House Passes Sweeping Climate Change Bill Dramatically, How Far "In the Wilderness" Is the GOP?

House Narrowly and Dramatically Passes Climate Change Bill
The House of Representatives on Friday passed by a very narrow margin, the most sweeping environmental bill in this nation's history. It basically would give President Obama everything that he wants from an environmental policy perspective: cap and trade, increased requirements for renewable energy, tax subsidies to help lower income individuals cope, subsidies for hybrid and electrical vehicles as well as tariffs for countries that do not have similar rules in place.

Republicans decried the cost to the consumer and the potential to spark a trade war. In the end, the vote of 219-212 was extremely close, with 8 Republicans joining 211 Democrats to vote in favor and 44 conservative to moderate Democrats joining the remaining 168 Republicans in opposition. This gives the house vote a 0.78 on our partisanship index or a "fairly partisan" ranking.

If you are in favor of these provisions, don't rejoice too much. There is zero chance that this bill, as written, could pass the Senate, where to break a filibuster, it will have to appeal not only to liberal Democrats but to moderate Democrats like Ben Nelson and Arlen Specter and moderate Republicans like Susan Collins and Olympia Snowe. Passage of the House bill greatly improves the chances of passage of sweeping legislation this year, but I have no doubt that if a bill ultimately passes both houses of congress, it will be more moderate than the version that just moved through the House.

A History of Political Power -- How Much Trouble is the GOP In?
There has been a lot of proclamation on the left that the GOP is dead in the water. A shrinking proportion of the electorate, we are told, they are at record low levels of political power and will continue to shrink over the next few years.

History might suggest otherwise. Sure, the GOP faces structural problems -- an aging party base, a lack of appeal to ethnic minorities who will soon be the majority, but parties have reinvented themselves before. Richard Nixon had the Watergate scandal -- just a cycle and a half later the Reagan revolution happened. George H.W. Bush had some of the worst approval ratings of any sitting President -- just 2 years later the Contract with America swept Republicans back into the House and Senate.

Of course, some returns take longer than others. Hebert Hoover's dealing with the start of the Great Depression cast the Republicans into the woods for a long time. Andrew Johnson's ineptness in dealing with reconstruction shoved Democrats out of power for years (in spite of the fact that he had run on a ticket with Republican Abraham Lincoln.)

So, where does the current GOP malaise rank? Let's start by looking at a chart of national political power in this country. The percentages are weighted 1/3rd based on House seats, 1/3rd based on Senate seats and 1/3rd based on control of the Presidency.


I find the ebbs and flows on this chart telling, but incomplete. Presidents are binary by nature, either one party wins or the other does. But congress can move by small percentages. So, let's look at the history of congressional power.


We can see that the GOP is nowhere near the lows of FDR's administration, not even as low as the post-Watergate era.

Don't get me wrong, the GOP has problems. They lack a unified platform or good spokesmen. They have a weak field for 2012 at this point. They don't seem poised to have a real shot at either house of congress in the next cycle. I'm simply saying history tells us that things can change quickly in politics.

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Another Political Affair, Stimulus Update, Congress Heads to Recess

Just Another Couple All-Too-Human Politicians
I had intentionally withheld comment on the affair revelation of Senator John Ensign (R-NV) as I generally find it extremely distasteful to psychoanalyze the personal lives of politicians. But, the revelation this week of Gov. Mark Sanford (R-SC) that he has also been having an affair with a woman in Argentina, not to mention the bizarre set of circumstances surrounding it, compels me to make a few observations about the political implications of these revelations.

First, let me state unequivocally that I feel the personal affairs of these men should be none of our business. We we elect leaders, we hire people to do a job, whether it is Governor, Senator or President. It is not a fair or reasonable expectation that we hold them accountable for everything that happens in their personal life. Relationships and marriage are complex enough, that far be it from me to presume to be able to judge the personal decisions of someone that I have never even met.

In the case of Governor Sanford, there is clearly a job-performance issue in that no one in government knew his whereabouts for days. It's a bad thing, for sure, but absent the affair, I'm not sure it would be damning. And Senator Ensign had an affair that did not impact his job in any way.

Having stated my personal views, let me also state that I fully understand that this is not how the game is played. While I don't agree with it, it is abundantly clear that such things obviously have an impact on political futures. This is especially true in the Republican Party, where those who strongly promote "traditional values" and appeal to Christian Conservatives add the element of personal hypocrisy in addition to the gory details.

The reality is that both men are finished as far as national ambitions are concerned. Senator Ensign was considered a rising star in the party and Governor Sanford had been considered a 2012 prospect. No more. Senator Ensign may or may not retain his job in the future (he isn't up in 2010), Governor Sanford is almost certainly done in politics after his term expires at the beginning of 2011.

I never loved either of these guys politically, but I feel sorry for them personally. The standards that we hold our politicians to are ridiculous. How many Fortune 500 CEO's would pass the same tests? Something has to give before every potential great leader steers clear of politics and all we are left with is blowhard ideologues. Remember, "Honest" Abe Lincoln got his nickname for repaying a debt to a hooker and John F. Kennedy had more affairs than years as President. Would we be better off if we had disqualified them from office?

Stimulus Update
Latest numbers from the Feds:
Authorized: $152.4 billion (30.5%) up $5.2 billion from last week
Spent: $52.9 billion (10.6%) up $4.0 billion from last week

The gap between authorized projects and spent money continues to grow. Transportation spending continues to lag with only $370 million spent so far, but $153 million of that is in the past week, so the pace has definitely accelerated.

Congress Heads to Recess -- Health Care Very Much in Question
Congress is headed to its 4th of July recess with a lot of unfinished business to complete this summer. There is the nomination of to the Supreme Court of Judge Sonia Sotomayor. There are all of the appropriations bills for the fiscal year that starts in October and there is that whole health care issue, which will likely wind up being intertwined with a heated debate over the HHS appropriations bills.

So far, appropriation actions have been taken as follows:
Senate -- no action on any bills (all bills must originate in the House, per the constitution)
House:
(1) Commerce & Justice
After Democratic leaders decided to limit amendments and debate, the GOP cried foul but was basically powerless to stop the movement of the bill (House rules do not give nearly the latitude to stall to the minority that Senate rules do.)

Final Vote: 259-157
Date Passed: June 18th
Partisanship Index: 0.83 (fairly partisan)

(2) Legislative Branch
A tiny bill in the grand scheme of things, but subject of much grand-standing about congressional spending.

Final Vote: 232-178
Date Passed: June 19th
Partisanship Index: 0.78 (fairly partisan)

(3) Homeland Security
A bill with lots of amendments but surprisingly high bipartisanship

Final Vote: 389-37
Date Passed: June 24th
Partisanship Index: 0.21 (highly bipartisan)

(4) Defense
Few amendments and broad bipartisanship

Final Vote: 389-22 with 1 voting "Present"
Date Passed: June 25th
Partisanship Index: 0.07 (highly bipartisan)

(5) Interior
Consideration begins tomorrow

Yet to be debated: Health and Human Services (likely to include Universal Healthcare debate), Veterans Affairs, Agriculture, Defense, Education, Energy (likely to include Cap and Trade debate), Housing and Urban Development, Labor, Transportation and Treasury.

That's a lot of work to do since both houses have to pass a bill then repass the conference report. And major, game-changing debates to be had. But, hey, Congress never got a budget in place last year, so at least things are moving along.

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Obama Dips His Toes into Iran, Is This the New Economic Normal?, Things That Annoy Me

President Obama Wades Carefully into Iran Situation
In his press conference today, President Obama declared that he was "appalled and outraged" at violence against protesters in Iran. It was the most direct statement made by the administration to date calling to task the powers that be in Iran. President Obama continued to stop short of directly criticizing the election process or result.

This appears to be par for course for President Obama, whose tendencies on both foreign and domestic issues to date has been to take a measured approach and slowly ramp up rhetoric in response to conditions. We had a glimpse of this in the campaign -- think back to the Jeremiah Wright controversy.

I doubt that his press conference today will appease conservatives who sought much more direct influence from the White House from the get-go. President Obama's measured approach is the polar opposite of former President Bush's. If you are a liberal, he is thoughtful, contemplative and intellectually geared. If you are a conservative, he is wishy-washy, indecisive and lacks courage. PoTAtoes, potTAHtoes.

It's Stopped Getting Worse, but Will it Get Better?
The gains in the stock market has stalled, unemployment is still at a record high and the World Bank just revised its global economic forecast down to a 2.9% contraction in the global economy this year.

It has many thinking -- you call this a recovery?

The problem the markets are experiencing right now is that while we no longer appear on the verge of a global economic meltdown, as we did to many in late Februrary and some of the economic statistics (home sales, retail sales, etc.) have stopped declining, all of the economic indicators have stabilized at a lower level.

It has led many to ask the question -- is this the new norm? Will we be living with 9-10% unemployment, zero growth and hard-to-get credit for generations to come?

I don't think so. The engine that drives long-term economic prospects is productivity growth - and productivity is still growing. The economy is performing under capacity right now -- too many people out of work, too many people working part time, too many people underemployed. But these are transitional, not structural issues. In fact, the history is that recessions often spawn productivity growth as businesses find creative ways to be more efficient out of survival instinct. We certainly saw this in the last 3 recessions. So, rest assured, things WILL get better again.

What may be fundamental changed is credit conditions. The S&P may take years to get back to 1,500 because corporations have realized the risk that massively debt-ridden balance sheets can cause (ask a few casino companies or maybe some banks.) Individuals are saving again because they realize that they can no longer rely on their home value and their 401K always going up. So thrift may be back in, at least for a while. But we grew the economy pretty well in the 1950s and people were relatively a lot more thrifty then. Innovation drives productivity, not spending.

Things That Annoy Me
A new feature -- suggested by my wife -- some short-takes on some things I find very annoying, in the political world and elsewhere. So, here it goes...things that annoy me:

(1) Glenn Beck. You can't like him unless you think Rush Limbaugh is too civil and liberal.
(2) Democrats who say they are feminists but defend David Letterman because the teenage girl he joked about isn't "on our team"
(3) Sarah Palin -- not over the Letterman controversy, but because she can't complete a sentence
(4) People who think that I care who won the U.S. Open
(5) People who call Sonia Sotomayor a racist. Oh, the poor opressed white guy. We just don't ever catch a break.
(6) Drivers who don't use turn signals
(7) Congressional Democrats, especially Harry Reid and Nancy Pelosi -- for never being organized on anything, never being united on anything and never having any backbone on anything

And finally, my annoyance of the week:
(8) Righteous ex-smokers (yes, I'm talking to you, President Obama), who want to legislate that we do what they had a choice about doing.

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The Costs of Health Care Reform, Stimulus Update, Some Historical Perspective

The Cost of Health Care Reform
It struck me as I was listening to some of the debate on the Sunday morning talk shows this morning, that we have lost all perspective in the health care discussion. Here are some facts to form the basis for an informed discussion. Where spending numbers are cited, they are based on CBO estimates.

(1) The federal government approximately $1 trillion per year on health care, excluding the costs of health insurance for federal employees. This is comprised of $700 billion in Medicare and Medicaid spending, $250 billion for tax preferences and subsidies for health insurance and $50 billion in veterans care and other miscellaneous health care initiatives.

(2) The leading proposed health care reform proposal, Senator Kennedy's (D-MA) bill, is estimated to cost $100 billion per year. You have probably heard a $1 trillion price tag, but this is over 10 years (1 trillion divided by ten is 100 billion.)

(3) The war in Iraq is estimated to have cost over $1 trillion over the course of 6 years.

(4) The economic stimulus package will cost an estimated $787 billion over the course of less than 3 years.

(5) The federal deficit this year is estimated at $1.8 trillion.

(6) The Kennedy bill is estimated to cut the number of uninsured in this country by 15 million, solving less than a third of the overall problem.

So, let's analyze. Health care reform as proposed, will be cheaper on an annual basis than the Iraq war. It will be about one third the size of the economic stimulus package. If totally unfunded, it would add about 6% to the deficit. It would represent about a 10% increase in total government health care spending.

Frankly, folks, the cost and scope of this thing is overblown. We are not having a real debate on a Canadian or British-style single-payer system. We are debating about nibbling at the edges with a proposed government-backed insurance alternative.

If the Democrats in Congress can't get this meager piece of reform done, they deserve to be voted out in 2010. Right now, they do not appear to have the votes. We'll see how the debate unfolds. Even former President George W. Bush got prescription drug benefits done.

Incidentally, here is some food for thought. In the history of publicly funded health care (approximately the past 100 years), no country that has gone to a government-run system has ever gone back. That means that EVERY country that has passed universal health care has found, over time, that it is superior to a free-market system. Just some food for thought.

Stimulus Update
The latest figures:
Authorized: $147.2 billion (29.5% complete) -- up $6.2 billion from last week
Spent: $48.9 billion (9.8% complete) -- up $2.5 billion from last week

Money continues to flow, although the trend continues to be that it is getting authorized a lot faster than it is getting spent. Traditional infrastructure spending, such as roads, bridge, etc., the so-called "shovel-ready" projects have lagged, with only $217 million spent by the Department of Transportation so far, despite $17.5 billion being authorized.

The pace will have to pick up to have quell rising unemployment. It is interesting to note, however, that for the first time since the recession began, last week the number of people receiving unemployment benefits actually declined modestly. This could foretell a drop in the unemployment rate, or it could just mean that a lot of people are having their benefits expire. We'll see when the June figures are published.

Historical Perspective
Since I publish frequent updates on President Obama's popularity, it's time again to put that approval rating in some perspective. We are well out of the much-lauded "first 100 days", so let's see how President Obama stacks up against some recent occupants of the White House in terms of approval. As we don't have the benefit of the same sample-weighted average poll of polls for previous President's that we have for President Obama, we will rely on Gallup data for comparison, as Gallup has had a tracking poll for every Post-World War 2 President. At comparable points in their Presidencies, the other Post-World War 2 Presidents stacked up this way:

Harry Truman: 65% Approval
Dwight Eisenhower: 70% Approval
John Kennedy: 72% Approval
Lyndon Johnson: 74% Approval
Richard Nixon: 60% Approval
Gearld Ford: 51% Approval
Jimmy Carter: 62% Approval
Ronald Reagan: 58% Approval
George H.W. Bush: 60% Approval
Bill Clinton: 44% Approval
George W. Bush: 55% Approval
Barack Obama: 58% Approval

You can see, in the Post-Nixon era, average approvals have declined a lot more quickly. The average for Truman through Nixon is 68% at this point in their terms, Ford through Obama, the average is 55%. This likely reflects the increased public scrutiny of public officials in the post-Watergate era and, more recently, the rise of 24/7 media.

So, President Obama is tracking behind all the Presidents through Nixon at this point in his term. Versus the post-Nixon Presidents, he is ahead of Ford, Clinton and W. Bush, even with Reagan and behind H.W. Bush and Carter. Of course, Clinton and W. Bush were re-elected and H.W. Bush and Carter were not. In fact, the average for those re-elected Post-Nixon is 52%, whereas those who were not re-elected is 58%.

So do these numbers actually tell us anything at this point?

All things being equal, obviously if I were President I'd rather be popular than unpopular, but it just shows that a heck of a lot can happen in three and a half years. Here are the things to watch out for in the trending. Let's look at what happened to the President's who won and lost re-election after this point:

The Winners
Ronald Reagan -- continued to decline, all the way to a 39% trough in early 1983 as the recession deepened and the GOP suffered huge losses in congress in 1982. Then, slowly ascended to 60% by the 1984 election.
Bill Clinton -- was on an uptick and broke back above 50% in early 1994, then declined again to 40% in late 1994 and suffering massive congerssional losses that year. He then began a slow rise to 57% by election-time in 2006.
George W. Bush -- stayed in a narrow channel in the mid-50s until September 11th, when his popularity spiked to over 90%, which helped to lead to unusal GOP gains in the 2002 mid-terms. It then began slow, steady decline, but was still at 53% in the 2004 elections.

The Losers
Jimmy Carter -- saw a slow, steady decline all they way to 30% in late 1979. He then saw a brief bump to above 50%, but was back to the low 30s come election day in 1980.
George H.W. Bush -- approval spiked up to near 90% by early 1991 as Operation Desert Storm kicked into full gear. Then saw a steady decline to the high 30s by election date as the recession took hold. Ironically, rose to above 50% approval after the election as economic conditions started to improve.

So what can we glean from this? Approvals at this point in a presidency probably say a lot more about how the mid-term congressional elections will go than how the next presidential race will shape up. Second, major events, particularly in foreign policy, can cause dramatic changes in Presidential approval. Finally, President Obama is slightly, but not dramatically above the mid-point for post-Nixon Presidents. He has certainly been among the most active in his early administration, partly due to circumstances, partly due to Democratic congressional control and partly due to his own tendencies towards a shift from Bush administration policies.

Next time, I'll take a look at macro-political trends to answer the question, in context, as to how much trouble the GOP is in. A good place to start is to compare this GOP to the post-Watergate GOP and draw comparisons.

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Partisan-Looking Appropriations, Angry Gay Rights Activisits, Kent Impeached, Iran Continued, Obama Approval Update

The Appropriation Process Beings with Partisan Sniping
The House has begun its appropriations process for the fiscal year that begins in October, and the first of the departmental appropriations bill -- the bill funding the seemingly not-so-controversial Departments of Justice and Commerce provides a striking example of just how large the partisan divide still can be. Democratic leadership made the decision to severely limit amendments, angering House Republicans, who, in turn, voted against the bill 149-24. Of course, the Democrats are demonstrating that they don't need Republican help to get things through the House (the bill passed 259-157 on the strength of Democratic votes.) And it isn't like this is the most partisan bill ever passed (after all, 24 Republicans voted for it and 8 Democrats against it.) But limiting amendments that might actually pass the Democratic-dominated body seems downright undemocratic, and the kind of practice that Pelosi and company used to decry when they were in the minority. Amazing how both partisans can do full 180s on the power of the ruling party when the balance of power shifts.

The appropriations process is long and this is just the first step. After passing the House, each appropriations bill will move to the Senate, which will have a lengthier debate about each because of the rules of debate (60 Senators have to vote to invoke cloture and limit debate.) Then, a conference committee will have to reconcile the two versions and a final version of the bill will have to pass both houses.

Often, the process is not finished by the start of the fiscal year in October and the congress has to pass temporary continuing resolutions to keep agencies funded in the mean time.

Gays to Obama: We Are Mad as Hell
Despite President Obama's efforts to reach out to the gay community by providing some federal benefits to gay partners, the gay community is mad.

They are mad that there has been no movement on gays in the military (see my previous blog: The Worst Law in the Land), they are made that he has not moved to repeal the Defense of Marriage Act (which, among other things, allows states to not recognize gay marriages from other states) and they are still mad that Rick Warren spoke at the inauguration.

They certainly have a point, President Obama has been less than a stalwart promoter of gay rights. But, he never really claimed to be a gay rights advocate and I think what we are learning is that these issues frankly aren't that important to him.

I think the President is on the wrong side of history here and is missing a cultural revolution that is happening at the state level to promote gay rights. That is shame. But not that unexpected.

Judge Kent Impeached
In some high drama, the House has unanimously voted to impeach Judge Samuel Kent of the U.S. District Court in Texas after he pled guilty to sexually assaulting two women, but refused to resign his post, stating that he wanted to contineu to draw his salary for another year.

Are you kidding me? You just got convicted of a felony but think you are entitled to another year of free money from the tax payers?

In order to remove Kent from office, the Senate will have to conduct a trial and vote to remove by at least a 2/3rds margin. I hope they move quickly.

This is the first impeachment passed by the House since Bill Clinton was impeached on charges of lying under oath about his affair with Monica Lewinsky.

Iran -- President Obama on the Sidelines
As protest continue in Iran and the Iranian government threatens bloodshed if they continue, President Obama has remained largely silent on the topic. He has started to come under fire from some for not taking a more active role.

My question is: what possible good would a more active role play? President Obama claiming the election was rigged (without real evidence, although most experts agree it was) would only inflame the Arab world against continued U.S. intervention. Right now, this is a grassroots uprising -- if President Obama speaks out it is a western-led conspiracy.

Obama Approval Update
No big shifts in President Obama's numbers in the past week and a half. He is holding at an approve minus disapprove of 26.9%. He has been in the 25% to 30% range since mid-May.


Broken down monthly, he continues to show a lower average in June than in May (every month of his presidency have seen his numbers decline, albeit slowly.)


Looking by poll sample type, we see:
Adult Americans: +29% Approval
Registed Voters: +31% Approval
Likely Voters: +9% Approval

This is the first time that we have seen the Adult Americans and Registered Voters numbers inverted with Registered Voters being more approving. This could be a statistical anamoly (Likely Voters still show much lower numbers) or it could suggest some poll methodology divergence. Either way, we'll keep an eye on it.

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The Stage for the Great Health Care Debate, Quagmire in Iran

The Stage is Set...
Of all the policy ambitions laid forward by President Obama for his first year in office, perhaps the most aggressive was the notion of signing universal health care legislation into law.

Let's review first the history:
This is at least a 50 year old debate. Universal coverage was first proposed (as near as I can tell) by President Harry Truman. It was advocated by not only Truman, but John Kennedy, Lyndon Johnson, Richard Nixon, Jimmy Carter and perhaps most aggressively, by Bill Clinton. All of them failed. Sure, Johnson took a step towards universal coverage with "The Great Society" which created the Medicare and Medicaid systems that provide coverage for the elderly, disabled and poor. President George W. Bush expanded Medicare coverage to include prescription drugs. Fully 5% of our GDP is now spent on government-funded health care. But 5% is less than a third of the estimated 16% of our GDP spent on health care in total, a far-cry from single-payer systems in Canada and Great Britain. And 42 million Americans remain without health coverage, mostly those in the lower-middle class, too rich to qualify for Medicaid, too young and able to qualify for Medicare but too poor and too underemployed to receive employer-provided health care.

Bill Clinton went for the gusto in year one. He had a Democratically controlled congress and was coming off a resounding victory in the 1992 elections. It wasn't even a close fight -- no universal health care bill ever made it to the floor of either house of congress for a vote.

The Current State:
42 million uninsured Americans. Estimated costs of $1.5 trillion dollars over the next decade to provide health care coverage to that population. Health care inflation exceeding the general rate of inflation by 2 to 3% per year in a rise that threatens to consume the economy. Four times the spending on health care of the rest of the first world with shorter life expectancies. Massive deficits without a cent spent on health care. A promise of no new taxes on those making under $250,000 per year. Millions already being spent by health care industry groups lobbying against increased government intervention.

So, how, against this history and these circumstances can the betting public (as measured by current Intrade rates), put the odds of congress passing universal health care coverage this year be even money?

President Obama has been very savvy so far. No secret meetings, a la Hillary Clinton in 1993. Bringing health care groups to the table. Leveraging the reconciliation process and the adjoining procedural rules in the Senate to dodge a fillibuster. Laying out broad principles without committing to specific policy options early on. All very smart.

But the heat is rising. Republicans and industry groups sense that there is a real chance that a bill will be passed this year and are pressing hard with ads and media appearences. "Do you want the government that ran the post-Katrina operation to run health care?" they ask in a piece of bitter irony. They point out rationing in single-payer systems. They decry a public option as crowding out existing private insurance.

But this issue is far more complex than any sound bite. Here are a few key issues to watch for:
(1) Cost Is THE Issue
We spend a ton on health care. There are a number of reasons for this. Republicans claim that it is because economic incentives for individuals don't favor good choices about care. My insurance covers going to a Doctor, so how hard am I going to think about the economic implications of going for a minor cold?

There may be some truth to this argument, but it doesn't explain why we spend many multiples more than countries that have single-payer. Ah, but they RATION care, say conservatives. You want a heart transplant in England, you better get in line.

The cold, hard fact is that EVERY health care system rations care. The criteria are just different. In single-payer systems, the rationing is explicit, as the government dictates which procedures will be covered and when. In our system, it is more subtle. It comes in the form of insurance caps for yearly coverage. It comes in the locking out of uninsured people from access to care. And it doesn't work very well -- we still spend a ton.

In a sense, Republicans are right, economic incentives do drive up the cost of care. The incentives are for Doctors, reimbursed per procedure, to rack up as many procedures as possible. The incentives for employers, who can reimburse health care tax free but are taxed on cash compensation, to provide stronger health care benefits and weaker wages. And the incentives for individuals are to take advantage of coverage as much as possible. It's broken on every level.

The other thing that drives our health care costs is perscription drugs. Essentially, we finance pharma R&D for the rest of the world. We pay five times the cost that single-payer states pay for perscription drugs and hundreds of times the cost that third-world countries are charged. Why? R&D is very costly for new drugs, but once the R&D is completed, the marginal cost of actually making the drugs is very low. Single-payer systems negotiate low-cost drugs beause they have ultimate leverage -- you don't like our price, don't sell it in our country. Drug companies go along because they have already spent the R&D and they marginally make money on the price that they sell drugs to Canada, England and France. In the third world, they largely sell at cost, which is a nice humanitarian gesture to African nations ravaged by HIV. In the US, however, they own a monopoly for as long as the patent is good. There is no single entity that can negotiate higher prices, therefore the manufacturers pretty much set the price.

Republicans rightly point out that if this profit incentive goes away, companies will shy away from costly R&D. But should the US really have to bear the world's burden for pharma research?

(2) What Is Universal Coverage?
Does it mean single-payer? Probably not, from what I've heard so far.

Does it mean everybody has access to health care? What exactly does that mean? Will everyone have insurance? Will we be forced to buy it?

(3) The Public Option
Will there be a government-run plan that everyone can buy in to? Will private plans be subjected to rules about what level of coverage they have to provide? Will employers still be the primary payers for health care?

(4) Financing
How exactly are we going to pay for any sort of expanded program?

Some Common Sense Ideas
Regardless of where you are on the ideological spectrum, it would be hard to disagree that the current system is broken. Our government spends more per capita on health care than nations that HAVE single-payer coverage, yet we have 42 million uninsured.

Here's a few common sense ideas:
(1) A Most-Favored Nation Clause for Pharma
A law that state, simply, that if you are going to sell drugs in the US, you cannot charge more than you charge in any other first-world country. This law would force single-payer states to quit riding our coattails and would force the pharma companies to develop an economic model that does not involve gouging the U.S. consumer.

The length of patents also needs to be examined, particularly for life-saving medications.

(2) An End to Multi-Tiered Care Pricing
Currently, if I go to an emergency room without insurance with a broken leg, it may cost me upwards of $20,000. If I get care through insurance, they will pay only a third of that. If I'm insured through Medicare/Medicaid, the government pays a quarter of that. If the hospital can't collect, I pay nothing.

These tiers of pricing do nothing but force people out of the system. A regulation requiring that hospitals charge the same fees for procedures for all patients would go a long way towards stemming that inequity. It wouldn't have to dictate what the price was -- obviously hospitals couldn't take Medicare/Medicaid patients if the prices were higher than Medicare/Medicaid pricing -- but it would ensure fairness to everyone who walks through those doors.

(3) Universal Preventative Care
Check-ups and vaccinations are cheap. And they save tons of money down the road. There is no reason not to nationalize MMR immunizations and blood pressure testing. Everybody should have access to these basics.

(4) Change the Tax Incentives
John McCain was right - the employer tax exemption distorts the market. End the credit and give all Americans a refundable tax credit in the same amount to be used for health care. Allow all individual health care spending to be tax exempt. Require that all coverage be portable (not contingent on employment), so people don't have to tie job decisions to health care decisions and people don't have to worry if they will have a job tomorrow to support health care they need today.

Are these the complete answer? No. We still have to decide the thorny issues of whether to offer a public health care option (I favor it) and how to regulate coverage (pre-existing condition clauses, risk rating processes, etc.) But it's a start.

The Political Reality
The heat is only going to turn up. Blue Dog Democrats are fundamentally not sold and at least some of their votes will be needed to pass a bill. If a bill isn't passed before the August recess, it is probably dead for the year. And the Sonia Sotomayor confirmation hearings are scheduled smack dab in the middle of when this debate will be taking place, in what I think is an awful political miscalculation by Senate Democrats.

And the biggest political reality of all -- if President Obama can't get this done this year, with big majorities in both houses of congress and public approval at his back, he probably never will get it done, the same as Bill Clinton.

50/50 odds? Sounds a little optimistic in light of the facts. President Obama may be a different kind of President (for better or for worse, depending on your political leanings), but he lives in the same old Washington. Of course, Intrade also has better than 2:1 odds that President Obama wins re-election. So, according to the betting public, President Obama doesn't need to get universal health care done in order to win in 2012. Certainly, Bill Clinton didn't, winning the popular vote by 9% in 1996, the widest margin for a Democrat since FDR. President Obama? I'm not so sure. Health care was the centerpiece of his campaign. He needs to get a bill passed. And he needs to figure out how to pay for it.

A Mess in Iran
Opposition protests and charges of vote tampering abound in Iran. I don't doubt that Ahmadinejad and the corrupt religious mullahs who control Iran are capable of fraud and may have stolen the election. But we need to watch our words. Alleging fraud without evidence, and it is pretty scant at this point, is dangerous. We have no scientific polls that show Ahmadinejad trailing and no direct evidence of vote-tampering. All we have is a "sense" based on pre-election rallies that the opposition was rising. We need more if we are going to contend the election was corrupt. And it is probably irrelevant anyway, as even if we had evidence of fraud, the Iranian government isn't about to take a mulligan.

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Our Bulging Budget Deficit, Assessing the FDA Tobacco Law, Stimulus Update, Looking at the Obama Cabinet, 2010 Projection Update

Deficit Continues to Bulge
Lower tax revenues, stimulus and bailout spending and generally higher expenses for recession-prone safety net programs such as unemployment benefits and food stamps bulged the federal deficit in the month of May to over $181 billion, according to the Congressional Budget Office, with spending of $302 billion and tax collection of only $121 billion. The year-to-date fiscal year deficit has reached $984 billion and is assured to cross $1 trillion for the first time this month. The May numbers are not as bad as they sound, as May is typically a high-deficit month (the deficit was over $160 billion last year), but the year-to-date numbers are ever bit as bad as they sound.

So how scared should we be? No less a liberal thinker than Paul Krugman is very scared. Conservatives are obviously also upset (although they are more for spending cuts, whereas Krugman is for large tax increases.) There was a Wall Street Journal article this week that showed that insuring Federal bond debt against default is now significantly more expensive than insuring debt from stable companies such as Intel and Campbell Soup, meaning that investors in general consider the government at a higher risk of default. Treasury Secretary Tim Geithner was dispatched to China to try to reassure the Chinese that their debt ownership is safe and was widely mocked up local press.

In the short-term, I don't think there is anything that we can do about the deficits. Raising taxes or cutting spending as we are trying to eek our way out of a recession could have disastrous consequences. In the long-term, we must do something different than the proposed Obama 10-year budget outline.

Deficits soak up investment dollars that would otherwise go to private industry, create a burden for future generations and threaten to hike up interest rates, making investment and innovation harder. Simply put, a dollar spent financing government debt is a dollar not going somewhere else, where it could be growing the economy.

So, what to do? For lessons, I look back to the Clinon-era budget and try to ask the question, what has changed?

(1) Defense Spending
Clinton took full advantage of the "peace dividend" from the end of the cold war and slashed defense spending to its lowest level as a % of GDP in generations. Today, we are still spending heavily for the conflicts in Iraq and Afghanistan, although the President's 10-year outline calls for us returning to Clinton era levels over a 10-year period. Defense Secretary Robert Gates has proposed cancelling a number of over-invested weapons systems which were of dubious value militarily, but which had been well-positioned politically. We'll see if congress goes along.

(2) Capital Gains Tax Collection
When the stock market is going up, the feds are collecting taxes from capital gains. When it goes down, they are dealing with tax credits for capital losses (albeit not the same magnitude.) The stock market went on an historic rally during the Clinton years, pushing up capital gains tax collection.

(3) Marginal Tax Rates
No way around it -- the $250K tax bracket helped solve the deficit. It likely returns in 2011 when the Bush tax cuts expire.

(4) Domestic Discretionary Spending
President Clinton was working with Republicans to reduce welfare spending and they put an absolute lock down on any new social spending. President Obama is expanding SCHIP, proposing universal healthcare, etc. Clearly we need more money to finance these things.

Bottom line -- the massive projected deficit of $1.8 trillion this year is not the real concern. We need to be focused in the short-term on growing the economy, which will grow the revenue base (it was primarily the recession that caused this massive deficit in the first place.) The structural deficits in 2011 and beyond are a big worry. I've said it a dozen times, if we are going to do universal healthcare, we MUST pass new taxes. No way around it. Pay your way and have an honest debate. After this year, debt as a % of GDP may surpass 50%. We weathered debts of 120% of GDP in World War 2. It is troubling, but not damning. But continue to rack up the debt will be damning in the long-term.

Senate Version of FDA Tobacco Bill Passes House
The House this week overwhelmingly passed the Senate version of a bill to ban candy flavored cigarettes, further restrict tobacco ads, increase the prominence of warning labels and allow the FDA to regulate nicotine content in cigarettes.

President Obama has said he will sign the bill, which would make it the 13th bill that the President will sign into law.

Based on the congressional vote, this law earns a 0.48 on our partisan index, with a designation of "bipartisan". Really the Republican party was fairly evenly divided between those representing tobacco states and the rest of the country. Democrats were near unified in support of the legislation. This brings the Obama administration totals to:

Highly Partisan Laws (2)
Fairly Partisan Laws (2)
Fairly Bipartisan Laws (2.5)*
Bipartisan Laws (2)
Highly Bipartisan Laws (2.5)*
Completely Bipartisan Laws (2)

* The CARD Act is counted as half "highly bipartisan" for the vote on the core bill and half "fairly bipartisan" for the separate vote on the provision to allow firearms in national parks.

Stimulus Update
Latest numbers from the feds:
Money Authorized: $141.0 billion (28.3%), up $5.6 billion from last week
Money Spent: $46.4 billion (9.3%), up $2.7 billion from last week

Despite President Obama's promise last week to pick up the pace, last week was actually a rather slow week for both money authorization and spending on the bill. This just shows the challenge of executing huge projects quickly and effectively. The bulk of the money spent so far has been for easy-to-execute social programs ($19.7 billion for HHS, $13.0 billion for the Social Security Administration.) The actual infrastructure provisions have moved more slowly (the Department of Transportation has authorized $15.7 billion but spent just $200 million so far.) The administration will need to pick up the pace to blunt the criticism that has been rising in recent weeks as the unemployment rate has climbed to 9.4% and people have started to doubt the effectiveness of the bill.

Assessing the Obama Cabinet
We are in day 145 of the Obama Administration, almost 10% of the way through his term, so I thought it would be a good time to look at how his cabinet picks are doing.

Superstars
Robert Gates -- a credible face on national defense, Secretary Gates has proposed a dramatic reorganization of military spending, replaced Generals in key roles in the Middle East and flawlessly begun to execute the President's strategy in Iraq and Afghanistan. It was widely rumored when he agreed to stay on that it was a one-year deal only and he would be gone by January 2010. Let's hope not. He's one of the best advisors that the President has.

Hillary Clinton -- a shining star as a diplomat and a valuable asset to the President. She has been unflinchingly loyal and kept her husband behind the scenes.

Stars
Janet Napolitano -- Napolitano has been a steady-hand at Homeland Security, proposing smart ways to make the department cheaper and more effective and dealing well and even-handedly with the swine flu and Mexican drug cartel crises.
Arne Duncan -- quietly and mostly out of the public eye, Secretary Duncan has proposed smart educational reforms with a moderate streak and has guided stimulus funds to high-priority projects.
Steven Chu -- a man of few spoken words, Mr. Chu is the achritect behind the President's coming proposal on cap and trade as well as other energy reforms.
Kathleen Sebelius -- we haven't seen too much of her yet, but expect her exposure to step up as the Health Care debate heats up.

Quiet Forces
Ray Lahood, Eric Shinseki, Hilda Solis, Tom Vilsack and Ken Salazar have all been quietly runing their agencies without much drama. Lahood had a minor flap when he floated the idea of a mileage tax early in the administration, but other than that, we've scarecely heard from these 5. Hilda Solis' profile may increase as the debate on card check steps up.

Duds
Eric Holder -- immediately after getting through a bruising confirmation fight over his recommendations on the Mark Rich pardon, Holder steps in it by calling the country "a nation of cowards" on race in the first camera appearence most Americans saw him in. He struck exactly the wrong tone at the wrong time. He has done some positive things, like stopping the prosecution of former Sen. Ted Stevens (R-AK), but overall, he's been a bust.
Tim Geithner -- from his tax-dodge controversy at confirmation to his disastrous first press conference to his now-scrapped toxic asset plan, Geithner has been an all-around bust. He was supposed to be a bi-partisan-respected savant at economics. He has looked like an ameaturish hack who is outside the circle of power in the White House.

Overall, President Obama has actually had a cabinet of fairly low prominence, in part because he has been personally out in front of the press so much. Previous President's, who didn't like to face the press, such as George W. Bush and Ronald Reagan, often had their cabinet speak for them. President Obama, at least so far, has not shown that tendency.

2010 Projection Updates
The Republican Party has technically been in the "wilderness" (controlling neither House of congress nor the Presidency) for only 145 days, but it feels longer. Prospects for a 2010 takeover of either house of congress still look bleak.

No new polling information of note on the Senate races, so my projection stays unchanged for now with 2 projected Democratic pick-ups (Ohio and Kentucky) and 1 projected Republican pick-up (Colorado).

In the House, Democrats hold a 6.3% lead in generic polling, slightly behind where they finished polling in 2008. My current projection is a GOP pick-up of 4 to 15 seats (central projection of 9 seats), far short of what would be needed to retake the House.

Ahmadinejad Apparently Wins by Wide Margin
Dashing U.S. hopes of regime change in Iran, Mahmoud Ahmadinejad has won the Iranian elections by a large margin with almost 63% of the vote. Hopes had been rising in recent days that reformer Hossein Mousavi's campaign was building momentum. Mousavi is disputing the results of the election, but with such a wide margin for Ahmadinejad, he will no doubt be in office for another term.

Progress happens slowly in the Middle East.

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FDA Regulation of Tobacco Closer to Reality, The Palin/Letterman Battle

Senate Votes for FDA Tobacco Regulation
By an overwhelming vote of 79-17, the Senate has approved a bill to allow the FDA to regulate tobacco products. The house had already passed a version of the bill, but the Senate amendments will need to be reconciled before it can be signed into law. It does not appear that there are any Senate amendments that will be major roadblocks to prevent passage, so expect this one to be finalized in the next few weeks. Voting against the bill were 16 Republicans and Sen. Kay Hagan (D) from tobacco-rich North Carolina.

The bill stops short of allowing the FDA to ban cigarettes but allows them to regulate both nicotine contents and ingredients, including banning flavor enhancers that might make tobacco more appealing to teenagers. Phillip Morris had come out in support of the bill, while all of the other tobacco manufacturers had opposed it.

Palin/Letterman
I would only mention this because the news is slow today and because it has received much media coverage, but Alaska Gov. Sarah Palin (R) at late-night host David Letterman are in a war of words. Letterman made some crude jokes a few nights ago about the sexual promiscuity of Palin's daughters, including saying that one got knocked up by Alex Rodriguez on a trip to New York City.

There isn't too much to this story. Dave's jokes were out of line, but the bigger story is that you have two people who want media coverage. Dave is battling Conan O'Brien in the ratings and Gov. Palin is trying to maintain national recognition. This story will likely quickly fade.

Horror at the Holocaust Museum
The killing of a security guard at the National Holocaust Museum is a huge shame and not a political issue. My heart goes out to the guard's family and for those at the museum at the time of the shooting.

It is worth noting that a major report, initiated by the Bush Administration and released by the Obama Administration on the risk of a rising tide of white supremicist terror was panned by some of the far right. Obviously, they were wrong and the report was right. Regrettably, I fear we may see more of the same from a fringe few over the coming months. We all should stay ever vigilant.

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Deeds Spanks All Comers in VA Primary, Chrysler Sale Cleared, Sotomayor Hearings Set, President Obama's Political Capital

Deeds Smokes McAullife
I'll grade myself on my call yesterday on the Virginia gubernatorial primary: right theory, right order of finish, WAY off on order of magnitude. I pride myself on calling races right and I do feel that this site got it a lot more right than any other major political website, but there is definitely room for improvement.

As of this writing, with 99%+ of precincts reporting, Creigh Deeds pulled in a whopping 50% of the primary vote in the three-way race with Terry McAullife (26%) and Brian Moran (24%) a distant second and third. I believe all of the reasons why I projected a Deeds win held true (that Republican Open Primary voters overwhelmingly voted against McAullife), but in a much bigger way than I could have imagined. I envisioned maybe a 5 point Deeds win -- all of the polls showed the race more or less a dead heat. This just shows the difficulty in polling the result of an open primary, especially a very low turnout primary as this one was.

This sets up what I consider to be a true toss-up general election. Both Virginia and New Jersey appear to be very interesting races...stay tuned.

Chrysler Sale Moves Ahead Less than 24 hours after Justice Ginsberg granted a temporary stay of the Chrysler reorganization plan, the Supreme Court has reached the decision not to grant cert and take up the case. The reorganization will move ahead as planned with combined ownership by the UAW, the Federal Government and Fiat.

This is a good thing for what is left of Chrysler. It has a chance to remake itself. There is a lot of work to do. Chrysler lags badly in innovation, design and quality to its global competitors (Toyota, Honda, Volkswagen and Ford are all miles ahead in all three categories) and it may yet fail, but it has a lifeline and the small-car technology from Fiat to lean into. This expedited bankruptcy also sets the precedent for the much-larger GM to follow a similar process.

Sotomayor Hearings to Begin July 13th
The Senate judiciary committee hearings for Supreme Court-Designee Sonia Sotomayor will begin July 13th. This is earlier than many Senate Republicans had wanted, arguing for hearings no earlier than late August to allow a thorough review of Judge Sotomayor's record. As I previously discussed, this argument is nonesense as we are talking about a twice-Senate confirmed nominee whose record has already been thoroughly reviewed. But it is a normal tactic for the opposition party to play a waiting game and hope something blows up. I would still be very surprised if Sotomayor doesn't pick up 70 votes and sail through her nomination. But you never know.

That the hearings are set to begin smack-dab in the middle of when congressional Democrats had hoped to be debating health care reform will spread the President's capital awfully thin. Let's take a look at home much he still has.

Holding Strong But Still Trending Down
First, for our new readers, let me explain the methodology of the poll aggregation graphs below. Unlike many sites (such as the widely reported realclearpolitics), I do not treat all polls as equal. Polls have different sample sizes and are therefore given weight based on its overall sample size, to create one "super poll". Also, polls have different methodology for treatment of "no opinion". Gallup, for instance, reports "no opinion" responses (their latest poll shows 61% approve, 34% disapprove, 5% "no opinion") whereas Rasmussen does not (their latest poll 58% approve, 41% disapprove, does not add to 100% due to rounding.) Therefore looking at just the approval percentage is not meaningful. I therefore use what I call "approve minus disapprove", that is the percentage of those surveyed who approve minus the percentage that disapprove. This gives a consistent basis for comparing the results over time. If the number is positive, President Obama generally has public approval, if negative he does not. I also show for reference the 7.2% line, the percentage by which the President won the national popular vote in November. This methodology closely replicates the polling aggregation method that I used to correctly project within 0.1% the results of the November election.

The verdict so far this month? More of the same. President Obama continues to enjoy broad approval, but the margin continues to slowly tighten. He is more popular than he was in November -- that is there appear to be McCain voters who approve of the President. But you can see from the trend why the administration is intent on getting things done now -- in politics you either use political capital or lose it.

I also look at the poll breakdowns by polling methodology. As some polls survey all adult Americans, some restrict to registered voters and some attempt to target likely voters, the numbers naturally vary.

As of today, the numbers by polling type are:
Adult Americans: +30%
Registered Voters: +26%
Likely Voters: +17%

It is worth noting that Rasmussen is consistently the only poll tracking Likely Voters. This is worth noting as the Rasmussen results have been all over the map, bouncing between +6% and +17% over just the past 4 days. I find it hard to believe that President Obama's underlying popularity is shifting that much day to day, so I wonder somewhat if Rasmussen is tinkering with the methodology. The +17% number seems more realistic, given that it would be hard to believe that there is a 20%+ spread between registered and likely voters. The Gallup polling last year that looked at both generally showed a 3-5% spread between the two (registered voters tend to be somewhat more liberal than likely voters.)


Month to month, President Obama is still off about 4% in June versus his May numbers, but still over 18% above his November vote totals.

My conclusion: the President still has a lot of capital. People are wary of large deficits and continuing high unemployment but are generally feeling better about the direction of the country and the economy than they were a few months ago (consumer confidence is at its highest level since last September, and right track/wrong track polling has gone from -48% on election day to even today.) Republicans have yet to organize a coherent attack (Rush, Newt and Dick are not helping) or present clear policy alternatives. The honeymoon will end (Republicans will eventually rebuild their party and rally around a coherent message, people will continue to feel economic pain at least for the next several months and the country as a whole is definitely to the right of the President), but for now, the President can afford to press hard.

Whether all this capital translates into being able to do Health Care, Energy Reform AND Immigration Reform in a meaningful way remains to be seen. Both Bill Clinton and George W. Bush accomplished NONE of those three things in 8 years each in office. President Obama is attempting to do it in one. If he pulls it off, it will be the most significant first year of a President in U.S. history. It should be interesting to watch.

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SCOTUS Stays Chrysler Sale, Sizing Up the VA & NJ Elections, Stimulus Under Fire

Chrysler Sale on Hold For Now
In a move that surprised many observers (including this one), the Supreme Court has temporarily halted the proposed Chapter 11 bankruptcy reorganization plan for Chrysler, which had called for ownership by the UAW Pension Fund, Fiat and the U.S. Government of a "new" Chrysler, which would be unsaddled from the burdens of its massive secured debt.

This issue is a thorny legal maze, but I'll attempt to make it as simple as possible. When a company enters Chapter 11 Bankruptcy, it is essentially admitting that it lacks the cash to meet its debt obligations. A chapter 11 filing seeks to dissolve the existing corporation and form a new corporation with the old corporation's assets. The process is designed with a pecking order of who gets what. So-called "secured" debt holders, those who hold debt guaranteed by the corporations assets are the first to get their money back. "Unsecured" debt holders, those who hold debt to the company that is NOT secured by the company's assets are next in line. Existing share holders are last in line and typically don't get anything (if the company had enough to cover its debt, it wouldn't need to file bankruptcy after all.) A reorganization is typically only approved by a court if it is believed to be preferable to debt holders to a liquidation (that is, it is believed they will get more of their money back by reorganizing the company.) Essentially the Chapter 11 process is about existing owner's getting bumped from a broke company and the debt holders taking ownership of the company in exchange for not getting their bonds repaid.

The legal issue at play in the Chrysler bankruptcy pertains to the pecking order that I just described above. The UAW Pension Fund is an unsecured debt holder (Chrysler owes payments to a pension fund, but they were not guaranteed by company assets), whereas a myriad of bond holders are secured debt holders. The proposed reorganization gives a large stake of the company to the UAW Pension Fund, while paying back secured debt holders only about 27 cents on the dollar.

This would ordinarily provoke a fight on the part of the major secured debt holders. The unique situation here, is that the Federal government brokered the deal and the major bond holders are financial institutions that owe billions in TARP money back to the government. They are clearly in no position to protest the deal.

The legal challenge came from a small group of minority bond holders, led by an Indiana State Workers pension fund. The challenge was rejected by the bankruptcy judge and rejected by a federal appeals court. The conventional wisdom was that the Supreme Court would leave the decision alone without comment. Apparently not so.

Justice Ruth Bader Ginsberg (who is the justice with jurisdiction to handle emergency requests from the 2nd Circuit where the appeal is coming from) has granted a temporary injunction while the Supreme Court considers whether to take up the case. The temporary injunction does not have a time limit, although the Supreme Court is expected to decide whether to hear the case or not. To hear the appeal, at least 4 of the 9 Supreme Court Justices would have to vote to grant cert in this case.

This has the potential to be a real mess. Fiat has threatened to walk away from the deal if it is not closed by June 15th and it would be nearly impossible to get a Supreme Court decision prior to that if the court agrees to hear the case. As I've documented previously in this space, every day that Chrysler is essentially closed down is a day further that R&D is getting behind for 2010 model year cars and another day that paint is drying in production lines.

A delay is bad for everyone. The scary thing is that the plantiffs seems to have a legal case. The proposed reorganization clearly puts unsecured debt holders ahead of their legally entitled place in line. But 27 cents on the dollar may be the best deal the plantiffs are offered. If they win and delay the reorganization, Chrysler will likely face liquidation and their cut will be substantially less.

That the Supreme Court might take this up is a shocker. That it was one of the courts most liberal justices who granted the stay is a double-shocker. This is a case where the court may make the technically correct legal decision that may wind up being bad for all involved.

Let's hope GM fares better in its proposed reorganization.

VA and NJ Governor Races
In 48 states, 2009 is more or less an off year for elections. Not so in the State of New Jersey and the Commonwealth of Virginia.

Virginians vote tomorrow in their Democratic gubanatorial primary. Former State Attorney General Bob McDonnell is running unopposed on the Republican side. Democrats face a fiercely contested 3-way contest between State Senator Creigh Deeds, former DNC Chairman Terry McAullife and former State Delegate Brian Moran. Polls are extremely close, although Moran appears to narrowly trail the other two. The polling data appears to show a pure toss-up between Deeds and McAullife.

Outside of Virginia, McAullife is the only figure that is well known, having been the face of the Democratic party for several years. Virginia primaries are extremely tough to call, especially in cases where one party is uncontested, as Virginia primaries are open. Republicans may vote for either the candidate that they find least offensive or the candidate that they think they can most easily beat. In either case, conventional wisdom would indicate that they would tend to oppose McAullife, who has been a thorn in the side of the GOP and possess an amazing fundraising rolodex.

The statistics tells us this one is a dead heat. My personal prediction, based on the intangibles mentioned above, is that Deeds edges out McAullife to win, but I wouldn't rule out any of the 3. If you live in Virginia, make sure you get out and vote tomorrow, as this one could be a nail-biter.

Looking ahead to the general, I would expect a very close race. Virginia is pretty much a pure swing-state at this point. Although it does have 2 Democratic Senators, a Democratic Governor and went for Obama this past November, it still has strong conservative support in rural areas. Its brand of Democrats tend to be the pro-gun, low tax variety and Obama won it much more narrowly than he did nationally. I look for a hard-fought general.

In New Jersey, it has already been decided that Chris Christie (R) will face incumbent Gov. John Corzine (D). 2009 is an awful year to be an incumbent governor with high unemployment and massive budget deficits that have led to either higher taxes, lower services or both. Corzine is unpopular and Cristie is ahead in the polls. Christie is a moderate and New Jersey, despite its strong blue-streak nationally of late, has a history of electing moderate Republicans. This will be a fun one to watch. Christie seems to have the edge at this point, but the GOP can sometimes fade late in New Jersey. I live in New Jersey and have not yet reached a decision, but will let you know when I do.

Stimulus Under Fire
Pressure is intensifying on the Obama administration to show results from the massive stimulus packaged passed this year. Conservatives and the media are calling into question the effectiveness of the program, given that unemployment has risen to 9.4% (up 1.5% since the package was signed.) As I've documented before, employment tends to be a lagging statistic in economics and I have always anticipated that it would reach around 10% by year end. The stimulus never could have immediately halted rising unemployment, but I believe was necessary to prevent utter collapse. Fair metrics to look at are how fast the money is being spent (as we will continue to document in this space) and whether the fundamental metrics of the economy are beginning to stabilize. I believe the improvements in housing and in leading employment indicators as well as the surge in consumer confidence indicate that the preliminary verdict is that the stimulus is having a positive effect. But that is a nuanced and difficult to explain position. 9.4% grabs headlines. The Obama Administration needs to work on its messaging.

Welcome, Newcomers
I placed an ad this week on one of my favorite political websites, electoral-vote.com and the site has certainly seen one of its highest traffic days ever today. If this is your first time visiting, welcome.

Please read through the commentary and analysis that I have been presenting since last election season. I hope you will be favorably impressed by the detail and accuracy of my election predictions this past year and the detailed analysis that I've presented on issues since then. I hope you visit often and join in the debate.

Please bookmark our site, tell your friends and come back soon. There is never a charge for this site and it is operated not for profit, so enjoy!

The President's Middle East Trip, Stimulus Spending Update, The Coming Health Care Battle, Abortion Revisited

Obama in the Middle East
Like many, I did not see the President's Middle East speech live, but I did watch the recording online and have read through the transcript several times to understand the key messaging. Here are my thoughts:
It is no great secret that President Obama is one of the great speech-givers of our time. Some would rate Bill Clinton and Ronald Reagan up there with him, most honest observers, I suspect, would put him ahead of those two.
The President's speech was brilliant, as usual, attacking abuses of women's rights in the middle east, the specter of terrorism and expanded territorial occupations in Palestine in one fell swoop. There have been minor criticisms from the left and the right, as well as some charges that the President is naieve for seeking a new path forward, but the criticism has been relatively minor.

So, the President gets a good grade on the speech, but that isn't what really matters. The policies that follow are what matters. And so far, every President in the past 40 years at least has tried to resolve conflicts in the Middle East, and by and large, every one has failed. I'm not yet convinced that this time will be any different.

Stimulus Spending
The latest numbers:
Money Authorized: $135.4 billion (27.1%) up $9.1 billion from last week
Money Spent: $43.7 billion (8.7%) up $7.1 billion from last week

So, it was a good week, with the government exceeding the $5.3 billion per week that it will need to spend to meet 40% spend by the end of the year and authorizing more than it spent, keeping the hopper of future spending full.

There have been some murmurs over the past week or so from the left, looking for another stimulus package (this would technically be the third packages, since a small tax-incentive package was passed while President Bush was in office.) I am not in favor of another package at this point, although I leave open the possibility if conditions change. My reasons are: #1 the current bill seems to be working (see the impact on housing starts, reduced layoffs, etc. mentioned in my prior blogs) and #2 We still have 91.3% of the existing bill left to spend, what would more funding help at this point?

I realize that 9.4% unemployment (the lastest report out on Friday) is miserable and people want fixes now, but fixing these cycles take time. I continue my projection that economic growth will return in the third quarter, but unemployment will not start falling until 2010. I don't think authorizing more money would change this -- we are already spending as fast as we responsibly can.

Sen. Kennedy's Health Care Bill
The health care debate is coming in July and it looks like Sen. Ted Kennedy (D-MA) has written the bill that will be the starting point for debate. It requires employers to provide health coverage, prohibits exclusions based on pre-existing conditions, creates a government alternative to private health plans and provides both subsidies for the poor and the requirement that people carry health coverage, with exclusions for those who can't afford it.

This is a very moderate starting point. It appears a Canada-style single-payer system is completely off the table as is the concept of separating employment from insurance coverage. That's a shame as these ideas were worthy of debate.

Democrats have a tightrope to walk on this issue. While they need no Republican votes (using reconciliation means they simply need a pure majority in the Senate), Blue Dog Democrats are very wary of a massive expansion of federal involvement in health care. What will likely emerge will probably be an improvement over the current system, but will probably be a watered-down version of total reform.

And we still haven't tackled funding. As I've been saying for months, the Democrats are going to have to come clean -- you can't do universal coverage without tax increases, period. So, let's go ahead and have that debate.

An Alternative View on Abortion
As of to highlight what I already knew, posting my views on the abortion debate spawned a bevy of e-mails and the highest site readership that we'd seen over a 3-day period since immediately after the inauguration. I won't print the nasty e-mails from both sides, but in the interest of balance, a pro-life friend of mine asked for space to provide an alternative point of view. I'm always in favor of people having all the facts, so I was happy to oblige. Here are his thoughts:

"Let me start by saying that I am not a religious person. I appreciate the support of pro-lifers across the country who are religious, but my views are driven by a moral belief, not a biblical one. My belief is simple - abortion is morally wrong. Abortion involves the killing of a human life, often for no reason other than convenience. Scientific evidence has shown that human organs develop in a fetus within the first few weeks of pregnancy and a fetus develops a beating heart within the first trimester of pregnancy. There are many reasons that a woman may wish to end a pregnancy -- difficult economic circumstances, personal troubles, etc. These are all legitimate reasons not to want to be a parent, but they do not change the fact that a human life has already been created. Trying to parse what "level" of human life is present and what rights it is entitled is a cop out. We don't allow infanticide because the baby has not fully developed into an adult human, nor should we do so prior to birth. How can a baby be legal to kill one moment and a heinous crime to kill a moment later, when it is born? Ample options exist to prevent mothers from having unwanted babies -- birth control and adoption come to mind. We should focus our efforts on making these options more widely available and caring for mothers-to-be in need, not killing humans. This is not about being pro or anti women's rights, this is about protecting the rights of ALL people born and unborn."

While I don't share these views, I respect that they are born of true belief. You already know my views on this issue, but I respect the opposition enough to present the alternative. Read both and draw your own conclusions.

And if you have thoughts on this issue that you would like shared, let me know. With knowledge comes enlightenment.

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Presidential Popularity Strong but Down Slightly, A Promise-Keeping Update, Gay Marriage in New Hampshire

Obama Approval -- Strong, But Weakest Yet
I don't want to oversell short-term trends, but I would be remiss if I didn't note that President Obama's aggregate approve-disapprove of 26.0% is the lowest of his Presidency to date. Now, as I've often noted, it is typical of new President's for their approval rating to decline somewhat over their first 100 days before it settles in at a more reasonable level. But in President Obama's case, there appears to be a slow erosion effect happening. We are in Day 136 of his Presidency, about a month past when the new President-euphoria typicall wears off and he is still declining, albeit slowly. His numbers are still very strong, so he may well yet stabilize at a good level of support, but it is worth watching.

Looking at the by month averages, we see that President Obama finished the month of May down from April (albeit just slightly) and early in June is tracking below May. His month-on-month declines are as follows:
Jan to Feb: -6.8%
Feb to Mar: -8.4%
Mar to Apr: -2.3%
Apr to May: -0.6%
May to Jun: -2.4%
* Month to date, only 3 days of data

In terms of polling methodology here is the current breakdown:
Adult Americans: +33%
Registered Voters: +28%
Likely Voters: +10%

At +10% with likely voters, the election would look a lot like 2008 as Obama would carry his 2008 states plus Montana.

Obama Promise-Keeping
The latest numbers from politifact.com show President Obama keeping 30 campaign promises, 8 compromises (promises partially kept) and 6 promises broken. Based on the rating system I set-up (where kept promises count as 1 point, partially kept promises half a point), Obama gets a 77% rating, far ahead of our 50% benchmark, and a grade of A-.

It is worth noting, however, that President Obama made 514 document promises, so we have only dealt with 8.6% of them. On the plus side, we are only 9.3% of the way through his first term, so we are more or less on pace.

New Hampshire Becomes the Sixth
New Hampshire this week became the sixth state in the country (following Maine, Connecticut, Massachussetts, Iowa and Vermont) to legalize gay marriage and the third to do so by legislative act. The formerly conservative stronghold is now a cutting-edge social policy trend-setter.

We'll see if a bill makes it through the State Senate in New York (it has passed the house and Gov. David Patterson (D) is a strong supporter) -- it appears at this point that the votes aren't there, but that it is relatively close.

We'll also keep tabs on the effort to put a ballot initiative on in Maine to reverse the law legalizing gay marriage there and the efforts to get a ballot initiative back on the ballot in California in 2010 to repeal Prop 8 and re-legalize gay marriage.

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Assessing the 2012 GOP Field, Another NY Special Election, A Rational Abortion Discussion

The GOP 2012 Field
Minnesota Gov. Tim Pawlenty (R) has announced that he will not seek a third term in 2010. It is widely believed that this is a precursor to a 2012 Presidential run. Although Pawlenty certainly could have run for a third term and still run for President, the primary campaign would have effectively started on day 1 of his third term in office. Also, he was no shoe-in to win re-election and running and losing would have effecively knocked him out of the Presidential race.

So, let's add him to my list of Republican contenders who are "probably" running. Here is my list:

Declared Candidates -- None
Probably Running -- Tim Pawlenty, Mike Huckabee, Mitt Romney, Newt Gingrich
Possible Running -- Sarah Palin, Bobby Jindal, Rudy Guliani
Long Shots to Run -- Colin Powell, Condoleezza Rice, Mitch Mcconnell, John Boehner
Doesn't Really Matter if they Run -- Tom Tancredo (the GOP Dennis Kucinich sans the hot wife)

Of the probable candidates, I think Pawlenty and Romney hold a huge advantage over Gingrich and Huckabee in terms of their electability. Gingrich is universally hated by the left and center and not particularly well-liked on the right, although he is fairly well respected across the political spectrum as a clever tactician and a guy with substantive ideas. Romney holds a moderate record on social issues (that he spent most of the 2008 primaries trying to talk away) and strong credibility on economic issues. Huckabee is the most charismatic of the four, but his appeal is limited by his fairly radical views on things like evolution.

Of the possible candidates, Palin and Jindal both hold some executive experience and strong appeal with the right wing, but both flopped fairly badly on the national stage. I predict that in the end, neither runs. Rudy Guliani already crashed and burned against Romney, McCain and Huckabee, I can't imagine him trying again or being more successful on a second run.

Of the long shots, McConnell and Boehner have absolutely zero positive name recognition with the general public. Conversely, Rice and Powell are both widely beloved. They would both present serious threats to Obama if they were nominated. But it doesn't appear either is particularly interested and both may be too moderate to win the nomination, even if they were (Powell, after all, endorsed Obama, supports abortion rights and affirmative action and Rice has virtually unknown social views.)

I hope Tom Tancredo runs again, not because it will matter, but just for the entertainment value.

Another Special Election
The selection of Rep. John McHugh (R-NY) as Secretary of the Army will create another New York special election in another swing district. NY-23 is extremely similar to NY-20 (NY-23 went for Obama but was 3% more Republican than the nation as a whole.) A date has not been set yet, but will likely be in Mid-July. Expect another nail-biting close race, unless one party fields an extremely strong or weak candidate. A decisive win by either side could be a bellweather of changes to come in the 2010 cycle.

Trying to Bring Logic to the Issue of Abortion
The murder of a late-term abortion doctor this past Sunday reopened the discussion of abortion across the news and talk circuit. As I've often said, this is probably the most divisive issue of our time and there are no easy answers.

Let me take a moment to share my logic and my views.

First, let me state that my views are not derived from religious sources. If you have a particular religious belief about this issue, there is nothing that I can say that would sway you. I don't have a response to "God said..." I can only approach this from a scientific and logical point of view.

My view is derived from trying to understand the arguments of the two extremes and formulate a view which is consistent with the moral judgements that we apply for people who are already born. Pro-life forces would want us to outlaw abortion from conception -- "life begins at conception" is a popular rallying cry. Their argument centers on the fact that there is a living, independent organism from the moment of conception, one that is "human" even if only a basic form for the first few months.

Pro-choice advocates (the most fervent ones) would have legalize abortion throughout all 9 months of pregnancy. The principal moral argument they make pertains to the right of a woman to make determinations that impact her own body.

I find both constructs unsatisfying. Sure, "life" begins at conception. But a cockroach is life and we don't afford it legal protections (I'm not calling a fetus a cockraoch, just making a point about what "life" means, but go ahead with the hate mail.) Similarly, we don't allow a woman freedom over her body if her body is wielding a gun pointed at her husband's head.

To me, I come back to the old adage that my freedom to swing my fist ends at your nose. So if abortion does kill a person that we consider worthy of legal protection, it should be illegal, if it does not, it should be legal.

So when is a fetus worthy of legal protection? I'm not willing to accept that it is totally unprotected for 9 months and then magically is a full person when it is born (nothing magical happens in that moment.) I also can't accept that a sperm and egg separate constitute nothing, but that the second they combine, you have a full-blown human, desrving of all the rights of any citizien.

To me, the moral standard should be sentientce. When is it that we are killing a thinking, feeling human being? For weeks 1 through 24 of a pregnancy, a fetus has no brain activity. It cannot think on any level, cannot feel pain and therefore should not be entitled to legal protection. Around week 25 of pregnancy (approximately the start of the third trimester), a fetus starts to gain brain activity. By week 30 or so, it has brain-function close to that of a normal infant. I could attempt to delve deeper into the level of brain-function to set a standard, but I believe in this case, we should err on the side of caution and consider a fetus worthy of basic human rights as of the start of the third trimester.

Third trimester abortion kills a thinking, feeling creature. It should be illegal (unless such a procedure is necessary to save the life of another thinking, feeling creature, the mother.) First and second trimester abortion kills cells that have no brain contained in them. They inflict no pain and cut off no thought. They should be legal and universally available.

As for the popular "rape and incest" exceptions, it does not matter to me, the law should be the same. HOW a woman got pregnant doesn't impact the morals of this issue to me. If a fetus is thinking and feeling, no reason WHY a woman is pregnant would justify abortion. If a fetus is not thinking and feeling, no reason why a woman is pregnant would make it immoral, in my view.

So what of this murder of a late-term abortion provider? I do not advocate violent action against a democratically elected government. I believe it is almost always wrong and counterproductive. I do however, understand the thought process that this killer followed. If you believe that abortion is murder and that by killing someone you would save the innocent, I can see where he convinced himself to "take matters into his own hands". I don't condone or advocate such a course of action, obviously, but I probably understand it more than most who possess a fairly pro-choice disposition. I just wish everyone would stop the violent rhetoric that incites this kind of violence and join a reasoned discussion.

Regrettably, I think far too few think through their position on this issue. There is too much emotion and not enough reasoned discussion.

I welcome your thoughts and comments on this thorny topic.

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GM Bankrupt, Why the Stimulus is Working, The Obama Date Night, Dick Cheney -- Gay Rights Advocate

GM Rolls into Chapter 11
In possibly the least shocking lead story of the year, General Motors today filed for Chapter 11 bankruptcy protection, marking the largest industrial bankruptcy in U.S. history and the fourth largest bankruptcy period (Lehman Brothers is #1, Enron is #5 for a little perspective.) In a widely telegraphed move, GM will receive at least $30 billion in additional government financing through the bankruptcy and emerge from bankruptcy, the US Government will be the majority shareholder with minority interests from the Canadian Government, the UAW Pension Fund and all of the bondholders whose claims will be exchanged for equity in the new company.

So, the bad news is that when all is said and done, the Feds will have sunk at least $70 billion into GM and Chrysler and they will have still gone bankrupt. The good news is that it appears Chrysler is close to emerging from bankruptcy in record time with a new debt and capital structure that may actually allow it to be successful as a much smaller company. We can hope for the same with GM. If these companies emerge successfully, the government will be able to sell its share and recoup some or all of the bailout money.

All of this (bankruptcy) should have happened months ago, as I have repeatedly advocated, but late is better than never. The Chrysler experience is proving that Chapter 11 was not the catastrophe that some claimed it would be, but rather the best, most orderly way for fixing fundamentally broken companies. In fact, had this action been undertakening back in December and January, I believe the new Chrysler and GM would be better positioned to compete in the economic recovery, as they would have emerged from bankruptcy already and be in a position for an effective 2010 model year launch.

It is scary how much of our former titans of industry the government now has a huge stake in: Citibank, Bank of America, GM, Chrysler, Fannie Mae, Freddie Mac. I hope there is a plan at the end of this to disentangle the government from the free market. Many of these actions were probably necessary (even if I think the auto bailout was sorely mishandled by both President Bush and President Obama), but long-term involvement has chilling reprecussions. We need an exit strategy.

Okay, GOP, How About that Stock Market Now?
On the day that the sixth largest company in the United States (per the Fortune 500 list, with over $183 billion in sales last year) filed for bankruptcy, the S&P 500 was up 2.6%. So what gives?

First, as I mentioned, the GM move had been telegraphed for weeks, so the market had largely "priced in" the bankruptcy, although it is worth noting that GM stock was still trading for $0.75/share last Friday and those shares are now worth, in the words of Animal House, "0.0", so it was not fully "priced in".

The real motivation behind the move was some good underlying economic news which can, at least in part, be directly traced to the stimulus. Disposable incomes increased by 0.5% last month in spite of the fact that gross incomes were flat. The reason? The tax credits in the stimulus package. Additionally, construction spending rose in May, another product of stimulus spending.

Remember when Republicans were saying that the stock market was a gauge on President Obama's performance? The S&P 500 is now up almost 13% since the President took office. Is the President now doing a stellar job? Bear in mind, the stock market declined a total of 37% during President Bush's 8 years in office. Do I now contend that the stock market is a real time barometer of a President's economic performance? No. As I've said in the past, long-run stock market returns ARE a good barometer of overall economic policy performance, but short-term results don't mean much.

The Obama Date Night
Congressional Republicans have criticized the President for using government resources (namely Air Force One and a helicopter) to take his wife to a Broadway show. What a stupid statement. The President doesn't have the option to take the bus, because of security concerns. How exactly do you think that President Bush got to his ranch in Crawford the dozens of times he went? Going to a Broadway play once and maintaining some sense of family normalcy while working 100 hours a week is certainly something to which the President is entitled.

That's all the virtual ink I can stomache devoting to that.

The Pro-Gay Marriage Dick Cheney
Many were shocked when former Vice President Dick Cheney stated clear support for legalization of gay marriage. Mr. Cheney also stated that he believed it was an issue that should be individually decided by the states. I agree with him on both points (although I oppose strongly the Defense of Marriage Act signed by President Bill Clinton that allowed states to disallow marriages from other states between gay couples, an exception that causes married people to become unmarried when they cross state lines that is not extended to teenage marriages, marriages between cousins or any of the other quirky marriage laws around the country.)

I was not among those shocked by Mr. Cheney's position. It has been well-publicized that has a gay daughter. In the 2000 Vice Presidential debate with Joe Lieberman, he expressed clear empathy for gay Americans and came out strongly for Civil Unions (although stopped short of endorsing gay marriage.) Dick Cheney was never a culture warrior. I've hated his foreign policy and civil liberties positions for 8 years, but we are in complete agreement on this one and I respect his courage in opposing the vast majority of his party and his defenders in coming out with this decisive stand. Good for him, for once.

Stimulus Update
Latest numbers from the government:
Money Authorized: $126.3 billion (25.3%), a $10.2 billion (2% of the package) increase from last week
Money Spent: $36.6 billion (7.3%), $5.5 billion or 1.1% of the package spent in the past week

The government will need to spend just over $5.3 billion per week, every week between now and the end of the year to meet the target of 40% of the package being spent by the end of this year.

Site Updates
This site finished the month of May with 210 visitors for the month, meaning that we have had more than 200 visitors every month since I put the counter up in January. Thanks for reading and referring your friends.

A few readers have noted as of late that I've had some incorrect spelling and grammar in my posts. I apologize for any gramatical and editing errors. I have been largely writing the blog from the road as my business travel schedule has been crazy and I don't always get a chance to fully edit my posts.

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