The 2007/2008 session of congress is still winding down (it won't be officially done until January), but I thought we'd take a look at some statistics from the Senate this post. The Senate is often said to be 100 different independent parties operating within one body and that is evident when you look at the statistics. Thanks to the National Journal for the voting record information. In our scoring +100 Liberal is a perfect liberal voting record, +100 Conservative is a perfect Conservative
Here are our awards for the session:
(1) Liberal Stalwarts
No, it isn't Barack Obama and Hillary Clinton, sorry conservatives.
Here is the top 10:
1. Sen. Kennedy (D) -- MA -- +90% Liberal
2. Sen. Boxer (D) -- CA -- +90% Liberal
3. Sen. Reed (D) -- RI -- +87% Liberal (the OTHER Reed)
4. Sen. Durbin (D) -- IL -- +82% Liberal
5. Sen. Harkin (D) -- IA -- +81% Liberal
6. Sen. Leahy (D) -- VT -- +78% Liberal
7. Sen. Sanders (Socialist) -- VT -- +76% Liberal (yes, the Socialist is the SECOND most liberal member of the Vermont delegation)
8. Sen. Mikulski (D) -- MD -- +75% Liberal
9. Sen. Lautenberg (D) -- NJ -- +74% Liberal
10. Sen. John Kerry (D) -- MA -- +72% Liberal
Note: Obama is +70% liberal, which would rank him 13th most liberal in the Senate. Hillary Clinton is +50% liberal, which would rank her 29th most liberal in the Senate. Independent Joe Lieberman ranks a +33% liberal, 37th most liberal in the Senate.
(2) Conservative Stalwarts
1. Sen. Sessions (R) -- AL -- +81% Conservative
2. Sen. Bunning (R) -- KY -- +81% Conservative
3. Sen. Isakson (R) -- GA -- +78% Conservative
4. Sen. Allard (R) -- CO -- +77% Conservative (leaving Senate in Jan)
5. Sen. Chambliss (R) -- GA -- +75% Conservative
6. Sen. Inhofe (R) -- OK -- +73% Conservative
7. Sen. Cornyn (R) -- TX -- +72% Conservative
8. Sen. Coburn (R) -- OK -- +71% Conservative
9. Sen. DeMint (R) -- SC -- +71% Conservative
10. Sen. Kyl (R) -- AZ -- +71% Conservative
Interesting that almost no one in leadership made the top 10 list here. It goes to show that most of the congressional leaders are by necessity, pragmatists.
(3) Most Moderate Senators
1. Sen. Smith (R) -- OR -- +4% Conservative (leaving Senate in Jan)
2. Sen. Nelson (D) -- NE -- +5% Conservative
3. Sen. Specter (R) -- PA -- +6% Liberal
4. Sen. Collins (R) -- MA -- +6% Liberal
5. Sen. Lugar (R) -- IN -- +7% Conservative
6. Sen. Snowe (R) -- MA -- +8% Liberal
7. Sen. Voinovich (R) -- OH -- +14% Conservative
8. Sen. Landrieu (D) -- LA -- +16% Liberal
9. Sen. Warner (R) -- VA -- +16% Conservative (leaving Senate in Jan)
10. Sen. McCain (R) -- AZ -- +16% Conservative
Interesting to note, McCain makes the Top 10 moderate list. We really did have a liberal running against a moderate in November and the liberal won.
(4) Various Distinctions
Most Liberal Republican: Sen. Olympia Snowe of Maine -- +8% Liberal
Most Conservative Democrat: Sen. Ben Nelson of Nebraska -- +5% Conservative
Most Liberal Delegation: Massachussetts -- Senators Kennedy and Kerry average a +81% liberal
Most Conservative Delegation: Georgia -- Isakson and Chambliss average +77% conservative rating
Most Moderate Delegation: Maine -- Both seats held by old school Republican moderates Susan Collins and Olympia Snowe, #4 and #6 on our moderate list
Most Polarized Delegation: Iowa -- Sen. Harkin (D) ranks a +81% liberal, Sen. Grassley (R) a +53% conservative
Overall Leaning of the Outgoing Congress -- +3% Liberal
Prediction for the New Congress -- more liberal than that!
So, what can we glean from all of this?
First of all, that party label still doesn't mean everything in the US Senate, like it does in countries with parlimentary systems. Geography and individual views have at least as much influence on governing philosophy as does party. There are still a few true moderates left, although their ranks keep getting smaller with Sen. Gordon Smith (R) losing in Oregon this go around and Sen. Arlen Specter (R) of PA likely to retire. But at least Maine maintains a moderate Republican delegation.
One thing is clear -- party lines do tend to get draw. Democrats and Independents hold all the top liberal spots, Republicans all the top conservative spots. In fact, there is only 1 instance where there is a Democrat more liberal than a Republican -- Sen. Ben Nelson (D) of Nebraska ranks more conservative than Senators Smith (R), Specter (R), Snowe (R) and Collins (R), but not by much.
Another interesting note is Obama's choices for leadership roles:
Sen. Barack Obama (D) -- IL -- +70% liberal
Sen. Joe Biden (D) -- DE -- +58% liberal
Sen. Hillary Clinton (D) -- NY -- +50% liberal
Sen. Ken Salazar (D) -- CO -- +28% liberal
Obama picked Democrats out of the Senate, but all more conservative than his own record. He passed on the liberal John Kerry in favor of more moderate Hillary Clinton.
We will look at the house in a later posting, although analyzing 435 voting records is a lot more complex than 100. What you tend to find in the house is greater polarization as you can run as districts tend to be more ideologically polarized than states. This, combined with the impact of the Voting Rights Act (which mandates black-majority districts that tend to be intensely liberal) and state gerrymandering (which tends to create safe, polarized districts) makes the house more ideological and the senate more contemplative.
Saving the Fillibuster
Now that Democrats firmly control both houses of congress, there is a whisper campaign in left-wing circles to do away with the fillibuster, the so-called "nuclear" or "constitutional" option that the Republicans considered earlier this decade. I opposed Republicans eliminating the fillibuster at the time and I oppose Democrats doing so now. The fillibuster is an important tool in American politics to moderate policy shift when one party controls all of congress and the presidency. While it is not written in the constitution, it is enshrined in American political tradition and should be maintianed. Democrats should look for ways to build bridges with moderate Republicans right now, not look to rule by one-party rule. They will control 58 to 59 seats in the new Senate. Is it too much to ask that they seek to get 1 to 2 Republican votes out of 40 to 41 to gain approval for legislation?
Monday, December 29, 2008
Sunday, December 28, 2008
Grading President George W. Bush
Now that the Bush administration is drawing to a close, it would be tempting to simple pile on. Clearly, the nation faces a number of difficult problems: a recessive economy and two wars for starters. A growing number of columnists and blogs have begun to ask the question: Is George W. Bush the worst president ever? If you were born after 1980, it's probably an easy answer. Otherwise, I think you would probably have to ignore a lot of historical perspective in order to rate Bush the worst. Sure, he's had his problems. He's also had some accomplishments.
So, to accurately rate President Bush, let's go through some highlights, lowlights and assign grades in key policy areas. For purposes of these ratings, we'll try to ignore ideology. We'll rate Bush on #1 His success in implementing his policies and #2 The success of those policies in achieving their objectives. For instance -- I may be Pro-Choice, but if outlawing abortion were a policy priority for Bush and he were successful able to outlaw it, he would get a high grade for accomplishing his policy priority.
Highlights of the Bush Administration
(1) Going into Afghanistan
It is easy to re-write history, this many years later, to read that it was always inevitable that we would go into Afghanistan to remove the Taliban from power. It was far from it. It became inevitable because Bush had a clearly articulated vision and skillfully leveraged national sentiment to achieve strong support for going in. With another leader, this might not had happened. Keep in mind that the Taliban had bombed the World Trade Center in the past, had bombed the U.S.S. Cole, etc. and the most we'd ever done is a launch a single cruise missle at a chemical factory.
(2) Medicare Perscription Drug Benefit
It is hard to believe that the single largest entitlement expansion of the last 30 years happened under a Republican president, but it did. Bush got the policy that he wanted and in all honesty, it has worked fairly well.
(3) Killing the Hussein Family
Uday, Qusay and Saddam were evil people. You may agree or disgaree with going into Iraq, but it is hard to argue that the world isn't better off having those 3 dead.
Lowlights:
(1) Strategy in Iraq / Donald Rumsfeld
Any objective analysis would say that we did not have a strategy for winning in Iraq when we went in. Remember how we were going to be greeted as liberators? Remember how oil revenue was going to pay for the war? Thousands of casualties and years later, Bush finally wised up and canned Rumsfeld and sent in more troops under the highly effective leadership of Gates and Petreaus. But for 5 years, we languished with a failed policy.
(2) Asleep at the Economic Wheel
Lack of regulation of the banking industry, loose credit policy, "the ownership society", all failed and failed spectularly in the waning days of the Bush administration.
(3) Defecit Spending
He got his tax cuts sure, but as I discussed in a previous blog, spending surged. Partly to finance the wars, but also earmarks, farm subsidies, entitlements, etc. Bush has not only passed on an economy in crisis, but a completely disfunctional federal budget with the highest level of federal debt since the immediate aftermath of World War II.
(4) Absence of Any Significant Domestic Policy Accomplishments
Remember the president's immigration bill? His social security proposal? His blue ribbon commission to rewrite the tax code?
No?
Maybe that's becasue they all went nowhere.
In that light, here are Bush's grades:
Foreign Policy -- D+
Bush gets credit for going into Afghanistan. He gets credit for capturing or killing the whole Hussein family. He gets credit for eventually changing out Rumsfeld and shifting strategy in Iraq. But five years of casualties and failed policy there, coupled with awful diplomacy that lead to falling stature of the US in the world drags this grade down. We also failed to get Osama Bin Laden, a far more important strategic target than the Husseins.
Tax Policy -- B-
Bush got the tax cuts he wanted. He failed to get the more overarching reform that he sought to simplify and rewrite the tax code.
Budget Management -- D-
Huge defecits, exploding debt and no plan in sight.
Immigration Reform -- D+
Bush articulated a very clear and compelling vision. He had support from congressional Democrats and moderate Republicans like John McCain and Olympia Snowe. Still, he failed to get any legislation signed into law.
Homeland Security -- B+
There have been no significant attacks on US soil since September 11th, 2001. Bush got the Patriot Act into law, a far-reaching and socially changing piece of legislation. The TSA has been a bit of a mess, but other than this, Bush has basically done what he set out to do.
Social Security Reform -- D+
Clear vision, Republican congress, yet Bush got nothing passed. As an aside, can you imagine if social security money were in the stock market right now?
The Supreme Court -- B
Harriot Myers was a bit of a fiasco, but Bush basically got what he wanted -- two respected judicial conservatives in Samuel Alito and John Roberts. They will have a blueprint on social policy for decades past when Bush is gone.
Economic Policy -- D-
A crashing economy and seemingly no strategy to fix it. Guess those upper-income tax cuts really didn't solve all our problems.
Social Policy -- B+
Bush got his policy on stem cell research. He put tons of new aid into Africa to combat AIDS. Basically, Bush got what he wanted on social policy, although for the most part, it was not a priority in his administration.
The Transition -- A
Bush has been a star in how he has worked tirelessly to enable to Obama administration to hit the ground running. Few Presidents have done as much for an incoming President of the opposing party.
Overall Grade for His Presidency: C-
Bush is not the worst President ever, not by a long shot. Hoover had worse economic policies. Grant and Nixon were far more corrupt. Lynodn Johnson had a far more destructive foreign policy. Bush was arguably a worse President than Clinton, his father and Reagan, probably equal to Carter and better than Nixon.
So, how will Obama stack up? We'll have to wait at least 4 and as many as 8 years to find out.
Next Up:
Analyzing the US Senate and its ideological factions
So, to accurately rate President Bush, let's go through some highlights, lowlights and assign grades in key policy areas. For purposes of these ratings, we'll try to ignore ideology. We'll rate Bush on #1 His success in implementing his policies and #2 The success of those policies in achieving their objectives. For instance -- I may be Pro-Choice, but if outlawing abortion were a policy priority for Bush and he were successful able to outlaw it, he would get a high grade for accomplishing his policy priority.
Highlights of the Bush Administration
(1) Going into Afghanistan
It is easy to re-write history, this many years later, to read that it was always inevitable that we would go into Afghanistan to remove the Taliban from power. It was far from it. It became inevitable because Bush had a clearly articulated vision and skillfully leveraged national sentiment to achieve strong support for going in. With another leader, this might not had happened. Keep in mind that the Taliban had bombed the World Trade Center in the past, had bombed the U.S.S. Cole, etc. and the most we'd ever done is a launch a single cruise missle at a chemical factory.
(2) Medicare Perscription Drug Benefit
It is hard to believe that the single largest entitlement expansion of the last 30 years happened under a Republican president, but it did. Bush got the policy that he wanted and in all honesty, it has worked fairly well.
(3) Killing the Hussein Family
Uday, Qusay and Saddam were evil people. You may agree or disgaree with going into Iraq, but it is hard to argue that the world isn't better off having those 3 dead.
Lowlights:
(1) Strategy in Iraq / Donald Rumsfeld
Any objective analysis would say that we did not have a strategy for winning in Iraq when we went in. Remember how we were going to be greeted as liberators? Remember how oil revenue was going to pay for the war? Thousands of casualties and years later, Bush finally wised up and canned Rumsfeld and sent in more troops under the highly effective leadership of Gates and Petreaus. But for 5 years, we languished with a failed policy.
(2) Asleep at the Economic Wheel
Lack of regulation of the banking industry, loose credit policy, "the ownership society", all failed and failed spectularly in the waning days of the Bush administration.
(3) Defecit Spending
He got his tax cuts sure, but as I discussed in a previous blog, spending surged. Partly to finance the wars, but also earmarks, farm subsidies, entitlements, etc. Bush has not only passed on an economy in crisis, but a completely disfunctional federal budget with the highest level of federal debt since the immediate aftermath of World War II.
(4) Absence of Any Significant Domestic Policy Accomplishments
Remember the president's immigration bill? His social security proposal? His blue ribbon commission to rewrite the tax code?
No?
Maybe that's becasue they all went nowhere.
In that light, here are Bush's grades:
Foreign Policy -- D+
Bush gets credit for going into Afghanistan. He gets credit for capturing or killing the whole Hussein family. He gets credit for eventually changing out Rumsfeld and shifting strategy in Iraq. But five years of casualties and failed policy there, coupled with awful diplomacy that lead to falling stature of the US in the world drags this grade down. We also failed to get Osama Bin Laden, a far more important strategic target than the Husseins.
Tax Policy -- B-
Bush got the tax cuts he wanted. He failed to get the more overarching reform that he sought to simplify and rewrite the tax code.
Budget Management -- D-
Huge defecits, exploding debt and no plan in sight.
Immigration Reform -- D+
Bush articulated a very clear and compelling vision. He had support from congressional Democrats and moderate Republicans like John McCain and Olympia Snowe. Still, he failed to get any legislation signed into law.
Homeland Security -- B+
There have been no significant attacks on US soil since September 11th, 2001. Bush got the Patriot Act into law, a far-reaching and socially changing piece of legislation. The TSA has been a bit of a mess, but other than this, Bush has basically done what he set out to do.
Social Security Reform -- D+
Clear vision, Republican congress, yet Bush got nothing passed. As an aside, can you imagine if social security money were in the stock market right now?
The Supreme Court -- B
Harriot Myers was a bit of a fiasco, but Bush basically got what he wanted -- two respected judicial conservatives in Samuel Alito and John Roberts. They will have a blueprint on social policy for decades past when Bush is gone.
Economic Policy -- D-
A crashing economy and seemingly no strategy to fix it. Guess those upper-income tax cuts really didn't solve all our problems.
Social Policy -- B+
Bush got his policy on stem cell research. He put tons of new aid into Africa to combat AIDS. Basically, Bush got what he wanted on social policy, although for the most part, it was not a priority in his administration.
The Transition -- A
Bush has been a star in how he has worked tirelessly to enable to Obama administration to hit the ground running. Few Presidents have done as much for an incoming President of the opposing party.
Overall Grade for His Presidency: C-
Bush is not the worst President ever, not by a long shot. Hoover had worse economic policies. Grant and Nixon were far more corrupt. Lynodn Johnson had a far more destructive foreign policy. Bush was arguably a worse President than Clinton, his father and Reagan, probably equal to Carter and better than Nixon.
So, how will Obama stack up? We'll have to wait at least 4 and as many as 8 years to find out.
Next Up:
Analyzing the US Senate and its ideological factions
Friday, December 26, 2008
Economics Lessons, Part 2
In my last blog, I discussed popular misconceptions about economic policy of Democrats and Republicans -- mainly the fallacy of the popularly held belief that Republicans are anti-tax, anti-spending and that Democrats are pro-tax, pro-spending. To summarize the last post (which you can read in its entirety below), over the past 30 years, while Democrats have certainly been more willing to tax than Republicans, Republicans have actually increased spending at a far greater rate, hence the larger deficits during Republican presidencies.
Now that the history lesson is over, I think it makes sense in light of the economic crisis to examine beliefs about the marketplace. I'll start by discussing a few commonly expressed philosophies and what I find inherently wrong with them.
(1) Socialism
The basic Marxist principle "to each according to his need, from each according to his ability" sounds appealing...everybody does what they can and everyone gets what they need. The problem is, in developed societies, it doesn't work very well.
The fundamental flaw with this theory is the "from each according to his ability" part. People respond to incentive structures. If you are not going to be rewarded more for working hard, you are not going to work that hard, by and large. In socialist economies, where gains are shared equally, my individual effort does not impact my standard of living significantly. Hence, I don't work hard.
The exception to this is when you can build a small community of like-minded people and there is sufficient social pressure to drive individual accountability. Classic examples of this are the Jamestown settlement (yes, they were socialists, pooling their resources) or Monasteries, where monks share in all the work and the gains from the work. These systems work well because there actually is an incentive structure -- you are a social outcast if you do not contribute in these small communities. Such a set of social incentives is near impossible in a society as large as the US.
(2) Laize Fare Capitalism
Preached to a greater or lesser extent for most of the past 50 years by economic conservatives, the premise of this theory is that free markets are extremely efficient relative to government and therefore allowing free markets to work, completely unrestricted, is the best way to secure long-term economic growth.
This premise breaks down in several areas. First of all, the concept of monopolies negates the efficiency of a market. The efficiency of market economics is based on competition. If a company can establish a 100% share and raise barriers to entry so high that no competitor can enter, a free market becomes very inefficient. Say Wal-Mart takes over all retailing and then every time a competitor tries to enter, they cut their prices to next to nothing until that competitor is bankrupt. Wal-Mart is then free, once they've bankrupted their competitors to provide lousy service, raise prices, limit goods, etc. and there is very little recourse.
The second breakdown in this theory is that free markets are only extremely efficient with a very limited focus -- short-term profitability. Free markets have no concern for trying to provide national defense, build infrastructure that would benefit other companies, protect the environment, etc. And the short-term focus of capital markets actively punishes investment for the long-term. No major corporation in the US today invests in basic research. All of the key innovations of the last 100 years -- the micro chip, the television, the microwave, etc. where all derived from government-funded research (primarily military.)
(3) Supply-Side Economics
This is, essentially, a less extreme version of Laize Fare capitalism. Supply side economics, brought to promience by Ronald Reagan in the 1980s, holds the core belief that economic growth comes from investment capital. The theory holds that by cutting taxes on capital gains and high income earners, you provide an economic incentive for investment, which leads to innovation and economic growth which "trickles down" to provide a better lifestyle for everyone.
The problem with this theory is that it only addresses one side of the supply/demand curve. Today's economy is a prime example. There is tons of investment capital out there. The economy is still tanking because there is not sufficient buying power at the lower end to invest. Therefore, the money is going into very safe places like precious metals, government bonds, etc. It is not spurring innovation or growth, it is sitting on the sidelines.
Demand must exist in order for economic growth to take place. And if demand exists, investment will happen. Business don't hire more people if their tax rates are lower, they hire more people if they think there is demand for their products and that hiring more people will earn them more money. They do this regardless of the tax rates applied on those earnings. Anything else would be bad business.
(4) Demand Side Economics
This brand of economics, preached by liberals who are not quite socialists, has the premise that cutting taxes or providing social benefits ot middle and lower income individuals will spur demand that will cause economic growth.
There is some validity to this, but similar to #3, it addresses only 1 side of the supply-demand equation. You can't have growth without capital investment to support the existance of supply and you can't grow productivity (the long-term key to all economic growth) without available investment funds.
Also, oppressively high tax rates (like the US had in the 1950s) can dampen incentives for high-income individuals to produce. If I am being taxes at 90% on every marginal dollar I earn over $200K, I'm pretty much going to stop earning around $200K.
What Works
As with most things, what really works is somewhere in between. The best economic policies pursue social goals through government schemes, but do them in a way that takes advantage of what markets do best.
The role of the government is to provide a clear, transparent playing field, to set rules that incentivize behavior that we want as a society, to provide a safety net for lower income individuals and to provide focused investments that spur productivity growth.
Key investments for the government to secure productivity growth are education and basic research. In the medium-term, the level of educaiton of populace is directly linked to its productivity. Therefore, funding and raising performance standards for education is critical. College affordability is also key. These are very important roles for governemnt.
Secondly, to raise productivity in the long-term, the government must be making investments in basic research that will spur next generation technology investment. These are investments that businesses will not make, as they have a 30 or 40 year payback, not the 3 or 4 year payback that a business wil typically require. This can be accomplished through the military, NASA and other governmental agencies.
Thirdly, the government needs to regulate industry to guard against monopolies and to guard against policies that could undermine the economy as a whole. The mortage crisis is a classic example. When companies grow so large that they are "too large to fail", meaning an economic collapse will ensue if they go bankrupt, the government must aggressively regulate their activities. This would include, in the case of lending, restrictions on the standards banks can use to set loans, capitalization requirements, accountability for risk management, etc.
Fourthly, is the safety net. Irrespective of market efficiency, most people find it morally reprehensible to have children go hungry or without vaccinations in a wealthy society. The government has a clear role in ensuring that this does not happen.
Finally, the government needs to manage broad societal goals that businesses won't take on because there is not a profit motive. Protecting the environment. Building infrastructure. National security. Police. Etc.
In #4 and #5, solutions that leverage the benefits of the free market are vastly superior to solutions that are strictly government run.
For instance, if we want to reduce carbon emissions, we could, for instance, simply mandate that each company reduce carbon by 50%. This would likely have a devastating effect on the economy. A preferable solution, is a system by which the government sets a target for carbon emissions and then auctions off the rights to those emissions to the highest bidder. This provides a huge economic incentive -- some companies will reduce emissions by 25%, some will reduce by 75%, but the ones that reduce by 75% will have a huge economic advantage. It does not perscribe a solution, but it lets the markets optimize under a new economic paradigm.
Another example is health care. Let's assume for a minute that we agree that health care is something that should be provided for every American. One approach would be a government takeover of health care. This would likely lead to inefficiency and bad decision making as it essentially creates another monopoly. An alternative solution would be to mandate that all Americans have health insurance and provide tax dollars for uninsured individuals to buy insurance with. Then, private providers could develop coverage plans and consumers could choose the ones that best fit their needs with the coverage dollars they have.
So with all this said, what do I believe about things like taxation and government spending? Complicated questions, but I'll give it a shot:
Taxation
A conservative friend of mine was speaking to me the other day about the benefits of the flat tax. I surprised him by saying that I agree with a flat tax....but, a real flat tax that encompasses all forms of income and covers all forms of taxes.
Let me explain -- there is a popular myth out there that rich pay the highest taxes. Not true. The middle class pay the highest taxes rate now. Sure the rich pay a marginal tax rate of 33% vs. a marginal tax rate for the middle class of 28%. But this excludes the impact of social security taxes, which amount to over 7% on the first $105K of income PLUS an additional 7% coming from your employer, meaning effectively that your check is reduced by 14% on the first $105K of income. This makes the REAL marginal tax rate for the middle class 42% vs. 33% for the wealthy. The poorest 30% pay nothing in income taxes, although they typically do pay the 14% in payroll taxes. Additionally, capital gains are taxes differently the earned income, with long-term capital gains taxes at only 15%.
This means that in effect, a rich person whose primary source of income is investments pays scarecely a third of the income tax that a middle-class working family does. It's not only economically inefficient, it's morally wrong.
Now some will argue that a lower capital gains tax is reasonable given that corporate earnings are taxes before transferrence to the investor. This is nonesense. All taxation occurs multiple times when money changes hands -- sales tax is collected at sale, corporate profits are then taxes and income for the worker is taxes again. It is no different with capital gains.
Also, some will argue that social security is different because you are paying into a system for which you get a benefit. But I could argue the same for any tax. Any notion that the dollars you pay into social security are the same ones that you take out later on is just mis-informed. The government is collecting a tax to pay a benefit, the same as any other tax.
So I do favor an all-encompassing flat tax, provided there is a sufficient standard deduction (say $20K per year) to exempt people below the poverty line. Applying taxes to people who can't afford rent and food is just cruel and it doesn't amount to much money. Secondly, we would need to wipe out ALL other deductions to prevent tax dodges. Yes, that includes charitable contributions. Charitable contribution deductions amount to nothing more than a government subsidy for churches and political groups -- how do you feel about religions you disagree with getting a government subsidy? Seems a little contrary to the constitution to me.
So what rate should be set? My basic answer is enough to cover government spending. The idea that taxes and spending are somehow two separate issues is just silly. We need to pay our bills. My one caveat to that is that during the next 2 years, as we battle a recession, a defecit is probably prudent. But Obama can't let 2 years become 4 years become 8 years. Not paying our bills is irresponsible, and for all you supply siders out there, it is soaking up investment capital that could be funding new innovations.
Spending
So is the level of government spending too high too low or just about right?
Ignoring the likely stimulus package (we will likely have to spend huge sums of money to get the economy going again, but that is not a part of core government spending), I'm entirely sure the answer...there are a lot of things I would like to invest more in but also a lot of government expenditures that are utter wastes.
Things to invest more in:
(1) Education and Job Training -- raising primary and secondary schools to world class must be a top priority to maintain or positoin as a world power. Providing access to post-secondary education for all children is also essentially. We don't spend nearly enough money federally to do this. Look at the horrible state of schools in places like Mississippi, Los Angeles, Camden, NJ, Gary, IN, etc. And look at the high percentage of kids who never make it to college.
(2) Basic Research -- we've given up our lead in science. There is not enough science or military spending right now inventing next generation technology. We are still flying Space Shuttles and F-15s, each 1950s and 60s technology. There is no microwave or microchip in the pipeline. This needs to be remedied. Basic Research funding could also do a lot to solve environmental problems.
(3) Health Care -- I do think it is a crime to see so many people without health care in the US. This is not an economic argument (the present system is probably more economically efficient than most) but a moral one. The government needs to design a system that improves health care.
(4) Infrastructure -- a big engine of our economy, it has been heavily neglected. Bridges, roads, rail, sure, but also upgraded air traffic control, an improved electrical grid and other enhancements. These are investments that will pay many-fold in the years to come.
(5) Troop Strength -- we do not have enough troops in the military to handle potential conflicts in the years to come. Again, not an economic need, but a national security need. The war in Iraq has demonstrated how undersized our military is -- can you imagine fighing a ground war against China or Russia if we have to tap reserves for multiple tours in Iraq? There is also a moral component to this, the sacrifices that we have asked of soliders with multiple deployments in combat zones and short breaks is wrong.
Investments that are a total waste of time:
(1) Farm Subsidies -- cut them all. 100% of them. They make our agricultural system economically inefficient and do nothing but line the pockets of big farmers.
(2) Earmarks -- John McCain had this one right. A process that lends itself to building bee hive museums and bridges to nowhere.
So, in total, I'd probably increase the size of government, but not by that much. And we'd have a tax code that made sense to pay for it.
Trade
I'm a free trader, bar none. Trade protections do nothing but make the system less economically efficient. If someone is willing to make it for us cheaper than we are willing to make it ourselves we should take it. And don't worry about them subsidizing industries -- if they want to sell to us at a loss, we should let them.
Yes, it will hurt specific industries, but overall it makes us more competitive.
We cannot avoid globalization, we need to capitalize on it.
Next Blog
Rating the Presidency of George W. Bush
Now that the history lesson is over, I think it makes sense in light of the economic crisis to examine beliefs about the marketplace. I'll start by discussing a few commonly expressed philosophies and what I find inherently wrong with them.
(1) Socialism
The basic Marxist principle "to each according to his need, from each according to his ability" sounds appealing...everybody does what they can and everyone gets what they need. The problem is, in developed societies, it doesn't work very well.
The fundamental flaw with this theory is the "from each according to his ability" part. People respond to incentive structures. If you are not going to be rewarded more for working hard, you are not going to work that hard, by and large. In socialist economies, where gains are shared equally, my individual effort does not impact my standard of living significantly. Hence, I don't work hard.
The exception to this is when you can build a small community of like-minded people and there is sufficient social pressure to drive individual accountability. Classic examples of this are the Jamestown settlement (yes, they were socialists, pooling their resources) or Monasteries, where monks share in all the work and the gains from the work. These systems work well because there actually is an incentive structure -- you are a social outcast if you do not contribute in these small communities. Such a set of social incentives is near impossible in a society as large as the US.
(2) Laize Fare Capitalism
Preached to a greater or lesser extent for most of the past 50 years by economic conservatives, the premise of this theory is that free markets are extremely efficient relative to government and therefore allowing free markets to work, completely unrestricted, is the best way to secure long-term economic growth.
This premise breaks down in several areas. First of all, the concept of monopolies negates the efficiency of a market. The efficiency of market economics is based on competition. If a company can establish a 100% share and raise barriers to entry so high that no competitor can enter, a free market becomes very inefficient. Say Wal-Mart takes over all retailing and then every time a competitor tries to enter, they cut their prices to next to nothing until that competitor is bankrupt. Wal-Mart is then free, once they've bankrupted their competitors to provide lousy service, raise prices, limit goods, etc. and there is very little recourse.
The second breakdown in this theory is that free markets are only extremely efficient with a very limited focus -- short-term profitability. Free markets have no concern for trying to provide national defense, build infrastructure that would benefit other companies, protect the environment, etc. And the short-term focus of capital markets actively punishes investment for the long-term. No major corporation in the US today invests in basic research. All of the key innovations of the last 100 years -- the micro chip, the television, the microwave, etc. where all derived from government-funded research (primarily military.)
(3) Supply-Side Economics
This is, essentially, a less extreme version of Laize Fare capitalism. Supply side economics, brought to promience by Ronald Reagan in the 1980s, holds the core belief that economic growth comes from investment capital. The theory holds that by cutting taxes on capital gains and high income earners, you provide an economic incentive for investment, which leads to innovation and economic growth which "trickles down" to provide a better lifestyle for everyone.
The problem with this theory is that it only addresses one side of the supply/demand curve. Today's economy is a prime example. There is tons of investment capital out there. The economy is still tanking because there is not sufficient buying power at the lower end to invest. Therefore, the money is going into very safe places like precious metals, government bonds, etc. It is not spurring innovation or growth, it is sitting on the sidelines.
Demand must exist in order for economic growth to take place. And if demand exists, investment will happen. Business don't hire more people if their tax rates are lower, they hire more people if they think there is demand for their products and that hiring more people will earn them more money. They do this regardless of the tax rates applied on those earnings. Anything else would be bad business.
(4) Demand Side Economics
This brand of economics, preached by liberals who are not quite socialists, has the premise that cutting taxes or providing social benefits ot middle and lower income individuals will spur demand that will cause economic growth.
There is some validity to this, but similar to #3, it addresses only 1 side of the supply-demand equation. You can't have growth without capital investment to support the existance of supply and you can't grow productivity (the long-term key to all economic growth) without available investment funds.
Also, oppressively high tax rates (like the US had in the 1950s) can dampen incentives for high-income individuals to produce. If I am being taxes at 90% on every marginal dollar I earn over $200K, I'm pretty much going to stop earning around $200K.
What Works
As with most things, what really works is somewhere in between. The best economic policies pursue social goals through government schemes, but do them in a way that takes advantage of what markets do best.
The role of the government is to provide a clear, transparent playing field, to set rules that incentivize behavior that we want as a society, to provide a safety net for lower income individuals and to provide focused investments that spur productivity growth.
Key investments for the government to secure productivity growth are education and basic research. In the medium-term, the level of educaiton of populace is directly linked to its productivity. Therefore, funding and raising performance standards for education is critical. College affordability is also key. These are very important roles for governemnt.
Secondly, to raise productivity in the long-term, the government must be making investments in basic research that will spur next generation technology investment. These are investments that businesses will not make, as they have a 30 or 40 year payback, not the 3 or 4 year payback that a business wil typically require. This can be accomplished through the military, NASA and other governmental agencies.
Thirdly, the government needs to regulate industry to guard against monopolies and to guard against policies that could undermine the economy as a whole. The mortage crisis is a classic example. When companies grow so large that they are "too large to fail", meaning an economic collapse will ensue if they go bankrupt, the government must aggressively regulate their activities. This would include, in the case of lending, restrictions on the standards banks can use to set loans, capitalization requirements, accountability for risk management, etc.
Fourthly, is the safety net. Irrespective of market efficiency, most people find it morally reprehensible to have children go hungry or without vaccinations in a wealthy society. The government has a clear role in ensuring that this does not happen.
Finally, the government needs to manage broad societal goals that businesses won't take on because there is not a profit motive. Protecting the environment. Building infrastructure. National security. Police. Etc.
In #4 and #5, solutions that leverage the benefits of the free market are vastly superior to solutions that are strictly government run.
For instance, if we want to reduce carbon emissions, we could, for instance, simply mandate that each company reduce carbon by 50%. This would likely have a devastating effect on the economy. A preferable solution, is a system by which the government sets a target for carbon emissions and then auctions off the rights to those emissions to the highest bidder. This provides a huge economic incentive -- some companies will reduce emissions by 25%, some will reduce by 75%, but the ones that reduce by 75% will have a huge economic advantage. It does not perscribe a solution, but it lets the markets optimize under a new economic paradigm.
Another example is health care. Let's assume for a minute that we agree that health care is something that should be provided for every American. One approach would be a government takeover of health care. This would likely lead to inefficiency and bad decision making as it essentially creates another monopoly. An alternative solution would be to mandate that all Americans have health insurance and provide tax dollars for uninsured individuals to buy insurance with. Then, private providers could develop coverage plans and consumers could choose the ones that best fit their needs with the coverage dollars they have.
So with all this said, what do I believe about things like taxation and government spending? Complicated questions, but I'll give it a shot:
Taxation
A conservative friend of mine was speaking to me the other day about the benefits of the flat tax. I surprised him by saying that I agree with a flat tax....but, a real flat tax that encompasses all forms of income and covers all forms of taxes.
Let me explain -- there is a popular myth out there that rich pay the highest taxes. Not true. The middle class pay the highest taxes rate now. Sure the rich pay a marginal tax rate of 33% vs. a marginal tax rate for the middle class of 28%. But this excludes the impact of social security taxes, which amount to over 7% on the first $105K of income PLUS an additional 7% coming from your employer, meaning effectively that your check is reduced by 14% on the first $105K of income. This makes the REAL marginal tax rate for the middle class 42% vs. 33% for the wealthy. The poorest 30% pay nothing in income taxes, although they typically do pay the 14% in payroll taxes. Additionally, capital gains are taxes differently the earned income, with long-term capital gains taxes at only 15%.
This means that in effect, a rich person whose primary source of income is investments pays scarecely a third of the income tax that a middle-class working family does. It's not only economically inefficient, it's morally wrong.
Now some will argue that a lower capital gains tax is reasonable given that corporate earnings are taxes before transferrence to the investor. This is nonesense. All taxation occurs multiple times when money changes hands -- sales tax is collected at sale, corporate profits are then taxes and income for the worker is taxes again. It is no different with capital gains.
Also, some will argue that social security is different because you are paying into a system for which you get a benefit. But I could argue the same for any tax. Any notion that the dollars you pay into social security are the same ones that you take out later on is just mis-informed. The government is collecting a tax to pay a benefit, the same as any other tax.
So I do favor an all-encompassing flat tax, provided there is a sufficient standard deduction (say $20K per year) to exempt people below the poverty line. Applying taxes to people who can't afford rent and food is just cruel and it doesn't amount to much money. Secondly, we would need to wipe out ALL other deductions to prevent tax dodges. Yes, that includes charitable contributions. Charitable contribution deductions amount to nothing more than a government subsidy for churches and political groups -- how do you feel about religions you disagree with getting a government subsidy? Seems a little contrary to the constitution to me.
So what rate should be set? My basic answer is enough to cover government spending. The idea that taxes and spending are somehow two separate issues is just silly. We need to pay our bills. My one caveat to that is that during the next 2 years, as we battle a recession, a defecit is probably prudent. But Obama can't let 2 years become 4 years become 8 years. Not paying our bills is irresponsible, and for all you supply siders out there, it is soaking up investment capital that could be funding new innovations.
Spending
So is the level of government spending too high too low or just about right?
Ignoring the likely stimulus package (we will likely have to spend huge sums of money to get the economy going again, but that is not a part of core government spending), I'm entirely sure the answer...there are a lot of things I would like to invest more in but also a lot of government expenditures that are utter wastes.
Things to invest more in:
(1) Education and Job Training -- raising primary and secondary schools to world class must be a top priority to maintain or positoin as a world power. Providing access to post-secondary education for all children is also essentially. We don't spend nearly enough money federally to do this. Look at the horrible state of schools in places like Mississippi, Los Angeles, Camden, NJ, Gary, IN, etc. And look at the high percentage of kids who never make it to college.
(2) Basic Research -- we've given up our lead in science. There is not enough science or military spending right now inventing next generation technology. We are still flying Space Shuttles and F-15s, each 1950s and 60s technology. There is no microwave or microchip in the pipeline. This needs to be remedied. Basic Research funding could also do a lot to solve environmental problems.
(3) Health Care -- I do think it is a crime to see so many people without health care in the US. This is not an economic argument (the present system is probably more economically efficient than most) but a moral one. The government needs to design a system that improves health care.
(4) Infrastructure -- a big engine of our economy, it has been heavily neglected. Bridges, roads, rail, sure, but also upgraded air traffic control, an improved electrical grid and other enhancements. These are investments that will pay many-fold in the years to come.
(5) Troop Strength -- we do not have enough troops in the military to handle potential conflicts in the years to come. Again, not an economic need, but a national security need. The war in Iraq has demonstrated how undersized our military is -- can you imagine fighing a ground war against China or Russia if we have to tap reserves for multiple tours in Iraq? There is also a moral component to this, the sacrifices that we have asked of soliders with multiple deployments in combat zones and short breaks is wrong.
Investments that are a total waste of time:
(1) Farm Subsidies -- cut them all. 100% of them. They make our agricultural system economically inefficient and do nothing but line the pockets of big farmers.
(2) Earmarks -- John McCain had this one right. A process that lends itself to building bee hive museums and bridges to nowhere.
So, in total, I'd probably increase the size of government, but not by that much. And we'd have a tax code that made sense to pay for it.
Trade
I'm a free trader, bar none. Trade protections do nothing but make the system less economically efficient. If someone is willing to make it for us cheaper than we are willing to make it ourselves we should take it. And don't worry about them subsidizing industries -- if they want to sell to us at a loss, we should let them.
Yes, it will hurt specific industries, but overall it makes us more competitive.
We cannot avoid globalization, we need to capitalize on it.
Next Blog
Rating the Presidency of George W. Bush
Wednesday, December 24, 2008
Turning Everything on Its Head: A Lesson in Politics and Economics, Part 1
The Conventional Wisdom
Here is what conventional wisdom tells us about the last 30 years of politics and economics:
Democrats generally prefer higher levels of government spending to finance expanded social programs. In order to accomplish this, they raise taxes, particularly on upper income individuals.
Republicans, on the other hand, favor more limited government and lower taxes, believing in the power of free markets to produce the highest level of prosperity for all.
When Ronald Reagan came to office in 1981, he aggressively reduced the size of government and cut taxes, yielding an economic boom. By cutting social programs, he angered Democrats, but Republicans praised his economic policies and believed they lifted all Americans.
George Herbert-Walker Bush came to office 1981 and started to carry on the Democratic legacy, but eventually agreed with congressional Democrats to a big tax increase and was voted out of office.
Bill Clinton then came to the White House and raised taxes again. These tax increases, plus the internet boom put the economy in balance.
After 8 years of Clinton, when George Walker Bush was elected and took office in 2001, he aggressively reduced taxes. Unlike Reagan, however, the economy didn't grow due to the September 11th terror attacks. Because of this economic contraction, we now face a global economic crisis.
Does this sound like the narrative that you have heard for a long time? Me too. The interesting thing is -- most of it isn't true.
The Real Story
Part 1, The Reagan Years
When Ronald Reagan took office, he did pursue aggressive reductions in the top marginal tax rates. However, through the Gramm-Rudman deficit reduction act, he also aggressively pursued closing tax loopholes, especially for upper income earners.
The results? When Reagan left office in 1991, federal taxes a percentage of GDP stood at 18.1%, down just slightly from the 18.8% when he took office (a net reduction of 4% in taxes paid as a percentage of the economy's size.)
Now, you could certainly argue (and I would) that Reagan's policies made the tax code more transparent and efficient by setting real marginal tax rates and reducing complicated tax dodges. What you can't really claim is that Reagan was a big tax-cutter.
Reagan also didn't cut spending. Not at all. Government spending as a percentage of GDP was the same 21.5% when he left office as when he came to office. And this doesn't even tell the whole story -- government spending had increased above 23% of GDP a few years into his administration. It was only at the end that he started to reign in the spend.
What was the result of taxes going down slightly and government spending going up? Higher deficits, obviously.
Reagan certainly prioritized spending differently by focusing more heavily on military investments and less on social programs, but he was clearly no small government guy.
Lots of borrow and spend going on.
Part 2, George H.W. Bush
Bush was not a turncoat tax raiser, as conservatives contended. To the contrary, taxes in total remained fairly stable during his administration, actually falling from 18.1% of GDP to 18.0% of GDP or a 1% tax cut. Sure, he agreed to raise top marginal rates at the end of his administration. But his administration also administered many tax cuts and credits, such as the Earned Income Tax Credit, increases in personal and dependent exemptions, etc.
What Bush did do was spend mone, increasing federal spending from 21.5% of GDP to 22.1% when he left office, a 3% increase.
Increased spending with flat tax revenue continued to increase the deficit.
Part 3, Bill Clinton, Not Your Big Spending Liberal
Bill Clinton came to office and promised to reduce the deficit. And he did. Aggressively. He raised taxes, very true. Taxes during Clinton's 8 years went from 18.0% of GDP when he entered office to 20.9% of GDP when he left, a 16% increase.
He also cut spending in a way that neither Reagan or Bush ever attempted. Federal spending fell from 22.1% of GDP to 18.5% of GDP when he left office, a 16% decrease.
The result was record federal surpluses leading to massive reduction in federal debt. Clinton achieved this in almost equal parts tax increase and spending reduction.
Part 4, George W. Bush, Borrow and Spend Mania
George W. Bush was definitely a tax-cutter's tax-cutter. He reversed almost all of the Clinton tax increases, bringing taxes down from 20.9% of GDP to 18.8% of GDP in the most recent numbers available, a 10% tax cut.
W. also loved to spend money, on prescription drug benefits, the war in Iraq and the TSA. Government spending rose from 18.5% of GDP to 19.9% of GDP, an 8% increase.
The result? Back in the red.
Conclusions
The last 4 presidents had very different styles when it came to taxes and spending.
President Change in Taxes Change in Spending Change in Deficit
Reagan 4% reduction No change 41% increase
First Bush 1% reduction 3% increase 21% increase
Clinton 16% increase 16% reduction >100% decrease
Second Bush 10% decrease 8% increase >100% increase
So, if we measure "conservative" by how much the government spends, Bill Clinton would be the most conservative President of the last 30 years, George W. Bush the most liberal.
If we measure "conservative" by how well they contain the deficit, then Clinton is still the most conservative, W. the most liberal.
It is only by tax policy that you get to the traditional view of Clinton as the more liberal and W. as more conservative.
But is borrowing massive amounts of money to finance tax cuts really conservatism?
Other Quick Takes
Minnesota still isn't decided. Al Franken now leads by 46 votes in the unofficial tally after completion of the recount. But he hasn't won yet. Not by a long shot.
There are still several issues to resolve:
(1) The 1,600 absentee ballots that were improperly rejected on election day. The state supreme court has ruled those ballots should be counted and that the two campaigns should agree to a process for awarding those ballots so the counting can be completed by December 31st. As of yet, no agreement.
(2) The Coleman camp claims some 130 ballots were potentially double-counted during the recount. State law allows for photocopies to be taken of ballots that are damaged and cannot be read by counting machines. In the recount, ballots with duplicates were supposed to be paired with the duplicates to ensure that no ballots were doubled counted. 130 or so ballots were not able to be paired. This could mean ballots were double counted, duplicates were lost or that ballots were incorrectly recorded to have a duplicate. Nobody knows. The State Supreme Court dealt a blow to the Coleman campaign today, ruling that the canvassing board shouldn't attempt to resolve the issue. But it didn't close the door on contesting these ballots -- it said a later court hearing after the election was possible. Which means that Minnesota might certify a winner and we might still have a protracted legal battle.
(3) There are still some discrepancies to resolve in the awarding of withdrawn challenges.
Frankly, #1 is probably the most important. 1,600 votes is a lot with less than a 50 vote margin. But we still have a mighty mess.
It looks like the seat might be vacant when congress convenes January 6th. It does not appear, according to Governor Pawlenty's office that he believes he has the power to name an interim senator. And Harry Reid has made it clear that he doesn't believe such a right exists constitutionally and congress might not seat a replacement pick.
This makes Florida in 2000 look like a day at the park.
Upcoming Blogs
Economics Lessons, Part 2 -- I share my beliefs on taxes, spending and capitalism
Rating George W. Bush -- assessing the successes and failures of the Bush administration
Happy Holidays, everyone!
Here is what conventional wisdom tells us about the last 30 years of politics and economics:
Democrats generally prefer higher levels of government spending to finance expanded social programs. In order to accomplish this, they raise taxes, particularly on upper income individuals.
Republicans, on the other hand, favor more limited government and lower taxes, believing in the power of free markets to produce the highest level of prosperity for all.
When Ronald Reagan came to office in 1981, he aggressively reduced the size of government and cut taxes, yielding an economic boom. By cutting social programs, he angered Democrats, but Republicans praised his economic policies and believed they lifted all Americans.
George Herbert-Walker Bush came to office 1981 and started to carry on the Democratic legacy, but eventually agreed with congressional Democrats to a big tax increase and was voted out of office.
Bill Clinton then came to the White House and raised taxes again. These tax increases, plus the internet boom put the economy in balance.
After 8 years of Clinton, when George Walker Bush was elected and took office in 2001, he aggressively reduced taxes. Unlike Reagan, however, the economy didn't grow due to the September 11th terror attacks. Because of this economic contraction, we now face a global economic crisis.
Does this sound like the narrative that you have heard for a long time? Me too. The interesting thing is -- most of it isn't true.
The Real Story
Part 1, The Reagan Years
When Ronald Reagan took office, he did pursue aggressive reductions in the top marginal tax rates. However, through the Gramm-Rudman deficit reduction act, he also aggressively pursued closing tax loopholes, especially for upper income earners.
The results? When Reagan left office in 1991, federal taxes a percentage of GDP stood at 18.1%, down just slightly from the 18.8% when he took office (a net reduction of 4% in taxes paid as a percentage of the economy's size.)
Now, you could certainly argue (and I would) that Reagan's policies made the tax code more transparent and efficient by setting real marginal tax rates and reducing complicated tax dodges. What you can't really claim is that Reagan was a big tax-cutter.
Reagan also didn't cut spending. Not at all. Government spending as a percentage of GDP was the same 21.5% when he left office as when he came to office. And this doesn't even tell the whole story -- government spending had increased above 23% of GDP a few years into his administration. It was only at the end that he started to reign in the spend.
What was the result of taxes going down slightly and government spending going up? Higher deficits, obviously.
Reagan certainly prioritized spending differently by focusing more heavily on military investments and less on social programs, but he was clearly no small government guy.
Lots of borrow and spend going on.
Part 2, George H.W. Bush
Bush was not a turncoat tax raiser, as conservatives contended. To the contrary, taxes in total remained fairly stable during his administration, actually falling from 18.1% of GDP to 18.0% of GDP or a 1% tax cut. Sure, he agreed to raise top marginal rates at the end of his administration. But his administration also administered many tax cuts and credits, such as the Earned Income Tax Credit, increases in personal and dependent exemptions, etc.
What Bush did do was spend mone, increasing federal spending from 21.5% of GDP to 22.1% when he left office, a 3% increase.
Increased spending with flat tax revenue continued to increase the deficit.
Part 3, Bill Clinton, Not Your Big Spending Liberal
Bill Clinton came to office and promised to reduce the deficit. And he did. Aggressively. He raised taxes, very true. Taxes during Clinton's 8 years went from 18.0% of GDP when he entered office to 20.9% of GDP when he left, a 16% increase.
He also cut spending in a way that neither Reagan or Bush ever attempted. Federal spending fell from 22.1% of GDP to 18.5% of GDP when he left office, a 16% decrease.
The result was record federal surpluses leading to massive reduction in federal debt. Clinton achieved this in almost equal parts tax increase and spending reduction.
Part 4, George W. Bush, Borrow and Spend Mania
George W. Bush was definitely a tax-cutter's tax-cutter. He reversed almost all of the Clinton tax increases, bringing taxes down from 20.9% of GDP to 18.8% of GDP in the most recent numbers available, a 10% tax cut.
W. also loved to spend money, on prescription drug benefits, the war in Iraq and the TSA. Government spending rose from 18.5% of GDP to 19.9% of GDP, an 8% increase.
The result? Back in the red.
Conclusions
The last 4 presidents had very different styles when it came to taxes and spending.
President Change in Taxes Change in Spending Change in Deficit
Reagan 4% reduction No change 41% increase
First Bush 1% reduction 3% increase 21% increase
Clinton 16% increase 16% reduction >100% decrease
Second Bush 10% decrease 8% increase >100% increase
So, if we measure "conservative" by how much the government spends, Bill Clinton would be the most conservative President of the last 30 years, George W. Bush the most liberal.
If we measure "conservative" by how well they contain the deficit, then Clinton is still the most conservative, W. the most liberal.
It is only by tax policy that you get to the traditional view of Clinton as the more liberal and W. as more conservative.
But is borrowing massive amounts of money to finance tax cuts really conservatism?
Other Quick Takes
Minnesota still isn't decided. Al Franken now leads by 46 votes in the unofficial tally after completion of the recount. But he hasn't won yet. Not by a long shot.
There are still several issues to resolve:
(1) The 1,600 absentee ballots that were improperly rejected on election day. The state supreme court has ruled those ballots should be counted and that the two campaigns should agree to a process for awarding those ballots so the counting can be completed by December 31st. As of yet, no agreement.
(2) The Coleman camp claims some 130 ballots were potentially double-counted during the recount. State law allows for photocopies to be taken of ballots that are damaged and cannot be read by counting machines. In the recount, ballots with duplicates were supposed to be paired with the duplicates to ensure that no ballots were doubled counted. 130 or so ballots were not able to be paired. This could mean ballots were double counted, duplicates were lost or that ballots were incorrectly recorded to have a duplicate. Nobody knows. The State Supreme Court dealt a blow to the Coleman campaign today, ruling that the canvassing board shouldn't attempt to resolve the issue. But it didn't close the door on contesting these ballots -- it said a later court hearing after the election was possible. Which means that Minnesota might certify a winner and we might still have a protracted legal battle.
(3) There are still some discrepancies to resolve in the awarding of withdrawn challenges.
Frankly, #1 is probably the most important. 1,600 votes is a lot with less than a 50 vote margin. But we still have a mighty mess.
It looks like the seat might be vacant when congress convenes January 6th. It does not appear, according to Governor Pawlenty's office that he believes he has the power to name an interim senator. And Harry Reid has made it clear that he doesn't believe such a right exists constitutionally and congress might not seat a replacement pick.
This makes Florida in 2000 look like a day at the park.
Upcoming Blogs
Economics Lessons, Part 2 -- I share my beliefs on taxes, spending and capitalism
Rating George W. Bush -- assessing the successes and failures of the Bush administration
Happy Holidays, everyone!
Thursday, December 18, 2008
Quick Takes: The Cabinet, Kudos to Bush, Rick Warren, The Auto Industry, Harry Reid, MN & NY Senate
The Centrist, Diverse Obama Cabinet
I was initially a little hesitant when the names of potential Obama cabinet members started circulating what seems like a lifetime ago and also concerned with the selection of the highly partisan Rahm Emanuel as his Chief of Staff. My concern was misplaced. It is hard not to be impressed with the true diversity of his cabinet by any measure: race, gender, party affiliation, political philosophy, etc. Here are some statistics.
Ethnic Diversity: African-American = 1, Hispanic = 3, Asian-American = 2, White = 9
Gender Diversity: Women = 3, Men = 12
Party Affiliation: Republicans = 2, Independents = 1, Democrats = 12
Note: I am counting Eric Shinseki as an Independent having served as Army Cheif of Staff under both Clinton and Bush, although I am not sure of his leanings. I am counting Robert Gates as a Republican as he has supported Republicans in the past although he is a registered independent. I am counting Timothy Geithner as a Democrat as he served as an undersecretary in the Clinton administration, although his party affiliation is undeclared.
Beltway Affiliation: Insiders = 10, Outsiders = 5
Note: For purposes of this definition an insider has worked in either congress or the federal executive branch, an outsider has not.
A truly impressive and qualified crowd. Of his 15 cabinet members, only 1, Eric Holder, will face any significant opposition in congress.
The far left (Daily Kos, etc.) is mad at Obama for not naming a more liberal cabinet. Conservatives are largely praising his choice or staying quiet, except for Holder. Even Fred Barnes said he was happy with his picks.
Bravo, Mr. President Elect.
The one chink in the armor for some -- no openly gay cabinet members. There is some buzz about openly gay undersecretaries and non-cabinet level secretaries, but the gay community appears to feel somewhat slighted. And Rick Warren didn't help him here either -- see below.
Kudos to Bush
I haven't said that often, but I have to say, Bush has gone out of his way to provide an orderly transition and support Obama as he has started his Presidency. He has made himself available to the President-Elect, he has refrained from criticism, he has had his cabinet prepare contingency plans for disasters shortly after Obama takes office and he has praised Obama's historic candidacy. This is nothing like the childish behavior of the Clinton administration in its last days or the cold hand-off from Bush's father to Clinton.
I've said it before and I'll say it again -- Bush has not been a great President, far from it. But he deserves credit for the service he is doing this nation by enabling Obama to hit the ground running.
The Rick Warren Situation
There has been a firestorm from the left and the gay community since it was announced that Rick Warren would give the invocation at Barack Obama's inauguration.
For any who don't know, Rick Warren is a prominent pastor who has staunchly conservative views on social issues, most notably gay rights. He is a staunch opponent of gay marriage and social unions and gay adoption. Warren's Saddleback Church hosted joint interviews with both John McCain and Barack Obama early in the campaign.
Let me state my nuanced view to this very touchy topic.
If I were Barack Obama, I would not have Rick Warren in my circle of friends. I believe gay rights is the crowning civil rights issue of our time. Gay Americans are the only group that still face legal and socially accepted discrimination. I find his sermons on the topic disturbing.
But this is exactly what Obama promised. Lest we forget, Obama is opposed to gay marriage as well. Obama went to Rick Warren's church at Saddleback to be interviewed. He has stated repeatedly the need to reach out to the evangelical community. Rick Warren is not being put in government, he is simply giving an invocation.
So while I disagree with Warren and Obama on gay marriage, I find it hard to criticize Obama for doing what he said he would do.
Who would've thought at this point that conservatives would be praising Obama and liberals criticizing him? Maybe he is a different kind of politician.
The Auto Industry
Now that the bailout package has failed, the ball is in the Bush Administrations court. Bush cannot simply kick the can down the road as almost certainly GM and possibly Chrysler would already be in bankruptcy by the time Obama takes office (Ford has a much stronger balance sheet and may well survive without bankruptcy or financial assistance.)
Bush had initially hinted that he would provide loans out of the remaining TARP funds. He is now indicating that an "orderly bankruptcy" may be the way to go. What exactly this means is not 100% clear yet, but I will restate my position that I think that the Big 3 are unworthy of a taxpayer bailout without bankruptcy and the sort of strict restrictions on executive compensation and financial restructuring that were not (but should have been) part of the financial industry bailout.
I am sick and tired of practicing capitalism with corporate gains and socialism with corporate losses. This is a preverse reverse socialism where the rich make out when times are good and the rich are still protected when times are bad.
I recognize the economic criticality of the auto industry and nobody favors the companies shutting down, but I cannot fathom why investors should get a return on a company that has been incompetently managed.
The Incompetent Harry Reid
While I did not support the bailout package, its failure to pass is another strike against Harry Reid. Seriously, can this guy get anything done? Since Democrats have taken the majority, can you think of one piece of major legislation he has pushed through?
Democrats and Bush reached an agreement on immigration reform. Didn't pass.
Democrats and Bush reached an agreement on the first bailout bill. Didn't pass.
Congress controlled the purse strings on Iraq. Bush got his way.
Democrats and Bush reached an agreement on the auto industry. Didn't pass.
What an abject failure. Democrats need to give Reid the boot. The country deserves better. And Democrats better wise up if they hope to hold their new found seats in 2010.
The Long Road in Minnesota, the "Election of One" in New York
The election that seems to never end in Minnesota is getting closer to over and shockingly, after seeing Norm Coleman lead throughout the recount, he could actually lose this one. It is still far from decided given the narrowness of the margins. Norm Coleman officially leads by 5 votes (no that is not a typo), but the challenges are not yet all sorted through, so those numbers will shift again, we just don't know in which direction.
Also, the state supreme court ruled today that about 1,600 improperly rejected absentee ballots should be counted, meaning another round of counts, another round of challenges and another round of resolving the challenges.
This is all supposed to be over by December 31st according to the ruling. Don't count on it being resolved any sooner.
In New York, Caroline Kennedy is running a campaign of sorts to get Governor David Patterson to appoint her to Hillary Clinton's seat. While I have nothing against Kennedy, who seems to be a pleasant, kind and decent person, I detest legacy blue blood politics. Kennedy has done nothing to earn a Senate seat other than have a famous name. Governor Patterson should appoint the person he thinks is best qualified, and he would have trouble convincing me that that is Kennedy. If Kennedy wants the seat, let her run for it in 2010. Heck, she'd probably win -- New Yorkers love both celebrities and the Kennedy family. But if she ran and won, she would be definition in a democracy, earn the seat. As it is, it feels like just another backdoor deal if she gets it by appointment.
I was initially a little hesitant when the names of potential Obama cabinet members started circulating what seems like a lifetime ago and also concerned with the selection of the highly partisan Rahm Emanuel as his Chief of Staff. My concern was misplaced. It is hard not to be impressed with the true diversity of his cabinet by any measure: race, gender, party affiliation, political philosophy, etc. Here are some statistics.
Ethnic Diversity: African-American = 1, Hispanic = 3, Asian-American = 2, White = 9
Gender Diversity: Women = 3, Men = 12
Party Affiliation: Republicans = 2, Independents = 1, Democrats = 12
Note: I am counting Eric Shinseki as an Independent having served as Army Cheif of Staff under both Clinton and Bush, although I am not sure of his leanings. I am counting Robert Gates as a Republican as he has supported Republicans in the past although he is a registered independent. I am counting Timothy Geithner as a Democrat as he served as an undersecretary in the Clinton administration, although his party affiliation is undeclared.
Beltway Affiliation: Insiders = 10, Outsiders = 5
Note: For purposes of this definition an insider has worked in either congress or the federal executive branch, an outsider has not.
A truly impressive and qualified crowd. Of his 15 cabinet members, only 1, Eric Holder, will face any significant opposition in congress.
The far left (Daily Kos, etc.) is mad at Obama for not naming a more liberal cabinet. Conservatives are largely praising his choice or staying quiet, except for Holder. Even Fred Barnes said he was happy with his picks.
Bravo, Mr. President Elect.
The one chink in the armor for some -- no openly gay cabinet members. There is some buzz about openly gay undersecretaries and non-cabinet level secretaries, but the gay community appears to feel somewhat slighted. And Rick Warren didn't help him here either -- see below.
Kudos to Bush
I haven't said that often, but I have to say, Bush has gone out of his way to provide an orderly transition and support Obama as he has started his Presidency. He has made himself available to the President-Elect, he has refrained from criticism, he has had his cabinet prepare contingency plans for disasters shortly after Obama takes office and he has praised Obama's historic candidacy. This is nothing like the childish behavior of the Clinton administration in its last days or the cold hand-off from Bush's father to Clinton.
I've said it before and I'll say it again -- Bush has not been a great President, far from it. But he deserves credit for the service he is doing this nation by enabling Obama to hit the ground running.
The Rick Warren Situation
There has been a firestorm from the left and the gay community since it was announced that Rick Warren would give the invocation at Barack Obama's inauguration.
For any who don't know, Rick Warren is a prominent pastor who has staunchly conservative views on social issues, most notably gay rights. He is a staunch opponent of gay marriage and social unions and gay adoption. Warren's Saddleback Church hosted joint interviews with both John McCain and Barack Obama early in the campaign.
Let me state my nuanced view to this very touchy topic.
If I were Barack Obama, I would not have Rick Warren in my circle of friends. I believe gay rights is the crowning civil rights issue of our time. Gay Americans are the only group that still face legal and socially accepted discrimination. I find his sermons on the topic disturbing.
But this is exactly what Obama promised. Lest we forget, Obama is opposed to gay marriage as well. Obama went to Rick Warren's church at Saddleback to be interviewed. He has stated repeatedly the need to reach out to the evangelical community. Rick Warren is not being put in government, he is simply giving an invocation.
So while I disagree with Warren and Obama on gay marriage, I find it hard to criticize Obama for doing what he said he would do.
Who would've thought at this point that conservatives would be praising Obama and liberals criticizing him? Maybe he is a different kind of politician.
The Auto Industry
Now that the bailout package has failed, the ball is in the Bush Administrations court. Bush cannot simply kick the can down the road as almost certainly GM and possibly Chrysler would already be in bankruptcy by the time Obama takes office (Ford has a much stronger balance sheet and may well survive without bankruptcy or financial assistance.)
Bush had initially hinted that he would provide loans out of the remaining TARP funds. He is now indicating that an "orderly bankruptcy" may be the way to go. What exactly this means is not 100% clear yet, but I will restate my position that I think that the Big 3 are unworthy of a taxpayer bailout without bankruptcy and the sort of strict restrictions on executive compensation and financial restructuring that were not (but should have been) part of the financial industry bailout.
I am sick and tired of practicing capitalism with corporate gains and socialism with corporate losses. This is a preverse reverse socialism where the rich make out when times are good and the rich are still protected when times are bad.
I recognize the economic criticality of the auto industry and nobody favors the companies shutting down, but I cannot fathom why investors should get a return on a company that has been incompetently managed.
The Incompetent Harry Reid
While I did not support the bailout package, its failure to pass is another strike against Harry Reid. Seriously, can this guy get anything done? Since Democrats have taken the majority, can you think of one piece of major legislation he has pushed through?
Democrats and Bush reached an agreement on immigration reform. Didn't pass.
Democrats and Bush reached an agreement on the first bailout bill. Didn't pass.
Congress controlled the purse strings on Iraq. Bush got his way.
Democrats and Bush reached an agreement on the auto industry. Didn't pass.
What an abject failure. Democrats need to give Reid the boot. The country deserves better. And Democrats better wise up if they hope to hold their new found seats in 2010.
The Long Road in Minnesota, the "Election of One" in New York
The election that seems to never end in Minnesota is getting closer to over and shockingly, after seeing Norm Coleman lead throughout the recount, he could actually lose this one. It is still far from decided given the narrowness of the margins. Norm Coleman officially leads by 5 votes (no that is not a typo), but the challenges are not yet all sorted through, so those numbers will shift again, we just don't know in which direction.
Also, the state supreme court ruled today that about 1,600 improperly rejected absentee ballots should be counted, meaning another round of counts, another round of challenges and another round of resolving the challenges.
This is all supposed to be over by December 31st according to the ruling. Don't count on it being resolved any sooner.
In New York, Caroline Kennedy is running a campaign of sorts to get Governor David Patterson to appoint her to Hillary Clinton's seat. While I have nothing against Kennedy, who seems to be a pleasant, kind and decent person, I detest legacy blue blood politics. Kennedy has done nothing to earn a Senate seat other than have a famous name. Governor Patterson should appoint the person he thinks is best qualified, and he would have trouble convincing me that that is Kennedy. If Kennedy wants the seat, let her run for it in 2010. Heck, she'd probably win -- New Yorkers love both celebrities and the Kennedy family. But if she ran and won, she would be definition in a democracy, earn the seat. As it is, it feels like just another backdoor deal if she gets it by appointment.
Sunday, December 7, 2008
First Glimpse: 2012
Okay, I know Obama hasn't even taken office yet, but since it is a relatively slow news period (if you don't count the economic bad news every day and confirmation of Obama appointments that we already knew about), I thought we'd look at the 2012 breakdown.
State of the States
The first map above shows a breakdown of the states by projected battleground status in 2012. Let me explain what I did. Since Obama won the national popular vote by over 7%, it is necessary to normalize for what the map might look like in a closer election. Therefore, we have designated as follows: Dark Red States
(States that were 20% or more pro-GOP than the nation)
Idaho, Oklahoma, Wyoming, Utah, Alaska, Alabama, Arkansas, Louisiana, Nebraska, Kentucky, Kansas, Tennessee, Mississippi and West Virginia
These states will go Democratic in 2012 -- if -- well, if hell freezes over.
Of course, it is worth noting that it wasn't long ago that Indiana and Virginia would've fit this definition and on the flip side, it was just back in 1996 that Bill Clinton was carrying states like Arkansas, Louisiana and West Virginia. Funny how things change.
Red States
(States that were 10% or more pro-GOP than the nation)
Texas, South Carolina, North Dakota, South Dakota, Arizona, Georgia
These states would go Democratic only in a landslide.
Of course, I (incorrectly) picked North Dakota for Obama this time around and Arizona might have been closer where McCain not from there.
Light Red States
(States won by McCain that don't fit the other two categories)
Montana, Missouri
These states could go Democratic in a decisive win, but probably would not be deciders in a close election. Missouri was obviously extremely close this year and Montana wasn't far off either.
Toss-ups
(States won by Obama but by less than he won nationally)
North Carolina, Indiana, Florida, Ohio, Virginia
Expect these states to all be hotly contested in 2012. They could well swing the outcome.
Light Blue States (States won by Obama by more than he won nationally but by 10% or less)
Colorado, New Hampshire, Iowa, Minnesota
Expect these to be fought over in 2012. A Republican challenger would need to pick up some EV's here in order to win.
Blue States
(States won by Obama by >10% and <20%) style="color: rgb(0, 0, 153);">Deep Blue States
Delaware, Connecticut, Maryland, California, Illinois, New York, Massachussetts, Rhode Island, Vermont, Hawaii, District of Columbia
Not going GOP anytime soon. Would need a Reagan or Nixon-style blowout to pick these up.
Census 2010 A major event that will influence the 2012 elections is the impact of the 2010 census. Population changes will impact congressional apportionment, which in turn will impact the number of electoral votes each state has. While we can't be sure until the census is taken, Census Bureau estimates give us a reasonable idea as to the changes that are likely. The second map shows the impacts.
Losing 2 Electoral Votes
New York and Ohio
The northeast and the rust belt take a hit.
Losing 1 Electoral Vote
Massachussetts, Pennsylvania, Illinois, Missouri, Iowa, Nebraska
The northeast and rust belt hit as is the midwest.
Gaining 1 Electoral Vote
California, Nevada, Utah, Arizona, Georgia
The west continues its strong growth and Atlanta-metro continues to sprawl
Gaining 2 Electoral Votes
Florida
Hurricanes don't scare away the growth in Miami and Tampa.
Gaining 3 Electoral Votes
Texas
You don't mess with Texas, which has been picking up EV's like crazy the last two censuses. Dallas/Ft.Worth, Houston booming.
In total -- Deep Blue states lose 3 electoral votes, Blue states stay even, Light Blue states lose 1 ev, Toss-ups are even, Light Red states lose 1 ev, Red states pick-up 5 ev's and Deep Red states stay even.
So it's -4 for blue states of all shades and +4 for red states of all shades. Edge GOP.
What It All Means
Post 2010 census, the EV's breakdown this way:
Deep Blue -- 150 EV's
Blue -- 95 EV's
Light Blue -- 29 EV's
Toss-ups -- 86 EV's
Light Red -- 13 EV's
Red -- 78 EV's
Deep Red -- 87 EV's
So the Dem's will come in to 2012 with 245 EV's pretty solidly in their corner, the GOP 165. To win, the Dem's must just hold the light blue states, which would give them 274 EV's in an even national election. The GOP get to only 178 EV's with the light red states and would need all the tossups plus 5 EV's from the light blue column.
Structurally, the advantage is Democratic going in. But not by a lot -- if the proportions from 2008 held, a 2% popular vote win would swing Colorado and New Hampshire and give the GOP 278 EV's.
2012 Candidates
So, who's in the queue for a 2012 run?
Democrats
Barack Obama -- pretty easy no brainer here
If Obama is alive and interested, it is incredibly unlikely that he would face a serious primary challenge. It is rare for a sitting President to have a serious challenge (Ted Kennedy taking on Jimmy Carter is the most recent one I can recall unless you count Pat Buchannan's run against the first Bush) and no Democrat wants to be the person who tried to take down the first black President.
If Obama for some reason is unavailable (death, illness or non-interest) than Hillary Clinton is the instant front-runner. Other rising stars include Sen. Jim Webb and Gov. Tom Kaine in Virginia and key members of Obama's cabinet such as Bill Richardson and Janet Napolitano. I guess you have to consider VP Joe Biden as well, but I can't see him holding up topping the ticket -- they practically had to shove him in a box for all his gaffes running for VP.
Republicans
Sarah Palin -- say what you will, but the Alaska Gov is the most interesting thing going in the GOP.
Newt Gingrich -- I don't know how seriously to take him, but he's trying to make a comeback and is the one guy left associated with a successful Republican brand and fresh Republican ideas.
Tim Pawlenty -- Minnesota Gov a true rising GOP star -- but will anybody know who he is?
Mitt Romney -- the most articulate guy in the GOP, many feel would've but a stronger fight up that McCain. If a black guy can win, certainly a mormon can contend, right?
Mike Huckabee -- the surprise rock star of 2008 may make a return appearence. Probably too radical on social issues to get the nod, but you never know.
It is unlikely the GOP has a Barack Obama lurking in the wings. The GOP has a much stronger tradition of nominating the "next guy in line" than the DEMs -- think George H.W. Bush, Bob Dole, John McCain. Of course George W. Bush bucked that trend, but you could hardly say he came out of nowhere, holding the most known Republican name in national politics.
The next guy in line theory would give the advantage to Romney, who has certainly paid his dues. But it's still a long way off -- maybe the next "guy" is really VP rock star candidate Palin. Don't underestimate her, she will be prepped and articulate when she returns to the national stage.
Friday, November 28, 2008
Giving Thanks, The Big 3, GOP Holds Ground in MN & GA, Terror in India
Why I Am Thankful
I just got back from Thanksgiving dinner at my sister's house in Maryland. We had a lot of turkey and cranberry sauce, too many slices of pie and a ton of political discussion -- most of my family are staunch conservatives, so we always have lively debate.
But it got me thinking about the things I am thankful for. Since this is a political column, I'll let you guys take it as a given that I am thankful for my wife, my family and all the other deeply personal things you don't care about.
But as an American, here are the things I am deeply thankful for:
(1) I am thankful that we live on one of the only nations on earth where people are free to speak their minds. Even in western democracies in Europe, the concept of a nearly absolute First Amendment is foreign -- you can be thrown in jail in Germany for advocating Nazism, for instance. I'm not advocating Nazism, but I am proud of a country mature enough to recognize that the best way to defeat it is to confront it head on.
(2) I am thankful that this November I was presented with an honest choice between two good and capable men for the Presidency. I'd have to go back a long way to say that in any previous cycle.
(3) I'm thankful that American economic might is such that we consider the current economic state a financial crisis. To 95% of the world's population, this would be a field day.
(4) I'm thankful that we are a mature enough nation to make intelligent decisions in the face of smears. No, I'm not talking about the presidential campaign, as I've said repeatedly, I actually found that to be remarkably clean. I'm talking about the North Carolina Senate race. Elizabeth Dole deserved to lose for the sleaze she was peddling at the end. And she did.
(5) I'm thankful our list of Presidents have been good enough that George W. Bush is considered among the worst. Compare him to bad leaders of other countries -- we've been blessed with a long string of capable leaders if he sorts to the bottom.
So, Happy Belated Thanksgiving. And give thanks that you live in the greatest country to have ever graced this Earth.
The "US" Auto Industry
One of the hot topics of discussion this Thanksgiving in my family was the US Auto Industry -- why it is failing and what should be done.
First, let me state my view that the Big 3 do not represent the US Auto Industry.
Here are a few facts:
First, there are more cars built in the US by companies other than GM, Ford and Chrysler than by GM, Ford and Chrysler. Just ask Toyota, Nissan, Honda, Mazda and BMW workers in places like South Carolina, Ohio, Tennessee and Mississippi. Then try to tell them they are not part of the US auto industry.
Second, ownership of all auto companies are multi-national. The Saudis own a chunk of GM and Ford. I own stock in Honda and Toyota. These are publicly traded companies. In a global economy of public companies, there is no such thing as a "US-owned" or "Japan-owned" company.
But let's put those points to the side and act under the assumption that the Big 3 ARE very economically important and therefore we have to look at what went wrong and what needs to be done.
Clearly the Big 3 are doing something wrong that Toyota and Honda (who are still profitable in this economy) are not doing wrong.
My brother-in-law attempted to passionately make the case that the source of all woes for the Big 3 was the UAW. While I don't necessarily consider the UAW to be the most forward-thinking organization in the world, this is, with respect, utter nonsense.
First, the US Auto industry's failings are not primarily driven by higher labor costs and lower productivity. Yes, it is a problem. But average assembly costs for Mini Coopers (made in the UK) are higher than for Big 3 cars and they are doing fine. The Big 3's's primary problems are and have been: poor innvoation & R&D pipeline leading to bad design and inferior production quality.
I haven't considered buying a Big 3 car for my last several vehicles because the designs were horrible and all empirical data points towards a very high cost of ownership due to poor product quality. If you don't believe me, try two things:
#1 Pick up an auto buying guide from consumer reports. Look at the real reliability data that they track from real owners.
#2 Call a GM dealership and ask them the price of an extended warranty. Then call a Honda dealership and do the same thing. Can you think of any reason other than poor quality that the same warranty costs 3x to 4x as much from GM?
So why are other companies doing so much better? Part of it has been strategic decisions made by management in terms of where to invest funds. GM, Ford and Chrysler have focused heavily on larger vehicles such as SUV's and Pick-ups, which are way down in this economy. Part of it is much poorer production systems leading to the inferior quality.
Toyota has had hundreds of books written about it and is widely considered to be the best run manufacturer of anything in the world. The key to their success is a focus on what they call "respect for humanity" -- the value of the line worker. Line workers at Toyota plants can each individually stop the line at any time they detect a quality issues. An hour of each of their days is devoted to continuous improvement. Toyota does everything it can to avoid layoffs and furloughs during slow sales periods. Does GM or Ford measure up to any of these standards? No.
Now, let's talk about the unions. Yes, higher wages are an issue for the Big 3. But how did those wages get there? The UAW can't unilaterally, management has to agree to them. Unions are actually a very free-market enterprise. Companies whose workers organize usually did something to deserve it. And companies that have unions that agree to bad contracts are to blame, not the unions. It's a union's JOB to get more money for its members. It's the company exec's JOB to do things in the interest of the company.
There is a reason that Caterpillar is not broke and GM is. Caterpillar recognized that they could not afford higher wages and fought a very tough fight with the unions to manage the issue. GM did not. Their fault.
I have absolutely zero confidence in the present management at the Big 3 to turn things around. Accordingly, I absolutely do not support a bailout to keep them afloat -- it would be wasted money. The only way I would support a bailout would be if present management is removed and replaced with capable business leaders who establish intelligent R&D strategies, improve labor relations and productivity and modernize factories. If congress doesn't see this, it should let the Big 3 go Chapter 11 and let the bankruptcy court impose these needed changes.
GOP Holds Ground in Remaining 2 Senate Races
It appears with most of the recount complete in Minnesota, that Norm Coleman has returned approximately the same lead he had going in (215 votes.) There are thousands of challenged ballots still to be resolved, so we don't know for sure, but I would say signs point towards a Coleman return to the Senate. Democrats should actually be grateful not to have Al Franken in their ranks.
In Georgia, Saxby Chambliss leads by 3 to 6% in all the polls that I've seen. He appears headed to a run-off win. It's too bad, Chambliss is a real seedy character, having won election by accusing his war veteran paraplegic rival of not being patriotic enough in 2002. But, it looks like he gets 6 more years.
Terror in India
Terrorist attacks on high-end hotels in Mumbai reminded everyone that there are issues other than the economic crisis that President Obama will have to contend with when he takes office. While India has a history of Hindu/Muslim tensions, these attacks were clearly targeted at Westerners, the primary guests in high-end hotels.
Interestingly, the Obama transition team responded with a statement much more quickly than the Bush administration did -- which begs the question -- who is really in power now?
One other side note -- does Joe Biden get points for being right?
I just got back from Thanksgiving dinner at my sister's house in Maryland. We had a lot of turkey and cranberry sauce, too many slices of pie and a ton of political discussion -- most of my family are staunch conservatives, so we always have lively debate.
But it got me thinking about the things I am thankful for. Since this is a political column, I'll let you guys take it as a given that I am thankful for my wife, my family and all the other deeply personal things you don't care about.
But as an American, here are the things I am deeply thankful for:
(1) I am thankful that we live on one of the only nations on earth where people are free to speak their minds. Even in western democracies in Europe, the concept of a nearly absolute First Amendment is foreign -- you can be thrown in jail in Germany for advocating Nazism, for instance. I'm not advocating Nazism, but I am proud of a country mature enough to recognize that the best way to defeat it is to confront it head on.
(2) I am thankful that this November I was presented with an honest choice between two good and capable men for the Presidency. I'd have to go back a long way to say that in any previous cycle.
(3) I'm thankful that American economic might is such that we consider the current economic state a financial crisis. To 95% of the world's population, this would be a field day.
(4) I'm thankful that we are a mature enough nation to make intelligent decisions in the face of smears. No, I'm not talking about the presidential campaign, as I've said repeatedly, I actually found that to be remarkably clean. I'm talking about the North Carolina Senate race. Elizabeth Dole deserved to lose for the sleaze she was peddling at the end. And she did.
(5) I'm thankful our list of Presidents have been good enough that George W. Bush is considered among the worst. Compare him to bad leaders of other countries -- we've been blessed with a long string of capable leaders if he sorts to the bottom.
So, Happy Belated Thanksgiving. And give thanks that you live in the greatest country to have ever graced this Earth.
The "US" Auto Industry
One of the hot topics of discussion this Thanksgiving in my family was the US Auto Industry -- why it is failing and what should be done.
First, let me state my view that the Big 3 do not represent the US Auto Industry.
Here are a few facts:
First, there are more cars built in the US by companies other than GM, Ford and Chrysler than by GM, Ford and Chrysler. Just ask Toyota, Nissan, Honda, Mazda and BMW workers in places like South Carolina, Ohio, Tennessee and Mississippi. Then try to tell them they are not part of the US auto industry.
Second, ownership of all auto companies are multi-national. The Saudis own a chunk of GM and Ford. I own stock in Honda and Toyota. These are publicly traded companies. In a global economy of public companies, there is no such thing as a "US-owned" or "Japan-owned" company.
But let's put those points to the side and act under the assumption that the Big 3 ARE very economically important and therefore we have to look at what went wrong and what needs to be done.
Clearly the Big 3 are doing something wrong that Toyota and Honda (who are still profitable in this economy) are not doing wrong.
My brother-in-law attempted to passionately make the case that the source of all woes for the Big 3 was the UAW. While I don't necessarily consider the UAW to be the most forward-thinking organization in the world, this is, with respect, utter nonsense.
First, the US Auto industry's failings are not primarily driven by higher labor costs and lower productivity. Yes, it is a problem. But average assembly costs for Mini Coopers (made in the UK) are higher than for Big 3 cars and they are doing fine. The Big 3's's primary problems are and have been: poor innvoation & R&D pipeline leading to bad design and inferior production quality.
I haven't considered buying a Big 3 car for my last several vehicles because the designs were horrible and all empirical data points towards a very high cost of ownership due to poor product quality. If you don't believe me, try two things:
#1 Pick up an auto buying guide from consumer reports. Look at the real reliability data that they track from real owners.
#2 Call a GM dealership and ask them the price of an extended warranty. Then call a Honda dealership and do the same thing. Can you think of any reason other than poor quality that the same warranty costs 3x to 4x as much from GM?
So why are other companies doing so much better? Part of it has been strategic decisions made by management in terms of where to invest funds. GM, Ford and Chrysler have focused heavily on larger vehicles such as SUV's and Pick-ups, which are way down in this economy. Part of it is much poorer production systems leading to the inferior quality.
Toyota has had hundreds of books written about it and is widely considered to be the best run manufacturer of anything in the world. The key to their success is a focus on what they call "respect for humanity" -- the value of the line worker. Line workers at Toyota plants can each individually stop the line at any time they detect a quality issues. An hour of each of their days is devoted to continuous improvement. Toyota does everything it can to avoid layoffs and furloughs during slow sales periods. Does GM or Ford measure up to any of these standards? No.
Now, let's talk about the unions. Yes, higher wages are an issue for the Big 3. But how did those wages get there? The UAW can't unilaterally, management has to agree to them. Unions are actually a very free-market enterprise. Companies whose workers organize usually did something to deserve it. And companies that have unions that agree to bad contracts are to blame, not the unions. It's a union's JOB to get more money for its members. It's the company exec's JOB to do things in the interest of the company.
There is a reason that Caterpillar is not broke and GM is. Caterpillar recognized that they could not afford higher wages and fought a very tough fight with the unions to manage the issue. GM did not. Their fault.
I have absolutely zero confidence in the present management at the Big 3 to turn things around. Accordingly, I absolutely do not support a bailout to keep them afloat -- it would be wasted money. The only way I would support a bailout would be if present management is removed and replaced with capable business leaders who establish intelligent R&D strategies, improve labor relations and productivity and modernize factories. If congress doesn't see this, it should let the Big 3 go Chapter 11 and let the bankruptcy court impose these needed changes.
GOP Holds Ground in Remaining 2 Senate Races
It appears with most of the recount complete in Minnesota, that Norm Coleman has returned approximately the same lead he had going in (215 votes.) There are thousands of challenged ballots still to be resolved, so we don't know for sure, but I would say signs point towards a Coleman return to the Senate. Democrats should actually be grateful not to have Al Franken in their ranks.
In Georgia, Saxby Chambliss leads by 3 to 6% in all the polls that I've seen. He appears headed to a run-off win. It's too bad, Chambliss is a real seedy character, having won election by accusing his war veteran paraplegic rival of not being patriotic enough in 2002. But, it looks like he gets 6 more years.
Terror in India
Terrorist attacks on high-end hotels in Mumbai reminded everyone that there are issues other than the economic crisis that President Obama will have to contend with when he takes office. While India has a history of Hindu/Muslim tensions, these attacks were clearly targeted at Westerners, the primary guests in high-end hotels.
Interestingly, the Obama transition team responded with a statement much more quickly than the Bush administration did -- which begs the question -- who is really in power now?
One other side note -- does Joe Biden get points for being right?
Friday, November 21, 2008
One Senate Race Decided, Presidential Map "Final", Obama Cabinet Rumors, The Politics of Depression
Senate Update
Here's where we now stand in the US Senate:
Ted Stevens has conceded the Alaska Senate race after the late mail in votes gave Mark Begich a small, but insurmountable lead. Republicans are probably relieved to be rid of Stevens, who, as a convicted felon for taking illegal perks from campaign donors would have faced an ugly expulsion fight in the Senate if he had won.
This leaves the Democrats with 56 Senate seats and the Republicans with 40. Independent/Socialist Bernie Sanders from Vermont gives the Democrats an effective 57 seat working majority. Throw in Independent Former Democrat Joe Lieberman, who appears to have buried the hatchet with Harry Reid and now intends to caucus with Democrats and the Dems have 58 seats secured for most issues.
We still have two races undecided and they are still important as they determine the size of the working majority and therefore the number of Republicans that Democrats will need to break filibusters.
In Georgia, because Saxby Chambliss did not receive 50% of the vote on election day (due to an independent drawing a small percentage of the votes), there will be a run-off in December. I continue to expect Chambliss to win -- a run-off will undoubtedly have lower turnout than the Presidential race, particularly among African-Americans and that will favor Chambliss. Advantage GOP.
In Minnesota, it is very close and very ugly. The state is in the midst of a hand recount that will take weeks after the initial count gave Republican Norm Coleman a lead of just 215 votes over Democrat Al Franken. 215 votes is a very tight margin (0.008% of votes cast) and anything could happen in the recount, although any lead is better than no lead for Coleman. With 46% of the vote recounted as of today, Franken has picked up 43 votes, putting the current margin at 136. At this pace, he would not overtake Coleman, but obviously, we don't know the weighting of which precincts the recounts came from, so we can't really project. There are also already over 800 ballots challenged by one side or another and a stack of provisional ballots that the Franken campaign is challenging should be included. This one is a real mess by the looks of it. I still give Coleman a small edge in prevailing. The deadline for resolving all of this is December 5th. We'll see.
If Chambliss and Coleman hold on, the GOP has 42 seats and moderate GOP senators such as Olympia Snow and Arlen Specter become very important in key filibuster votes.
Presidential Race is Official -- Sort Of
The last state winner has been declared in the 2008 presidential race -- John McCain was declared the winner in Missouri after a recount left him with an over 3,000 vote lead. This is in line with the map published here two posts ago.
So, the 2008 race is in the books right? Close, but not technically. The electoral college does not officially meet to elect the president until December 15th. No reason for Obama supporter to fret, the electors are all party loyalists and have pledged to support their candidate. But you do occasionally get interesting little footnotes, like the elector in 1988 who flipped the ticket and voted for Lloyd Bentsen for President and Michael Dukakis for Vice-President.
Obama Cabinet Rumors
The famously tight-lipped and disciplined Obama camp has been letting a lot of leaks out lately. No official cabinet appointments, but a lot of informal information out there. Here is the latest:
Secretary of State -- Hillary Clinton -- seems like this one is almost a done deal
Secretary of Treasury -- Timothy Geithner (New York Federal Reserve Chairman) -- Wall Street loved the pick, rallying stocks today, although the markets only gained back a small percentage of the 50% crash over the past few months.
Secretary of Homeland Security -- Janet Napolitano -- Demoratic Governor of Arizona -- happiest guy about this would be John McCain, who was like to face a fierce fight for his Senate seat from Gov. Napolitano otherwise.
Secretary of Health & Human Services -- Tom Daschle -- former Senate Democratic leader
Secretary of Defense -- Robert Gates -- wouldn't be much of a stretch for the guy currently in the job
Attorney General -- Eric Holder -- Deputy AG under Clinton
Bill Richardson is also rumored to be strongly considered for a cabinet role, but it is unclear which one.
A well qualified group who will all sail through to easy confirmations. But I must say -- I was hoping to see more Republians (guys like Chuck Hagel and Colin Powell) to bridge the divide as Obama has often spoken. I'd also like to see fewer Clinton retreads, although I concede that about the only qualified Democrats alive for cabinet positions worked in the Clinton administration.
The Politics of Depression -- How to Judge Obama's First 100 Days
In an economic mess like we are in, it is unrealistic to expect President Obama to take us to prosperity in his first few months, but here are some things to look for:
(1) A Sensible Economic Stimulus Plan
Obama has spoken frequently about the need to rebuild our national infrastructure and the need for a new green economy. I can't think of two better aims for an economic stimulus plan that would build jobs and also accomplish important and lasting policy objectives.
If Obama gets a package that centers around one or both of these things, I will consider it a success. If he gets no bill or one that is just pork-laden giveaways, we will know he failed.
(2) Disciplined Management of the Bailout
The management of the bailout has been an utter disaster so far, with shifting focus every day, from buying toxic mortgages to recapitalizing banks, to buying stakes in insurers. All the money has flowed with no strings attached, creating embarrassment and very little economic benefit.
Getting the right team in and getting order to how the money is managed is critical.
(3) An Auto Solution
The talks in Washington this week around the auto industry got nowhere fast, thanks in no small part to the absurd behavior of the Big 3's CEOs who left me emotionally wanting the whole industry to go bankrupt just to teach them a lesson. Of course, we can't let Detroit go out of business, but getting to a plan that forces meaningful change in the industry rather than just a cash extension to continue the same bad management practices they have had is crucial.
It's worth noting that Toyota is not in trouble and now builds as many cars in the US as GM. Just some food for thought.
(4) Meaning Change in the Capital Markets
Controls on mortgages, changes to short-selling rules, sound monetary policy -- all of this needs to be handled to solve the long-term economic issue.
(5) All Other
If Obama gets ANYTHING done on Healthcare, Immigration, Social Security, Iraq, etc. in the first 100 days, it's a victory. I would expect that the first 100 will be almost entirely economically consumed.
That's it for now -- stay tuned.
Here's where we now stand in the US Senate:
Ted Stevens has conceded the Alaska Senate race after the late mail in votes gave Mark Begich a small, but insurmountable lead. Republicans are probably relieved to be rid of Stevens, who, as a convicted felon for taking illegal perks from campaign donors would have faced an ugly expulsion fight in the Senate if he had won.
This leaves the Democrats with 56 Senate seats and the Republicans with 40. Independent/Socialist Bernie Sanders from Vermont gives the Democrats an effective 57 seat working majority. Throw in Independent Former Democrat Joe Lieberman, who appears to have buried the hatchet with Harry Reid and now intends to caucus with Democrats and the Dems have 58 seats secured for most issues.
We still have two races undecided and they are still important as they determine the size of the working majority and therefore the number of Republicans that Democrats will need to break filibusters.
In Georgia, because Saxby Chambliss did not receive 50% of the vote on election day (due to an independent drawing a small percentage of the votes), there will be a run-off in December. I continue to expect Chambliss to win -- a run-off will undoubtedly have lower turnout than the Presidential race, particularly among African-Americans and that will favor Chambliss. Advantage GOP.
In Minnesota, it is very close and very ugly. The state is in the midst of a hand recount that will take weeks after the initial count gave Republican Norm Coleman a lead of just 215 votes over Democrat Al Franken. 215 votes is a very tight margin (0.008% of votes cast) and anything could happen in the recount, although any lead is better than no lead for Coleman. With 46% of the vote recounted as of today, Franken has picked up 43 votes, putting the current margin at 136. At this pace, he would not overtake Coleman, but obviously, we don't know the weighting of which precincts the recounts came from, so we can't really project. There are also already over 800 ballots challenged by one side or another and a stack of provisional ballots that the Franken campaign is challenging should be included. This one is a real mess by the looks of it. I still give Coleman a small edge in prevailing. The deadline for resolving all of this is December 5th. We'll see.
If Chambliss and Coleman hold on, the GOP has 42 seats and moderate GOP senators such as Olympia Snow and Arlen Specter become very important in key filibuster votes.
Presidential Race is Official -- Sort Of
The last state winner has been declared in the 2008 presidential race -- John McCain was declared the winner in Missouri after a recount left him with an over 3,000 vote lead. This is in line with the map published here two posts ago.
So, the 2008 race is in the books right? Close, but not technically. The electoral college does not officially meet to elect the president until December 15th. No reason for Obama supporter to fret, the electors are all party loyalists and have pledged to support their candidate. But you do occasionally get interesting little footnotes, like the elector in 1988 who flipped the ticket and voted for Lloyd Bentsen for President and Michael Dukakis for Vice-President.
Obama Cabinet Rumors
The famously tight-lipped and disciplined Obama camp has been letting a lot of leaks out lately. No official cabinet appointments, but a lot of informal information out there. Here is the latest:
Secretary of State -- Hillary Clinton -- seems like this one is almost a done deal
Secretary of Treasury -- Timothy Geithner (New York Federal Reserve Chairman) -- Wall Street loved the pick, rallying stocks today, although the markets only gained back a small percentage of the 50% crash over the past few months.
Secretary of Homeland Security -- Janet Napolitano -- Demoratic Governor of Arizona -- happiest guy about this would be John McCain, who was like to face a fierce fight for his Senate seat from Gov. Napolitano otherwise.
Secretary of Health & Human Services -- Tom Daschle -- former Senate Democratic leader
Secretary of Defense -- Robert Gates -- wouldn't be much of a stretch for the guy currently in the job
Attorney General -- Eric Holder -- Deputy AG under Clinton
Bill Richardson is also rumored to be strongly considered for a cabinet role, but it is unclear which one.
A well qualified group who will all sail through to easy confirmations. But I must say -- I was hoping to see more Republians (guys like Chuck Hagel and Colin Powell) to bridge the divide as Obama has often spoken. I'd also like to see fewer Clinton retreads, although I concede that about the only qualified Democrats alive for cabinet positions worked in the Clinton administration.
The Politics of Depression -- How to Judge Obama's First 100 Days
In an economic mess like we are in, it is unrealistic to expect President Obama to take us to prosperity in his first few months, but here are some things to look for:
(1) A Sensible Economic Stimulus Plan
Obama has spoken frequently about the need to rebuild our national infrastructure and the need for a new green economy. I can't think of two better aims for an economic stimulus plan that would build jobs and also accomplish important and lasting policy objectives.
If Obama gets a package that centers around one or both of these things, I will consider it a success. If he gets no bill or one that is just pork-laden giveaways, we will know he failed.
(2) Disciplined Management of the Bailout
The management of the bailout has been an utter disaster so far, with shifting focus every day, from buying toxic mortgages to recapitalizing banks, to buying stakes in insurers. All the money has flowed with no strings attached, creating embarrassment and very little economic benefit.
Getting the right team in and getting order to how the money is managed is critical.
(3) An Auto Solution
The talks in Washington this week around the auto industry got nowhere fast, thanks in no small part to the absurd behavior of the Big 3's CEOs who left me emotionally wanting the whole industry to go bankrupt just to teach them a lesson. Of course, we can't let Detroit go out of business, but getting to a plan that forces meaningful change in the industry rather than just a cash extension to continue the same bad management practices they have had is crucial.
It's worth noting that Toyota is not in trouble and now builds as many cars in the US as GM. Just some food for thought.
(4) Meaning Change in the Capital Markets
Controls on mortgages, changes to short-selling rules, sound monetary policy -- all of this needs to be handled to solve the long-term economic issue.
(5) All Other
If Obama gets ANYTHING done on Healthcare, Immigration, Social Security, Iraq, etc. in the first 100 days, it's a victory. I would expect that the first 100 will be almost entirely economically consumed.
That's it for now -- stay tuned.
Sunday, November 16, 2008
Obama Leaves Senate, Ongoing Senate Battles, GOP 2012
Obama Senate Resignation
Barack Obama officially resigned from the US Senate this weekend. This is probably a good strategic move as he doesn't want to be President-Elect amidst the fights in the Senate that will occur in the lame duck session of congress. He is now, for all intents and purposes, the leader of the country and needs to be focusing his time and resources on a successful transition, not on serving in the senate.
Where is Obama?
Obama has been largely absent from the public eye since winning the election -- the only notable exceptions being his brief press conference and the much touted meeting with President Bush at the White House. His aides say he is busy vetting cabinet choices. But we still haven't heard any cabinet choices. It is sort of a shock to the system after seeing Obama constantly on TV that he is largely absent. He has not even commented on Paulson's flip-flop on how to use the bailout money. Is this his "one president at a time theory" or is Obama ducking going on record? I'm not sure, but it appears this will continue for the next two months.
In the cabinet sweepstakes, both Hillary Clinton and Bill Richardson have been floated as possible Secretaries of State. I was hoping for a Republican such as Chuck Hagel or Colin Powell to demonstrate Obama's commitment to bi-partisanship and the Obama camp has been mum on the deliberations, so I hold out hope. Either Clinton or Richardson would clearly be qualified, but it would either mean that Obama wouldn't be picking a very bi-partisan cabinet or he would have to do so in his domestic appointments, which is less likely.
I'll keep you posted.
Ongoing Senate Battles
The Democrats have secured 55 senate seats, the Republicans 40 and 2 will be held by independents (former socialist Bernie Sanders who is essentially a Democrat and former Democrat Joe Lieberman, who may or may not caucus with Democrats but tends to vote with them on domestic issues and with Republicans on foreign policy issues.)
The remaining battles are:
Georgia -- Saxby Chambliss won the most votes but failed to cross the 50% threshold and will therefore face a run-off. Given that Georgia had huge African-American turnout for Obama on November 4th that may not all show up for a Senate run-off, it seems more likely than not that Sen. Chambliss will win the run-off. John McCain has been out campaigning for him in Georgia this past week.
Minnesota -- Norm Coleman leads Al Franken by less than 250 votes in the final tallying, obviously triggering a recount. This one still could break either way given how close it is, but my experience tells me that the candidate leading the first count usually wins the recount as well. Do the Democrats really want Al Franken in the Senate when all is said and done? He is a loose cannon and a pretty nasty guy, frankly.
Alaska -- it appears that some sanity may exist in at least half of the Alaskan electorate. Not all the absentee and provisional ballots have been counted yet, but Anchorage Mayor Mark Begich has extended his lead to over 1,000 votes with what has been counted so far. 1,000 votes is more than it sounds like in a state as small as Alaska. Begich appears headed to the senate while Stevens appears headed for 12 cent an hour license plate-making duty.
So, if Georgia and Minnesota break GOP, as I expect they will and Alaska breaks Dem, the Dems will have a working majority of 58-42 on domestic issues and 57-43 on foreign policy issues. Not completely fillibuster proof, but any legislation that peels off a few Republicans (immigration, health care and education all come to mind) will be difficult for the GOP to stop.
We'll see how it all turns out in the next few weeks.
GOP 2012
A lot of ink has been written about the GOP doing soul searching in the wake of Obama receiving a higher percentage of the vote of any Democrat since 1976 and it's worst congressional showing since the post-watergate era of the 1970s. I personally think this talk is a little over-rated. Sure, the GOP is in the worst spot it has been in 30 years. But, think about this:
(1) The presidential race was still only a 6 to 7 point decision. That's not a big percentage of the vote. in 1996, they lost by almost 9% then won in 2000 (granted, while losing the popular vote.) A change in foreign policy position, a change in economic times or a high-profile gaffe and they are back in national contention.
(2) They will probably gain in the mid-terms. It is extremely rare that the incumbent party of a new President does well in the mid-term elections. The GOP retook congress in 1994 after Bill Clinton's win in 1992. I doubt they will retake congress in this case, but I certainly expect them to make inroads.
Having said all that, the GOP needs to decide what type of candidate they want in 2012. From the response at the Republican Governor's meeting, the party is cooling somewhat to Sarah Palin. She is still on the radar and certainly has the best national name recognition, but there are many other choices for the GOP that may have broader appeal: Tim Pawlenty, Charlie Crist, Bobby Jindal, etc. These young, intelligent, articulate and bi-partisan governors are probably the future. Sarah Palin may look a lot less appealing as $60/barrel oil takes its toll on the Alaskan economy. But then again, we may not yet have met the 2012 nominee.
Regardless, I think the Republican party just needs to do a few basic things to put it back in contention:
(1) Revive Economic Conservatism -- John McCain tried to do this late in the campaign by talking about tax and spend liberalism but it lacked credibility given the Bush record. Republicans need to present a coherent case for way government needs to be smaller, how they would shrink deficits and why lower taxes would benefit the populace. A bold proposal like a flat tax or eliminating the income tax in favor of a consumption tax would help. The incrementalism that Bush pushed is a sure loser.
(2) Retake Foreign Policy from the Neocons -- we will likely be out of Iraq by 2012. The party needs to return to its traditional position that we do not get militarily involved in countries unless they present a clear and present danger to our national security. This worked and had credibility in the 80s and 90s, the Iraq war put a huge crack in it.
(3) Let Obama Take Issues Off the Table -- Fred Barnes had a great piece in the weekly standard on this topic. If Obama gets comprehensive immigration reform passed, it takes it off the table as an issue in 2012, the same way that "Don't Ask, Don't Tell" took gays in the military off the table. Just letting these issues run their course will help Republicans avoid issues that divide the base.
(4) Push the Popular Parts of Your Social Agenda -- being anti-gay marriage is still (regrettably) popular in the US. Being anti-abortion is not. Knowing the difference and talking about the issues that resonate with the public is critical.
That's all for now...65 days until Obama is sworn in and a lot left to happen.
Barack Obama officially resigned from the US Senate this weekend. This is probably a good strategic move as he doesn't want to be President-Elect amidst the fights in the Senate that will occur in the lame duck session of congress. He is now, for all intents and purposes, the leader of the country and needs to be focusing his time and resources on a successful transition, not on serving in the senate.
Where is Obama?
Obama has been largely absent from the public eye since winning the election -- the only notable exceptions being his brief press conference and the much touted meeting with President Bush at the White House. His aides say he is busy vetting cabinet choices. But we still haven't heard any cabinet choices. It is sort of a shock to the system after seeing Obama constantly on TV that he is largely absent. He has not even commented on Paulson's flip-flop on how to use the bailout money. Is this his "one president at a time theory" or is Obama ducking going on record? I'm not sure, but it appears this will continue for the next two months.
In the cabinet sweepstakes, both Hillary Clinton and Bill Richardson have been floated as possible Secretaries of State. I was hoping for a Republican such as Chuck Hagel or Colin Powell to demonstrate Obama's commitment to bi-partisanship and the Obama camp has been mum on the deliberations, so I hold out hope. Either Clinton or Richardson would clearly be qualified, but it would either mean that Obama wouldn't be picking a very bi-partisan cabinet or he would have to do so in his domestic appointments, which is less likely.
I'll keep you posted.
Ongoing Senate Battles
The Democrats have secured 55 senate seats, the Republicans 40 and 2 will be held by independents (former socialist Bernie Sanders who is essentially a Democrat and former Democrat Joe Lieberman, who may or may not caucus with Democrats but tends to vote with them on domestic issues and with Republicans on foreign policy issues.)
The remaining battles are:
Georgia -- Saxby Chambliss won the most votes but failed to cross the 50% threshold and will therefore face a run-off. Given that Georgia had huge African-American turnout for Obama on November 4th that may not all show up for a Senate run-off, it seems more likely than not that Sen. Chambliss will win the run-off. John McCain has been out campaigning for him in Georgia this past week.
Minnesota -- Norm Coleman leads Al Franken by less than 250 votes in the final tallying, obviously triggering a recount. This one still could break either way given how close it is, but my experience tells me that the candidate leading the first count usually wins the recount as well. Do the Democrats really want Al Franken in the Senate when all is said and done? He is a loose cannon and a pretty nasty guy, frankly.
Alaska -- it appears that some sanity may exist in at least half of the Alaskan electorate. Not all the absentee and provisional ballots have been counted yet, but Anchorage Mayor Mark Begich has extended his lead to over 1,000 votes with what has been counted so far. 1,000 votes is more than it sounds like in a state as small as Alaska. Begich appears headed to the senate while Stevens appears headed for 12 cent an hour license plate-making duty.
So, if Georgia and Minnesota break GOP, as I expect they will and Alaska breaks Dem, the Dems will have a working majority of 58-42 on domestic issues and 57-43 on foreign policy issues. Not completely fillibuster proof, but any legislation that peels off a few Republicans (immigration, health care and education all come to mind) will be difficult for the GOP to stop.
We'll see how it all turns out in the next few weeks.
GOP 2012
A lot of ink has been written about the GOP doing soul searching in the wake of Obama receiving a higher percentage of the vote of any Democrat since 1976 and it's worst congressional showing since the post-watergate era of the 1970s. I personally think this talk is a little over-rated. Sure, the GOP is in the worst spot it has been in 30 years. But, think about this:
(1) The presidential race was still only a 6 to 7 point decision. That's not a big percentage of the vote. in 1996, they lost by almost 9% then won in 2000 (granted, while losing the popular vote.) A change in foreign policy position, a change in economic times or a high-profile gaffe and they are back in national contention.
(2) They will probably gain in the mid-terms. It is extremely rare that the incumbent party of a new President does well in the mid-term elections. The GOP retook congress in 1994 after Bill Clinton's win in 1992. I doubt they will retake congress in this case, but I certainly expect them to make inroads.
Having said all that, the GOP needs to decide what type of candidate they want in 2012. From the response at the Republican Governor's meeting, the party is cooling somewhat to Sarah Palin. She is still on the radar and certainly has the best national name recognition, but there are many other choices for the GOP that may have broader appeal: Tim Pawlenty, Charlie Crist, Bobby Jindal, etc. These young, intelligent, articulate and bi-partisan governors are probably the future. Sarah Palin may look a lot less appealing as $60/barrel oil takes its toll on the Alaskan economy. But then again, we may not yet have met the 2012 nominee.
Regardless, I think the Republican party just needs to do a few basic things to put it back in contention:
(1) Revive Economic Conservatism -- John McCain tried to do this late in the campaign by talking about tax and spend liberalism but it lacked credibility given the Bush record. Republicans need to present a coherent case for way government needs to be smaller, how they would shrink deficits and why lower taxes would benefit the populace. A bold proposal like a flat tax or eliminating the income tax in favor of a consumption tax would help. The incrementalism that Bush pushed is a sure loser.
(2) Retake Foreign Policy from the Neocons -- we will likely be out of Iraq by 2012. The party needs to return to its traditional position that we do not get militarily involved in countries unless they present a clear and present danger to our national security. This worked and had credibility in the 80s and 90s, the Iraq war put a huge crack in it.
(3) Let Obama Take Issues Off the Table -- Fred Barnes had a great piece in the weekly standard on this topic. If Obama gets comprehensive immigration reform passed, it takes it off the table as an issue in 2012, the same way that "Don't Ask, Don't Tell" took gays in the military off the table. Just letting these issues run their course will help Republicans avoid issues that divide the base.
(4) Push the Popular Parts of Your Social Agenda -- being anti-gay marriage is still (regrettably) popular in the US. Being anti-abortion is not. Knowing the difference and talking about the issues that resonate with the public is critical.
That's all for now...65 days until Obama is sworn in and a lot left to happen.
Tuesday, November 11, 2008
Red/Blue States, Scorecard vs. Other Sites, Transition Thoughts and Response to a Comment
First, a minor correction to my last post. My electoral vote count was off by 1. Obama has won a single electoral vote in Nebraska (note the blue circle on the map below) that I had not accounted for. As a refresher, both Maine and Nebraska allocate their EV's in a different manner from the other 48 states which are winner take all -- they award 2 EV's to the winner of the state and 1 EV to the winner of each congressional district. Obama won 1 EV in Nebraska even though McCain won the state -- the first time this has happened since these laws passed. It doesn't really change anything, but I thought it was worth noting the correction.
Now, on to today's subjects
(1) Red States vs. Blue States
The question has come up a lot since Obama's victory whether there are still red states and blue states. The map above shows the winner of each state (assuming Missouri holds for McCain) in the electoral college. Clearly, Obama made inroads into regions of the country that neither John Kerry nor Al Gore was able to win -- southern states like Virginia and North Carolina, Florida (which is technically in the south, but really it's own geographic region) and the southwest (New Mexico, Colorado and Nevada) as well as expanding into Indiana and Iowa.
As you can see from the map above, though, other than some geographic expansion by Obama, the fundamentals of the map don't appear to be all that changed -- deep south states are still red, as is Texas and most of the mountain west. The northeast, midwest and west coasts are still the basis of Democratic power.
But the simple "winner take all" look at the states belies some interesting facts. The chart below shows the same map, but shaded based on the MARGIN of victory (full blue or full red in this case is a 40% margin, white is an even state.)
So, what do we see? Let me look at the regions:
a. "True Blue" States -- The Northeast and New England
These regions are basically locked down for Democrats. Pennsylvania and New Hampshire are a little closer than the other states, but don't expect a Republican to win here for a long time.
b. The "Left" Coast -- CA, OR, WA
Probably pretty similar -- Democratic and trending more so, but you see a little more potential give if the Republicans had a big year
c. The Deep South -- AL, MS, LA, AR
Probably safe Republican states in any year
d. The Non-Coastal Northwest -- ID, WY, UT
These are the safest Republican states out there -- not going Dem anytime soon
e. The Midwest
There is a Democratic power base in Illinois, but the rest of the region is moldable -- the margins are simply not that great. Indiana is the new swing state and Ohio is always in play, but in a closer year, so too are Wisconsin, Minnesota and Iowa
f. The "New" South
Virginia, North Carolina and to a lesser extent Georgia and South Carolina become new frontiers in battlegrounds
g. The Hispanic Southwest
Arizona, Colorado, New Mexico all become intense battlegrounds.
h. Florida
Always a battleground, always.
So Florida and Ohio remain crucial in future elections as they have in the past few, but f & g also become important fights, especially given that all of those states will likely have expanded electoral votes in 2012 after the 2010 census results are in.
(2) Scorecard vs. Other Sites
Obama won the election 365 EV's to 173 for McCain or a margin of 192 EV's.
We projected 356-182 or a margin of 174 EV's or 18 EV's off from the actually margin (we predicted 9 EV's wrong which adds 9 to Obama's total and subtracts 9 from McCain's)
Here is us compared to other major sites:
3bluedudes.com -- off by 4 EV's (too many for Obama)
electionprojection.com -- off by 24 EV's (too many for McCain)
electoral-vote.com -- off by 24 EV's (too many for McCain)
karlrove.com -- off by 54 EV's (too many for McCain)
realclearpolitics.com -- off by 54 EV's (too many for McCain)
intrade.com -- off by 38 EV's (too many for McCain)
npr.com -- off by 148 EV's (too many for McCain)
There are a ton of others -- you can go to 3bluedudes.com to see the complete list, but this is a fairly representative sample. 3bluedudes.com had us all beat with accuracy of count, but by and large this site stacked up well against most of the experts. As you can see, most sites called more EV's for McCain than materialized. We did too, but were closer than the vast majority of sites. Our only pitfall was incorrectly calling Indiana (we incorrectly called North Dakota too, but that was miscalled the other way.)
In short, we did pretty well and given the available data, I'm not sure the projection could've been any better. North Dakota we simply didn't have enough data, and Indiana was just a really close state that could've gone either way.
(3) Transition Update
The Bush's hosted the Obama's at the White House this week -- by all accounts it appears to have been a cooperative and well managed meeting. Bush honestly seems to want to help Obama and that is a good thing, because the national will need a good handover to hit the ground running. There are a ton of important issues to deal with and the last thing we would want would be progress slowed by egos -- fortunately this doesn't seem to be the case.
Obama is working behind the scenes to keep Lieberman in the Democratic party. This is a good move. It would be damaging to the notion of a post-partisan presidency if the first thing your party does is kick out the guy in your party who opposed you. Lieberman is an asset to Democrats both in his support on domestic issues AND in his dissenting voice on foreign policy. They should look to keep him.
No word yet on key cabinet positions -- I continue to hope Obama will be bi-partisan in his selection.
It looks a lot like Camelot is back in Washington. All the fascination with the Obama's dog, Michelle's clothes, the school the first kids will go to -- it all beckons back to an era when people viewed the President as a social role model as opposed to merely the leader of the nation. This is on one hand uplifting and on another hand disturbing and I lean a little bit towards disturbing. The President is the leader of the most powerful nation on earth. While it is great that Obama loves his family, it is frankly irrelevant to his skills as a leader. There are serious issues confronting the country and that should be the focus. Having said that, I do understand that many people seek to hold the President up as a role model and in that vein, I hope the Obamas do the nation proud.
(4) A Reader Comment
In my final post election night, I closed with the line "God Bless America". A reader commented to the effect of "sure, you say that now that Obama won."
I had enough of a visceral reaction to this comment that I felt it warranted some discussion. I generally think that things that evoke emotion are worth discussing.
I will readily admit, first of all, that I felt a wave of emotion and patriotism at the notion that this country, which has an unfortunate history of slavery and racial discrimination, had fulfilled the ideals set forth in the Declaration of Independence by electing an African-American as President. I also admit that this patriotism was aided by the fact that as I stated several weeks before the election, I was supporting Obama for the office.
Having said this however, I take exception to the notion that my patriotism is contingent on the outcome of a particular election. I have proudly been an American my whole life. I have worked since I got my first paper route at 10, paid my taxes, volunteered in my community, voted in every election for which I was eligible and always tried to be an advocate for things that I believe would make the nation greater. I believe the United States is the greatest country on earth and that Obama's election would not have been possible in most of the world, the first world included.
I resent very much the attempt by some in the conservative movement to co-opt patriotism from all of us. I resent Sarah Palin talking about the "real America" excluding those of us who live in places less conservative than her standard. I resent Rush Limbaugh and Sean Hannity implying that protesting a war that people disagree with is unpatriotic. I resent it, but it is their right as Americans to say it. So I don't resent them nearly as much as I resent those who name a bill that strip mines the bill of rights "the Patriot Act". Benjamin Franklin famously said that "those who would sacrifice liberty for a measure of security deserve neither security nor liberty" and I agree.
I don't call those who disagree with me unpatriotic. I have spoken throughout the campaign (in this space) about my belief in the character and patriotism of John McCain.
It is the height of ignorance and arrogance to call those who don't support a myopic world view unpatriotic and I will continue to call out those who do so.
The strength of this country is in our ability to resolve our differences through debate and at the ballot box. What makes me most patriotic isn't that Obama won -- it is that in this great country of ours Obama and McCain could debate and the winner chosen by the population could assume power peacefully.
So, God Bless America. ALL of America.
Now, on to today's subjects
(1) Red States vs. Blue States
The question has come up a lot since Obama's victory whether there are still red states and blue states. The map above shows the winner of each state (assuming Missouri holds for McCain) in the electoral college. Clearly, Obama made inroads into regions of the country that neither John Kerry nor Al Gore was able to win -- southern states like Virginia and North Carolina, Florida (which is technically in the south, but really it's own geographic region) and the southwest (New Mexico, Colorado and Nevada) as well as expanding into Indiana and Iowa.As you can see from the map above, though, other than some geographic expansion by Obama, the fundamentals of the map don't appear to be all that changed -- deep south states are still red, as is Texas and most of the mountain west. The northeast, midwest and west coasts are still the basis of Democratic power.
But the simple "winner take all" look at the states belies some interesting facts. The chart below shows the same map, but shaded based on the MARGIN of victory (full blue or full red in this case is a 40% margin, white is an even state.)
So, what do we see? Let me look at the regions:a. "True Blue" States -- The Northeast and New England
These regions are basically locked down for Democrats. Pennsylvania and New Hampshire are a little closer than the other states, but don't expect a Republican to win here for a long time.
b. The "Left" Coast -- CA, OR, WA
Probably pretty similar -- Democratic and trending more so, but you see a little more potential give if the Republicans had a big year
c. The Deep South -- AL, MS, LA, AR
Probably safe Republican states in any year
d. The Non-Coastal Northwest -- ID, WY, UT
These are the safest Republican states out there -- not going Dem anytime soon
e. The Midwest
There is a Democratic power base in Illinois, but the rest of the region is moldable -- the margins are simply not that great. Indiana is the new swing state and Ohio is always in play, but in a closer year, so too are Wisconsin, Minnesota and Iowa
f. The "New" South
Virginia, North Carolina and to a lesser extent Georgia and South Carolina become new frontiers in battlegrounds
g. The Hispanic Southwest
Arizona, Colorado, New Mexico all become intense battlegrounds.
h. Florida
Always a battleground, always.
So Florida and Ohio remain crucial in future elections as they have in the past few, but f & g also become important fights, especially given that all of those states will likely have expanded electoral votes in 2012 after the 2010 census results are in.
(2) Scorecard vs. Other Sites
Obama won the election 365 EV's to 173 for McCain or a margin of 192 EV's.
We projected 356-182 or a margin of 174 EV's or 18 EV's off from the actually margin (we predicted 9 EV's wrong which adds 9 to Obama's total and subtracts 9 from McCain's)
Here is us compared to other major sites:
3bluedudes.com -- off by 4 EV's (too many for Obama)
electionprojection.com -- off by 24 EV's (too many for McCain)
electoral-vote.com -- off by 24 EV's (too many for McCain)
karlrove.com -- off by 54 EV's (too many for McCain)
realclearpolitics.com -- off by 54 EV's (too many for McCain)
intrade.com -- off by 38 EV's (too many for McCain)
npr.com -- off by 148 EV's (too many for McCain)
There are a ton of others -- you can go to 3bluedudes.com to see the complete list, but this is a fairly representative sample. 3bluedudes.com had us all beat with accuracy of count, but by and large this site stacked up well against most of the experts. As you can see, most sites called more EV's for McCain than materialized. We did too, but were closer than the vast majority of sites. Our only pitfall was incorrectly calling Indiana (we incorrectly called North Dakota too, but that was miscalled the other way.)
In short, we did pretty well and given the available data, I'm not sure the projection could've been any better. North Dakota we simply didn't have enough data, and Indiana was just a really close state that could've gone either way.
(3) Transition Update
The Bush's hosted the Obama's at the White House this week -- by all accounts it appears to have been a cooperative and well managed meeting. Bush honestly seems to want to help Obama and that is a good thing, because the national will need a good handover to hit the ground running. There are a ton of important issues to deal with and the last thing we would want would be progress slowed by egos -- fortunately this doesn't seem to be the case.
Obama is working behind the scenes to keep Lieberman in the Democratic party. This is a good move. It would be damaging to the notion of a post-partisan presidency if the first thing your party does is kick out the guy in your party who opposed you. Lieberman is an asset to Democrats both in his support on domestic issues AND in his dissenting voice on foreign policy. They should look to keep him.
No word yet on key cabinet positions -- I continue to hope Obama will be bi-partisan in his selection.
It looks a lot like Camelot is back in Washington. All the fascination with the Obama's dog, Michelle's clothes, the school the first kids will go to -- it all beckons back to an era when people viewed the President as a social role model as opposed to merely the leader of the nation. This is on one hand uplifting and on another hand disturbing and I lean a little bit towards disturbing. The President is the leader of the most powerful nation on earth. While it is great that Obama loves his family, it is frankly irrelevant to his skills as a leader. There are serious issues confronting the country and that should be the focus. Having said that, I do understand that many people seek to hold the President up as a role model and in that vein, I hope the Obamas do the nation proud.
(4) A Reader Comment
In my final post election night, I closed with the line "God Bless America". A reader commented to the effect of "sure, you say that now that Obama won."
I had enough of a visceral reaction to this comment that I felt it warranted some discussion. I generally think that things that evoke emotion are worth discussing.
I will readily admit, first of all, that I felt a wave of emotion and patriotism at the notion that this country, which has an unfortunate history of slavery and racial discrimination, had fulfilled the ideals set forth in the Declaration of Independence by electing an African-American as President. I also admit that this patriotism was aided by the fact that as I stated several weeks before the election, I was supporting Obama for the office.
Having said this however, I take exception to the notion that my patriotism is contingent on the outcome of a particular election. I have proudly been an American my whole life. I have worked since I got my first paper route at 10, paid my taxes, volunteered in my community, voted in every election for which I was eligible and always tried to be an advocate for things that I believe would make the nation greater. I believe the United States is the greatest country on earth and that Obama's election would not have been possible in most of the world, the first world included.
I resent very much the attempt by some in the conservative movement to co-opt patriotism from all of us. I resent Sarah Palin talking about the "real America" excluding those of us who live in places less conservative than her standard. I resent Rush Limbaugh and Sean Hannity implying that protesting a war that people disagree with is unpatriotic. I resent it, but it is their right as Americans to say it. So I don't resent them nearly as much as I resent those who name a bill that strip mines the bill of rights "the Patriot Act". Benjamin Franklin famously said that "those who would sacrifice liberty for a measure of security deserve neither security nor liberty" and I agree.
I don't call those who disagree with me unpatriotic. I have spoken throughout the campaign (in this space) about my belief in the character and patriotism of John McCain.
It is the height of ignorance and arrogance to call those who don't support a myopic world view unpatriotic and I will continue to call out those who do so.
The strength of this country is in our ability to resolve our differences through debate and at the ballot box. What makes me most patriotic isn't that Obama won -- it is that in this great country of ours Obama and McCain could debate and the winner chosen by the population could assume power peacefully.
So, God Bless America. ALL of America.
Friday, November 7, 2008
Post-Election Scorecard
So, how did this site do on projections for the 2008 Presidential Election? Fairly well, actually, although there is always room for improvement.
Note: For purposes of this analysis, I am assuming that John McCain won Missouri, although most of the networks have not yet called it. He currently leads by 5,800 votes barring a recount.
Here is the top line rundown:
(1) Electoral Votes
Projected Actual Difference
356-182 364-174 Obama won 8 more than predicted
States Correctly Projected: 48 out of 50
States Missed: North Dakota predicted for Obama, went to McCain, Indiana predicted for McCain went to Obama
Electoral vote percentage correctly projected: 97.4% (524 out of 538)
(2) Popular Vote
Projected Actual Difference
Obama by 7.2% Obama by 6.5% McCain won 0.7% more than predicted
In other words, we predicted 99.3% of the popular vote correctly.
(3) State Averages
Average Miss in States Designated Battleground: 1.6%
Average Miss in States Not Designated Battleground: 2.8%
Total Average Miss: 2.5%
Note: These averages have been weighted by the number of electoral votes in a state
Clearly, I was a lot more accurate in battleground states, which shouldn't be a surprise since there is much more polling data available on close states and I spent much more time on the analysis of these states.
State Projection Details
a. Projected Non-Battlegrounds
There were 38 states that I designated as non-battlegrounds in the last projection. Of these 38 states, all 38 proved to be non-battleground with the projected winner in fact winning by more than 8%
b. Projected Battlegrounds
Of our twelve projected battlegrounds, I break my projection accuracy into a few categories:
i. Almost Exactly Right (Right Winner, within 2% of the vote) -- 7 states
North Carolina -- Projected Obama win by 0.4%, Actual Obama win by 0.3% -- 0.1% error
Virginia -- Projected Obama win by 5.3%, Actual Obama win by 5.6% -- 0.3% error
Missouri -- Projected McCain win by 0.6%, Actual McCain win by 0.2% -- 0.4% error
Ohio -- projected Obama win by 3.2%, Actual Obama win by 4.0% -- 0.8% error
Florida -- Projected Obama win by 1.6%, Actual Obama win by 2.6% -- 1.0% error
Georgia -- Projected McCain win by 4.3%, Actual McCain win by 5.5% -- 1.2% error
Montana -- Projected McCain win by 3.7%, Actual McCain win by 2.5% -- 1.2% error
ii. Right Winner, Wrong Margin (Right Winner, >2% error) -- 3 states
Colorado -- projected Obama win by 5.8%, Actual Obama win by 8.8% -- 3.0% error
Arizona -- projected McCain win by 4.2%, actual McCain win by 8.4% -- 4.2% error
Nevada -- projected Obama win by 5.7%, Actual Obama win by 12.6% -- 6.9% error
Arizona is fairly easy to explain -- McCain clearly got some late "home state" benefit that hadn't showed up in the polling.
Colorado and Nevada are more problematic for me to explain. Colorado was still relatively close to correct (within 3%), Nevada we were way off. Both states had massive early voting and late campaigning by Obama. This may have driven people to break late for Obama, but I'm not really sure. We just missed here, although we projected the right winner.
iii. Wrong Winner -- 2 states
Indiana -- projected McCain win by 1.5%, actual Obama win by 1.0% -- 2.5% error
North Dakota -- projected Obama win by 0.2%, actual McCain win by 8.8% -- 9.0% error
In the case of North Dakota, I'd been screaming for two weeks that we needed new polling. We didn't get it and clearly it might have shown that McCain had pulled back ahead, but we will never know. Suffice it to say, error will be a lot higher if the input data is old.
Indiana was always projected close, but 2.5% error is well above average for battleground states. I'd say this was the most surprising miss of the election year.
So, with all that, here's the scorecard:
National Vote Accuracy: 99.3%
Electoral Vote Accuracy (overall): 98.5%
Electoral Vote Accuracy (state by state): 97.4%
Battleground State-Level Accuracy: 98.4%
Overall State Level Accuracy: 97.5%
Percent of States Correctly Called: 96%
Non-battlegrounds: 100%
Battlegrounds: 83%
Percent of battlegrounds called within 1 point: 42%
within 2 points: 58%
within 3 points: 75%
Overall, I'm extremely proud of these results -- I got all of the major things about the election right both nationally and at a state-by state level.
Next week, I'll compare this site to other major projection sites so that you will get a feel for the comparative scorecard.
One Last Word on the Bradley Effect
Of the many things positive things that happened Tuesday night, one that may have been lost in the shuffle is the death of anyone talking about the Bradley effect again. There is not a single state where I could cite a Bradley effect based on our projections and the actual results. On election night, when the early returns came in from Georgia, I incorrectly states that it appeared there might be an effect in that state. I was wrong, as the final returns came very much in line with our pre-election projections.
It's a great day for America when race is not a key determining factor in our elections.
Quick Take on the First Week Post-Election
Obama has named Rahm Emanuel as his chief of staff. It is his choice and he should choose someone he is comfortable with, but this is clearly not a pick in the spirit of bi-partisan reconciliation. I think this is fine, provided he puts moderates and Republicans in some of his cabinet seats (Chuck Hagel, Colin Powell and Dick Lugar would all be obvious choices.) If he does not, it will become a problem. Despite a decisive victory (the highest percentage of the popular vote of any candidates since 1988 and the most total votes ever), Obama needs to be as bi-partisan a president as he was a candidate. The risk will be with control of both houses of congress to just ram through an agenda -- that temptation should be resisted.
Obama's first news conference was impressive. He was poised, funny and professional. Isn't it great to have a new President who can actually answer complex questions coherently? Having said that, not a lot specific was really said, so we'll have to wait and see. Hopefully the transition of power will go as smoothly as both Bush and Obama are promising.
Now that the election is lost, McCain aides are laying into Sarah Palin, accusing her of not only being a diva, but an idiot who doesn't know Africa is a continent, doesn't understand the 3 branches of government, doesn't know which countries are in North America, etc. This may all be true, but for once, I will come to Palin's defense. If this is all true, then it means Sarah Palin is ignorant, not stupid. McCain picked her, she didn't pick herself -- he was the one who made the judgment she was ready. She undoubtedly did the best she could for the campaign and if that wasn't good enough, it's on him for asking her to run -- it was unreasonable to expect her to say no. Palin I believe possess the intelligence to learn the issues and be a threat down the road. I don't care for her divisive style of politics, but I recognize political skill when I see it. McCain's campaign should be ashamed of itself for trying to lay the blame for the loss at her feet after picking her and doing so many things wrong: suspending the campaign, horrible performances in the first two debates, losing his message. George H.W. Bush won with Dan Quayle and surely Palin is no worse than Quayle.
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