked like a bunch of bickering school children. Romney clearly had his worst performance, losing his cool in a way I had not seen in previous debates. Cain looked like an utterly unserious front-runner. Perry looked like a guy who has lost all momentum and is just trying to gin up controversy to keep himself relevant. If there was a winner, it was Newt Gingrich, whose professorial, intelligent responses played a lot better against this backdrop than they had in previous debates.

In spite of Romney's poor performance, it is abundantly clear to me that he is the only credible candidate in the field.

Cain? If the anchor to your campaign is a tax plan and you can't explain it, you are in big trouble. People might forgive some of the downright ignorant things Cain has said on foreign policy, his utterly confusing responses to questions about social issues and his borderline racist comments about Muslims if he was rock solid on economic policy. But Cain would be a train wreck in a general election campaign.

Perry? The more that even Republican hear him speak, the less they like him. Does anyone really think this is the guy to bring down Barack Obama?

Gingrich? He WOULD be credible -- if he didn't carry so much baggage. He's a smart guy and a great debater. He explains his positions in a clear, well thought out manner. But if he ever became a serious threat in the polls, his sketchy personal past and long history in Washington would be a club over the head of his poll numbers.

Bachmann? Please. Crazy doesn't win general elections.

Santorum? If the lynchpin of your campaign is that you've won in a swing state and the reason you aren't in office is that you lost re-election in that swing state by 18%, you aren't starting in a great place. Besides, he comes off horribly bitter. Nobody takes him seriously.

Paul? His loyalists love him, but the day the GOP nominates an anti-war, pro-drug and prostitution legalization, pro-gay marriage (sort of) libertarian, I'm investing in snow plow dealerships in hell.

Huntsman? Is he still running? Regrettably, Jon Huntsman is a very serious and well qualified candidate. He just can't get the GOP to pay attention to him.

All of which leaves Romney as the guy with the most credibility.

The key question is whether that will matter to the GOP in this nomination cycle. It didn't matter when they nominated Christine O'Donnell in Delaware, Joe Miller in Alaska and Sharon Angle in Nevada in 2010. Do they want to win or do they want a Tea Party loyalist? We shall see.

Qaddafi Dead
The death of Libyan Dictator Muammar Qaddafi (or Gaddafi if you like that spelling) is good news to the world. Qaddafi was an awful dictator, hated by his people and well known for making crazy and offensive UN speeches that delegates would walk out of.

You can criticize President Obama at great length on many domestic topics, but to the surprise of many, he has been a rock-solid leader on foreign policy.

The GOP can say all they want that he bows too much or isn't strong enough, but the facts tell a different story.

Osama Bin Laden is dead. So are scores of Taliban and Al Qaeda leadership.
Muammar Qaddafi is dead.
The Iraq War is essentially over with the last US troops leaving in the next couple of months.
Our position in Afghanistan is strengthened (albeit we still need an exit strategy.)
We have a new, comprehensive, nuclear weapons reduction treaty.
We have new free trade deals spanning the globe.

Did President Bush have 1/10th this amount of accomplishment in 8 years?

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Cain Ahead in the Polls but Romney Way Ahead in the Betting, The Meaning of 9-9-9

2011-10-16T11:45:00.004-04:00

Who Exactly is the Favorite?
Frequent readers to this space can't exactly be surprised by the Jupiter-gravity speed fall of Texas Governor Rick Perry from frontrunner to near afterthought in the GOP race. After all, I'd been warning you for weeks: Rick Perry is this year's Fred Thompson, Rick Perry is a great concept for the GOP but a horrible candidate, Rick Perry is not ready for prime time. Certainly none of this stopped the talking heads from immediately appointing Perry the guy to beat as soon as he led in the polls. But they stopped talking about him just as fast as his numbers crashed, instead focusing on the new guy at the top in national polling: former Godfather's Pizza CEO Herman Cain.

Cain is ahead in the national polls modestly and leads in several early states. The primary and caucus calendar is a dynamic thing, thanks to Florida's decision to go early, but ultimately it should settle down to the first 5 races still being Iowa, New Hampshire, Nevada, South Carolina and then Florida. The "early 4" will do whatever it takes to move their debts to preserve their early status and will all therefore set calendar dates earlier than Florida's accelerated January 31st date. South Carolina has already moved its date up to January 21st, Nevada to January 14th. Iowa and New Hampshire have not yet set their dates, but the mostly likely dates are for Iowa to go January 3rd and New Hampshire to go January 7th, although there is some possibility that New Hampshire will attempt to go in December, as they are extremely unhappy with the notion of having only a four-day gap between Iowa and them.

These states all have different dynamics. Iowa and Nevada are caucuses, which require participants to donate money, invest significant time and openly declare their support for candidates - in other words, these are events that only the most devoted party members participate in. New Hampshire, South Carolina and Florida are primaries, which, at a minimum, allow open access to any member of the party that wishes to participate and require only the few minutes it takes to go cast a vote. Add to this the further wrinkle of primary rules - New Hampshire has what is known as a "semi-closed" primary - Republicans and Independents can participate in the GOP primary but Democrats cannot. South Carolina has an "open" primary, meaning anyone of any party can participate in its GOP primary (they cannot participate in both primaries, but that is largely irrelevant this year as President Obama faces no real opposition for the Democratic nod.) Florida has a "closed" primary - only registered members of the GOP can participate.

So, with 4 different kinds of elections in the offing in the first 5 contests, polling gets extremely tough. Caucuses are notoriously hard to poll for and open primaries are generally harder to get a read on than closed primaries. All of that said, let's assess the latest polling numbers both nationally and in the likely first 5 states:

Latest Average of Averages for National Polls:
Romney - 20.5%, Cain - 19.2%, Perry - 13.7%, Paul - 8.6%, Gingrich - 7.6%, Bachmann - 4.8%, Santorum - 1.9%, Huntsman - 1.6%

While Romney still leads marginally over Cain nationally, all the dynamics would seem to favor Cain. Perry has been in decline and his support, almost vote-for-vote, has been going to Cain. Paul has been a relatively constant at that level, with a small, but very loyal demographic backing his libertarian views. Gingrich has been on the rise, mostly at the expense of the other minor candidates. The other candidates don't have enough support to be worth taking, but to the extent that they fade, it is likely that Bachmann and Santorum's supporters would go to Cain, while Huntsman's would go to Romney, based on their ideologies.

So, for now, call it basically a wash between Romney and Cain, with Cain gaining and Romney relatively constant (he's been in the low 20s virtually the whole election cycle.)

Averages by State:
Iowa (only 1 recent polls): Romney 26%, Cain 20%, Paul 12%, Perry 11%, Bachmann 11%, Gingrich 5%, Santorum 5%, Huntsman 1%

New Hampshire (3 recent polls): Romney 40%, Cain 15%, Paul 12%, Huntsman 6%, Perry 5%, Gingrich 4%, Bachmann 3%, Santorum 1%

Nevada (no recent polls)

South Carolina (no recent polls)

Florida (no recent polls)

So, as things stand now, Romney would be poised to take the first two contests, which would give him considerable momentum going into the next 3. Cain is live in Iowa, but Romney appears to be a lock in New Hampshire, which neighbors his home states of Massachusetts.

You would think Nevada is fairly neutral ground (a moderate state but a caucus structure), South Carolina would heavily favor Cain (or anyone else polling well against Romney, being a conservative electorate) and Florida would be a fairly neutral state (classic large-state swing contest.)

So to have the momentum to mount a serious charge, anybody other than Romney (for now, we'll say Cain) needs to win in Iowa. Expect the next couple of months leading up to the caucus to be fast and furious in that regard.

While on face, Romney is the favorite, the betting odds might surprise some. Here are the latest odds from our friends at Intrade:
Romney to win nomination: 68.5%
Perry to win nomination: 12.4%
Cain to win nomination: 8.9%
Someone else to win:10.2%

How can Mitt Romney be such an overwhelming betting favorite when he is only a marginal leader in the polls? And how can Perry be ahead of Cain when all the numbers look like he's sunk?

The answer is pretty simple. One is that nobody buys the Cain phenomenon yet as a lasting trend. Donald Trump led the GOP field in the polls at one time. Then it was Michelle Bachmann. Then Rick Perry. Now Herman Cain is on the verge of it. Through it all, Mitt Romney has plodded along with his 20-25% support. It's starting to look like the GOP is going to date a lot of super models but marry the girl next door (note: this analogy has nothing to do with the good looks of the candidates for those who may not be able to connect the dots.)

I've been predicting Romney to get the nod from the get go. Seems like the smart money is coming around to that.

9-9-9
Since Cain is, at least for the moment, polling strongly in the GOP race, it is worth spending a little bit of time discussing his cornerstone proposal, a fundamental change in the tax code that he has been touting as his "9-9-9 plan".

Before I dissect the plan, let me give Cain credit. I'm not a fan of the 9-9-9 plan in a lot of ways. But at least Cain has proposed something meaningful. Can you tell me the tax plan of Mitt Romney or Rick Perry? That's because they don't have one. So, while I don't agree, I appreciate that Cain is actually contributing to the dialogue rather than just spouting platitudes about not raising taxes.

9-9-9, at its essence, is a replacement of most of our existing taxes: corporate, individual income and payroll with a 9% tax on corporate profits, a 9% tax on individual incomes and a 9% sales tax.

Let me start by providing context to the discussion. There are two important decisions to be made relative to taxation. The first is HOW MUCH the government should collect in taxes. This should (but often isn't) be related to how much you want the government to spend. In other words, how many bills do I need to pay and therefore what do I need to collect in taxes? The second decision in a tax code is WHO should pay the taxes and in what proportion.

Cain has stated that his plan was designed to be initially neutral to what the current tax code collects. I am unable to independently verify that claim, but not able to disprove it either. You see, it's such a fundamental change in the method of collection (the addition of a national sales tax, a major change in the corporate tax structure) that I simply lack adequate data and study at this point to verify whether it is revenue neutral or not. So, for purposes of this debate, let's assume that it is, or, if it isn't that Cain would adjust it to be a 10-10-10 plan or an 8-8-8 plan to compensate.

On the issue of who pays, there is some good but a lot of bad.

In our current tax code, the people that pay are the upper-middle class. The most heavily taxed money is income that is between $85K and $106K. This income is subject to a federal rate of 28% plus an effective payroll tax of about 15% (considering both the employer and employee share, which you have to, since they both, in essence, come out of the employee's pocket), for a combined rate of about 43%. This is higher than the 39.6% effective rate paid on very high incomes (over $383K).

Also paying are US-centered businesses that are in non-capital intensive industries - think software companies and small retailers. They pay an effective rate of 35%.

The people who don't pay much are:
The working and lower middle classes with children - 47% of the population is able to avoid all income tax through exemptions and deductions and therefore pay only an effective payroll tax of around 15%.

Investors and the non-working rich - capital gains and dividend income is taxed at only 15%.

Businesses that have foreign operations, qualify for energy-efficient tax credits or have heavy capital needs that they can leverage accelerated depreciation - GE famously paid no federal taxes last year and they are not alone. By shoveling profits to foreign affiliates, taking advantage of accelerated depreciation laws and getting givebacks from the government for investing in green energy, many companies can reduce their effective tax burden to close to zero.

This doesn't seem like a great system in total. Under Cain's system, the people who would pay most heavily would be:
The working class and the lower-middle class - those who effectively live "paycheck to paycheck" and spend all of their income would be hit fully with both the income and the sales tax and pay an effective rate of 18%.

Who would be hit the least? The investing class and corporations, who would pay a mere 9%.

It doesn't seem like a good system to me. And it isn't because I'm opposed to a less nuanced tax structure.

I'd propose instead, that a better system would be to ditch the sales tax (which is regressive in that it hits the poor a lot harder) and exempt the first $30K per year in individual income from taxation (you shouldn't be taxing people into poverty.) Beyond that, I'd be fine with a flat tax rate with no deductions (no home mortgage deduction, no charitable contribution deduction, etc.) I'd treat all investment income (capital gains, dividends, etc.) the same as any other income and nix the corporate tax. This way, you'd eliminate all the balance sheet and income statement gain playing and tax the money at receipt. In reality, the rates would likely have to be a lot higher than Cain's 9%, under a system such as mine, the likely rate would need to be 20% or so, but that would beat the heck out of having some pay 43% and some pay nothing.

Tax reform is a debate we have been putting off way too long. I thank Herman Cain for getting us started even if I don't like his plan.

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The Left-Wing Tea Party?, If He's So Unpopular Then Why Is He Winning?

2011-10-09T12:28:00.001-04:00

Occupy Wall Street: Populism Abounds
For three weeks now, left-wing protestors, seemingly without a unifying cause other than anger at corporate greed have been demonstrating in New York at Wall Street. Their causes and complaints are varied, but can best be summarized as populist. They complain about the bank bailouts and crony capitalism. They seek higher (much, much higher) minimum wages, free college education for all and other benefits for the working and middle class.

Similar to origins of the Tea Party, this movement is fueled out of anger by people who don't feel like they've gotten a fair shake out of our economic system. But, obviously these protestors have a different cause than the Tea Party. Where the Tea Party has sought to minimize the size and scope of government, these protestors seek to expand it: more regulation of large businesses, more rights for workers. It is a classic populist revolt.

As of yet, very few on the political left have taken up the banner of Occupy Wall Street, although the unions are openly supporting them. But the right has certainly been taking aim. Presidential Candidate Herman Cain criticized the movement and made the incredible statement that if you aren't rich in this country, that it's your own fault for not working harder and achieving more (quite a bold statement in this economy.)

So what does this all mean? It's too early to tell. The movement, like so many other protest movements could become an entertaining but largely irrelevant distraction (I'm reminded somewhat of the protests that follow the G20 around the world.) It could become the "Tea Party of the left", a populist uprising that wreaks havoc on moderate members of the Democratic Party (I still contend that the Tea Party has hampered GOP success, not enhanced it.)

The larger lesson here can be assessed through the intersection of the Tea Party and the Occupy Wall Street protests. These protesters come from different worlds and have very different solutions to what ails the country. But the root of the protests are the same. First, crony capitalism and most specifically, the bank bailouts are a common root of their anger. It's interesting that activists from the right and the left are both energized about the same issue - money flowing from the government to large corporations - and for largely the same reasons. Secondly, the general economic malaise is breeding both movements. They have different solves, but both are mad about persistent unemployment and a lack of opportunity.

The problem for Occupy Wall Street is that unlike the Tea Party, they don't have a national platform next year. The Tea Party can influence, to some degree, the GOP nominee. President Obama has no real challenger for the Democratic nod, so disaffected liberals don't have a real choice unless a third party candidate emerges, and if one did, they would have to realize that supporting him or her would simply play into the hands of a GOP that they are at even greater odds with.

How Can President Obama Still Be Up in the Polls?
It's been a couple months since I've updated the President's polling numbers - I will provide a full update soon, but looking at his tracking numbers, his approve minus disapprove has slid further - into the -8% to -10% range. This would ordinarily imply, as re-election campaigns tend to be about the incumbent, a popular vote percentage in the range of 45-46%, which is similar to the amount that would be projected by current economic statistics.

So why is President Obama polling better than that?

He is basically dead even with Mitt Romney in national heads up match-ups (up in some polls, down in others.) He leads the rest of the field by healthy, but not overwhelming margins (around +5% against Perry, more than that against the rest of the field.)

I think there are a few reasons for it, some that GOP candidates can overcome in the months to come and some that are a bit of an intrinsic advantage to Obama.

(1) People Don't Like the GOP Field
There is a reason that Republicans keep trying to recruit new candidates (see Chris Christie.) They know that the public isn't enamored with the current crop. Romney is certainly the most acceptable general election candidate (as the polls above reflect), but even he tracks behind where he should. This is in part because in a GOP primary, the candidates (except Jon Huntsman) have all taken a hard turn right. If the GOP contest is settled early (and by the calendar, it certainly seems that it will), then they may have an opportunity to track back to the center and gain some traction. This will be most easy if the nominee is Romney.

(2) People Like Obama Personally
Don't underestimate the importance of personality on the race. While Obama's policies have become increasingly unpopular, he is still a popular figure. A good family man who speaks in a way that seems hip and relevant and at times even cool, Obama has the potential to outperform. The GOP can't and probably shouldn't do much to tarnish that image (it would likely backfire), but they can build up the personal bonafides of their own candidates. In this case, Romney is not the best guy, since he's a blue blood private equity guy. Herman Cain's self-made man story sells a whole lot better.

(3) Some of the Anger is from the Left
The Occupy Wall Street protests above highlight an important fact - part of President Obama's unpopularity is derived from the right (see the Tea Party), some from the center (who are just mad we are broke and the economy stinks) but some is clearly from the left. This group isn't going to back a GOP candidate, the best a Republican can hope for is that they are mad enough to stay home.

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

2011-10-02T12:47:00.002-04:00

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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The "I Told You So" Edition

2011-09-25T11:32:00.004-04:00

When you write about politics and specifically when you make political, economic and social projections, you get your fair share of things wrong. I've gotten a few minor things wrong (see North Dakota's projection in 2008, not massively wrong, but wrong nonetheless) and a few major things wrong (see my blog during the height of the financial crisis about how the economic recovery would be strong -- oops.) So, it's nice to know that I haven't lost my knack for identifying some of the things to come in the political world. Two cases in point this week.

Perry Candidacy Already on the Rails
Frequent readers will know that I never believed the hype around Texas Governor Rick Perry's prospects of becoming the GOP nomination. The media has been gaga over Perry and his sudden rise in the GOP field. One can understand why. Perry is a conservative, in line with the party faithful in his political beliefs. Perry has a good track record economically in Texas. On face, he looks like what today's GOP wants. But, as I wrote a few weeks ago when Perry got into the race, I'm not convinced Perry is ready for prime time or capable of leading the GOP.

And so it was on full display in the latest Republican debate, a Fox News hosted affair, where Perry looked bewildered, spoke in sentence fragments, stepped in it on perhaps his one moderate political stance by alienating the GOP base when he had an opportunity to make a unifying statement and generally fell completely flat. He hasn't been a rock star in the other debates, but this was, by far, his worst performance.

And GOP loyalists spoke. In the Florida straw poll, a poll Perry had spent heavily and campaigned strongly for, he got scorched by conservative talk show host and businessman Herman Cain and barely finished ahead of Romney, who had not campaigned hard or spent heavily in the poll. Now, I take these straw polls with a grain of salt. This is a poll of loyalists, not a poll of representative voters in a GOP primary. And you can certainly spend to up your standing. I don't think Cain is in any way the favorite in Florida. But let's analyze what it means.

The Tea Party wing isn't happy with Mitt Romney as a choice, primarily because of his moderate positions when he was Governor of Massachusetts, most notably his health care plan which looks a lot like President Obama's national plan. Consequently, they were ready to flock to Perry. The message from the Florida straw poll is that they are no longer happy with Perry as an alternative. They weren't willing to cross and vote for Romney, so they voted for Cain as a kind of second-choice protest. Of course, Cain has his supporters as well, but few believe a businessman with no political experience and a penchant for saying outrageous things will really be the nominee or could seriously take down President Obama.

So where does this leave the state of the GOP? The right wing still isn't happy with Romney, but it is very fragmented, since there isn't a clear good alternative with Perry looking like a hack. One possibility is that Perry ups his game and they decide to get behind him. Another is that another candidate, perhaps one already announced (Newt Gingrich? Michelle Bachman?) or one that hasn't (Sarah Palin?) is able to concentrate this support. The third, and I still think most likely scenario is that the Tea Party wing stays fragmented and Romney is able to win by being just conservative enough and strong enough a general candidate to get the nod.

Nominations doesn't get decided in September the year before. They will be decided in the first quarter of 2012, when everyone really tunes in. But it's shaping up to be an interesting, competitive race.

Another Shutdown Showdown
I told you that we'd be back here. We are a mere week before the start of the government's new fiscal year and there is no agreement on how to proceed with the Fiscal 2012 budget, leaving us at a logjam that yet again threatens a government shutdown. The issue this time is the level of funding for FEMA and how it will be paid for. Republicans want a less than $4B funding replenishment, paid for by offsetting spending cuts in other area. Democrats want closer to $8B, without the offset. The GOP plan passed the House narrowly and was soundly rejected in the Democratic Senate. The Democratic plan has not been voted on in either house.

The budgetary dysfunction continues. Even if they are able to come to agreement in the next week (expect another 11th hour deal that nobody likes), this will only kick the can down the road to Mid-November, right before the bi-partisan deficit commission is supposed to report back its recommendations. So we will have at least 3 more fights that create uncertainty, make long-term programs highly inefficient and threaten to shut down the government.

Many have noted recently that Congressional approval is around 12%, by far an all time low. The question is, who are the 12% who approve? Does anyone else just feel like voting against every incumbent regardless of party?

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A First Whiff of a Scandal?, Read 'Round the World

2011-09-17T09:18:00.000-04:00

Is the Squeaky Clean Obama Image Tarnished?
President Barack Obama has his critics. He has been consistently attacked from the right with a venom, called everything from a socialist to a secret Muslim, to a radical African (who knew that being Muslim or African were such bad things) to the more sane and mundane criticisms that he has spent too much money and run up too much debt.

On the left, criticisms have intensified of late as many groups are not happy with the progress of President Obama in liberal causes. The President has kept Gitmo open, extended the Bush tax cuts and, by and large, continued President Bush's policy in Afghanistan, all very sore spots for progressives who were key to his nomination and election.

All of the criticism, both intense and mild, has basically been centered on the President's politics, however. There really hasn't even been a hint of scandal in the Obama Administration, a stark contrast to virtually every other administration in the past 30 years.

President George Herbert Walker Bush was personally involved in the Iran Contra scandal and the Savings and Loan scandal broke while he was in office. President Clinton had all manners of minor scandals (does anyone remember Hillary firing the White House travel office or opaque land deals in Whitewater?) and one massive one - lying under oath about his sexual encounter with an intern named Monica Lewinsky. President George Walker Bush, while having nothing as national newsworthy as Clinton, had the outing of CIA Operative Valerie Plame and persistent questions about civil rights infractions and torture as part of anti-terrorist operations.

Somehow, for almost 3 years, President Obama has stayed clean. Not a hint of personal scandal - he seems to be a faithful husband and a good father. Not a hint of financial scandal - there is no evidence of personal dealings that unfairly profited the Obamas. And no hint of political scandal - even the ugliness over Blago trying to sell a Senate seat largely reinforced Obama's squeaky clean image as all the evidence was that Blago was upset because Obama WOULDN'T play ball as Blago tried to wheel and deal for the seat.

This squeaky clean image has taken on a little tarnish this month, with questions raised around a federal loan guarantee to a now-bankrupt copy called Solyndra, that had manufactured thin-film solar panels in the United States. The Obama Administration apparently pushed through a loan guarantee to Solyndra as part of the stimulus package, despite serious questions raised by government analysts that indicated that Solyndra didn't have a viable business model. Worse yet, a key Solyndra investor is a major Obama campaign contributor, who had visited the White House on at least 4 occasions.

Does this rise to the level of a major scandal? I don't think so, at least not yet. There isn't evidence that those two facts are connected (the contribution and the loan guarantee.) It's logical to assume that a lot of people that are investing in solar technology are likely to have political leanings that would support the President. And it doesn't stand a logical test that an investor, who had put his own money into a company, would do so believing it would fail - obviously if he did try to sway the process to get a loan guarantee, he did so believing it would make the company successful.

But this does all smack of crony capitalism. And in an age where people are still made about the bank bailouts and Wall Street bonuses, crony capitalism is pretty toxic. My guess is that this fades from the news pretty quickly but resurfaces at some point after the GOP field is settled. President Obama doesn't have a ton of equities going into the election, he'd better hope a clean image remains one of them.

Who's Reading This Space?
One of the things that I love about Google is that they are constantly innovating. Just recently, the blogspot service was upgraded to give some basic locational information about blog readers. In that vein, I though it might be interesting for you to know a little bit about who is reading this site.

This site has a truly global audience, although it is centered in the United States. The top 10 countries for readership are listed below:

1. United States - 62%
2. Germany - 6%
3. Russia - 5%
4. Poland - 3%
5. Canada - 2%
6. Slovenia - 2%
7. United Kingdom - 2%
8. Netherlands - 1%
9. Singapore - 1%
10. Ukraine - 1%
Other Countries (many of them!) - 15%

It's neat to know that this blog is read from Iran to France to Slovenia. The popularity in various countries is also interesting. Obviously, the traffic being heavily US doesn't surprise me, given that this space is all about electoral politics in the US. Germany seems a logical second, both because of the close political relationship between the two first-world economies and the fact that there are a large number of military personnel deployed in Germany, who could be the readers (note that the traffic is only listed by where the traffic came from, not the nationality of the individual who was reading.) The rest of the list is an interesting mix of first-world economies that follow American politics and developing countries where they may be readers interested in the lessons of the American political system. Perhaps the most interest country of traffic, Iran, just missed the Top 10 listed at number 11.

Hello to everyone in the global audience. I hope you find this site informative about American politics and that you enjoy it. As always, I welcome your thoughts.

How about in the interest of a little friendly global competition, we try to see what country can get the most traffic to this site in the next month? I'm sure the US will have the most, but the battle for second is wide open! Tell all your friends to visit and check us out.

Debate-O-Rama, A Curious Case of Jewish Politics

2011-09-14T20:15:00.000-04:00

All Debates, All the Time
The first caucuses and primaries are still almost five months away, but the full-time debate circuit is in full swing. It started with an early May debate that was sparsely attended and almost as sparsely watched on Fox News (Mitt Romney didn't even bother to show up.) The first "real" debate happened in Mid-June on CNN and included all of the present field minus Rick Perry but plus Tim Pawlenty. Then the August debate in Iowa that featured largely the same field on Fox News. Then...things really got rolling. With Perry now in the race, we had the MSNBC debate on September 7th. Now, we've had the CNN / Tea Party Express debate this week in Tampa. Everyone is back in Florida next week for a Fox News debate in Orlando. Then at least 2 more debates in November on CNN and Fox News.

Suffice it to say, we should all have had the chance to become very informed by the time the actual voting begins.

This week's debate was a fascinating affair. Commentary from much of the media painted the debate as contentious but without a lot of clear winners and losers. I couldn't disagree more. In the MSNBC debate, I praised Rick Perry for earning his spot on the stage despite his prior reputation as an intellectual lightweight. In the CNN debate this week, I thought he got absolutely creamed. He was the clear loser in the back and forth with Mitt Romney, who successfully demonstrated Perry evading a clear question about whether Social Security should be discontinued as a program, a position that everyone knows would be toxic in a general election. Perry also took a much more serious assault for his "default in, opt out" vaccination program, issued by executive order, against an STD that causes cervical cancer, a completely defensible position, but one that Perry was running scared from in a conservative forum. Perry looked absolutely punch-drunk by the end of the discussion and Mitt Romney still looked Presidential. Michelle Bachmann turned in probably her best performance, although I still don't see a path to victory for her unless Perry completely implodes.

I'm sure Perry will continue to lead the polls, at least for the time being, but I think Romney will slowly, but steadily, chip away at his lead. Pre-Debate, Perry was leading in most national polls by 12 or 13%. If Romney can make a little headway, and win decisively in New Hampshire (he is still well ahead there), I think he has a strong path to the nomination.

Of course, just because I think Perry is a weak general election candidate and a lightweight doesn't mean he can't get the nod or that it isn't possible that he could topple an unpopular Barack Obama in the general election. And Perry may well get a lot better at debating with all the practice he's getting. But Romney is still the guy to beat.

New York - 9, All National Politics Are Local?
The 9th district in New York doesn't generally elect Republicans. It is more Democratic than the national average, having voted for Barack Obama by 4% more than the national average (Obama +11% in 2008.) Anthony Weiner represented the district for 12 years before resigning in disgrace (the reason for the special election.) It last had a Republican representative in the 1920s. Before today, that is.

In an odd campaign that was part a referendum on an unpopular President in general and partly a specific referendum on our relationship with Israel, Bob Turner pulled an impressive upset, winning the seat for the GOP by about 6%.

The district is a little unique in its heavy Orthodox Jewish population and Middle East politics were front and center in the race. President Obama's positions on Israeli-Palestine peace talks, and specifically his view that the starting point for discussions should be the return of the West Bank and the Gaza Strip to Arab control were front and center.

This result demonstrates the odd political divide that many religious Jews face. It's dangerous to generalize, but that's a bit of what demographic politics are about. Jewish people, in general, tend towards liberal positions on social and economic issues but conservative positions on foreign policy, especially as it pertains to the Middle East and Israel specifically. The GOP has, for a long time, been a staunch ally to Israel. In the case of Orthodox Jews, some of the social policies lean a little further right as well.

So is there a national message in this vote? One could certainly be that President Obama is in trouble with the Jewish vote. He certainly is not at risk, at least at this point, of losing New York (it would take an absolute national thumping to put that state in play), but the Jewish vote is also a critical swing constituency in Florida, a state very much in play in 2012.

It's also one more data point, albeit a murky one, that the national mood continues to be anti-Democrat.

This result isn't the be all and end all of predicting a 2012 outcome, but, on balance, it certainly isn't good for Democrats.

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Remembering 9.11.2001

2011-09-11T08:56:00.000-04:00

It was the day that changed so much in our country. While it would be hard to say that a country that has been through a civil war, two world wars as well as tough wars in Korea and Vietnam still had its innocence, in many ways it felt that way as we watched the events of 9/11 unfold. We knew in the back of our heads that there were terrorists out there, both foreign and domestic. We'd seen the World Trade Center attacked before and a crazy lone wolf bomb Oklahoma City. But we'd never seen anything like this. 2,977 victims dies that day, almost all civilians. Two of the most iconic buildings on the New York City skyline were erased forever. And it was the catalyst for two brutal wars, an Iraq war that would claim the lives of 4,792 U.S. service men and women and a war in Afghanistan that would claim 1,664 of our soldiers.

It changed our day-to-day lives too. The Patriot Act reduced freedoms that we had come to expect by allowing extreme measures like wiretaps without warrants. The new Department of Homeland Security introduced much tougher security measures at airports. And, despite our progressive protestations to the contrary, none of us ever thought the same way about an Arab face on a commercial airline flight again as we fought to fight our nature to stereotype.

It impacted popular culture in many ways too. Bill Maher was fired from ABC for saying that the hijackers weren't cowards (he has since found work at HBO.) NYPD and NYFD t-shirts and hats became the most popular items of clothing in the country. Shows like Lie to Me and 24 rose to the height of popularity.

Patriotism became stylish again. I've never seen the nation as unified as it was after 9/11. We rediscovered how much we love this country through our anger at those who attacked it. Our differences of race, religion and party all seemed meaningless, if only for a time.

On 9/11, we were all Americans, all New Yorkers, all patriots. Our economy is weaker than it was 10 years ago. Our political system is dysfunctional. Our budget deficit is huge. But our spirit is unbroken. Osama Bin Laden is in a watery grave and we are still standing, unafraid.

God Bless America.

Perry Earns His Spot on Stage, Obama Stimulas: DOA

2011-09-09T17:44:00.000-04:00

Rick Perry Turns in an Acceptable Performance
The first GOP Presidential debate featuring Rick Perry was at times a boring affair, but one that ultimately served its purpose for front-runners Rick Perry and Mitt Romney as it clarified a clear choice between the only two candidates at this stage that have a realistic shot at the GOP nomination.

Perry didn't exactly set the world on fire with his debate performance, but he showed that he can hold his own on the stage with Mitt Romney, who had been running over the rest of the field in the previous two contests that he had attended. Perry hit Romney hard on his job creation record in Massachusetts (a factually dubious claim, given the very low unemployment rate when Romney left office, but an effective talking point nonetheless), the similarity of Romney's health care plan in Massachusetts to Obama's national plan (a very true fact, and it's a shame that Romney won't defend the success of that plan) and generally staked out his turf as the more conservative alternative. He didn't come off as a wing nut or a slave to the Tea Party, but his red meat barbs at President Obama should be enough to satisfy that wing of the party.

Romney, for his part, made no real mistakes, but also didn't break any real new ground or necessarily effective refute Romney's position, which is, in essence, that Romney is too moderate for the average GOP primary voter.

As I said before, my money is still on Romney in the long run - I just feel he is a better politician than Perry and that Perry will ultimately be prone to say more things that will alienate mainstream voters. But Perry did well to solidify his standing in this depend.

My last thought on the GOP debate is -- who the hell did the make-up for the candidates? Every candidate appeared to have an awful case of John Boehner orange skin disease. You'd think they could get these things nailed down for a national television appearance. One candidate looking oddly orange would have been interesting, but the whole field looking that way had me scratching my head.

Does Anybody Really Expect This Thing to Pass?
The GOP controls the House and has a large enough minority to effectively filibuster in the Senate. President Obama's new $400B+ stimulus package, consisting of lower-income and middle-class tax breaks, infrastructure spending, extended unemployment benefits and aid to states is an interesting policy paper. But does anyone expect that it will even get to a vote in either chamber?

The only piece that might gain some traction is continued payroll tax reductions. After all, the GOP loves to cut taxes. But those pesky taxes on the rich? Forget it. More spending of any kind? Deader than dead.

This will be an interesting speech that ultimately means nothing. It was as much about staking out ground for a campaign as actually trying to get something done. Pay attention to the deficit super committee, ignore this piece of DOA legislation.

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A Fascinating Decade in Politics, An Awful Labor Day, 9/11 Remembered

2011-09-05T09:52:00.001-04:00

The Most Interesting Political Stories of the Decade
The period of time surrounding Labor Day is historically a slow period for political news and this year has been no different. With Congress in recess and most of the American public tuned out, we are largely taking a break from budget battles and election campaigns that are sure to heat back up in the coming weeks. So, I thought I'd take a step back and recall what I consider to be the most interesting political stories of the past decade. For consideration, my time window is from election day 2000 to election day 2010, as historical a period in American politics as I can recall. In reverse order, here are my favorite stories:

(5) TARP is Signed Into Law, October 3, 2008
This story is fascinating on many levels. The economics of sub-prime mortgages and the subsequent financial crisis are well documented. But what amazes me is the political juxtaposition that all of this caused. A Republican President calling for massive government intervention in the economy. A Democratic Congress delivering a a corporate welfare bill with mostly Democratic votes. Key Republican votes bought-off with earmarks and set-asides. They say sausage-making is ugly, and this necessary (and ultimately not very costly) intervention in the economy had all kinds of twists and turns that caused it almost not to happen. Passing unpopular legislation in any time is tough. Passing it heading into a Presidential election is almost unheard of. That it did is nothing short of a bi-partisan miracle.

(4) Iraq War Resolution Enacted, October 16, 2003
The Iraq war would become issue number one by liberal critics for President George W. Bush's foreign policy. It seems in retrospect, somewhat absurd to get attacked by terrorists in Afghanistan and attack an unrelated dictator in Iraq, where Al Qaeda didn't even have a presence prior to our invasion. But let's face it, Hussein was a known enemy with no shortage of reasons not to like. Perhaps it is for this reason, or perhaps the fact that a congressional election was a few weeks away and nobody wanted to run as a dove, but the fact that the likes of Hillary Clinton and John Kerry voted for the war resolution, a position that they would forever try to explain away, speaks volumes of the political climate of the time.

(3) Lisa Murkowski Elected to the Senate as a Write-In, November 2, 2010
Does an Alaskan Senate election really warrant being halfway up this Top 5 list? You bet it does. Look, I realize that this was more a story for political junkies than it was a national news item, but as a purely political story (remember, these are the top 5 political stories), it doesn't get any better than this. After losing a close primary to Tea Party darling Joe Miller, incumbent Senator Lisa Murkowski decided to run for re-election as a write-in candidate. Ultimately, she won by over 4% with her 39% trumping Miller's 35% and Democrat Scott McAdams 23%. Including Murkowski, there have been exactly two successful write-in candidates in Senate history; the only other time this has happened was in 1954 when South Carolina elected Strom Thurmond by write-in. And in Thurmond's case, he had the support of the local party (the popular incumbent had died shortly before the election, wheeas Murkowski was strictly an independent operator. And it was a bold signal that even in conservative Alaska, moderates could still beat Tea Party candidates.

(2) Barack Obama Elected President, November 4, 2008
Forget what you think of his Presidency for a second (and a majority of you disapprove, if I'm reading the polls correctly) and focus on how incredible the moment was. I'm a close political follower, but if you'd asked me in 2003 who Barack Obama was, I wouldn't have known. I do remember seeing then Senate Candidate Barack Obama's speech before the 2004 DNC and being awed. But if you had told me then that a man who's highest political office at the time was the Illinois State Senate, a man who was black, a man who had a Muslim name and a man who had attended a radical black church in Chicago (or at least been a member, who knows how often he really went, but I digress) would not only be elected President but win Virginia, North Carolina and Indiana in doing so, I'd have dismissed you as a real hack. But one incredible night in 2008, it all happened. The arc of American politics and civil rights will never be the same, regardless of what happens in 2012.

(1) The Florida Recount, November-December, 2000
There will never be a political story of this magnitude in our lifetime. This had ALL the elements. A stunningly close deciding vote tally in Florida (537 votes for Bush by the official results, 154 votes for Bush by the unofficial tally when the recount was halted and somewhere between a Bush win by 493 votes and a Gore win by 170 votes depending on the standard and the counties looked at, according to post-election studies), a national popular vote win for Gore, a drama set up by Gore losing his home state of Tennessee after never campaigning in it, the third-party candidacy of Ralph Nader gumming up the works, the butterfly ballot causing thousands of votes to incorrectly be case for Pat Buchanan, a Supreme Court case decided on party lines. This was Tilden-Hayes without the backdrop of the Civil War. And whether the "correct" guy won is still a matter of debate among the political class and the American public. The truth of the matter? We proved that the margin of error in vote tabulation is greater than 0.009%, the margin of Bush's official win, meaning that it is simply impossible to know who won with any certainty, except by looking at who was sworn into office. It's a shame that real voting reform hasn't followed.

I promised 5, but I need to do 1 honorable mention, which isn't terribly significant politically, but is fascinating none the less:
John Ashcroft Losses to a Dead Man, November 7, 2000
Before he was the Attorney General that famously signed off on all the controversial homeland security policies of the Bush administration, John Ashcroft was a United States Senator from Missouri. In 2000, Ashcroft was running for re-election against incumbent Governor Mel Carnahan. In October, Carnahan was killed in a plane crash, too late to be removed from the ballot and replaced with another Democrat. Roger Wilson, Carnahan's Lieutenant Governor and now-Governor of Missouri pledged to appoint Carnahan's widow to the seat if Carnahan won (if a dead man wins election to the Senate, the seat is considered vacant and the Governor can make a temporary appointment.) The vote totals on election night where 51% for Carnahan, 49% for Ashcroft. Thus, Mel Carnahan became the only dead man in United States history to win a Senate election. Jean Carnahan went on to the Senate for 2 years and John Ashcroft went on to the AG's office.

Have other great political stories of the past 10 years that I've missed? Send me your favorites.

A Miserable Labor Day
It's hard to think of a more depressingly ironic piece of news for Labor Day, a day built to celebrate America's blue collar workers to be celebrated with the backdrop of a Bureau of Labor Statistics report Friday that the U.S. economy created zero new jobs in August, the economies worst performance in nearly a year. Some would argue that is not quite as bad as it sounds, as the private sector was modestly net positive, offset by cuts in governmental jobs. But it is awful. Keep in mind that the economy needs to grow by about 200,000 jobs each and every month just to keep up with population growth. By this measure, since November 2007 (the month before the recession officially began), we are 15.6 million jobs in the hole, that is, there are 6.8 million less jobs and we need job growth of 8.8 million to keep up with population growth. So, just to get back to where we were in 2007, we'd need job growth of 400,000 jobs per month for six and a half years. And we aren't close. The result? An "official" 9.1% unemployment rate, but a more daunting decline in participation in the workforce not seen since before working women were the norm.

Remembering 9/11
Do you remember what you were doing on September 11, 2001? Where you were? What you felt? I think we all do. Next Sunday, it will have been 10 years since those awful attack in New York City, Washington and Pennsylvania. We have been the right combination of good and lucky to avoid a major attack in the 10 years hence. We are a more sober, less arrogant America than 10 years ago. We are more war-weary, more pressed economically and know a whole lot more about radical Islam. We are more politically divided than ever and our problems are large. But we are still One America, a feeling that flashed back through our consciousness earlier this year when we learned that Osama Bin Laden, the mastermind behind killing thousands of our innocent countrymen and women had been killed. A whole generation will be defined by the events of 9/11, which was really the coming of age moment for the Millennials. Let's never forget the unity and national pride that brought us together that day.

Happy Labor Day, everyone. Here's hoping that you are off work and that it is because you get today as a holiday, not because you can't find work.

Is the Perry Surge for Real?, Dangerous Voter Disenfranchisement

2011-09-01T20:27:00.002-04:00

Is Perry Really the Front-Runner?
The newest national polls are all in and they confirm one fact, if the primary elections were all held today, Rick Perry would be the GOP nominee for President. Fox News has Perry at 26% of likely primary voters versus 18%, CNN has the margin at 27% to 14%, Gallup 25% to 14%, all well outside the margin of error. There is only one major problem for Rick Perry...the primaries aren't being held tomorrow.Perry's appeal to the GOP base is obvious: he's a conservative, well in line with the Tea Party voters who dominate GOP primaries and he brings the credibility of 10 years of experience as Governor of Texas, much stronger qualifications than, say, Michele Bachmann, who has never held an executive office. Perry possess good looks, a charming and unassuming southern drawl and a great economic story from the State of Texas.But to my eyes, Rick Perry has some major obstacles from turning this polling theory into reality:(1) He Appears Unready for PrimetimeHe fumbles when asked about foreign policy, calls Ben Bernake (a Bush appointee) a traitor and seems to have a poor command of the national issues of the day. You don't have to be a genius to be President, but you do have to appear Presidential. And trust me, as much as the GOP is Tea Party-tilted these days, they also want to win a national election and party loyalists have to be worrying right now whether Perry would get squashed like a bug in a debate with Barack Obama (who, lest we forget after 3 painful years of governing, is very good at the whole campaigning thing.)(2) He Has to DebateMitt Romney has utterly owned the GOP field in the first couple of debates. He's polished, sharp and behaves like the next President. Perry is going to have to stand on a stage with Romney and convince the GOP he's the better guy.(3) Romney is the Next GuyAll of recent history would indicate that the "next guy in line" usually gets the GOP nod -- either a previous candidate who came up just short or a guy with a powerhouse name brand connection to the party. Perry has neither. Consider:1968 - Richard Nixon - previous Presidential candidate1972 - Richard Nixon - incumbent1976 - Gerald Ford - incumbent1980 - Ronald Reagan - previous Presidential candidate1984 - Ronald Reagan - incumbent1988 - George H-W. Bush - sitting VP and previous Presidential candidate1992 - George H-W. Bush - incumbent1996 - Bob Dole - previous Presidential Candidate2000 - George W. Bush - powerhouse name brand2004 - George W. Bush - incumbent2008 - John McCain - previous Presidential candidateOf the whole bunch, only George W. Bush in 2000 hadn't previously run for President. And the name "Bush" ain't no hay.(4) The Open Primary EffectThere is no Democratic Presidential race of any consequence and in many states (such as South Carolina), there are "open" primary systems, meaning that Democrats and Independents can choose to participate in the Republican primary if they choose to sit out the Democratic one (which won't be meaningful.) In many other states with "closed" primaries (such as New Hampshire), Independents still have the choice. Even in the states with "completely closed" primaries (such as my home state of New Jersey), you can still switch party registration very close to primary day to vote in the GOP primary and then switch back afterwards.My point in all of this is that there will likely be a sizable contingent of Democrats and Independents voting in GOP primaries this season. Does anyone think they will be backing Rick Perry?Don't get me wrong...Perry is the definitive betting favorite at this stage. But so was Rudy Guliani. My money is still on Romney, but it's still early and a lot can still happen.

Why Asking for ID Isn't a Good Thing
In Rolling Stone this month, Ari Berman writes an excellent piece on a recent campaign by the GOP in some states to place additional requirements on voters in 2012. The story is linked here.Requiring ID to vote sounds fantastic in theory -- who wouldn't want to stop ineligible voters from showing up? But it creates huge problems in states where 10% of the population has no state issued photo ID card and that population is largely poor and minority. I'm all for stopping voter fraud, but there is zero evidence of any election in the US in the past 20 years where widespread voter fraud existed. If we are truly worried about the wrong person showing up and a poll (and believe that someone would risk 7 years in prison to cast ONE false vote), there are simple checks that have been in place for years in many states, including cross-checking actual signatures against ones recorded on a voter registration form or requiring commonly available non-photo ID such as a utility bill (who, after all, is going to NOT vote but give their utility bill to someone else to vote falsely?)Does the Tea Party really believe that you should be REQUIRED to get a government ID in order to cast a vote, often at a cost? Doesn't that sound a lot like requiring people to buy a product or service, something they are suing the Obama Administration over as unconstitutional?If you like this site, tell your friends.

The State of the Presidential Race, Many Months Out

2011-08-22T19:47:00.003-04:00

If you read this space frequently, you know that I firmly believe in the provable theorem that polling more than a year out from a Presidential race is not fairly predictive of the outcome of the actual race. From the unbeatable George Herbert Walker Bush to the clear one-terms Ronald Reagan and Bill Clinton, political comebacks and political disasters abound. Recency is everything in politics.

So it is with the 2012 race. President Obama could enjoy a reviving economy and go on to win decisively. He could continue the long popularity slide of his Presidency to date and wind up with 1980-style whipping. Whether you like or dislike the President, it's hard to deny that none of us, with any kind of reasonable certainty, can know his fate.

Having said that, I'm all about looking at races and understanding where they stand. So, let's look at the latest, post-Pawlenty, post-Perry announcement polling and see where the 2012 race might wind up. Gallup has just released a series of heads up match-ups for the Presidency and they look as follows:

Obama vs. Romney - Romney +2%
Obama vs. Perry - EVEN
Obama vs. Bachmann - Obama +4%

So, let's talk about the map where Obama enjoys something between a 4 point edge and a 2 point deficit.

First, let's safely assume that any state John McCain won will be a safe GOP state in a close race (Obama won by more than 7 points nationally in 2008):

This gives, to the prospective GOP nominee:
Wyoming, Oklahoma, Utah, Idaho, Alaska, Alabama, Arkansas, Louisiana, Kentucky, Tennessee, Kansas, Nebraska, West Virginia, Mississippi, Texas, South Carolina, North Dakota, Arizona, South Dakota, Georgia, Montana and Missouri

This gives the GOP nominee 181 electoral votes with the new census counts.

On the flip side, let's assume that any state that Obama won by 15 points or more is a relatively safe Democratic state (the worst-case scenario in this polling is less than a 10 point national swing from the 2008 vote.)

To Obama, this therefore gives:
District of Columbia, Hawaii, Vermont, Rhode Island, New York, Massachusetts, Maryland, Illinois, Delaware, California, Connecticut, Maine, Washington, Oregon, Michigan, New Jersey and New Mexico

This gives Obama 208 electoral votes by the new count.

On the GOP side, let's assume that the two really close states in 2008, which were exceptional outliers on the Democratic side, do not repeat. Namely, let's put North Carolina and Indiana in the GOP count.

This adds 26 to the GOP side and takes the GOP total to 207.

So we are building off a base of 208 for the GOP and 207 for the Democrats, with 270 votes needed for victory.

The states in play are:
Wisconsin, Nevada, Pennsylvania, Minnesota, New Hampshire, Iowa, Colorado, Virginia, Ohio and Florida

So what are some of the strategies that a GOP candidate looking to unseat Obama could use to get to 270?

(1) Take the closest states from 2008
If the GOP candidate simply went in rank order of the next-closest states, they could target:
Florida, Ohio, Virginia and Colorado. Between these 4 states lie 68 electoral votes, vaulting a prospective GOP nominee to 276 and winning the election.

(2) Go Big or Go Home
A variant of John McCain's strategy in 2008, simply target the big prizes. Aim for Florida, Ohio (which no Republican has EVER won without taking) and Pennsylvania. Between the 3, they hold 66 electoral votes, giving 274 to a GOP nominee who sweeps them.

(3) Go Hispanic
Put Rubio on the VP ticket and target pushing the GOP share of the Hispanic vote up from the 25% or so that John McCain enjoyed to a more respectable 35% or 40% and take the heavily Hispanic states. This means fighting for Florida, Colorado and Nevada, which would yield 43 electoral votes, pushing the count up to 250. The problem with this strategy is that you still need Ohio and even that is not quite enough, as it only raises the total to 268. You still need one more outlier state, possibly Iowa or Virginia to complete the sweep.

(4) Go for the Rust
Target economically depressed states. Ohio has been swamped by the recession, as have Florida, Nevada and Wisconsin. Those 4 get you to 269, which is enough to prevent a victory, although a GOP candidate would still need 1 more state to complete the sweep.

(5) The Southern / Flyover Strategy
The Northeast and Mid-West are Obama's wheelhouse, so why fight him there? Focus on taking back the South, namely Florida and Virginia and fight for flyover Iowa. This gets you to 250. Still some work to do, so go hard for Iowa as well, which gets you to 268...pick up one more state and you are there.

Strategies 1 and 2 seem by FAR the most feasible to me. The key issue with strategy #1 is that Virginia continues to trend blue, as does Colorado. Ohio and Florida certainly seem winnable to a GOP candidate. Strategy #2's greatest risk is Pennsylvania, which hasn't gone red in quite some time (24 years by 1988, to be precise.) Strategies 3, 4 and 5 just require too many resources in too many states with no room for error.

Interestingly, if you look back to 2008, I wrote extensively about the importance of Colorado in deciding Presidential races. Much of the attention in races is rightly focused on the biggest swing states of Florida, Ohio and Pennsylvania.

But, as I mentioned above, Pennsylvania is a long-shot for any GOP candidate in a close race. And Ohio and Florida are close to must-haves for a GOP candidate, but are, in and of themselves, insufficient to win.

Colorado didn't wind up getting a lot of press in 2008 because the race simply wasn't close enough and the election was basically decided before the polls even closed there -- once Obama took Ohio it was more or less curtains for McCain. But if you start with the most Democratic states in 2008 and go down the list until you get to 270, you get to 263 without Colorado and 272 with it. Doing the same thing on the Republican side, you get to 266 without Colorado and 275 with it. So if the 2008 pattern holds, Colorado will be THE swing state.

Broaden out to the three states closest to that inflection point and you see they are Iowa, Colorado and Virginia.

Obama has 257 without them, so he wins if he takes Virginia (+13 takes him to 270 EV's) or with both Iowa AND Colorado (+15 takes him to 272). Conversely, a GOP candidate would have to take Virginia AND either Iowa or Colorado.

Colorado and/or Virginia could be the key to the whole thing. Obama certainly needs 1 of the 2 in most feasible scenarios and the GOP may well need both. Here's to shifting political power in the US.

Of course, if it's a 10 point rout in one direction, this discussion is all academic. But it's been a long-time since we had a 10 point rout (28 years on election day.)

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Is Rick Perry Ready for Primetime?, Where Will the Jobs Come From?

2011-08-21T12:59:00.002-04:00

Federal Reserve Treason?
Texas Governor Rick Perry's entry into the 2012 Presidential race has turned the contest on its head. Perry, hardly a well-known national figure before this year, instantly became the national man to beat, surging to the front of polls of Republicans. Well Romney still holds a comfortable lead in New Hampshire and Michelle Bachmann will undoubtedly be competitive with Perry in the Iowa Caucuses (Romney is more or less conceding Iowa), Perry has jumped to first in the betting odds overnight (his odds of receiving the nomination are 37%, Romney's are 30%, according to Intrade.)

But Perry has stumbled out of the gate, stopping just sort of calling Federal Reserve Chairman Ben Bernake (who has originally appointed by President George W. Bush) a traitor and implying he would get roughed up if he came to Texas. He has Karl Rove calling him a lightweight and major GOP figures questioning his intellect.

The George W. Bush comparisons are flying fast and furious, and for obvious reasons. Perry followed Bush as Governor of Texas, both have stepped on their words at times and questions about the intellectual horsepower of both persist. And both have that signature Texas twang.

I look at Rick Perry and see a different parallel. In 2008, a conservative, experienced, southern politician was more or less begged by conservatives in the establishment to get into a race that was being fought between a moderate establishment candidate and a series of conservatives who couldn't win a general election. When this candidate finally got in the race late, he instantly vaulted into the top 2 in polling, but quickly flamed out as he ran a horrible campaign that failed to live up to the pre-candidacy expectations. That man was former Tennessee Senator and former star of Die Hard and Law and Order, Fred Dalton Thompson. I think Perry is this year's Thompson. Conservatives liked the idea of his candidacy but will soon sour on the reality. Assuming Perry shows up for the debate September 7th, we'll get the first glimpse of if I'm right.

Where Will the Working Class Work?
A stable democracy demands an economy where the working and middle classes exist and can work in jobs that support a decent standard of living. Throughout history, different structures have emerged that support growing economies in ways that support broad employment. Agrarian economies had the population working in fields, planting and harvesting crops. After the industrial revolution, the working class moved to higher value work in factories as farming became more automated. The 1990s saw the dawn in the US of the service economy, with more people working in call centers, retail stores and financial services and fewer in factories as manufacturing started to move abroad.

So, with 9% unemployment now, where will the jobs come from? Apple, the crown jewel of American innovation and the most value company in the world doesn't even crack the top 50 employers in the US. The top 5? Wal-Mart, McDonald's, UPS, Sears and Home Depot. Three retailers, a fast food restaurant and a parcel delivery service. It hardly feels like the 21st century economy.

The risk, of course, if broad swaths of the population either remain unemployed or work for peanuts (or Big Macs) at McDonald's and economic wealth continues to concentrate amongst the gifted few that land the big dollars in capital markets or as an executive at Apple, is that the majority of Americans will no longer feel the system works or that they have a stake in the economy. The lack of a stable middle class is extremely destabilizing, as is evident in much of the third world.

So how do we solve this? We should have an industrial policy that focuses on the industries that generate middle class jobs, as Germany has done with high-end manufacturing. Our problem is, we have no political will to create such a coordinated policy and the deficit taints the possibility of serious reinvestment in the economy.

Until that changes, expect the wealth gap to continue to grow.

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Bachmann Wins Straw Poll, Perry In, Pawlenty Out

2011-08-14T09:37:00.003-04:00

Bachmann Beats Back the Ron Paul Machine
Ron Paul has a knack for good showings in straw polls, a fact evidenced many times over his previous attempts at running for President. His support base is obviously a minority of the Republican party, but they are highly enthusiastic, show up and Paul is always well funded. So it is not insignificant that Michelle Bachmann was able to show up as a Presidential newbie and beat Paul in the Ames Iowa Straw Poll, the first official test of GOP Presidential candidates in Iowa.

Front-runner Mitt Romney had basically not decided to participate, probably a savvy move since he was not going to win either the straw poll or the Iowa caucuses, which cater to the more conservative wing of the party. His strategy is to dominate the more moderate New Hampshire primary and ride that win to national victory.

Jon Huntsman was also not in the game, as an even more moderate candidate than Romney. His strategy is...well...I'm honestly not really sure. He has no shot that I can see against Romney in New Hampshire and will get swamped by the right wing in conservative states like Iowa and South Carolina. But I digress.

The results of the straw poll were as follows:
Michelle Bachmann -- 29%
Ron Paul -- 28%
Tim Pawlenty -- 14%
Rick Santorum -- 10%
Herman Cain -- 9%
Rick Perry (Write-In) -- 4%
Mitt Romney -- 3%
Newt Gingrich -- 2%
Various Others -- 1% (Jon Huntsman - 0.4%, Thaddeus McCotter 0.2%, etc.)

These results solidify Bachmann's standing as the Tea Party alternative to the more mainstream Romney, but she has to look over her shoulder at Rick Perry, a Tea Party darling who has actually governed.

So, in my book the winners are:
Bachmann -- solidified as a legitimate candidate.
Paul -- encouraging enough to him to keep running (although he has no shot at actually getting the nomination.)
Santorum -- 10% means that the underfunded Santorum will keep getting invited to debates although I give him zero chance of getting the nod.
Cain -- similarly, a 9% showing makes him a legitimate alternative, but again, with no chance of the ultimate prize

The big losers:
Pawlenty -- staked his campaign on a win in Iowa (more on that in a second.)
Gingrich -- it is obvious at this point that the conservative establishment Republican delights neither conservatives nor the establishment. He should probably drop out, but I think he is enjoying the stage.
McCotter -- okay, he wasn't getting invited to debates anyway. But betting your whole campaign on Ames and getting 0.2% is pretty pathetic for the a guy who actually holds elected office.

Perry Gets In
Rick Perry will be THE subject of the next Republican Presidential debate on September 7th. And he is instantly in the top 2 candidates. He brings to the race an unblemished economic and social conservative and a great economic story in Texas. His liabilities will be that he is far less polished and likely not to be as strong a debate performer as front-runner Mitt Romney and that he has expressed some views in the past that would be huge liabilities in the general election, including expressing potential support for Texas succession (although if you read the actual quote, it is less extreme than it is usually represented, but still bad) and a very absolutist view on social and religious issues.

His candidacy clearly hurts Michelle Bachmann as he is a more polished and accomplished representative of the same basic points of view. Bachmann inspired early and is still in the game with the Ames win, but it gets harder and harder for her, with the race looking a lot like a mainstream New England moderate pitted against a southern conservative, a classic GOP civil war.

Pawlenty Out
Recognizing the reality on the ground, Tim Pawlenty is exiting stage left. It's a shame, in a way. Pawlenty had a great record as a moderate governor of a purple state. He was smart and accomplished. But Pawlenty never established a core constituency, moderates were already aligned to Romney and conservatives far preferred Bachmann or Perry. Pawlenty bet the farm on the Ames poll, and after not being able to crack the top 2, exiting stage left this morning.

This is a three-way race between Romney, Perry and Bachmann at this point. The others will make a little noise, Paul with libertarians, Santorum with social conservatives and Cain with the populist talk-radio crowd, but none can win the nod.

Lots more debates and lots of time to come. Heck, Sarah Palin could even get in (although I'd advise against it, I think she'd get rolled against this field.)

Let the games continue.

A Feisty Debate

2011-08-12T15:39:00.003-04:00

They Came to Play
Here is my quick review of debate performances from last night from the GOP candidates for President:
Mitt Romney -- on point, on message, side-stepped questions about his moderate record and venture capital past deftly. Lacked the passion to inspire the right, who didn't like him anyway, but continued to solidify his status as the mainstream front runner, a status he will need when Rick Perry gets in this weekend.

Michelle Bachmann -- a sub-par performance versus her coming out party at the last debate. Engaged in pointless squabbling with Tim Pawlenty which helps neither of them. Pawlenty is at about 3% in the polls...why is Bachmann wasting her venom on him when Romney is the real opponent?

Ron Paul -- debates just aren't his specialty. I have a soft spot for Paul and his credible and consistent commitment to libertarian values. But he is far too professorial and not nearly engaging enough at these forums. He wins points for being out front on auditing the Fed, a step the entire field has jumped on now but that Paul has been advocating for years.

Jon Huntsman -- utterly uninspiring. I give him points for sticking to his guns on his moderate positions, although that won't likely help him with the GOP primary and caucus crowd, except in open states, but Huntsman had very little in the way of original ideas or inspiration.

Newt Gingrich -- one of his best performances. For the first time, looked and sounded like a credible candidate, put forward real ideas and took on the moderators. Probably too little, too late for Newt, but fun to watch.

Tim Pawlenty -- didn't miss his second chance to go after Romney. Did a much better job of exposing his record than last time and had much more concise, coherent answers. Still a bit of a bore.

Herman Cain -- the fact that Romney was praising him shows you all you need to know -- Cain is a side show with no real chance.

Rick Santorum -- unexpectedly strong performance from the conservative firebrand. But he is in dead last in the polls, having failed to bring in even his conservative base. May not even get invites to future debates.

Winners?
Romney and Gingrich

Losers?
Bachmann (how fast is her star fading?), Huntsman

In my view, the door is still wide open for Rick Perry. I don't think any of the rest of the field can take down Romney.

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Osama Bin Who?, What to Make of the State of the Economy, Debate #3 Prepping

2011-08-06T12:56:00.004-04:00

President Obama - At the Low Point
I remember when Osama Bin Laden was killed by a daring raid on his compound in Pakistan just a few months ago. Political pundits, both wishful Democrats and mainstream commentators were speaking of how this would seal the deal to re-elect President Barack Obama to a second term. I got a good laugh at the time. It isn't that President Obama didn't get a bounce in the polls as a result of the Bin Laden raid - he clearly did. For a fleeting second, we were just a bit more unified as Americans. It is just that I know how short the American attention span is. President George Herbert Walker Bush was flying at 89% approval in the spring of 1991, coming fresh off victory in the Persian Gulf. By November of 1992, his approval was 34% and he got a mere 38% of the vote in his attempt at re-election.

Whether President Obama is re-elected in November 2012 remains to be seen. As I just noticed, a lot can happen fast in American politics. What is clear is that the approval benefit that the President got from the killing of Osama Bin Laden has faded and then some. The last few weeks of debt-ceiling wrangling has taken its toll on his numbers, as evidenced below.

His monthly numbers put him at the low point of his Presidency. Being clearly into the negative numbers is perilous for a guy hoping to be re-elected. The gamblers on Intrade still think an Obama re-election is more likely than not (it is currently priced at a 54% probability), but less likely than at any previous point in his Presidency. Simply, unless the Republicans commit suicide with a candidate like Bachmann, the President will need to at least hold and probably improve his current job approval numbers to get four more years in the White House.

Correcting Stock Markets, Austerity and Debt Downgrades, Oh My!
The investment world took a collective gasp this week. It wasn't one event. In fact, in a lot of ways, the fundamentals were looking better. The debt ceiling was raised. The European central bank is looking into buying the debt of Italy and Spain, providing an under-pinning of support for the fragile Euro. Corporate profits are at record levels. But people are very nervous. And there are causes to be nervous.

1. Austerity
The debt deal will clearly lead to lower government spending, across the board, which has an anti-stimulative effect on an economy, at least in the near-term. $666B of the $787B in stimulus funds (85%), the keystone economic program of the Obama administration to date have already been spent. The "stimulus by another name" payroll tax credit expires at the end of the year. Extended unemployment benefits are also set to expire at the end of the year.

President Obama has called for extension of unemployment benefits, an extension of the payroll tax cut and increased spending on infrastructure, all of which sounds like stimulus without the President actually calling it stimulus. But is it realistic to spend more and tax less at the same time that the Congressional panel must find another $1.5 trillion in cuts or tax hikes over the next 10 years? It's hard to do deficit reduction and stimulus at the same time.

2. The Stubborn Jobs Picture
Hiring actually picked up a little in June, but progresses at an anemic pace. The 117,000 jobs created last month are scarcely enough to keep pace with population growth. The official unemployment rate remains a stubbornly high 9.1%. If you include those who have given up looking for work, it's an even-more depressing 10.9%. Include those working part-time who are trying to work full-time and you get the "underemployment" rate, a whopping 16.4%.

People who aren't working aren't generating economic output, paying taxes or spending money. Not a great place to be.

3. The Debt Downgrade
Standard and Poors downgraded the quality of U.S. Government Bonds from the highest rating of AAA, a rating U.S. debt has held for all of modern history, to its second-highest rating of AA+. This has received a lot of press, but is probably overblown. Treasury yields are near the lowest levels in modern history as the massive sums of cash not being used to grow the economy are finding their way to the "safe haven" of governmental debt. There simply is no other debt market that can hold that much cash and so it is highly likely that Treasury Yields will remain low of the near-term and the government will not have an issue finding a home for its debts.

Besides, let's be real...S&P doesn't exactly have a stellar track record. Those Collatoralized Debt Obligations that imploded the economy in 2008? AAA rated by S&P. AIG's debt in 2007? AAA rated by S&P. Is S&P really saying that governmental debt now is more risky than AIG or CDO's were then? Or perhaps they are just admitting that they aren't very good at projecting risk.

At any rate, the economy continues to limp along. Whether it will take a turn towards higher growth or slide back into a second recession is difficult to predict. But it will have a huge impact on the election.

Time for Another GOP Debate - What to Watch
Next Thursday at 9 PM ET, Fox News will host the third official GOP Presidential primary debate. I say third official, because the first debate was before the major players got in and therefore excluded key contenders like Mitt Romney and was not broadly watched. This debate should feature all the key players, except for the still-undecided Texas Governor Rick Perry, who really is the guy everyone wants to see.

What we should be watching is how hard the other candidates come after Romney, who is the clear front-runner at this point. Romney has been on lock-down during the debt ceiling discussion, stating no point-of-view. Are the other candidates going to call him on it? Go after him for Romney-care? Try to sell themselves as the more plausible alternative?

Tim Pawlenty was widely criticized for playing it very safe in the second official (but first broadly participated) debate and failing to go after Romney. His campaign is languishing, so don't expect that this time. Expect Bachmann to be full of fire, as she always is. And expect the others to attempt to do something to break themselves out of the pack. I'm just not convinced that any of the present field can beat Romney or that anybody other than Romney can beat Obama. But, like I said, Rick Perry isn't in the game yet.

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A Good Bargain for America

2011-08-01T17:59:00.002-04:00

I know that the compromise struck between President Obama and Congressional Republicans will make a number of people unhappy. Tea Party members will be livid that the cuts aren't deeper and faster and that tax cuts will be on the table for the joint select committee. Liberals are livid that there are no revenue increases in day 1. But, make no mistake about it, this is a very good deal for the country.

The details of the deal are as follows:
* $917B of defined cuts over the course of the next 10 years. Basically these cuts are the cuts agreed to early on in the Biden deficit discussion and impact both Defense and Domestic Discretionary spending.
* $1.2T in cuts to be identified by a bi-partisan select committee comprised of 6 Democrats and 6 Republicans. The committee must report back recommendations by Thanksgiving and Congress must act by December or draconian across-the-board spending cuts will be imposed across the budget, including both entitlements and defense.

Would I have liked to see an upfront end to the Bush Tax Cuts? Absolutely.

Do I think we could have gone deeper, faster with cuts in Defense and wasteful spending such as agricultural subsidies? Sure.

Do I wish that we'd just passed Erskine-Bowles instead of appointing YET ANOTHER committee to find out what we already know we need to do? Of course.

But this ensures a significant reduction in the deficit and provides the ammunition to force a real compromise that addresses both entitlements and tax reform. And, most importantly, it ensures default. Everything is on the table as it should be. I am the most optimistic that I've been that we will address the deficit in a responsible way that I have been in over a decade.

Let's hope the thing passes.

The Senate should not be an issue as there is broad support for the deal. The House is a slight question mark with the progressive caucus and the tea party caucus both in firm opposition for precisely opposite reasons, the progressives because the cuts are too deep for their liking and there is no immediate tax changes and tea party members because they don't feel the cuts go deep enough and don't touch entitlements immediately.

This is the best possible deal given the circumstances. President Obama, Senator Minority Leader Mitch McConnell and House Speaker John Boehner deserve credit for finding common ground, even though it took way too long.

House voting begins in about 30-40 minutes. I predict passage. I don't believe Speaker Boehner would be holding the vote if he didn't think he could get to 216. I would guesstimate that the bill will get in the neighborhood of 240 votes, with bi-partisan support, although with more GOP support than Democratic support. It should sail through the Senate with 70+ votes.

I'll keep you posted.

Watching Rome Burn

2011-07-30T07:46:00.003-04:00

Why Everyone Should Be Ashamed About the Debt Limit
So, here we stand. 72 hours before the Treasury Department says that the government will run out of money to fund the operations of the Federal Government. And there is no deal in sight. No one has proposed a plan that would even remotely balance the budget for this year. The budget compromise, agreed to by all sides just a few months ago, is off by over 40 cents on the dollar. Even the most aggressive spending reduction plan out there, the Ryan plan, wouldn't come close to balancing the budget anytime in the next 10 years. Yet there is no deal in sight.

This is a very high stakes game of chicken. Over $750 billion worth of wealth has been wiped out in the past week as stocks have faltered, fearing a US default may actually happen. All other policy discussion in Washington has been put on hold for this debate. And no one is leading.

The GOP criticizes the Obama Administration for not proposing a detailed plan for deficit reduction. They are 100% right. In fact, the lack of any meaningful administration attention to our disaster of a balance sheet was the primary reason that I voted Republican in the mid-terms in 2010. The GOP taking of the House did succeed in bringing the issue into focus, but has not sparked the grand compromise that all sides should want. I would further criticize Obama heavily for pushing very hard for the Erskine-Bowles deficit reduction commission, then largely ignoring their very good proposal for months, rather than pushing for adoption at a moment in time when he had broad bi-partisan support from the center for a package that included sensible spending cuts, tax reform that would increase revenues and make the tax system far more efficient and necessary entitlement reforms. In other words, entitlements from the left and taxes from the right becoming third rails is entirely Obama's fault because he did not seize the moment. Finally, Obama literally handed the GOP his best leverage in this discussion by agreeing to an awful tax cut bill at the end of last year while not even asking for a debt ceiling hike at the same time.

Oh, my friends at the GOP, where do I start? Taxes are the lowest they've been since the Eisenhower administration, yet they oppose eliminating special tax breaks for Exxon Mobil? If that isn't an extreme point of view, I don't know what is. And other than the freshman, where exactly where these spend thrifts when federal spending grew by 15% (as a % of GDP) during the Bush administration while taxes were cut by 25%? The people who signed up for Medicare Part D and two wars while asking the American people to pay LESS are suddenly offended when the check comes? What a joke.

The world won't end if a bill isn't passed by August 2nd. The Federal government may have a few more days than the original estimate, thanks to higher than expected tax revenues. And if we do breach the limit, there are short-term options. In leaks to the press, it appears clear that the Obama Administration would avoid the worst catastrophe, failing to make payments on US Bonds, but they would do so at a brutal price to the most vulnerable, delaying social security and unemployment checks and other payments that can be deferred. But don't think for a second that the consequences won't be severe. We have a very fragile economy, which has been teetering on the verge of a double-dip recession and heightened interest rates as well as income lifeline being cut off to the working class could very easily plunge us back into recession, which would ultimately make the deficit problem a whole lot worse.

Let's hope that there is a deal this weekend. Almost any deal is better than no deal. And let's hope eventually the GOP gets serious about compromise and Obama gets a real plan.

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All Sizzle and No Steak, Could Perry Disrupt the GOP Race?

2011-07-17T10:39:00.002-04:00

How the "Grand Deal" is Rapidly Turning Into NothingIt's quite an interesting narrative around the debt ceiling. Historically, debt ceiling increases have been non-events in American politics. The right of the government to borrow is authorized by law. From the country's inception until 1917, Congress individually reviewed every bond issuance. In 1917, realizing that the country's affairs and balance sheet had become far too complex for such micro-management, Congress passed the Second Liberty Bond Act, which authorized blanket federal borrowing, up to a preset limit, at the time, $8 billion. Since that time, Congress has continually raised the limit as inflation and deficit spending have driven the debt up over time. Historically, these increased have passed easily. Congress passed debt increases in 2002, 2003, 2005, 2007, 2008, 2009 and 2010 with little fanfare (do you even remember a debt ceiling debate during the Bush Administration?)

This time however, the newly minted House GOP majority, buoyed by Tea Party activists, saw an opportunity to set the stage for their fiscal policy goals by demanding major deficit reduction in return for the ceiling increase. House Speaker John Boehner set the standard that at least $1 in debt-reducing initiatives must pass for every $1 increase in the debt ceiling. Rep. Paul Ryan laid out the House GOP blue-print which called for radical changes to entitlements and a whole bunch of non-specific cuts to discretionary spending (the Ryan Plan set targets but did not actually say WHAT it would cut beyond entitlements.)

It now appears that the GOP was bluffing and doesn't actually want a deal. Why do I say that? Because President Obama has embraced their somewhat silly position around the debt ceiling (the debt ceiling is a product of laws Congress already passed, so why do they suddenly act shocked and demand cuts when the check comes?) and pushed for a grand bargain, a $4 trillion deal over 10 years that would include 85% spending cuts and 15% new revenues, with the new revenues being generated solely by closing corporate and wealthy tax loopholes. He even put entitlements on the table.

No dice, says the GOP. "Everything" is on the table say John Boehner and Eric Cantor, "everything" that is except tax increases. With taxes sitting at their lowest level in 60 years and the President proposing only the most symbolic of tax hikes, the GOP position is somewhat absurd.

Now it is the GOP, led by Senate Minority Leader Mitch Mcconnell, who are pushing for either a much smaller deal or a gimmick by which Congress would agree to debt ceiling increases in a way that allows the GOP to vote against them but still let them happen.

I've been critical of President Obama's negotiating tactics in the past - I thought he cut a horrible deal on the Bush Tax Cuts and gave away a ton of leverage and I thought that he gave the GOP 80%+ of what they wanted in the Fiscal 2011 budget. But, I admit, I was wrong about this one. He has played it masterfully.

The GOP looks hypocritical and is stuck defending why they would walk away from $3+ trillion in spending cuts because they don't want Exxon-Mobile or private jet owners to lose their special tax exemptions. They look unserious about deficit reduction and like they are simply pandering and playing politics.

In short, the GOP is losing the debate and is scrambling to figure out there new position. Boehner, who actually wants a deal, is wedged by Eric Cantor, who has no interest in legislation. Several others in the GOP have expressed openness to closing tax loopholes, including conservative Tom Coburn and moderate Lindsey Graham. But it looks like there will be no deal.

So, the can gets kicked down the road and the GOP loses credibility. What a shame.

Rick Perry Could Make Waves
It looks increasingly likely the Texas Governor Rick Perry will enter the GOP 2012 Presidential field. He is a compelling candidate in many ways - he obviously has executive experience, he has strong conservative credentials (which is obviously very helpful in GOP primaries and caucuses) and he is a good speaker. In short, he is Michelle Bachmann with more credibility.

His entry would clearly be bad for Bachmann as they would be fighting for the same set of voters. Moderates and those most interested in general election victory would still back Mitt Romney, although conservatives who were holding their nose and supporting Romney because they viewed him as the only credible general candidate, might jump ship.

So, in short, how relevant Perry would become depends on where he pulls his support from. If he steals support mostly from Bachmann, he will simply solidify Romney's national lead. If he stills primarily from Romney, he could win or he could open the door for Bachmann to win with a plurality of Tea Party voters and talk radio listeners.

Either way, in what has become kind of a ho-hum field, Rick Perry's entrance adds an element of excitement.

The Grand Deal Falls Through, How Republicans Have Changed the Subject, Why John Boehner is Good for the GOP, 2012: Romney or Bust

2011-07-10T13:23:00.003-04:00

No Mega-Deal on the Debt
President Bill Clinton's Democratic Party was dealt a complete spanking in the 1994 mid-terms after public backlash against his proposed health care reform sparked the now famous Republican Revolution and Newt Gingrich's Contract with America. Clinton deftly adapted to the new political reality and negotiated with Gingrich to reform welfare and restrain government spending, which led to budget surpluses, a resounding re-election in 1996 and a lasting legacy for both Clinton and Gingrich.

President Barack Obama's Democratic Party was dealt a complete spanking in the 2010 mid-terms after public backlash against his adopted health care reform sparked a Republican takeover of the House and significant gains in the Senate. Some of us (myself included) hoped that this would lead to a grand deal on the deficit, built on the basis of the bi-partisan debt commissions recommendations.

It appears it is not to be, at least for now. The President and House Speaker John Boehner had been quietly attempting to negotiate a 10-year, $4 trillion deal that would have reportedly included not only tax changes but reforms to all three major entitlement programs. Such a deal would've been course-altering for the country and a major feather for both.

But, as is often the case, political reality got in the way. The House GOP wasn't going to bite on even the smallest of tax increases. Liberal Democrats in the House and Senate weren't going to go for entitlement reform. No compromise, no deal.

So, it appears we will likely get a deal half that size, that consists entirely of spending reductions. $2 trillion over 10 years really isn't as draconian as it sounds. It frankly wouldn't even get government back to the size of 5 years ago. But it's better than nothing. And based on the stated GOP principle that they will only vote to extend the debt ceiling only by the amount of spending that is reduced, $2 trillion would still be sufficient to get the country through the 2012 elections, all of which would set up a huge set of decisions for the population in 2012.

Just remember:
(1) The Bush Tax Cuts, extended by Obama, are slated to expire on January 1, 2013.
(2) Also on January 1, 2013, major tax changes take place as part of the Health Care reform act. These include a 0.9% Medicare tax increase on wages over $200K and a 3.9% tax on investment income for those making over $200K.
(3) Assuming a $2T increase, the new debt ceiling will be breached, likely in late 2013.
(4) The individual mandate tax for health care takes effect on Jan 1, 2014.

So, We, The People will likely have a lot to decide next November about the future of the country.

It's All About Spending, Baby
The 111th Congress, over the course of 2 years, passed 383 bills which became law. Granted, some of these were to name post offices and the like, but some very meaty legislation became law in 2009 and 2010, including:
* SCHIP Expansion
* The Lily Ledbetter Fair Pay Act
* The Stimulus Package
* Healthcare Reform
* Two major financial reform bills (the CARD Act and the Dodd-Frank Act)
* 9/11 First Responders Act
* Start Treaty
* Don't Ask, Don't Tell Repeal

In it's first 6 months, the 111th Congress has passed only 23 bills which have become law, or to put it another way, is only on pace to produce 24% as much legislation.

And this is just the way the GOP wants it. Their desire, coming out of the 2010 mid-terms, was to make the discussion all about reducing government spending. And they have succeeded, in spades. First, it was the Fiscal 2011 budget, in which they extracted over $80 million of spending reductions, albeit less than what they had hoped. Now, it is the debt ceiling increase, which will allow them to extract a large number of spending cuts and will consume all of the political air time until at least early August.

Then, lest we forget, Fiscal 2012 begins in October, and save for the House passing a Defense bill, virtually no work has been done on this opportunity for the GOP to extract more cuts.

When was the last time that you heard anyone talk about Immigration Reform, Environmental Policy or anything other than the budget?

John Boehner: Policy, Not Just Politics
House Speaker John Boehner is good for the GOP. Will Boehner and I disagree on a whole host of policy issues, I greatly respect the fact that he is about getting things done, not simply political grandstanding. It was Eric Cantor and whining wing of the GOP that caused the debt talks to break down (along with the liberal whining wing of the Democratic party), not Boehner. Boehner was willing to put everything on the table.

He also masterfully worked through deals with the White House to extend the Bush Tax Cuts and cut the deal that passed on the 2011 budget.

The more Republicans out there actually trying to make policy and strike deals versus simply scoring political points against the White House, the better off the nation and the GOP are.

Romney Is The Only One Who Can Win
Okay, maybe that's a little too bold a statement. If people actually knew Tim Pawlenty or Jon Huntsman, either would be a viable choice against President Obama, in what could wind up being a very close election in 2012. But that isn't going to happen. It's Romney vs. Bachmann unless someone else breaks out very quickly. And Bachmann can't win. I grant you that polling at this stage of the race is still very tenuous, but look at the average numbers this month:

Obama vs. Romney: Obama +5.5%
Obama vs. Gingrich: Obama +11.5%
Obama vs. Huntsman: Obama +14.0%
Obama vs. Pawlenty: Obama +14.2%
Obama vs. Bachmann: Obama +14.3%
Obama vs. Paul: Obama +18.0%

No polls yet on Obama vs. Thaddeus McCotter (go look it up, if you don't know what I'm talking about.)

It's actually quite amazing given how bad the economy is that President Obama still leads the field. Romney is within striking distance, no one else is even close. I expect things to tighten, particularly if we keep having jobs report like June's.

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Obama vs. Cain: Obama +19.0%

Time to Gerrymander, The Path to Success on the Debt Ceiling, Looking at the Party Factions, Reasons to Celebrate American Independence

2011-07-03T11:44:00.005-04:00

43 States Full of Gerrymandering
In the early 1800s, Democratic-Republican Governor of Massachusetts Elbridge Gerry, working with allies in the state legislature, crafted a map of State Senate districts that was designed to thwart the Federalists by building as many majority Democratic-Republican districts as possible. The 12th District, designed in the Boston area, closely resembled a salamander. Hence, the terry Gerrymander was born as a symbol of designing districts not on the basis of any rational grouping of towns and neighborhoods, but with the specific intent of benefit the party in power.

And it has been thus for the past two centuries. It is a time-honored tradition, used by both Democrats and Republicans alike, to shape Congressional districts to benefit ones own party.

The 2012 Congressional elections will be the first with newly drawn districts based on the 2010 Census. All 50 states will have to redraw, including not only the ones that are gaining or losing seats, but also the ones where the seats are staying the same, as population shifts have still made current districts uneven.

Seven states have laws on the books to protect against Gerrymandering. These states use a bi-partisan commission to draw districts in logical ways to avoid this effect. Arizona, Hawaii, Idaho, New Jersey, California, Minnesota and Washington all fall into this category. For a 7 other states, Gerrymandering is irrelevant as they hold a single at-large seat. Delaware, Vermont, North Dakota, South Dakota, Montana, Wyoming and Alaska fall into this category.

In the remaining 36 states, however, it is open season. Of the largest of these redistricting prizes: Texas, New York, Florida, Pennsylvania, Ohio, Illinois, Michigan, Georgia, North Carolina and Virginia, only 1 (Illinois) is a Democratically-controlled legislature and only 2 others (New York and Virginia) have divided legislatures; 7 of these 10 states are firmly controlled by Republicans.

Whatever your personal views on Gerrymandering (I support the bi-partisan commissions, most partisans seem to favor those when they are out of power and oppose them when they are in power), the dynamics of this year show the huge intrinsic advantage that Republicans have in the House in the 2012 elections. Not only are Republican states by and large picking up seats: Democratic-leaning states are losing 7 seats, GOP-leaning states are gaining 6 (Nevada, a swing state, is gaining the 7th seat), but they will largely control the redistricting process, which could swing as many as a dozen seats to the advantage of the GOP.

So, any hope the Democrats had that higher turnout in 2012 will help them overcome 2010 GOP gains has to be blunted by a intrinsic GOP advantage of almost 20 seats going in.

How About This Compromise?
The impasse on raising the debt ceiling and the associated deficit reduction package that the Congressional GOP have demanded has come down to one basic issue: taxes.

At issue: Democrats want tax changes to be part of the deficit reduction package, namely the elimination or reduction of tax credits and exemptions for rich corporations and individuals. Republicans with a few exceptions (Sen. Tom Coburn (R-OK) and Sen. Lindsey Graham (R-SC) being the most notable) have stated opposition to any proposal that increases total tax revenues, even if they do not increase marginal rates. Democrats are loathe to support massive spending cuts without something on the tax side.

In the spirit of Grover Norquist (who I detest, but that's another discussion), how about this compromise? Put through the spending cuts (on discretionary spending, nothing significant is going to happen with entitlements, unfortunately), incorporate reductions of tax loopholes for the wealthy and corporations, but offset those with reductions to taxes for middle-income Americans. This holds to the GOP pledge of not increasing net taxes, but throws the Democrats a bone on income equality.

What do you say, Eric Cantor and Harry Reid?

Who Unites the Factions Best?
Ronald Reagan famously swept into office over incumbent Jimmy Carter by winning over moderates who came to be known as "Reagan Democrats". In every election, there is a core of support for each party which is complemented by how well the unite the factions that can go either way. In recent years, it seems party loyalties have become even more complex, so I thought it might make sense to take stock of the membership factions of each party to understand how each party might to try to build a winning coalition next November. I'll also assess the risk of each group dumping their home party in a given election.

1. The Democrats
Democrats rely on a number of different factions:
a. Social Justice Liberals
This group includes those whose primary issues are civil rights-related, including gay rights. This group has been around since at least the 60s and tend to be passionate voters with a strong moral bent to their voting.
Risk Level: Low

b. Socialists
Those seeking economic justice, they tend to have core issues such as universal health care, social assistance, education spending and income equality. These are not all full-blown socialists, but are generally people that admire the social safety net of large European countries.
Risk Level: Low

c. Feminists
This group tends to overlap heavily with the Social Justice Liberals, but they tend to have a single voting issue that overrides everything else: abortion-rights.
Risk Level: Low

d. Doves
This group is the anti-war gang. They strongly opposed Iraq and now want out quickly of Afghanistan and oppose involvement in the conflict in Libya. They turned out big for Obama in 2008
Risk Level: Medium (but only because the GOP isn't likely to run as the party of peace against President Obama)

e. Populist Hispanics
Hispanics in general, and Mexican-Americans specifically favored the Democrats heavily in the past on the basis of their economically liberal views and support for immigration reform. But Democrats part ways with this heavily Catholic group on social issues such as abortion and gay rights.
Risk Level: Medium (the economy hasn't improved and the President has largely ignored this Hispanic base, although he did nominate Sonia Sotomayor to the Supreme Court)

f. Social Libertarians
Those that favor not only abortion-rights but hate the Patriot Act, Gitmo, want to legalize Marijuana and prostitution and generally want the government completely out of social issues.
Risk Level: High (the President hasn't closed Gitmo, has extended the Patriot Act and the Tea Party seems to have co-opted the social libertarian message)

Republicans
a. The Corporatists
The Goldman-Sachs, Exxon-Mobil wing of the GOP isn't as concerned with true free markets as they are with making the government business-friendly. They favor tax breaks and subsidies and limited government regulation.
Risk: Low (this group hates the President)

b. Christian Conservatives
The social-issue focused group opposes gay marriage, abortion rights and affirmative action and is far more interested in traditional values than economics.
Risk: Low

c. The Tea Party / Economic Libertarians
This group generally opposes government involvement in the economy and favors far lower government spending, lower taxes and less regulation.
Risk: Low-to-Medium (they won't support Obama, but they could stay home if a more Corporatist Republican takes office)

d. The Neo-Cons
Remember when the Neo-Cons were the big new thing? The first Republicans in ages to support such concepts of nation-building, this new way of Republican thinkers was prominent during the Bush Administration. They are a lot quieter these days after a decade of war, but they are still around.
Risk: Low

e. Northeastern Republicans
This socially liberal but economically conservative bunch, wants less government but things the Tea Party and the Christian Conservatives are a little out there. There are a lot less of these pragmatists than the used to be, but they are still around.
Risk: Medium-to-High

f. Establishment Republicans
This group likes Medicare, Medicaid and Social Security but opposes Universal Healthcare. A nuanced, but large group, they are resistant to change in general, they are the classic Reagan Democrats. They want our existing social programs maintained, but don't want new ones, and sure don't want their taxes going up.
Risk: Medium

There are many other groups (true Libertarians and all shades of moderates) out there, but each party is going to have to shore up a complex base to win.

Why America is Great
As we celebrate 235 years of the Untied States of America on July 4th, here are a few of the reasons why America is great:
1. The Best Capital Markets
Why are the most innovative companies in the world based in the US? Our innovative spirit, to be sure. But also, we have the best capital markets in the world. Venture Capital, Angel Investing and strong property rights all make the US one the best place in history to turn an idea into a business.

2. The Most Diverse, Integrated Population Ever
We are a truly diverse nation. Black, White, Hispanic, Asian, Native American, protestant, Catholic, Jewish, Muslim, gay, straight, bisexual, and on and on. Sure, other countries have elements of diversity -- there is a sizable Muslim population in France and lots of people from Fiji in Australia. But can you name anywhere else that has existed in history where the population is so well economically and socially integrated? Sure, we still have our problems, but can you imagine the election of a guy like Barack Obama in Europe?

3. The Bill of Rights
Nothing before or since anywhere in the world has established the rights of the citizenry so uniquely. Free speech? Good luck with that in Germany. Bearing arms? Have fun in Great Britain. We have the strongest spirit of individual rights of anywhere in the world and it leads to the most open dialogue about social and political issues of anywhere on Earth.

4. The University System
Sure, it's too expensive. Sure, the tenure system is broken. And yes, the funding system is unfair to middle-class savers. But there is a reason that people from all over the world come to our colleges and universities. Because they are the best.

5. Class Mobility
Maybe its less than it was for some a generation ago, but it isn't gone. But take a look at the stories of Chris Gardner (the subject of the book and film "The Pursuit of Happyness" who went from homeless to running an investment management group), Oprah Winfrey (who grew up poor in Chicago to build a media empire), Bill Clinton (born poor to a single-mother in rural Arkansas to become President of the United States) and David Geffen (who grew up in poverty in Brooklyn and rose to be the biggest name in the music business), rags-to-riches stories simply don't happen with the prevalence that they do in the United States anywhere else.

Happy Independence Day, everyone. I hope you get a long weekend.

A Civil Rights Victory in New York, Huntsman Gets in the Game, Miserable Money Malaise

2011-06-25T10:13:00.004-04:00

New York Makes it Six
Despite weak national leadership on the subject by President Obama, a courageous New York State Senate voted Friday night to legalize gay marriage in the State of New York. The bill had previously cleared the Democratically controlled state House and passed on a final vote through the GOP-controlled body 33-29, which included the votes of 29 of the 30 Democrats in the body and 4 Republicans who were bold enough to buck their party base and their leadership to do the right thing. An enthusiastic Governor Andrew Cuomo quickly signed the bill and it is now law.

It is worth appreciating just how far we have come on this issue in a short period of time. In 2004, Massachusetts became the first state in the United States to legalize same-sex marriage, but did so through a state court order. This court order set off a fire-storm which, along with some clever politicking by Karl Rove, led to a slew of ballot initiatives in 2004 and beyond which explicitly banned same-sex marriage in 28 states. It wasn't until 2009 that the first legislative legalization of same-sex marriage occurred, with most of New England acting the same year - Vermont, New Hampshire and Maine all legalized through the legislative process although Maine's legalization was overturned by a 53%-47% ballot vote on a proposition to repeal in 2009. Iowa and Connecticut also legalized same-sex marriage by court order. The District of Columbia has also legalized same-sex marriage by city ordinance.

The New York law is significant in several ways. First of all, it is the largest state that currently allows same-sex marriage (California allowed same-sex marriage for a brief period before the now-infamous Prop 8 passed by a narrow 52-48% vote in 2008.) Secondly, it is the first time ever that a Republican-controlled state body has passed a gay marriage bill. The 4 Republicans who crossed over deserve all the credit in the world for their courage, credit I withhold from President Obama, who has been decidedly weak on this issue.

So, here is where things stand as of the New York change:
States/Localities Where Gay Marriage is Legal and Performed: Massachusetts, Vermont, New Hampshire, Connecticut, Iowa, New York, District of Columbia -- 35.1 million people live in these states or 11.4% of the population

States/Localities Where Gay Marriage is Legal But Not Performed (out-of-state gay marriages recognized): Maryland, New Mexico -- 7.8 million people live in these states or 2.5% of the population

States/Localities Without Gay Marriage but With Civil Unions with Equivalent Rights: New Jersey, Delaware, Illinois, Nevada, California, Oregon, Washington, Hawaii -- 74.4 million people live in these states or 24.1% of the population

States/Localities Without Gay Marriage but With Civil Unions with Limited Rights: Colorado, Wisconsin, Maine -- 12.0 million people live in these states or 3.9% of the population

So, cumulatively,
11.4% of the population can get a gay marriage in their home state
13.9% of the population can get a gay marriage and have it recognized in their home state
38.0% of the population has access to either gay marriage or equivalent rights through a civil union
41.9% of the population has access to at least some form of civil union rights

So, we've made a lot of progress but still have a lot to do.

So where are the next fronts in this debate?
(1) The Potential Gay Marriage States
California - a Prop 8 repeal seems likely eventually. The vote was very close in 2008, attitudes have shifted to be somewhat more pro-gay marriage since then and the 2008 vote was ironically hampered by a very high African-American turnout in 2008 (African-Americans are overwhelmingly opposed to gay marriage but tend to break liberal other than that.) 2012 wouldn't be the ideal time to try, but 2014 might be.
Maine - the last vote in 2009 was only 53%-47%, a new vote might yield a victory for gay rights advocates at the ballot box.
Rhode Island - recent polling indicates strong support (60%+) among the voting population there, although the actual avenue would likely be by legislation through the state house.
Illinois, Washington, Oregon - all states with full civil unions where there is public support for gay marriage (I exclude New Jersey from this list as gay marriage likely has no chance as long as Chris Christie is Governor)

(2) Next Frontiers for Civil Unions
States where civil unions would likely have public support but are probably not ready for gay marriage include a lot of traditional swing states:
Pennsylvania, Ohio, Michigan

(3) The Constitutionality of the Defense of Marriage Act
This act, cowardly signed by President Bill Clinton in 1996 permitted states not to recognize gay marriages performed elsewhere. I've been amazed that this issue has not made it to the Supreme Court, as it seems, on face, to be flagrantly unconstitutional. Article 4, Section 1 of the constitution states:
"Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State. And the Congress may by general Laws prescribe the Manner in which such Acts, Records and Proceedings shall be proved, and the Effect thereof."

The so called "Full Faith and Credit" clause is crystal-clear to the average person. States must honor contracts, legal proceedings and public acts performed in all the other states. It is the basis of our system of rights and property laws. And gay marriage is clearly all three (a contract, a legal proceeding and a public act.)
The Defense of Marriage Act itself quotes the Full Faith and Credit clause and claims constitutionality on the basis that the constitution provides congress the right to the Congress to make determinations about what qualifies under Article 4, Section 1. The constitution contains no such language. I've quoted Article 4, Section 1 in its entirety above.

Conservative support for this highly dubious constitutional argument flies in the face of alleged "strict constructionism". The truth is, conservatives seem fine with judicial activism as long as it supports their agenda.

Much more to come on this key civil rights fight.

Jon Huntsman, The Moderate Long Shot
Speaking of gay rights supporters, former Utah Governor and former Obama Administration Ambassador to China Jon Huntsman got in the race this week. Huntsman is a long shot, for several reason. The first is that his pragmatic, moderate politics don't play well to Republican primary crowds. Huntsman favors civil unions (the same position, as best I can tell, as President Obama), recognizes man-made global warming and has a history of working across the aisle, great general election qualities but poison pills to the tea party. He also suffers from very low name recognition and crowded space among mainstream establishment Republicans (he looks and sounds a lot like both Mitt Romney and Tim Pawlenty.) I don't expect Huntsman to win, but he is going to be an interesting voice in the debate.

The Rotten Economy
Unemployment still stands at 9.1%. US Economic growth for the first quarter was only 1.9% and expected to be only modestly better in the second quarter (to give you a feel, 3% growth is generally required just to maintain the unemployment rate, 4 or 5% to significantly dent it.)

President Obama is stuck. New stimulus is a non-starter in the GOP House. Tax cuts only pile on to an already untenable deficit and debt load. He's stuck riding this one out. And as we've often discussed, economics are the single most important factor in Presidential elections.

The approximately 3-year stimulus plan that was already passed continues but is almost out of juice. As of now:
Tax Cut Paid Out: $259.9 billion out of $288 billion (90.2% complete)
Spending: $395.0 billion of $499 billion (79.2% complete)
Overall: $654.9 billion out of $787 billion (83.2% complete)

Of course, the GOP and President Obama agreed to a stimulus bill of sorts at the end of 2010 as part of the deal to extend the Bush Tax Cuts for all. The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 provided for many measures intended to stimulate the economy:
* Extension of Bush-era income and capital gains tax reductions through 2012 as well as a compromise on the estate tax rate
* A "fix" to the alternative minimum tax, which raised exemptions to prevent middle-class families from falling under the tax
* Extensions of the American Recovery and Reinvestment Act's Child Tax Credit, Earned Income Tax Credit, and American Opportunity Tax Credit
* Job Creation Tax Credits, Ethanol Tax Credits and Accelerated Depreciation Tax Credits for businesses
* A 13-month extension in unemployment benefits
* A brand-new, 1 year payroll tax reduction

This was clearly a much more Republican bill than the original stimulus. The original stimulus was 62% spending and 38% tax cuts and totaled $787B in cost.

The 2010 bill was almost as large, costing approximately $671B, but was only 8% taxing and 92% tax cuts. Spending in the bill broke down as follows:
* Provisions extending Bush-era tax cuts -- 46%
* New Middle Class and Working Class tax cuts -- 37%
* New spending provisions - 8%
* Provisions extending Obama stimulus tax cuts -- 6%
* Other business tax cuts - 3%

Arguably, for all the talk of President Obama being a socialist, he has been the most tax-cutting President in US history. The problem is, he also likes to spend. There is some argument for this as a short-term measure to jump-start the economy. But we are way past short-term. We need to solve the structural deficit, not pass another set of tax gimmicks. Any ideas on how to get to a compromise on that one?

The Trouble with An Innovation Economy, The Entitlement Drag

2011-06-19T00:30:00.002-04:00

Innovations Are Great, But the Jobs are in China

I was reading a magazine article the other day on Chinese manufacturing giant Foxconn. You may know Foxconn as the company that manufactures the iPhone, as well as many other high tech electronic devices. You may also know Foxconn as a place that famously had a rash of worker suicides last year, that prompted reforms in pay and work practices. Or you may never have heard of them. I don't have a view on Foxconn as a company one way or another, but the article struck a cord with me for a different reason. It mentioned, in passing, that number of people that Foxconn employs.

Think about this - Apple and Foxconn are approximately the same size as measured by revenues or profits. Apple develops unbelievable innovations - iPods and iPads, smart phones, computers, etc. It is a crown jewel that politicians talk about when the mention American ingenuity and the innovation economy. Foxconn is nobody's idea of an innovator, it's simply a manufacturing firm that leverages cheap labor in China at a lower cost than competitors in other countries can.

Here is the problem...Apple employs 30,000 people, Foxconn employs 1,000,000. Granted, the 30,000 people at Apple by and large do very well. Senior management has made themselves very rich. Even middle management and the programmers that build the innovation make excellent livings and get great benefits. It's a heck of a lot better to work at Apple than Foxconn, no doubt. But only 30,000 people get to live an Apple-sponsored lifestyle.

It's hard to build a middle class economy this way. Apple is a giant technology company. At 30,000 per company, you'd 493 new Apples to employ all the unemployed in this country. Never mind the fact that most of the unemployed would be vastly unqualified for a job at Apple.

My point is that we need to be more than an "innovation economy" to be sustainable. Innovation is great, but if we export the manufacturing to China and the customer service to India, then a small group of people in the US will get rich on the innovation, but the rest of the country won't benefit.

We would be wise to steal a page from Germany's playbook and invest in some real industrial policy. Germany has done an outstanding job growing high-dollar manufacturing jobs by investing in its industry and its trade education. Alas, I fear in the current Washington gridlock, that ideas like this are a complete non-starter.

Would you like fries with that?

The Entitlement Drag
If we spend all our money on Social Security, Medicare, Medicaid and Unemployment Benefits, how will we ever invest in the infrastructure and the education needed to build a full employment economy?

Our mass transit systems are far inferior to Europe and much of Asia. Our air traffic control system is from the 1950s. Our power grid is still largely powered by coal plants built 100 years ago. Funding for education at all levels is being cut.

We used to find ways to invest in big things - the Apollo missions, the Eisenhower Interstate system, the precursor to the internet. Now, I fear, we are spending too much money just on social programs which have no long term payback. No, I don't favor slashing and burning the social safety net - it's part of the values of a modern society. I'm just saying we need some balance. And probably some higher taxes to pay for it. Another non-starter these days.

Romney Owns

2011-06-13T21:49:00.003-04:00

Short reaction to the first GOP debate (yes I know, it's technically the second one, but the first one where the field showed up): I don't see a credible threat to Mitt Romney for the GOP nomination. He was funny, engaging, well-spoken and gave smart, concise answers even when dealing with thorny issues, such as Romneycare and his flip-flop on abortion. He looked and sounded Presidential. No one else on the stage was even close.

Jon Huntsman? Rick Perry? The field is wide open. You just have to beat the Mitt.

Gingrich Falls, Weiner Tweets, The Economy Sputters

2011-06-12T11:08:00.002-04:00

Just to Reiterate, Newt Doesn't Have a Chance
Last week, I had him third in a very weak field of declared candidates, a distant third to the close-to-insurmountable Mitt Romney and the far behind but highly credible Tim Pawlenty. Apparently his closest advisers agree that things are not going particularly well for the one-time Speaker of the House in his bid to become the GOP nominee as 7 of his top guys all resigned on the same day this week. A few are presumed to be going to work for Tim Pawlenty, a few others are rumored to be in talks with Rick Perry if he decides to mount a run. Either way, those closest to the Gingrich campaign appear to want nothing to do with it. And why should they? In national polls, Gingrich is not only getting trounced by declared-candidate Romney, he's getting trounced by unannounced candidates Palin and Guliani, and even getting beat by sideshows Herman Cain and Ron Paul. Gingrich will likely not win a single nominating contest and should be gone after South Carolina, if he doesn't pitch in the towel sooner.

Anthony Weiner, The Sad Clown
Call it the curse of technology. Call it the oldest fault in men since time began. Either way, once well-respected Rep. Anthony Weiner (D-NY) is now a sideshow. His sexting with at least 6 women over the past 3 years, including sending explicit photos has everybody and their brother calling for his resignation, including virtually all high profile Republicans and high profile Democrats such as House Minority Leader Nancy Pelosi (D-NY.)

What Weiner did was incredibly stupid. I always say that the internet is written in ink and you'd best not do anything on there that you wouldn't want your mother to see. Pictures of your erection certainly qualify there. Having said that, I'm not sure I'm on board with the Weiner resignation brigade.

It is not clear to me that Weiner has done anything even remotely illegal. It does not appear that he used government resources in his sexcapades. So at the end of the day, if all he did was send dirty photos, are his actions really so much worse than what the likes of Bill Clinton, Newt Gingrich, and a whole host of other politicians did, who actually had sex with women while in office and stuck around? And how exactly does this effect if Weiner is a good congressman?

I guess we still have a strong puritan streak in this country.

Unemployment and Slow Growth - Not a Good Recipe for Obama
The President has to be fearful about the economic news of late. 1.8% GDP growth last quarter. Unemployment at a virtual flatline for the last several months right around the 9% line (9.1% last month, according to the BLS), nearly 2x what a healthy economy would be. Even the stock market, which had been the bright spot, has started to sputter with all the bad news.

If the election is going to come down to the economy, as I firmly believe it will, President Obama is going to need for things to be better a year from now than they are today, or he may find himself designing a Presidential library in Chicago.

Meet Your GOP Field, Debt Ceiling Chicken, Some Easy Predictions

2011-06-05T14:22:00.002-04:00

The GOP Field is Set, Sort Of, Maybe
We have gained a lot of clarity over the course of the past few weeks about who is in and who is out in the race for the GOP 2012 Presidential nomination. The Huck isn't running. Neither is Trump (read back to my earlier posts when he first started making noise if you don't already understand why.) Daniels is sitting this one out. It's actually a pretty thin field as it stands. There are five meaningful players who have not made decisions yet. Accordingly, here are my power rankings of the "in" and the "maybe" candidates.

The "in" candidates:
1. Mitt Romney - the clear and undisputed front-runner. Yes, he used to be a pro-universal health care, pro-choice, pro-gay rights, Massachusetts moderate. But, let's face it - an attractive face with business experience and a strong governing record is a pretty good place to start for a party that actually wants to win.

2. Tim Pawlenty - if Romney stumbles or health care becomes too much of an issue, Pawlenty is the other "legit" candidate. He has gubernatorial experience, he is liked both within the party and popular in his home state. Pawlenty's biggest problems are a. that he backed cap-and-trade at one point, b. that few outside the mid-west and the party loyalists know him and c. he isn't particularly charismatic. He's going to have to count on a Romney slip-up to get seriously in the game.

3. Newt Gingrich - the highly intelligent but deeply flawed Gingrich is clearly qualified as former Speaker of the House. He is also a pretty famous jerk, both personally and professionally. His personal life will dog him in the GOP primaries including his two failed marriages, his cheating and his overall lack of personal morals. He is also not very inspirational and highly confrontational. I can't seem him winning, but outside of Romney and Pawlenty, he's pretty much the only other credible candidate.

4. Ron Paul - the ever-entertaining libertarian is running again. He will make some noise, raise some money and even get some votes (heck, he could finish 2nd in libertarian-leaning New Hampshire!), but he can't get the nod - he would be a disaster for the GOP if he did.

5. Herman Cain - Cain is a great speaker and lit up the first debate, but he's hard to take seriously as a candidate. No experience governing and if you peel back the brilliant surface rhetoric, he's not particularly insightful. He'll be fun to watch, like Paul, but will be a sideshow.

6. Gary Johnson - if you took Ron Paul and subtracted the wit and charisma, you'd have Gary Johnson. Another devoted libertarian, Johnson will create havoc for some of the front-runners, but will get few votes, thanks to the much better known and far more entertaining Ron Paul.

The "maybe" candidates:
1. Rudy Guliani - shockingly, the 2008 electoral disaster hasn't kept Guliani from polling near the front of the 2012 field. He could be a real player, but I'm left with the following question: if the GOP didn't like him in 2008 and he hasn't done much since, why will they like him now?

2. Michelle Bachman - the darling of the tea-party could make some noise. The tea-party has shown its muscle over and over again in GOP primaries. Bachman winning the nomination would be a disaster for the GOP, however, as she would likely get absolutely torched in the general.

3. Jon Huntsman - the erstwhile Obama Administration Ambassador to China is actually just the sort of general election candidate the GOP should want. He's a center-right candidate who works extremely well across the aisle and has a proven ability to govern. But can you imagine the GOP nominating a former Obama Administration official who is a social moderate? Me neither.

4. Rick Perry - the conservative Texas Governor is one candidate I've had my eyes on for a while. He's the perfect intersection for the GOP of a candidate with conservative enough chops to be appealing to the tea party while being mainstream enough to not freak out the general public. Still - nobody knows Perry and it isn't totally clear he is even interested.

5. Sarah Palin - her star has faded fast. I admit to being wrong about her - I warned not to underestimate her in 2008, but she has been a paper tiger with frequent gaffes and no depth. Besides, she's making too much money at Fox to run.

6. Rick Santorum - he's a complete afterthought. His far-right social views may appeal to some on the fringe, but other candidates will have that space well covered and Santorum couldn't even run competitively for re-election in Pennsylvania. He shouldn't waste his time. And don't Google his name unless you have strong intestinal fortitude.

The GOP is Playing Chicken - And It May Work
The US Government has hit its debt ceiling, but Congress seems in no hurry to act. Tim Geithner has given an approximate "real" deadline of August 2nd, which the government can get to by stopping payments to pension funds and deferring other short-term payments. The bottom line is that the debt limit will have to be raised as no one has proposed anything approaching a budget that is balanced for this year -- even the most conservative proposal for the Fiscal 2011 budget called for about a $1.4T deficit and the one enacted was slightly more moderate than that. But Republicans are staging grand theater, holding symbolic no votes on a ceiling increase with no spending decreases attached and demand major reform to everything except taxes.

So what do we make of all of this? The GOP isn't trying to destroy the country, I don't think and will therefore make sure that the debt ceiling is increased prior to August 2nd. A compromise that allows all sides to save face will likely occur, which will likely involve big planned defense reductions, big reductions in domestic discretionary spending, token changes to Medicare and no change in tax policy. This is the middle ground that both sides can probably live with, although it will likely leave the two biggest problems with the budget - taxes and entitlements, mostly unchanged.

Be prepared for action to come at the very last minute, so expect at least another month and a half of wrangling before we throw together a short-term fix.

Some Easy Predictions
Allow me to stick my neck out. Write me later when I'm proven to be an idiot:
(1) Mitt Romney will win the GOP nomination -- why? There is nobody credible enough to beat him. Besides, he's the "next guy in line" (read my posts from 2008 to understand how important this is to GOP nominations.)

(2) The debt ceiling will be raised prior to August 2nd. See above.

(3) The Democrats will not retake the House and will lose the Senate in 2012. Read my prior posts - the map is just awful for them.

(4) The Presidential race will be within 5% and the key states will be Virginia, Colorado and Ohio, not Florida and Pennsylvania.

(5) Sarah Palin won't run for President.

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2012 - Who Is In and Who Is Out

2011-05-15T08:19:00.002-04:00

With Mike Huckabee's announcement last night that he will not seek the GOP nomination in 2012, the shape of the field is becoming a lot more clear. Huckabee's decision makes a lot of sense personally - he has come into a great deal of wealth since the 2008 campaign as a national personality on Fox News and a Presidential bid would have taken a significant toll both personally and financially. His non-presence in the race shakes things up a bit, since he was certainly one of two defacto front-runners for the nomination (the other being former Massachusetts Governor Mitt Romney.)

So let's take stock of who's in, who's out and who may be in for the GOP for 2012.
Definitely In (Have Declared)
Newt Gingrich - the former Speaker of the House and so-called GOP "idea man" is definitely having a go. He has national name recognition, but that's part of his problem - people don't particularly like Newt. He's a serious candidate, but I certainly don't see him as a favorite to either win the nomination or the general election.

Ron Paul - the perennial Libertarian Republican draws huge crowds and big fundraising everywhere he goes. But his brand of extreme defense of individual liberties doesn't resonate well outside of a small group in the GOP. Most of the Christian Conservatives that show up on primary day don't want legal drugs, recognition of gay marriage or a halving of the military. Still, Paul will make some noise and be a lot of fun. But no chance he wins the nomination.

Gary Johnson - the former Governor of New Mexico could actually split the Libertarian wing, as he is very similar in his politics to Paul. Sometimes more articulate on stage, although not as charismatic, Johnson will be fun to watch, but is not a serious player for the same reasons that Paul isn't.

Probably In (Have Formed Exploratory Committees)
Tim Pawlenty - the former two-term Governor of Minnesota used to be a moderate, a guy who favored cap-and-trade, moderate views on social issues and common-sense bi-partisanship. To win the GOP nomination, he is trying to walk back some of those views and appeal to the GOP base. Pawlenty is not the greatest speech-giver in the world, but he is a serious candidate and was a very respected governor. With Huckabee out and the field wide open, Pawlenty could be a player for the nomination.

Mitt Romney - the former Massachusetts Governor is almost certainly the prohibitive front-runner with the Huck out. Similar to Pawlenty, he has his own moderate demons. Interestingly, he was able to successfully walk back prior support for abortion rights and gay rights with ease in 2008, but is having a hard time explaining his support for a health care package in his home state that is very similar to the national reform enacted by the Democrats. Still, an attractive former businessman with loads of political experience and keen intellectual skills is a rare enough commodity, if I were placing a bet today on the GOP nod, it would be Romney.

Rick Santorum - the stridently socially conservative former Senator from Pennsylvania will attract some support from die-hards, but mainstream GOP members realize that he is as unelectable as they come in a general election race. I think Santorum will probably fade quickly after poor showings in Iowa and New Hampshire.

Herman Cain - the former CEO of Godfather's Pizza and talk-radio host lit up the other candidates in the first Presidential debate. An excellent speaker and debater, Cain will be fun to watch, but nobody expects a political newbie to be in serious contention for the White House.

Could Be Running
Mitch Daniels - the exit of Huckabee from the stage certainly opens up a door to the well-respected conservative Indiana Governor. Daniels is beloved among the party faithful, although not particularly charismatic for a guy hoping to tame a national stage. He will struggle with name recognition initially (he is virtually unknown outside of political circles and his home state), but I expect him to be a contender if he runs.

Donald Trump - America's favorite blow-hard real estate mogul has already jumped the shark in my opinion. If I were betting, I don't think Donald will run, I the he just likes the attention. And when it comes right down to it, it's hard even for conservatives to take this guy seriously.

Sarah Palin - her star is fading fast as legitimate, in-office politicians like Michelle Bachman and Rand Paul take up the tea-party mantle. She is also pretty well hated outside of the GOP. I can't see why she would want to run and suspend her lucrative media empire.

Michelle Bachman - the darling of the Tea Party movement gets a lot of love from a small cross-section of the GOP. She may run to make a point, but she isn't a serious contender.

Not Running
Basically, every other Republican in the US. Huckabee passed. So did Bobby Jindal. Rising stars Chris Christie and Marco Rubio have both declined as well. So did Mississippi Governor Haley Barbour.

The field is starting to take form. There are a dozen or so debates to take place over the summer, fall and winter, which should help some of the lesser-knowns level the playing field with the better-known candidates. It will be a fun ride.

Death Comes to the Most Evil Man on the Planet, A Blow to the Fringe, Presidential Resurgence (At Least for Now)

2011-05-07T14:37:00.005-04:00

Code Name: Geronimo, Status: Dead
It was a long-delayed catharsis for those of us who have the awful day of September 11, 2001 etched into our memories, which is pretty much every American over the age of 10.

After 10 long years of at least two wars (three if you count Libya), countless American soldiers lost, trillions of dollars spent and stunning intrusions into our civil liberties, the man who started it all, undoubtedly the most hated and evil man on the planet, terrorist Osama Bin Laden is dead.

Bin Laden was nothing he claimed to be. He portrayed himself to be a man of the Arab people. But he was no revolutionary. Part of the reason he was located was that he was not, as many expected, hold up in some remote cave, but living a lavish life in a mansion outside of Abadabad, Pakistan.

He was no courageous warrior. By all accounts, his last minutes were filled with cowardice, not bravery.

He was no true believer, even in the distorted principles of the radical sect of Islam to which he belongs. A true believer would have welcomed the chance to enter the afterlife a martyr and join his harem of virgins. But Bin Laden resisted like a man who, rather than being a religious man, was a deceitful, cynical man, who used religion to gather the poor and the downtrodden to his evil cause.

The political punditry have already begun the debates -- who gets the credit - George W. Bush or Barack Obama? Should the photos be released? What does this mean for 2012? I will talk about all these things in the months ahead. Politics is an important part of preserving our democracy. I wouldn't spend so much of my time writing about it if I believed otherwise.

But before you read the next two sections, which rejoin the political discussion, take a moment, or an hour, or a week and savor the vast improvement that human race has undergone by no longer having Osama Bin Laden within its ranks. He was a disgrace to Islam and the Arab world, but most importantly to humanity. I am not a religious person, but today, I hope gravely that I am wrong, so that there is a hell for Osama Bin Laden to burn in.

I'm also not a believe in the death penalty, but I can't think of a better exception to the rule than the most evil man on the planet.

Good riddance, Osama. Congratulations, Navy Seals.

Conspiracy Theories That Are Dead
It's been a rough couple of weeks if you are a wing nut conspiracy theorist. If you were one of the so-called "birthers", the release of the President's original birth certificate struck a blow to your cause. In fact, a new CNN poll reveals that a mere 3% of the population believes the birther nonsense, down dramatically from earlier polls that had the numbers well into the double digits.

If you are one of the so called "truthers", those who believe that the government was complicit, or even behind, the events of September 11th, your theory took a pretty hard blow with the surgical killing of the man who really did it.

In a Democracy, there will always be wing nuts. Some wing nut theories are harmless, like the fascination with Area 51. Some are vicious and evil, like the Ku Klux Klan. And some are just plain stupid. Birthers and truthers fit somewhere between the second and the third.

Surges Aren't What They Used to Be

I had mentioned in my last post that the President's numbers had been sagging. This, of course, was prior to the successful killing of Osama Bin Laden. Prior to the killing, the President's approve minus disapprove had slumped to the range of -2, which, while not the absolute lowest of his Presidency, basically meant that the entire "lame duck bump" that he got following the success of the lame duck session of the last congress, combined with improving economic conditions, had entirely faded. Very predictably, the President, got a bump from the killing of Bin Laden. His daily numbers since my last report are below.

With the killing occurring right at the beginning of May, you see exactly the same pattern in his monthly numbers.

What is interesting is that while the President certainly got a bump from getting Bin Laden, it is nowhere near the bumps that past Presidents have seen in uniting moments like this for the country. George Hebert-Walker Bush saw his approval rating climb to over 90% in some polls following the success of the first Persian Gulf War. The same was true for George Walker Bush following the immediate aftermath of September 11th. By that standard, Obama's poll bump seems pretty modest.

But times are different. For one thing, we've been at war for 10 years, so the unifying effects of a military operation have been significantly muted. For another, the economic is still very tough for a great many people. Unemployment, while well down off its high, is still a painful 9.0%, a full 1.5% higher than the worst it got during H.W. Bush's administration, when his approval sank as low as the 20s. Thirdly, we are clearly more polarized -- the days of a President having 90%+ approval may be gone for good. And finally, and this is a good thing, voters actually seem to be viewing this through a sophisticated lens. The President's approval on foreign policy matters has jumped to multi-year highs as has his approval on the war on terror. In other words, people give the President credit for a job well done getting Bin Laden, some just don't approve of him overall because of our economic and budgetary troubles. That is a completely fair, well-reasoned point of view.

As I say just about every week now, election 2012 is all about the economy. Killing Bin Laden is a crowning achievement for President Barack Obama's legacy. But the things that build legacies are not necessarily the ones that win elections.

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I Demand to See Donald Trump's Birth Certificate, Hoping for the Gang of Six, A Presidency in Crisis?

2011-05-01T11:41:00.003-04:00

Birthers Are Racist Idiots
Barring some kind of dramatic event unfolding, my sincere hope is that this is the last time I have to write about this topic. I've spilled enough virtual ink on this nonsensical topic. Let me try one more time to rehash things:
In 2008, when then-Senator Barack Obama was running for President, rumors from the conservative blogosphere emerged that he had not, in fact, been born in Hawaii, but had been born in Kenya. In response, his campaign released a "Certificate of Live Birth", the current legal copy of a birth certificate issued in Hawaii, which should have put the issue to bed. But there is no convincing idiots with logic, and the rumors have persisted, buoyed in recent days by the incoherent ramblings of one Donald Trump.

Let me review the facts one more time:
* The "Certificate of Live Birth" is the current legal standard for birth certificate copies in Hawaii, it is accepted as proof of birth in all 50 states and by the U.S. State Department for the issuance in passports.
* Microfiche evidences proves positively that the birth of Barack Obama in Hawaii was reported by the hospital in two papers the day after it occurred.
* Several news organizations including factcheck.org and CNN had viewed the original of his birth certificate in Honolulu and reported that fact.
* Even if one were to ignore the obvious facts as to the location of his birth and choose to continue to believe he was born in Kenya, President Obama would likely have been eligible anyhow as he was entitled to U.S. citizenship at birth based on the citizenship of his mother. This is no different from Senator John McCain, who was born in Panama while his father was serving in the military.

But, the President relented this past week and was able to convince the State of Hawaii to release his birth certificate. This was a poor move in my opinion -- there was absolutely zero credible evidence to counter from the birthers and frankly, if the right-wing of the GOP wants to behave like a bunch of braying jackasses, I'd be happy to let them. Karl Rove commented extensively on how this issue was hurting the credibility of the President's opponents, as had Bill O'Reilly and they were both 100% correct. But, in his continuing spirit of "ever backing down", the President conceded ground to the wing nuts and convinced the State of Hawaii to release his original.

So why do I think birthers are racist? Ask yourself a question. Has Donald Trump released a copy of his birth certificate? How about Mitt Romney? Michelle Bachman? Have any of the GOP candidates?

And why is no one asking?

You could say that it is because there is no credible reason to believe that any of them were born outside the United States and you'd be right. There is equally zero credible evidence that Barack Obama was born outside the US. Simply put, if you choose to believe that the President was born in Kenya, against all facts, then you are simply buying into the Muslim-Kenyan-Tribal image of our first black President. And you are doing so without evidence. And that is racism, period.

If you've been hawking this issue, get a life. I'm talking to you, Mr. Trump.

Will the Gang of Six Crack the Deficit Code?
We are a long way from a deal on long-term deficit reduction. It's a very strong possibility that, as has happened so many times in the past, all the talk will lead to very little action. There have only been a few times in my lifetime that the parties have come together to effectively address the deficit. The Gramm-Rudman deficit reduction act of 1985, which closed tax loopholes and implemented the original version of "pay as you go" comes to mind. So does the tax deal that President George Herbert Walker Bush struck with congressional Democrats in 1991, which was wildly unpopular with his party but set-up for the surpluses of the late 90s. But it doesn't happen much.

But I AM very encouraged with the bipartisan negotiations that are taking place between the so-called "Gang of Six" which include 1 liberal Democrat (Dick Durbin-IL), two moderate Democrats (Kent Conrad-ND and Mark Warner-VA) and three conservative Republicans (Saxby Chambliss-GA, Mike Crapo-ID and Tom Coburn-OK.) Using the deficit reduction commissions plan as a baseline, they are working towards a deal and making some progress. Coburn has even defended tax changes that would increase revenue (also known as tax increases) so long as the revenue-enhancement is achieved through closing loopholes and not through raising marginal rates (which is what the deficit panel had proposed.) I wish we'd gained alignment at the outset for an up-or-down vote on the panel's findings, but thanks the partisan flip-flopping of Senator John McCain and others, we didn't get that chance. But if these six Senators, who come from across the ideological spectrum, can agree on a plan, then I believe that a bipartisan bill can pass. And they are doing it the right way, putting things on the table, negotiating in good faith. We all should root for their success.

How Much Trouble is Barack Obama In?
I've been writing for a while that President Obama was an odds-on favorite for a second term. My theory has always been that the timing of economic recovery would create favorable conditions for an incumbent, regardless of any policy squabbles. But the economic recovery has become significantly less robust, with economic growth slowing to 1.8% in the first quarter of this year and inflation jumping up significantly, particularly on commodities such as oil and food. Incoming growth above the "mendoza line" of 1.5% (the line on linear regression analysis that generally correlates to the incumbent President's party receiving 50% of the Presidential vote) is not assured and the President's poll numbers, after a bump at the end of last year and the beginning of this year, have sagged again (a full update on those numbers next week.)

But the President is still polling favorable against would-be GOPers. Here is a quick average of his performance against possible GOP candidates:

Versus Mike Huckabee: Obama +2.5%
Versus Mitt Romney: Obama +2.4%
Versus Jon Huntsman: Obama +11.0%
Versus Michelle Bachman: Obama +12.0%
Versus Mitch Daniels: Obama +13.0%
Versus Tim Pawlenty: Obama +13.5%
Versus Newt Gingrich: Obama +14.3%
Versus Donald Trump: Obama +15.4%
Versus Sarah Palin: Obama +17.9%

Of course, these polls are not very predictive of final outcomes at this stage of the race - Jon Stewart did a great comedy piece on this on the Daily Show last week which relived the news reports of Hillary Clinton being a lock in 2008, Joe Lieberman being the front-runner in 2004 and Bill Clinton being in 7th in the Democrat running order in 1992. But they do give us some clues.

Clearly Huntsman, Daniels and Pawlenty are suffering from the fact that few people really know very much about them yet. And Gingrich, Trump and Palin are likely suffering from the fact that people DO know a lot about them. Romney and Huckabee are the two established, credible candidates that the public knows, and they poll pretty close to President Obama. Either one of the lesser-knowns will break out of the pack or those two, who have to be considered the front-runners at this point (regardless of Donald Trump polling well in some polls at this point), would run a very close, competitive race with the President next November.

So how much trouble is the President in? I've said it before and I'll say it again -- it's all about the economy.

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The Next Fronts in the Budgetary War, America's Energy Future

2011-04-17T10:51:00.002-04:00

With Fiscal 2011 Behind Us, The Battle Turns to the Debt Ceiling and the Blueprint
I give John Boehner a lot of credit as a politician. When the GOP swept into control of the House last November, Republicans were quick to note that they still only controlled "one-half of one-third of government", that is, that they controlled half of the legislative branch but not any of the executive branch (certainly true) or the judiciary (not really true, but makes for a good one-liner.) But with control of the House came a very important power, one that I noted that we all should hold the GOP accountable for - control of the purse strings. And use that control the Republicans have done.

Think back to prior to November. The debates that took place in the last congress were about stimulus, health care, Don't Ask, Don't Tell, nuclear arms treaties. The President wanted to talk about comprehensive immigration reform and cap and trade. The Republicans have focused the political debate in this country on one thing and one thing only: government spending. Boehner did a masterful job getting most of what he wanted in the fiscal 2011 budget. This time-consuming debate was just an initial salvo in the debate to come.

First up, the debt ceiling. By sometime in late May, the federal government will have reached the maximum amount that it is allowed to borrow by law and will need permission from congress to continue issuing bonds. As there is no viable path to budgetary balance this year, the impact of not getting that permission would be nothing short of catastrophic. Essentially, large swaths of the government would shut down and the US would fall into default on treasuries, which would destroy the value of the full faith and credit of the government and cause massive spikes in interest rates. I don't think most of the Republicans want to see this happen, but they are certainly looking to use the debt ceiling as a bargaining chip. Boehner and company will attempt to use the debt ceiling legislation to extract even more significant cuts in spending. This is a fairly dangerous game of chicken, but from what I've seen, in games of chicken, the Democrats seem to be blinking first most of the time the past few years.

Then, there is the Ryan plan, the GOP blueprint for the next 10 years of government spending. All but 4 Republicans in the House supported the plan (no Democrats did), which called for abolishing Medicare and Medicaid as we know it, replacing Medicare with subsidized private plans and Medicaid with block grants to the states. It also called for extension of the Bush/Obama tax cuts at all income levels and major reductions in domestic discretionary spending (it left Social Security untouched, although some Republicans have been calling for the retirement age to be raised to 70 over time.)

If you would have told me a year ago that 98% of House Republicans would have supported a plan to dismantle Medicare, I wouldn't have believed you. But it just shows how far Boehner has been able to shift the debate. The Ryan plan is clearly DOA in the Democratically-controlled Senate and President Obama would veto it regardless, but it stakes out a striking opening position in the debate over balancing the federal budget.

Republicans seem highly likely to control both Houses in 2013 (see my previous post on the Senate map and how awful it is for the Dems in 2012), which means that the Presidential election will be very high stakes. If a Republican candidate wins, we could very well see something like the Ryan plan enacted.

President Obama, for his part, has called for more modest reductions in domestic discretionary spending, significant reductions in defense expenditures and allowing the Bush/Obama tax cuts to lapse for those making over $250K. It's a start, but doesn't go nearly far enough to fix the budget. Republicans are sure to strongly oppose the tax changes and a least a portion of the defense reductions.

Let the debate begin.

Why $4 Gas is a Good Thing
In the breakthrough economics book, Freakonomics, economist Steven Levitt makes one point abundantly clear over and over again: people respond to incentives. From drug dealers, to parents with kids in day care to sumo wrestlers, the book chronicles how incentives drive behavior large and small. The same is true with energy policy.

When gas is sub-$2/gallon, whatever we may say about carbon emissions, national security, etc., not a lot will change with the behavior of individuals that drives our oil consumption. When it reaches $4/gallon, magical things happen. People buy hybrid and electric cars. Corporations start investing in alternative energy. We start to make real progress against our dependence on foreign fuels and evolve our economy.

$4/gas hurts, but let's hope it is here to stay. Our green energy economy depends on it.

Crafty GOP Strategy Gets Them Most of What They Want

2011-04-09T11:18:00.002-04:00

In the late hours of the night on Friday night, congressional leaders and the President reached an agreement on the discretionary budget for the remainder of Fiscal 2011.

On the surface, it looks like a compromise...the GOP had sought $61B of cuts and had sought to eliminate funding for Planned Parenthood. They got $38.5B in cuts and had to live with Planned Parenthood continuing to be funded by the federal government, albeit with the opportunity to symbolically vote against the funding. So they got 63% of their cuts but didn't get their key social policy change. Feels like a compromise that splits the difference, doesn't it?

But look closer. The continuing resolutions passed had already cut over $10B in funding. The temporary 6 day resolution that was passed to allow the government to keep functioning and provide time for the House and Senate to vote on the compromise cut another $2B. That's $50.5B in total cuts, 83% of what the GOP had sought.

And the Planned Parenthood funding? A red herring. The total annual funding to Planned Parenthood from the federal government totals a mere $75 million, or 0.02% of annual federal spending. And Planned Parenthood is already prohibited from providing abortion services with the funding. In fact, the funding provides cervical cancer screening and contraception, perhaps the latter is opposed by the very far right fringe of the GOP, but both are things that 99% of rational people would support. But by making it a central issue, Boehner and company were able to get the Dems to cave on the more important issues at stake.

So, the GOP, with its majority in one House of Congress, was able to get 83% of what it wanted. Nicely done. Now, can we have a debate about the 7/8ths of the federal budget not covered by domestic discretionary spending?

The Obama Doctrine, Any Chance for Real Entitlement Reform?, Energy Policy Twisting in the Wind

2011-04-03T11:18:00.002-04:00

Is There an Obama Doctrine?
Every President has a philosophy behind how they involve the military in foreign affairs. The notion of a Presidential "doctrine" dates back to President James Monroe, whose "Monroe Doctrine" stated that the US would view further colonization in North America by European nations as an act of aggression but that the US would not interfere with existing colonies or with the internal affairs of European nations.

More recently, the "Bush Doctrine" of former President George W. Bush moved US foreign policy to a more activist position, parting ways with other Post-World War 2 Presidents in supporting the notion of pre-emptive war to protect US security interests, justifying intervention in Iraq, a country which had not attacked the US on the potential for a future threat.

So, more than 2 years into his Presidency, with airstrikes in Libya taking place in the past two weeks, it is worth asking, is there an "Obama Doctrine" and what is it?

The President has stepped up presence in the Afghanistan, wound down operations in Iraq, stayed out of tribal conflicts in Africa, but supported rebels in Libya.

Afghanistan is arguably a "shoot second" war, since the Taliban was clearly the driving force behind the September 11, 2001 attacks on the World Trade Center and the Taliban controlled the former government in Afghanistan. Iraq was clearly a pre-emptive war, as there was no overt act of aggression taken by Iraq.

Taking just these two examples, one would assume that the "Obama Doctrine" is more of a return to the philosophies of George H.W. Bush and Bill Clinton, of US intervention only where there is a national security interest and we are struck first, or where there is a clear act of aggression against a US ally, such as in the case of the first Gulf War.

But then there is Libya. We were not attacked. Libya did not attack a US ally. This is clearly a case of involving the US in a civil war in Libya. And therein lies the distinction. It is not quite a war of pre-emption (no one considers Libya a credible threat to US security compared to Iran or North Korea), nor is it a "shoot second" war. The mission in supporting the rebels is clearly to support regime change and protect humanitarian interests, even if the former is not explicitly stated by the administration.

There is an intellectual argument for supporting humanitarian missions by the US military, but it is a slippery slope. If Libya, then why not Darfur? Or Somalia? The list of civil wars causing human strife in the world is long. But clearly Libya involvement is low impact at this point. We aren't committing ground troops. We have the backing of NATO. US Casualties will be extremely low and the cost low compared to Iraq or Afghanistan.

So, as best I can tell, the nascent "Obama Doctrine" advocates use of force when:
(1) There is an imminent threat to US security
(2) As a proportional response to an attack on the US
(3) For limited humanitarian reasons, with the support of the international community

We'll see how this philosophy evolves over time.

Will Paul Ryan's Bold Proposal Spark Real Reform?
Rep. Paul Ryan, who is the point man for the 2012 GOP budget, is set to reveal a bold plan for reform Medicare and Medicaid, two of the four albatrosses around the neck of the US budget (the other two being defense spending and social security.) Ryan's plan is reportedly very bold, including:
(1) Changing Medicare as we know it for those 55 and under. Eliminating government coverage for those who retire after 2021 and replacing it with a federal grant to purchase private insurance.
(2) Dramatically reducing Medicaid funding over time and replacing the traditional program with block grants to the states, who would have the freedom to experiment with different systems for the funds in their own states.

This is a radical change. The Medicare plan essentially contains costs by reducing the rate at which government expenditures on Medicare go up. To explain it simply, if costs under Medicare are rising 10% per year, Ryan's plan might increase the insurance grant by only 3% per year, meaning that private insurers would have to figure out ways to provide coverage at a lower cost than the government would. This means that either private insurers will find a way to get vastly more efficient or the level of coverage will go down to something more affordable.

This is basically rationing by another name - a charge sure to be leveled by the left, but actually a good thing, if you have read my prior writings. The ONLY way to significantly "bend the cost curve" is to be more selective about what is covered. You simply can't reduce costs AND provide every form of care to every person at every stage of their life. That is how socialized systems contain cost - they restrict the availability of some treatments. And it's a path we'll have to go down to fix Medicare, even if Ryan won't want to admit that that's what his proposal does.

The Medicaid proposal is basically more of the same...less money and let the states try to figure out how to manage that more limited funding.

Ryan's proposal is a long way from perfect. There are some elements of health care that should be non-negotiable from a cost standpoint - vaccinations and preventative care that are both necessary and economically effective at reducing long-term costs for one and emergency care for another. Executed poorly, his proposal could simply lead to more cost-dumping on emergency rooms and do further damage to the system. And his proposal obviously doesn't address how but foists that choice on individuals and states.

But it's a great starting point to have the debate. I'm sure the Democrats will declare the proposal dead on arrival in the Senate. That's fine. But how about they come forward with an alternative that has a similar level of cost containment and let's have a debate.

Fixing the structural deficit is going to require some hard choices about entitlements. Kudos to Ryan for bravely taking the first step to provoke that debate.

Budget Deal? No Budget Deal? Can We Move On?
The fiscal year is half over for the government. Six times Congress has in some form or another kicked the can down the road. The GOP wanted $61B in domestic discretionary cuts. They've achieved $10B so far with the last two continuing resolutions. The debate now is how much of the remaining $51B they wanted will happen.

Can we please settle this debate quickly and move on to discussing entitlements. We will never even get to the debate on Ryan's proposal if we just keep debating continuing resolutions.

With a $1.5T deficit, does it really matter if we cut $20B more or $40B more? How about we finish this quickly and focus on the $1.5T problem.

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