5.7% Economic Growth and What It Means, Time to Watch Wisconsin?

The Recovery Becomes Official, What's Next?
The Bureau of Economic Analysis on Friday released it's quarterly report on the performance of the United States Gross Domestic product, which included the preliminary estimate of economic growth in the 4th quarter of 2009. The US Economy grew at an annualized rate of 5.7% in the 4th quarter of 2009, the fastest rate in over 6 years. This, following the revised 2.2% growth rate for the third quarter of 2009, marks two consecutive quarters of positive economic growth. For all intents and purposes, we can declare that the "Great Recession" ended in the summer or fall of 2009, although an official pronouncement won't be made until long after the fact.

So what exactly does this mean and how does this jive with the current 10.0% unemployment rate and the even more scary "underemployment rate" which counts those who are unemployed, those who are no longer classified as unemployment because they have given up looking for work and those who are working part-time but are seeking full-time work, of 18.3%?

First, let's take a step back and remember what these numbers mean.

The Gross Domestic Product of the United States is the value of all goods and services produced in the United States within a year. This is a very important bottom-line economic number as the the value of all the goods and services produced directly correlates to the standard of living people have as all goods and services produced here are either consumed here or exported, with the value of the exports used to buy other goods. A very good metric for the overall standard of living in a country is its Per Capita GDP, that is the Gross Domestic Product divided by the population. This is how many goods and services the average person can expect to receive. This explanation is a little over-simplified, but generally true.

The US population is not static. It is growing at a rate of about 2% per year. Therefore, the GDP has to grow at a rate of 2% per year just to maintain the existing standard of living. When growth falls below 2%, even if it does not go negative, living standards decline. When it exceeds 2%, living standards increase.

The chart below shows the quarterly GDP growth rates since 2007. The green line is the actual GDP growth rate. The blue line is the "gap to 2%", that is the amount by which the standard of living in the United States is below where it was before the recession started.



There are two key lessons that I believe that you can glean from this graph.

(1) Economic performance under President Obama has been remarkable good
It's an odd thing to say with unemployment extremely high, but if you look at the growth curve, the economy was in utter free-fall in the 4th quarter of 2008 (before the President took office) and in the 1st quarter of 2009 (after the President took office, but before any reasonable impact from his economic policies could take effect.)

Of course, giving him full credit for the recovery would be silly. The actions to stabilize the financial system taken by the Bush administration in its last days, as lacking as they may have been in terms of proper accountability, was critical in preventing an even greater slide. The natural economic cycle obviously also plays into this -- economies go up and down to a certain extent irrespective of government policy. The Fed has also been critical, slashing interest rates to their lowest levels ever and providing large amounts of liquidity by taking on a large balance sheet.

Still, it's hard to deny the impact of President Obama's policies. Cash for Clunkers and the First Time Homebuyer credit spurred auto sales and arrested the free fall of home prices. Tax credits stabilized consumer spending. Infrastructure spending spurred construction employment, albeit not at a fast enough pace.

The bottom line is, in just three quarters, the rate of economic growth went from a pace of 6.4% contraction to a pace of 5.7% growth, over a 12% swing.

(2) How Far We Still Have to Go
If you look at the gap to 2% growth, the economy is still 5.8% smaller than it needs to be just to restore the standard of living prior to the recession. That may not sound like a lot relative to a 5.7% growth rate, but it is. Let me explain.

Keep in mind that going forward, the economy will continue to have to grow at 2% just to hold its ground, so a year of 5.8% growth wouldn't restore the standard, it would require a year of 7.8% growth, 5.8% to fill the hole and 2.0% to account for population growth. Nobody thinks 7.8% growth is going to happen.

So, based on more realistic scenarios, how long before we get back to where we were?
At 5% growth, it would take 2 years to get back to where we were at the start of the recession -- in other words we wouldn't be back to where we were until the end of 2011.

At 4% growth, it would take 3 years, or the end of 2012.

At 3% growth, it would take 5.75 years, or the fall of 2015.

And the 5.7% growth number includes a lot of inventory recovery - businesses restocking inventories following holding them at historic lows during the recession, growth that is not repeatable. 4% is probably a pretty rosy scenario. Which means that we are going to see elevated unemployment for some time to come.

So, in the end, the news is good, but we have a long way to go. The Fed will have to balance growth with controlling inflation and will ultimately need to increase interest rates to more normal levels if economic growth continues. There is still anxiety and depressed consumer spending thanks to high unemployment. But it's hard not to feel a lot better than we did a year or nine months ago.

Stimulus Spending and the Proposed "Jobs Bill"
The latest government report shows that stimulus money continues to slowly go out the door. The latest figures:
Tax Cuts: $92.8 billion spent out of $288 billion (32.2%)
Spending: $195.6 billion spent out of $499 billion (39.2%)
Total: $288.4 billion spent out of $787 billion (36.6%)

Given that 63.4% of the stimulus money remains unspent, why is President Obama saying that a "jobs bill", also known to those of us paying attention, as another stimulus bill, should be the top priority of congress this year?

Clearly part of it is political, the President is trying to pivot to an economic focus after the bloody fight over health care sapped his public approval. This is understandable. The Democrats want to be seen as doing something with people still hurting under the scourge of unemployment.

But authorizing more spending may not be the best course to chart. The best course is probably to focus on effectively deploying the almost half a trillion dollar already available under the stimulus package, working to close out TARP and collect remaining outstanding loans to the financial services industry, chart a course back to private enterprise for GM, which may well earn a profit this year and chart a plan to deficit reduction that will prevent future economic growth from being impaired by massive amounts of investment capital being absorbed through government bonds.

That work isn't as sexy, but is probably what is needed. Hopefully that will all happen in the background. But we are probably going to get at least a token jobs bill in the meantime.

Feingold at Risk?
A theoretical Rasmussen poll matching incumbent Senator Russ Feingold (D-WI) against popular former Republican Governor and former Secretary of Health and Human Services Tommy Thompson, shows Thompson leading Feingold by 3%. This is a theoretical poll as Thompson has not indicated that he is going to run. Still, it is a worrisome number for Feingold, as it shows that he IS vulnerable this November. It is enough to move Wisconsin from a Likely Democratic Hold to a Lean Democratic Hold.

Other polls released this week showed the GOP continuing to lead in North Carolina and the DEM's continuing to lead in California, but neither was significant enough to move the rating of the races, which were both already listed as leaning in those respective directions.

The GOP is slowly chipping into one Democratic seat after another. Is this just a low point for the DEM's and will the ultimately recover or hold on and win Wisconsin, Indiana, California, New York, Pennsylvania, etc.? Or is this the start of a GOP November rout, where the GOP finds an improbable way to secure 10 seats and control of the Senate.

No one can know at this point. We'll see what the polls do in the next few days in the aftermath of the State of the Union speech.

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Can Obama Pull Together a Fractured and Damaged Democratic Party?

A lot of people have remarked to me in the past few months how amazingly little the present political environment resembles the environment in 2008, when President Obama won a decisive victory in the Presidential race and Democrats established huge majorities in both houses of congress.

In actuality, early 2010 looks a heck of a lot like 2008. An unpopular President. A party exposing deep philosophical fractures as the true believers talk down and attempt to beat the moderates in line. A confused platform that seems to have drifted away from both the party's core values and the American people. It was the Republicans in 2008, it is the Democrats today.

The President's approval numbers have been largely flat this week, continuing to reflect a deeply divided country that was united just a short year ago.



His monthlies show a slightly larger than 1% decline since December, certainly not the President's worst month in office, but a continuation of a series of declines.



So, what to do? As long as unemployment is high, it almost doesn't matter. And unemployment appears likely to still be at a very elevated level in November. This has the Democrats scattering when it should be liberating them. If you are going to get blamed for the poor economy, you might as well be fighting to do everything that you think needs to be done, rather than worrying about losing an election. They need a leader that gives them a rallying cry. That addresses the key moral issues of the day. That provides clear direction.

Can President Obama be that guy?

The verdict is still out. But the President will have to do much, much more in his second year in office than he did in his first year to lead his party. Outsourcing to Pelosi and Reid no longer works.

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SOTU Recap: Was That Reagan in 1982?

I miss the days when State of the Union speeches typically lasted 40 to 45 minutes. Bill Clinton set the bar for insanely long speeches, stretching as long as 90 minutes some years. And President Barack Obama last night continued that ugly trend, going almost 75 minutes by my count.

Here's my quick recap on the good and the bad:

The Good
1. He was funny, self-deprecating and entertaining for the first half of the speech. I loved the line referring to health care "as should be clear by now, I didn't do it because it was good politics."
2. He stuck to his guns. Health care, still needed. Cap and Trade, get it done.
3. His explanation of the economic circumstances facing the country and his administration's approach was excellent.
4. He FINALLY loudly called for Congress to allow gays to serve openly in the military.

The Bad
1. No path forward - how are we to reconcile the political reality of today with the ambitions that he laid out.
2. False bi-partisanship - the repeated rhetoric of last November, with very little tangible action. We'll buy it when we actually see Democrats and Republicans working together.
3. Small ball, and not even good small ball - small business capital gains taxes? Are you serious? Small businesses aren't hiring because they can't get credit and don't have customers, not because their owner is worried that when he makes millions, he will have to pay a 15% tax. Not a single new big initiative.

In total, it was a decent, but fairly forgettable speech. I expect the President's approval to get a modest bump from the speech. It will do nothing in and of itself, to move congress forward. The President's actions in the coming weeks are critical if he is serious about getting real bi-partisanship or getting health care or cap and trade done. He's going to have to be a lot more directly involved in the process and a lot more active.

So, why the title of this blog? Take a look at the link below to view President Ronald Reagan's 1982 State of the Union Speech.

http://www.youtube.com/watch?v=2QFLsxeEl5I

I watched it today because I was interested in how a different President, from a different party, reacted to similar economic circumstances. Interestingly, while the solutions proposed are different, the construct is remarkable similar. Both talk about the crisis they were handed. Both defended their programs, saying things would have been far worse without their actions. Both expressed optimism, without really committing to timelines or metrics for improvement. Both spent more than half of their speech on economic matters, with only small sections on foreign policy issues, despite the prominence of international concerns in their administrations.

It should be noted that Reagan's party went on to get smacked in November 1982, but that Reagan won in a landslide in 1984. We'll know in a few months whether the first half of that repeats for President Obama.

A few quick thoughts on Bob McDonnell's GOP response:
It was a very good response speech. Having a live audience worked much better than a single individual staring at a camera. And Gov. McDonnell (R-VA) is clearly a gifted communicator. The speech was respectful and upbeat, while drawing stark policy contrasts.

In short, it was much, much better than Gov. Bobby Jindal's (R-LA) awful response speech a year ago. While it would be early to suggest that a star was born last night, it is clear to me that McDonnell has the potential for higher office.

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Biden Out (Beau That Is), Bayh at Risk, Full Steam Ahead on Health Care?, Your Guide to the State of the Union

Beau Isn't Running
Beau Biden has decided not to seek the Senate seat that was vacated by his father assuming the Vice Presidency this past January. This is a major blow to Democrats in the state, who had been counting on the popular Biden brand name to carry the race against very popular At Large Rep. Mike Castle (R). With Biden out of the race and no star candidates in the mix, I'll move this race from a Toss-Up to a Lean GOP Pick-Up, pending polling information.

I guess the move wasn't terribly shocking, as this is shaping up to be a rough year for Democrats in November and Biden would've been fighting a pick 'em race against a popular ex-Governor and rare true moderate. Why should Biden risk his popularity now, when he could wait for an easier shot, in a better year, in heavily Democratic Delaware.

Bayh No Lock
Popular, well, at least, I thought he was popular, moderate Sen. Evan Bayh (D) will not have a walk either in his race either. A just-released Rasmussen poll shows him down 3% against potential opponent Rep. Mark Pence and up only 3% against less well known John Hostettler.

It is not clear yet if Pence will run and this is only one poll. I will move it from a Likely DEM Hold to a Lean DEM Hold pending information on Pence's possibly candidacy and additional polling. This is another one to add to the mix of races that would've seemed like easy defenses a year ago but are now competitive. The same poll found Obama's Approve minus Disapprove in Indiana to be at -13%, in a state that he won by a slim margin in 2008.

Full Speed Ahead with Health Care?
Reports out of Washington are that after President Obama's seeming concession to a smaller-scale health care bill that Pelosi and Reid may push ahead with a two-pronged approach of passing the Senate measure in the House and then using reconciliation to make changes to the bill later on.

The reconciliation process would require only 51 Senate votes but can only be used on the provisions related to taxation and spending. So, for instance, they could be used to alter the provisions pertaining to taxes on high-cost insurance plans, but could not be used to modify the provisions related to pre-existing conditions. It is debatable whether modifying the abortion-funding rules falls within the scope of reconciliation, and that is likely to be a contentious issue with passing the bill in the House. But it is likely if the House passed the bill that Democrats could muster 60 votes for a stand-alone change to explicitly prohibit abortion funding, if it was part of the quid pro quo.

If the reports of this plan are true, this is a dramatically bold plan, in the face of the Massachusetts defeat. But it is also the best possible long-term path for Democrats. To come out of two years with dominant majorities without real reform on their signature issue would be a disaster. And while the GOP likes to point to the unpopularity of the overall bill, almost all of the individual provisions of the bill are popular, indicating to me that the public may like it better as a law than they did as a bill.

Even if Pelosi and Reid push ahead with this plan, it is far from a done deal. They have to convince liberals to accept a more moderate Senate bill and have to convince at least some Blue Dogs that this bill is worth risking their necks in November for. No easy feat given the way the Democratic party has been running scared for the past week. But we'll see.

State of the Union Viewers Guide
President Obama gives his first official State of the Union speech tomorrow night, although his address to a joint session of Congress a year ago was essentially the same forum, and in light of the events of the past couple of weeks, it is highly anticipated for us political watchers. Here are my things to watch:

(1) What does he say about his priorities from last year?
Is it full steam ahead on Health Care, public opinion be damned? Is this a moral or an economic issue? Will we scale back or push for all we can get? Or is this issue headed to the back burner with little mention?

Is Cap and Trade still on the table? Will the President push it or ignore that priority from last year? Will he say anything about Copenhagen?

(2) Jobs, Jobs, Jobs
What will he stay about the stimulus? Call it successful but not enough? Say that it did what was intended? What will he propose going forward? What promises will he make about unemployment, if any?

(3) The Deficit
The rumor is that he is going to propose a 3-year freeze on spending for a large portion of domestic discretionary spending. Was this a trial balloon or will he propose it? Will he talk about sun-setting the Bush tax cuts in 2011? What will he say about the balance of the stimulus? How about the cost of Iraq and Afghanistan? Will he even mention entitlement reform, the elephant in the room? Will he explicitly push Congress to appoint a bi-partisan commission, with a straight up or down vote on their recommendations?

(4) Foreign Policy
Does it get much mention or is it pushed to the back? What will he say about GITMO and his failure to meet one of his first executive orders? Will he talk about winding down Iraq? Any shift in tone on Afghanistan?

(5) Small Ball / Triangulation
Will we see some Bill Clinton-style small ball, triangulated initiatives? Remember 100,000 more cops on the street and Family Medical Leave -- are things like this in the offing? WIll the tone be more about the big, bold ideas or the small practical ones?

(6) What is the State of the Union?
I remember Bill Clinton saying "the State of the Union has never been stronger", a triumphant declaration of victory in a time of sub 4% unemployment and the beginnings of the internet boom. Clearly the President can't say this. But what will he say that recognizes the struggle ordinary people are feeling yet conveys confidence in the future? How will he solve the "Stockdale Paradox", named for Admiral Stockdale, who, as a POW in Vietnam, figured out a way to remain confident that he would be rescued without setting a specific date.

It is an almost impossible speech given the current circumstances, but the President needs a home run performance to recharge his administration and his priorities. He needs to walk the line between pragmatic and bold. He needs some quick wins and some big wins. Most of all, he needs to reshape the dialogue.

I'll be watching, as I suspect most of you will too. State of the Unions are always impressive and entertaining, with all the trappings of Congress and the Presidency. And they do matter in terms of setting the agenda, perhaps more than any other speeches. And perhaps no speech given by a President known for giving some famous speeches, will be more important to his Presidency.

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Assessing the Landscape, Post-Massachusetts -- The Senate, The House and the President

Democrats are running scared. Republicans are triumphant. Scott Brown is a rock star (although it is his "available" daughter Ayla Brown who possesses the musical skills.) Health care appears to be on hold, at least for several weeks and may be massively scaled back after that. Cap and trade appears dead. President Obama has made an abrupt turn from talking health care to populist attacks on the financial system and a focus on jobs. The consensus in Washington is that Scott Brown's election changed everything for this year.

But did it really? Where exactly do we sit heading into the mid-terms and what should the parties be doing?


Presidential Approval
Interestingly, there is surprisingly little movement in the President's numbers. Since the MA shot heard round the political world, his number are actually up about a point, although still nothing impressive.



His monthly number still show a decline in January, which would make 11 out of 12 months that he would post a popularity decline. All of this leads me to a key conclusion about Massachusetts -- the earth didn't suddenly move, it has been shifting over the course of the past year. And the Democrats aren't out of business -- the President still has more people who approve of him than disapprove. It's just a much more closely divided nation than it was a year ago, a reflection of the President's complete failure to create a post-partisan or even bi-partisan environment on key issues (although, as we've noted before, despite the harsh rhetoric on both sides, there is a lot of bi-partisanship happening quietly.)



Latest Senate Calls
Massachusetts obviously comes off our tracking list with the victory of Scott Brown in the special election. He will be in office until the 2012 elections. So, we are now operating off a base of 57 Democrats, 41 Republicans and 2 Independents. Republicans now need a gain of 10 seats in order to gain control of the Senate, assuming the 2 Independents both stay with the Democrats when caucusing and counting on Vice President Joe Lieberman's tie-breaking vote.

A few updates, most of them favorable to the GOP, thanks to some newly-available polling. As always, I'll start with the races where I am moving my projection, then talk about relevant polling in other races.

Colorado -- some rare good news for the DEMs. Incumbent Senator Bennett is up by 1 to 3% in a new Research 2000 poll. This race moves from Lean GOP Pick-up to Toss-up.

New York (Gillebrand) -- assuming Pataki is the guy for the GOP, this one is a crap-shoot. Gillebrand leads Pataki by 3 points in a new Marist poll but trails him by 13 points in a new Sienna poll. That's enough to move this race from Lean Democratic Hold to Toss-Up.

Pennsylvania -- Pat Toomey is up by 9 points in the Rasmussen poll, the only recent poll available. This race moves from a toss-up to a Lean GOP Pick-Up.

Missouri -- as I suspected, Carnahan has slipped over the past few months and a new Rasmussen poll shows Blunt with a 6 point lead. It's not quite enough to move the race to the GOP column, but certainly enough to move the race from a Lean Democratic Hold to a Toss-Up.

Other races not moving:
California -- conflicting information here as incumbent Barbara Boxer is up by 10 to 17% against 3 potential challengers in a new Field poll, but only up by 3 to 6% against the same challengers in a similarly-timed Rasmussen poll. We'll leave this as a Lean Democratic Hold for now and wait for more information.

Arkansas -- incumbent Blanche Lincoln is leading 3 of 4 potential challengers in a Mason-Dixon poll but trailing all of them in a Rasmussen poll. Since the most probable nominee for the GOP is Gilbert Baker, the one who lead Lincoln in both polls, we'll leave it as a Lean GOP Pick-up, but we'll keep a close eye on it.

Louisiana -- A new poll shows incumbent Republican David Vitter comfortably leading by 18 points in this race. It remains a Likely GOP Hold.

All of this leaves us with:
Safe Democratic Holds (6)
Connecticut, Maryland, New York (Schumer), Oregon, Vermont, Washington

Likely Democratic Holds (3)
Indiana, Wisconsin, Hawaii

Lean Democratic Holds (2)
Illinois, California

Toss-Up -- Democratic Controlled (3)
Delaware, New York (Gillebrand), Colorado

Toss-up -- GOP Controlled (1)
Missouri

Lean GOP Pick-Up (2)
Arkansas, Pennsylvania

Lean GOP Hold (5)
New Hampshire, Kentucky, Ohio, North Carolina, Arizona

Likely GOP Pick-Up (2)
Nevada, North Dakota

Likely GOP Hold (5)
Georgia, Alaska, Kansas, Louisiana, Florida

Safe GOP Hold (7)
Iowa, South Dakota, Alabama, Idaho, Oklahoma, South Carolina, Utah

Net Projection: GOP +3 to 7 Seats

Best Case GOP (all leaners): GOP +9 Seats
Best Case DEM (all leaners): DEM +4 Seats

So, as it has looked for months, the GOP appears poised to make in roads into the Democratic Senate majority, but appears to have little chance of regaining control.

House Look

Out generic average continues to be pretty steady with the GOP at +3.0%.
Projection: GOP +41 Seats
Republicans still appear poised to, very narrowly, regain control of the House.

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Scorecarding the MA Senate Race -- How'd I Do?, Did the Whole Game Just Change?

Results Versus Projections
So, the votes are counted, other than a few stray overseas absentee ballot and we have a clear picture of how well I projected the Massachusetts Senate result.

First, the obvious, I got the ultimate outcome right. Unlike many political sites, such as the highly reputed Cook Report, which simply rated the race a "toss-up" going into Tuesday, I always make a projection, regardless of the closeness of the margin. And we were right again. Combine that with getting the end result right in the New Jersey and Virginia Governors races this past November and going 48 for 50 in calling state results in the Presidential race, as well as nailing dead on the popular vote margin in 2008 and I think this site has a track record that rivals any political expert in terms of projecting elections over the past two years.

Now, on to the specifics of Massachusetts. Below are the actual (unofficial, but verified) vote percentages from Massachusetts versus my final projections:
Scott Brown: Actual 51.9%, Projected 50.8%, Error = 1.1%
Martha Coakley: Actual 47.1%, Projected 47.1%, Error = 0.0%
Joe Kennedy: Actual 1.0%, Projected 2.1%, Error = 1.1%

Note that the projection was exactly correct on Martha Coakley's vote percentage and that the error on the other two candidates was entirely due to Joe Kennedy receiving less than half of the statistical projection and those votes going to Scott Brown. If you re-read my blogs leading up to the election, I noted that minor independent candidates almost always poll better than they actually do...I even reasoned that Kennedy might lose about half of his support on election day. I also noted that it stood to reason that late departures from the Kennedy camp would favor the Republican over the Democrat. You can't statistically project that type of phenomenon, but I've seen enough of these elections to detect the pattern.

So, all told, I think I did extremely well in projecting an extremely difficult race to call, given all the rapid-moving dynamics and the inherent difficulty in projecting a special election.

I feel much better about these results than I do in the New Jersey and Virginia Governor's races, where the results were correctly projected, but the margin in both was off by just over 3%.

Time to Rethink the Whole Agenda?
While the result in Massachusetts was not unanticipated in most political circles, you could feel the ground shift as the results were called.

Democrats were calling for starting over on health care. Republicans possessed a swagger that they haven't had since early last decade. Centrist commentator Mort Zuckerman, who supported President Obama last November, blasted the President for the lack of openness, the ugly deals cut on health care and the general tone of his administration.

I'm reminded of a frequently used phrase in Washington: elections have consequences. And this election appears to be having broad-reacihng consequences.

Democrats have wisely ruled out ramming a bill through congress before Brown takes office. House Democrats have ruled out passing the Senate bill. This means, effectively, back to the drawing board. Are they even going to try for a bill? If so, what will it take to win over Olympia Snowe? Will they go just far enough to get to 60 or go much smaller and hope to win 70 or 75 Senate votes? What of the rest of the President's agenda? Will the Senate even debate Cap and Trade? Is immigration reform anywhere on the horizon? What of the budget for next year?

The direction of debate will largely be shaped by the President's State of the Union address next week. For a man who rose to power in large measure on the prowess of his powers of communication, this is THE most important speech of his career. Bigger than his 2004 DNC speech. Bigger than his speech on race. This speech will set the course for the next year of his Presidency and beyond.

In that vein, here is my unsolicited advice:
(1) Talk about deficit reduction
I've harped on this for months...the administration has not, as of yet, presented a credible deficit reduction program in any way shape or form. It has been accurately noted that Independents, who Obama won big with in November 2008 but who turned to a little-known State Senator named Scott Brown yesterday, tend to be socially liberal but fiscally conservative. They want stem cell research, abortion rights and don't so much mind gays in the military, but they detest runaway spending and deficits. Also, more than anything, they despise harsh partisan rhetoric and backroom deals.

The President can't solve the deficit in a speech. And the solutions are ugly...raise taxes, reform entitlements, cut social programs, cut the military, etc. But the President CAN support Senator Evan Bayh (D-IN) sensible proposal for a non-partisan deficit reduction commission that would come back with a proposal to curb the deficit that Congress would be required to give an up or down vote to, as a whole. This process worked when military bases needed to be closed in the 1980s and 90s, and if you recall that era, there was no more contentious issue then. Giving full visible support to such a proposal would be a big win with independents and would garner bi-partisan support in Congress.

(2) Move quickly on the easy, bipartisan parts of health care. A bill to prohibit pre-existing condition exclusions, allow the purchase of insurance across state lines and to set up exchanges for the uninsured, that allowed reimportation of perscription drugs and that provided some modest tort reform could pass with big GOP support. The President could finally get the bipartisanship that he has been promising but utterly failed to deliver on.

(3) Refocus on jobs and fast. The elements are in place to drop unemployment. The problem is, Mr. President, people don't think you are working on it. Talk about what you are doing. Talk about the green energy economy. Talk about productivity investments. Make people believe that you #1 care and #2 are competent to do something about it.

(4) Advertise a little. Tell people about the 4 million kids who have health insurance that didn't when you administration took office. Talk about the troops coming home from Iraq. Talk about the credit card protections for consumers that you have put into place.

Have we entered a new era of gridlock or the dawning of a new age of bipartisanship?

I fear the former but hold out hope for the later. The President must take the first step, but the GOP will have to be willing to play ball as well.

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President Obama, Meet Senator Scott Brown

It certainly wasn't unexpected if you read my projection yesterday, but Scott Brown has defeated Martha Coakley for the Massachusetts Senate seat vacated by the death of incumbent Ted Kennedy.

The latest results have the margin at 5.4%, slightly larger than my final projection. We'll see where the final results come in and then scorecard the projection, but it looks like I was within 2% on the margin.

Congratulations to Scott Brown. He ran a fantastic campaign in a state with uphill demographics at just the right moment in hitory.

The spinning has already begun -- if you asked Republicans, this is the end of the world for the Democrats. If you ask the Democrats, this was a local race with a lousy candidate.

As I said yesterday, the truth is probably somewhere inbetween, but this does feel like a pretty strong repudiation of the Democratic agenda. If Massachusetts votes against giving the Democrats 60 votes in the Senate, and trust me, voters there understand the implications, then who DOES want them to have 60?

So, the $900 billion question is...where does all of this leave health care reform?

We'll have to see the next few weeks play out, but I'll simply say for now -- it doesn't help the DEMs. The options going forward are well documented, but I'll rehash them here with my own assessment:

1. Ramrod a bill through before Brown takes office. It will take approximately 15 days to certify the election, because state law requires waiting 10 days for overseas absentee ballots to come in, followed by 5 days for the cities to validate vote totals. So, the theory goes, for the next 15 days Senator Kirk can still vote in the Senate while Democrats slow-walk the certification.

Odds of this happening: Absolutely zero unless Democrats decide to commit political suicide. Ignoring the vote of the people of Massachusetts to ram through a bill, while it may technically be legal, would toss gasoline on the flames of populist revolt fomenting in this country. Simply put, this scenario will NOT happen.

2. House passes the Senate bill as passed in the Senate. This option averts the need for the Senate to do anything to move the bill forward -- if the House passes an identical bill, the President can simply sign it and be done.

Odds of this happening: Low to moderate, but not impossible. House Democrats don't like the Senate bill and particularly don't like the thought of having to accept it with no input. But there may be no other way to get a bill and they may decide something is better than nothing.

3. Use Reconciliation. Use the rules of the Senate to pass a bill with 51 votes. The problem is that only budgetary issues are elgibile to use the reconciliation process which leaves out big parts of the legislation such as eliminating pre-existing condition exclusions or creating national health care exchanges.

Odds of this happening: Very Low. You just can't get enough of the bill done this way.

4. Go After Senator Snowe. She voted for the bill in committee. Give in to her demands, whatever those may be and make her vote number 60.

Odds of this happening: Low. Why, after seeing the bloodbath in Massachusetts, would Senator Snowe even consider playing ball? I think she is a woman of principle, but I don't think she is crazy.

5. Scale back. WAY back. Build a bi-partisan consensus.

Odds of this happening: Moderate. Dems may have to swallow hard and pass an incremental bill that does the things the GOP has agreed to. It would be better for them than getting nothing, but not much better.

6. Fail. Pass Nothing.

Odds of this happening: Moderate. This truly would be Waterloo for the Dems, but if you can't make one of the above 5 options, this happens by default.

One thing you can say about American politics, it is never boring.

I think it's safe to say Blanche Lincoln, Arlen Specter and Harry Reid are shaking in their boots tonight. They probably should be. But it is also amazing how much things can change in 10 months. Think of how much they've changed in the past 10.

Thanks for tuning in. Full post-election scorecarding in my next post.

Congratulations again to Scott Brown. As always, I'll take a moment to recognize the wonder that is our republic with peaceful elections and transitions of power. Let's never stop being awe-inspired by what we have in this country. God bless America.

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New Averages with Insider Advantage Poll

I told you I thought there would be at least one more poll release today and it is in. The Insider Advantage poll, with a sample size of 804 gives Republican Scott Brown a 52%-43%-2% (3% undecided) lead over Martha Coakley.

Recasting our non-partisan poll averages from earlier today, we now have:
Sample Weighted Average: Brown +3.7%
Unweighted Average: Brown +3.5%
Median Result: Brown +3.5%

Our New Statistical Projection: Brown 50.8%, Coakley 47.1%, Kennedy 2.1%

In all of the polls, Brown has been between 48% and 52% and Coakley has been between 41% and 49%.

While it is still certainly possible that Coakley could win (my projections have missed by 4 percentage points on occasion, although it is rare, and this is particularly dicey race to call, given the special election circumstances.)

Bettors are reacting to the poll numbers by betting hard on Brown, making him a 7:3 favorite in betting. Honestly, with the bevy of polls released in the past few days and none of them showing Coakley leading, I think these odds are probably over generous to Coakley. I would rate her chances of surviving tomorrow at 15 to 20%.

Honestly, who thought a year ago that the Republican comeback would start in Massachusetts? Certainly not me. A few weeks ago, I was saying that if the GOP could keep the margin under 15, it would be a moral victory.

Assuming Coakley loses, there will be a lot of post-mortem. Democrats will talk about how bad a candidate she was, failing to campaign hard early, showing no personality in the debates, etc. Republicans will call it a referendum on the Obama administration.

The truth is somewhere in between. Coakley HAS been a below-average candidate for Senate. She has inspired not at all, was extremely wooden in the debates and has, frankly, run a nasty, divisive, negative campaign. But, none of this would even matter in an ordinary year. In an ordinary rule those attributes would cause her to win by 15 points instead of 30, not lose.

Nor is distrust of the Obama administration the whole story. Sure Obama's approval is down. But it is still around 60% in Massachusetts, meaning that Brown is getting a fairly good sized chunk of people who actually like what the President is doing.

This is partly a proud American tradition of reigning in one-party rule. We, as a country, frankly don't like it very much when either party gets their way unfettered. And this instinct has proved healthy in most cases.

Of course, there is still a chance Coakley will win. Not much left to do but get out to the polls and count votes.

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Massachusetts Update

A few new pieces of polling data have come in today, so I thought I'd update my projections. The two new polls are as follows:
(1) Research 2000 has conducted a Sample Size 500 poll that shows the race dead even at 48%-48%-3% with 1% undecided.
(2) Management Research Group has conducted a Sample Size 565 poll that shows a solid Brown lead at 51%-41%-2% with 6% undecided.

It is worth noting that Management Research Group has significantly less experience doing political polling than the big firms and universities (Gallup, Rasmussen, Research 2000, Quinnipiac), although that certainly doesn't mean that they are wrong. It is odd that they still show 6% undecideds in a race that is happening tomorrow.

At any rate, the aggregation of all the data now looks as follows for all non-partisan polls:
Sample-Weighted Poll Average: Brown +2.3%
Unweighted Average: Brown +2.9%
Median Poll Margin: Brown +3.0%

Our Statistical Projection: Brown 50.3%, Coakley 47.2%, Kennedy 2.1%

I don't personally believe that in a race this close, that 2.1% of voters will case a protest vote for Kennedy. History shows that independents tend to underperform their polling data, but I have no way to estimate how much, so I'm not going to attempt it. It would seem logical that Kennedy bleed-offs would break disproportionately for Brown.

There are three scenarios that I can envision:
(1) A Coakley squeaker -- all the undecideds break for Coakley, turnout is on the high end and the Kennedy voters stick with the Libertarian rather than reverting to Brown. Margin: Coakley 49.3%, Brown 48.6%, Kennedy 2.1%
(2) Brown wins close -- the numbers fall more or less as we project
(3) Brown rally continues -- the undecideds all break for him and he peels off half the Kennedy voters. Margin: Brown 53.2%, Coakley 45.8%, Kennedy 1.0%

I actually view these three scenarios as fairly equally likely, although obviously I think scenario #2 is the central scenario, which is why I'm projecting it.

The intrade odds on the race have moved from even-money mid-day yesterday to favoring Brown by almost 2:1 odds. This kind of supports my three equally-likely scenarios theory -- in 2 of my 3 scenarios Brown wins, giving him the same 2:1 advantage.

I'm expecting one more poll to be released today and if it is, I will update my projection, but for now, this race remains a Lean GOP Pick-Up, by a slightly better margin than yesterday.

Regrettably, I will be traveling tomorrow night and may not be able to publish a post until later in the evening. It appears unlikely that we will know a winner for several hours after the polls close regardless, unless it turns out to be an unexpected blowout.

Massachusetts Preliminary Projection

It's two days before the election, therefore I no longer afford myself the luxury of calling the Massachusetts Senate special election a "toss-up". Let's analyze the data we have.

Polling and Statistical Data
We have three polls available to us that were:
(1) Taken in the past week
(2) Non-partisan in nature

These polls break down as follows:
Polling Firm Sample Size Coakley Brown
ARG 600 45% 48%
Suffolk 500 46% 50%
Rasmussen 1,000 49% 47%

So, here are the averages:
Sample-Weighted Average: Brown +0.9%
Pure Average: Brown +1.7%
Median: Brown +3.0%
Average of Averages: 1.9%

Statistical Projection: Lean GOP Pick-Up, Brown +1.9%

It is worth noting that Coakley's range is 45% to 49%, with an average of averages of 46.6%, while Browns range is from 47% to 50% with an average of averages of 48.5%. Since neither candidate appears to be over the 50% threshold, this election could very much be decided in the last two days as undecideds (estimated in this average at 4.9% of the vote) break one way or another. If these statistical projections are correct, Coakley would need 70% of the remaining undecideds.

It is also worth noting that there is a third-party Libertarian candidate in the race. It seems highly unlikely, despite the fact that he has an unrelated "Kennedy" last name, that he will garner a significant number of votes in such a close race, but different polls have treated his candidacy differently (some listing his name among the possible candidates in the poll, some not.) As we frequently see (most recently in New Jersey), third party candidates tend to underperform their polling on election day. And one would have to consider that Kennedy voters would largely swing to Brown. On the flip side, purely undecided voters, one would suspect, might break more than 50% for Coakley, given the state demographics.

So, all in all, I believe that this polling indicates, based on the data available today, that Scott Brown has a 70% chance of winning on Tuesday.

Of course, lots of variables will be important, from the impact of final-weekend spending, to the impact of President Obama (who is still popular in Massachusetts) stumping for Coakley, to, most importantly, the turnout on Tuesday (less is good for Brown, more is good for Coakley), especially relative to the polling assumptions.

I will update this statistical projection tomorrow, if, as I suspect, at least some new polling data are available.

The Betting Public
Intrade betting odds peg the race (as of this moment) at even odds. This reflects the close polls and also some disbelief that Massachusetts will actually elect a Republican. We'll see if that skepticism is warranted.

The Buzz in Washington
The inside buzz in Washington is that Brown is going to win. The GOP is already prepping a celebration dance, the DEMs already pitching talking points about how this is a unique race, not a vote on the Democratic agenda. When you start hearing these points, you know who they think is going to win. There are also several inside reports that internal polling by the Democrats shows Coakley in big trouble.

What to Make of It All
My overall conclusion: this is an extremely close race that is extremely hard to project, not only because of the closeness of the polling, but also because of the dynamics of a special election and the difficulty in estimating turnout.

Brown appears, at least at this point, to be more likely ahead than not. But he is not far ahead, if he is ahead.

So, if you live in Massachusetts, whether you support Coakley or Brown, you should make sure to vote. This may be the closest statewide race in the state for some time and voting in this type of election is far more critical than in a Presidential race (where the state is typically a slam-dunk for the DEMs.) So, get out and vote. And we'll all stay tuned Tuesday to see how you did.

I will publish an update on Monday if there is any new information to report on.

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Massachusetts and Beyond, Presidential Approval Continues Slow Slide, Health Care Slogs Along, Haiti Relief - A Donation Worth Making

2010 Updates - A Very Unusual Year
Is the Senate race in Massachusetts a DEM blow-out, a GOP blow-out or a pick 'em race headed into next Tuesday? It all depends who you believe.

There have been two conflicting polls released in recent days that illustrate the danger of using numbers from partisan oriented polling firms in projecting races. A poll released yesterday by PJM/Cross Target, a Republican-affiliated polling firm, showed Republican Scott Brown with a shockingly large 15 point lead over Democrat Martha Coakley. The same day, a Democrat-afilliated Blue Mass Group poll shoed Coakley with an 8 point lead in the same race. A 23 points spread on two polls trying to measure the same race on the same day? And it just happens that the Democratic poll has the Dem leading big and the GOP poll has the Republican leading even bigger? Please, stop insulting our intelligence.

Back in the real world of neutral polls, this is a pick 'em race. The two last credible polls that we have are a Suffolk poll showing Brown at +4% and a Rasmussen poll showing Coakley at +2%, both released this week. Both Suffolk and Rasmussen are legitimate, neutral polling firms. The Rasmussen poll has a 1,000 voter sample size, with the Suffolk poll having a 500 voter sample size, which gives more weight to the Rasmussen poll in our aggregation method. I typically like to have at least 3 recent polls to make a good statistical projection, but going with what we have, Brown would have the slimmest of leads.

This is clearly a pick 'em race, not a blow-out in my books.

Massachusetts moves from Lean Democratic Hold to Toss-up.

I don't project toss-ups going into election night, so I WILL be making a projection soon as to the final outcome of the race, based on whatever data I have at that point.

In the November Senate races, there are multiple changes, most of them bad for the DEMs. Let's review the states with new polls.

California -- a new Rasmussen poll shows incumbent Senator Barbara Boxer leading business woman Carly Fiorna by only 3%, in what would've been a walk for the DEMs a year ago. California moves from Likely Democratic Hold to Lean Democratic Hold.

Nevada -- Harry Reid is in big, big trouble bag home. A January 14th Rasmussen poll shows Reid down by 12 to 14% versus likely GOP challengers and a January 8th Mason-Dixon poll shows him trailing by 8 to 10% against the same challengers. Nevada moves from Lean GOP Pick-up to Likely GOP Pick-up.

North Dakota -- with incumbent Sen. Byron Dorgan retiring, it appears the Democrats will lose his seat. Hoeven leads by 21 to 25% against likely Democratic opponents, according to a January 15th Research 2000 poll. Based on those numbers, this is starting to look like a safe bet for the GOP, but we'll hold it one notch short until we see another poll. North Dakota moves from Lean GOP Pick-up to Likely GOP Pick-up.

Connecticut -- the one piece of good news for the Democrats is that with Chris Dodd out of the way, his seat is probably the safest in the Senate for Demcorats to retain. A January 14th Quinnipac poll shows Blumenthal with amazing leads of 35 to 42% against likely GOPers. This race stays a Safe Democratic Hold.

New Hampshire -- more confirmation that Ayotte has a small-to-moderate lead. A January 12 Rasmussen poll shows her at +9%, largely agreeing with a January 7th ARG poll that showed her at +7%. This one stays a Lean GOP Hold.

Ohio -- continued evidence of a narrow GOP lead here. Portman is up 3% in a January 12 Rasmussen poll. This stays Lean GOP Hold.

We don't have new polls yet in Missouri and Pennsylvania, so they stay where they are, but I would say my current ratings, particularly in Missouri are probably suspect, given the national trend since the last polls we have.

All of which leaves us with:
Safe Democratic Hold (6)
Connecticut, Maryland, New York (Schumer), Oregon, Vermont, Wisconsin

Likely Democratic Hold (3)
Indiana, Wisconsin, Hawaii

Lean Democratic Hold (3)
New York (Gillebrand), Illinois, California


Lean Democratic Pick-Up (1)
Missouri

Toss-Up -- Democratic Controlled (3)
Massachusetts*, Delaware, Pennsylvania

* Special Election, January 19th

Likely GOP Pick-Up (2)
Nevada, North Dakota

Lean GOP Pick-Up (2)
Colorado, Arkansas

Lean GOP Hold (5)
New Hampshire, Kentucky, Ohio, North Carolina, Arizona

Likely GOP Hold (5)
Georgia, Alaska, Kansas, Louisiana, Florida

Safe GOP Hold (7)
Iowa, South Dakota, Alabama, Idaho, Oklahoma, South Carolina, Utah

Net Projection: GOP +3 to 6 Seats
Best Case GOP (all leaners): GOP +10 Seats
Best Case DEM (all leaners) DEM +4 Seats

We still have a wide range of possible scenarios that could happen by November. And as it should be with ten months to go before the election. But it definitely continues to trend GOP as the President's numbers slip and Democrats keep falling all over themselves.

The GOP needs a gain of 11 seats, assuming Joe Lieberman continues to caucus with the DEMs, in order to regain control, so we still don't have a scenario for GOP control of the Senate, although we are getting closer.

In the House, polls continue to show varying scenarios, but my aggregate number has actually been relatively stable.
The latest read: GOP +4.0% on the generic ballot
Projection: GOP +44 Seats

The GOP needs 40 seats to regain control, so for the third time in a row, I'm projected a GOP takeover of the House, at least at this point.

President Obama -- A New Low in Poll Numbers

President Obama's numbers have slipped a little over a point since the new year as you can see from the poll trend below, bringing him to a new low for his Presidency. There were a slew of new polls released this past week, so the averages are pretty strong, based on a very broad sample.



The trend shows up in the President's monthly numbers, which now stand at +3.6% approve minus disapprove for the month of January, also a new low. The President's numbers have declined every month but one in his Presidency.



So is there any good news for Democratic enthusiasts in these numbers? A little. The President, while at a low for his Presidency, is still modestly above the zero line, which means there are still slightly more people who approve of his performance than disapprove. And when you run for re-election, you don't need to win by much, you just need to win.

Secondly, there is some reason to be optimistic that likely improvement in the economy between now and November will bolster his numbers. Still, these numbers are bad for this stage in the Presidency.

While there has been an ongoing debate between the competing schools of thought that "all politics are national" and "all politics are local", the truth is that all politics are BOTH and that weakening numbers for Obama are no doubt having an impact on Senate races, including the Massachusetts toss-up that was considered a walk by everyone just a few months ago.

Health Care - Everything is Complicated Again
As negotiations continue between the White House and Congressional leaders to come up with a consolidated health care bill that can pass both Houses, a deal has been struck on the tax on high benefit plans that was a part of the Senate bill, but was opposed by some House Democrats, who feared it would impact benefits of union workers. The compromise? Exempt union plans from the tax.

This is a bad compromise, an agreement that is both fundamentally unfair (why should union members get tax treatment that is different from non-union members with the same benefits?) and also takes the teeth out of what was probably the one good piece of cost containment in the bill. These types of bad deals seem like par for course lately in a divided Democratic party.

The Coakley/Brown race further complicates things. If Brown wins, he is Republican #41 in the Senate, which shatters the fragile 60 vote coalition that the Democrats had put together to get the first bill passed. This upset, if it happens, would leave the Democrats with several options:
#1 Just have the House pass the Senate bill -- this appears to be a non-starter according to Speaker Nancy Pelosi, since the Senate bill contains the Caddy Tax we discussed above. But if the Brown upset happens, perhaps her stance will soften and she will push the bill through with the agreement that a later bill would deal with provisions that House members don't like.

#2 Hurry up and pass something before Brown is seated -- it will likely take at least 10 days to certify Brown the winner, possibly more if the race is extremely close and a recount is needed (recall the months it took to seat Al Franken in the bitterly contested Minnesota race last year) and the Democrats could try to pass something before Brown takes office. This would open them up to brutal criticism -- after all Massachusetts Democrats changed the law to allow a temporary appointment in the Senate and using that vote to circumvent the will of the Massachusetts people to ram through a bill that is unpopular in the polls would make for some easy GOP ads in November. It would, however, be a legal move and Democrats might just bite the bullet to pass a bill, but it would be a dangerous move for sure.

#3 Recruit Olympia Snowe -- Senator Snowe voted the bill out of committee and it would be hard to argue that the bill isn't more conservative now than it was then. Senator Snowe voted against the bill on the floor the first time around, complaining the Democrats were moving too fast, but she should have had plenty of time to think and read by now. Still, will Senator Snowe really want to be the deciding vote for such a massive Democratic accomplishment?

#4 Use Reconciliation -- this option is very messy as only portions of the bill could be attached to a process requiring only 51 votes in the Senate and could lead to an incomplete bill taking effect, but if all else fails, Democrats may seek this nuclear option. Of course, they still need 218 votes in the House, which is no slam dunk, but they may consider this to avoid the disaster of nothing passing.

This bill obviously isn't a done deal yet and we will all have to stay tuned.

Haiti -- Worth Our Giving
If you have a heartbeat, you can't help but be touched by the awful destruction in Port au Prince, Haiti, following a massive earthquake that may have killed as many as 100,000 people.

One of the most inspiring features of American culture has always been our willingness to give in times of need. Americans give more money to charity, in absolute dollars, in percent of income, by any measure you like, of any people in the world.

An aid is needed. Economic times back home are tough. But what we face is nothing compared to the grisly mess faced in Haiti. We have a moral obligation to do what we can to help.

I urge all readers to give. Former Presidents Bill Clinton and George W. Bush have teamed up to organize aid efforts. The unity these two are showing in the face of the crisis should tell you that this relief effort has nothing to do with politics. What is needed is money to help dying, starving, threatened people.

Please, please, go to:

http://clintonbushhaitifund.org/

and give whatever you can to the Clinton/Bush Haiti Fund. If all you can afford is $10, still give it, that $10 could be the difference between a Haitian living and dying.

I have no affiliation with the fund.

Thank you for reading and thanks in advance for your generosity.

Breaking Down Massachusetts -- TIme to Take Upset Talk Seriously

A new Rasmussen poll released today shows Democrat Martha Coakley with a slim, 2 point lead over Republican Scott Brown in the special election race for the Massachusetts Senate. Unlike the PPP poll released early in the week, Rasmussen is a non-partisan polling firm, albeit one that has come under fire from the left for having polling data this year favorable to Republicans. Scott Rasmussen, in my view, has several things enhancing his credibility:
(1) His polling was above average in its state-by-state accuracy in November 2008
(2) He was also above average in the accuracy of his polls in the New Jersey and Virginia Governors races
(3) The primary source of Democratic criticism has been that his approval figures for President Obama have consistently run 5 to 10% behind the consensus of the rest. But a public opinion poll is not the same as an election projection poll. The Rasmussen poll has differed from many other public opinion polls in that he has attempted to target likely voters, whereas many other polls target the general public or registered voters. But all election projection polls (at least all the ones worth anything) target likely voters.

In short, I have no statistical evidence in actual elections that would cause me to question the methodology behind Scott Rasmussen's polls, and absent that and especially given his track record of accuracy, I consider his polling credible.

So, lending the Rasmussen poll some credence and noting that the polling has tightened 7 points over the past week in that poll, I'm left to conclude that we now have a horse race.

Massachusetts moves from Likely Democratic Hold to Lean Democratic Hold

So, let's break down the things that will make the difference:
(1) Momentum in the closing week -- advantage Brown -- clearly he is gaining and if you were to draw a trend line from a few weeks ago to election day, Coakley is in big trouble
(2) Bank account -- big advantage Coakley -- she can spend, spend, spend in the closing week in a way Brown can't match. Both her own campaign and the DNC are far better funded in the home stretch than Brown and the RNC. Her wisest move would be to hit hard in the closing week to move social moderates and rally the base.
(3) Base turnout -- advantage Brown -- the GOP base is fired up and tends to turn out higher in off-year elections to begin with (social conservatives ALWAYS make it to the polls.) The DEMs are pretty beaten down and it's hard to imagine 19-year-olds and African-American voters turning out for Martha Coakley in the same numbers that they did for Obama.
(4) State demographics -- advantage Coakley -- let's face it, Massachusetts doesn't really want a Republican, not a real Republican anyway. It's among the bluest states. Brown's surge reflects a lot of frustration with the Obama administration, the state of the economy and the sense that things aren't getting any better in this country (take a look at the right track / wrong track poll numbers if you doubt me.) Plus, Americans like to check power. But will those socially liberal, economically moderate independents really pull the lever for Brown in the end?

Can #1 and #3 overcome #2 and #4?

The betting public on intrade presently pegs the odds in the race with Coakley as a 10 : 3 favorite. That seems about right to me heading into the home stretch. Brown really could legitimately win, but the odds are still stacked against him. But if he pulls this off, it will be an amazing rallying cry for the GOP and an amazing hit to the DEMs.

I expect a number of new polls in this race in the next few days, which should help lend us some clarity heading into next Tuesday. Bear in mind that special elections are notoriously hard to poll for, as it is hard to tell who will actually show up to vote the Tuesday after a holiday weekend.

But it's going to be a fun ride, and quite possibly a late night next Tuesday

Grading Year 1 of the Obama Administration

The time has come for my rundown of the first year of the Obama Administration. Yes, I realize we are technically still a week short of a year from the Tuesday on which Barack Obama became the 43rd man to assume the Presidency (yes, he is commonly referred to as the "44th President", but that's because Grover Cleveland is counted twice due to his split terms, interesting piece of political trivia for a cocktail party sometime.) But, let's face it, there is very little that is going to change the essential ratings that we will look at. No legislation is going to be passed between now and then as the Senate is not in session (other than a brief Pro Forma session on the 19th). The poll numbers aren't likely to move significantly, unless unemployment miraculously halves o the President denounces his citizenship. The accounting on year 1 is largely in.

We'll look at year 1 from three perspectives:
#1 Political Priorities -- my assessment of the Obama Administration's effectiveness in implementing the key priorities that the President himself laid out for year 1.
#2 Court of Public Opinion -- we'll compare the President's numbers to both an absolute scale and a comparative scale to other Post-World War 2 President's
#3 Presidential Promise-Keeping -- we'll consult with our old friends at Politifact.com to see how closely what the President has done has matched his words from the campaign trail.

So, let's get started.

Political Priorities
The President laid out three clear priorities for year one of his administration, through an early speech to a joint session of congress. Let's grade them.

#1 The Economy -- Stabilize the Financial System, Contain Unemployment and Build a Platform for Economic Growth
My Grade: B
Despite poll numbers that don't yet reflect his success (more on that later), the President has actually done a number of important things towards this end. The American Recovery and Reinvestment Act was landmark legislation, signed into law early in his administration, the largest investment of public funds in economic recovery since FDR. The early provisions of this bill, which stabilized funding for state governments and provided key tax incentives that have stabilized the auto and home industries, were critical in preventing a deeper depression. The bulk of the spending, which is yet to take place, is of the more traditional infrastructure variety, designed to generate long-term efficiency gains (a better maintained infrastructure is a catalyst to a more efficient economy) as well as provide some job growth along the way.

The administration's actions on the auto industry got off to a slow start, with, unfortunately some more money down the drain in emergency loans early on. But in the end, they got it right, facilitating an orderly bankruptcy and exchanging government debt for a large equity stake that may ultimately pay off for taxpayers. It is unquestionable that without government intervention, GM would have gone down for good. Some thought that for the best -- the weak die in capitalism, after all. But the associated spike in unemployment and collapse of first-tier suppliers would have been devastating for years to come.

On the TARP funds, the government is getting repaid...by Goldman Sachs, by Bank of America, by Citigroup.

The economy is growing again and unemployment has stopped rising. The financial system didn't collapse. Stocks are way up since the President took office. The President and the Administration deserve some credit, as does Ben Bernake.

The performance was not perfect, to be sure. We are $180 billion into AIG, money we will likely never see all of again, and we got there without adequate controls on pay or policy. The President stupidly said the stimulus bill would contain unemployment at 8%, a gross mis-calculation about the state of the economy. The administration has all but missed a huge opportunity to significantly change how financial services operate in this country and has not done anything to stop the "too big to fail" phenomenon. Not enough home owners have received mortgage relief. There is not enough credit flowing to consumers or small businesses.

But considering the abyss we were staring into, the administration by and large deserves credits for making the right big calls on the economy.

#2 Health Care -- Expand Access to Insurance, Contain Costs
Grade: C-

On the plus side: this President has gotten further with health care reform than any previous President. He has already signed a bill into law that has dramatically expanded access to insurance for poor and lower-middle class children. The bill that might make it out of Congress would expand coverage to millions.

On the minus side: he promised a bill by August, then by year-end and got neither. The big bill is not signed into law. Even if it does get signed, while it is good on the access side, it does nothing serious about cost. There are no provisions to reimport prescription drugs or negotiate for world-pricing. It has no public option to compete with insurance companies or cost regulations with teeth. It fails to address tort reform and the cost of malpractice insurance.

These grade could go way up next year if the President signs a bill into law. But it is fair to say that in year 1, he failed more than he succeeded.

#3 Environment -- Invest in Green Energy, Cap Carbon Emissions
Grade: D+

On the plus side: there were some decent clean energy investments in the stimulus bill, the House passed a Cap and Trade bill. The EPA can regulate Carbon by executive order.

On the minus side: Cap and Trade is stuck in the Senate and there appears to be no will after the bruising and long battle on health care. The administration has presented no clear energy strategy -- how exactly are we going to reduce our dependence on foreign oil?

All in all, nothing substantial has changed in our environmental policy. A very incomplete set of accomplishments.

#4 All Other
Grade: C-

On the plus side: decisive action on Afghanistan (albeit after a LONG wait), a clear exit strategy in Iraq, better relationships with our allies, several very good laws and executive orders (the Fair Pay Act, the Edward Kennedy Serve America Act, just to name a couple)

On the minus side: we are still firing Arabic translators from the military for being gay, the President's bowing and present-giving gaffes have started to get embarrassing, we've done nothing on immigration policy, ambassadorships are still full of patronage, the tone in Washington has gotten worse, not better.

My overall grade: C

The President gets credit on the economy. Everything else, is incomplete at best and failing at worst. Republicans will say that I am far too generous on the role of the administration in stabilizing the economy. But I truly believe that administration acts were critical. Democrats will say my bar is way too high for other issues, considering what other Presidents have done. But I didn't set that bar, the President did, in an early speech in which he promised all of what I graded in his first year, plus a lot of other things that aren't even discussed.

A mediocre start to a Presidency for a man who showed brilliance in the 2008 campaign. Let's hope year one just reflects some inexperience and growing pains, as they did with a young Clinton administration in 1993. The President could learn a thing or two in how Clinton evolved the game.

The Court of Public Opinion
Current Average of Approve Minus Disapprove (Month of January 2010, Jan 1-10): +3.7%

Obviously the wealth of polling data that is now available is not available for all previous administrations. However, the Gallup tracking poll is. So we'll contrast Obama's approve minus disapprove with the historical Gallup information. Here are the other post-World War II Presidents:

1. George W. Bush +77%
2. John F. Kennedy +59%
3. Lyndon Johnson +53%
4. George H.W. Bush +47%
5. Dwight Eisenhower +43%
6. Richard Nixon +23%
7. Jimmy Carter +19%
8. Bill Clinton +9%
Gerald Ford +9%
10. Barack Obama +4%
11. Ronald Reagan +3%
Harry Truman +3%

There have been some in the blogosphere that have stated that President Obama has the lowest approval rating on record. While I don't find that to be quite the case (it all comes down to what polls you pick and what day or range of days you use, if I were to use the low point for the President on the Gallup poll, I would have the same finding), he's close enough to the bottom of the year 1 rung that the court of public opinion weighs unfavorable against him.

On the plus side, a small percentage more people approve than disapprove of his performance. Also, as you can see from the above, first year numbers are not necessarily very instructive as to re-election prospects: numbers 1, 3, 5, 6, 8a, 11 and 11b were re-elected, numbers 4, 7 and 8b were not (John Kennedy obviously did not run.) And the biggest re-election landslides were #6 and #11a. So it isn't like his term is over.

And the circumstances coming in were definitely tough -- a massive economic crisis, tough wars in a war-weary nation and insanely high expectations all fuel the fall-off.

Still, in the court of public opinion, after 1 year, President Obama clearly gets bad marks.

Overall Public Opinion Grade; D


Presidential Promise-Keeping

politifact.com is tracking 507 documented promises that the President made on the campaign trail. Every once in a while they will add a promise if new campaign tape emerges or eliminate a promise if they determine that two they are tracking are redundant. But the rules for politifact are simple, if the President said it when he was running, they attempt to track it.

Of the 507 promises, the President has taken some sort of complete action (kept, broken or compromised) on 134 of them, or 26.4%. Right on track with being 25% of the way through his term. So Obama gets full marks for taking action on the issues that he promised.

Of the 134 he has acted on, 91 have been Kept, 31 have been Compromised on and 12 have been broken. Giving a full point for kept promises, a half point for compromises and no points for broken promises, the President has scored 106.5 promise-keeping points out of possible 134 on these promises, or a score of 79%. On face, this is a fantastic score. I think any reasonable observer would say that if a President does 80% of what he said he would do when he gets to office, that is about as good as it gets. My standard rule of thumb is about 50%.

So what are the key promises kept, compromised and broken? You can go to politifact.com and see all of them, but here are some highlights:

Kept:
- Establish a Credit Card Holder's Bill of Rights
- Expand Access to the Children's Health Insurance Program
- Implement plan to end the war in Iraq
- Send two additional brigades to Afghanistan
- Expand AmeriCorps
- Reverse restrictions on stem cell research

Compromised
- Set a three-month moratorium on foreclosures (a three-month moratorium was not set, but an alternate foreclosure-abatement plan was implemented)
- Increase TSA funding (it increased, but not by as much as he promised)
- No tax increases of any kind of people making less than $250,000 (cigarette taxes were increased by over 200%, although in a conflicting campaign statement, candidate Obama had stated support for such a tax)
- No signing statements to nullify the law congress writes (Obama has used signing statements, but claims they are for clarification only)

Broken
- Posting of bills on the internet for 5 days before signing (broken on his first major bill, the stimulus bill and continued from there)
- Health Care negotiations on C-SPAN (that, as we re-learned this week, won't be happening)
- Allow penalty-free hardship withdrawals from IRA's and 401K's in 2008 and 2009 (not done)

The interesting thing is that on SUBSTANCE, the President is near-perfect, every major policy area he has acted on has been in basic agreement with his positions on the campaign trail. Where he has failed has been on the openness and transparency issues...putting bills on the internet before signing, health care negotiations on C-SPAN, lobbyist rules, etc. And it is on this impression that "nothing has changed in Washington" that I think the President is most vulnerable.

Still, in total, whether you like it or not, on policy, you got what he said you were going to get.

Grade on Promise-Keeping: B+


Year 2 and Beyond
So what will the coming year hold? It may or may not hold a health care bill being signed into law (Chris Dodd talked about "hanging by a thread" today and an upset in Massachusetts would be a massive setback for the bill), we likely won't see a cap and trade bill. Congress has another set of budgeting to do, something which will start early to get Congress home in time for what is sure to be a vicious campaign season.

In short, it is likely that policy accomplishments in 2010 will be limited to the first 3 months of the year. If it's big and it isn't done by March, it probably won't get done.

And expect a bloody November, to a greater or lesser extent, for Democrats.

How the President reacts to smaller or non-existant majorities, as President Clinton had to do in 1995, will largely shape the arc of the rest of the Obama Presidency. So will the state of the economy and the success of his Afghanistan strategy. Eleven months ago, we were all asking, "doesn't it seem like the President is taking on too much?" The answer, at least after one year, appears to be "yes, he did." We'll see if the long view proves something different.

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Harry Reid: Shame On You, Big MA Upset Brewing?

If you have been living in a cave the past 24 hours, perhaps you missed Senator Harry Reid's revealed words about President Obama from the campaign trail in 2008. To be specific, Senator Reid said that then-candidate had a real opportunity to win because he was "light-skinned" and "had no Negro dialect, unless he wanted to".

You could certainly make an intellectual argument that America was more ready to accept a bi-racial President than a dark-skinned black President. You could similarly argue that if the President did not have strong command of proper language skills, he would not have been a viable candidate. Neither of these are the point.

The subtext of Senator Reid's remarks reveal a clear racism. First, the choice of the word "Negro", a word broadly considered offensive in the African-Ameican community for well over 40 years. Second, the notion that somehow President Obama's ability to speak without "Negro dialect" in some way set him apart from most African-Americans is simply wrong and deeply racist. Cory Booker can't speak to white people? How about Deval Patrick? David Patterson? Heck, Jesse Jackson speaks perfect English and he ran for President 22 years ago. What does Senator Reid think, that 95% of African-Americans go to work every day and talk like 50 Cent?

Perhaps Senator Reid's problem is that he doesn't actually know that many black people. At the time he made those remarks, there was but one African-American Senator, Senator Barack Obama. There is still only one African-American Senator, the embattled Roland Burris, and there will likely be none come December.

Michael Steele made the point on the Sunday talk circuit that there is a double-standard in play here, that if a Republican had made similar remarks, he would have been run out of town. And he has a point. The eagerness to forgive and forget on the left in this case in extremely inconsistent. When Senator Trent Lott made the remark that if Strom Thurmond had become President, "maybe we wouldn't have a lot of the problems we have today", a reference which those of us familiar with Thurmond's 1948 Dixiecrat run for President assumed referred to civil rights legislation, but which Lott never explicitly said, seem downright mild compared with Reid's verbal offense.

President Obama has issued a statement of forgiveness and support for Senator Reid. I do not grant the President the right to make a determination of forgiveness on behalf of anyone beyond himself. If he wants to forgive Senator Reid, that is certainly his right. And I might forgive Senator Reid, who is clearly sorry, personally. But words have meaning and statements have consequences. Senator Harry Reid cannot lead the Democratic Party in the Senate after making such a deeply racist statement. He should step down immediately from his post.

No need to call for his resignation -- voters in Nevada have the opportunity to make their own judgement in November. And I suspect that this is just a nail in the coffin.

Coakley and Brown in a Dead Heat??? Not So Fast.
There was a poll that lit up the political internet yesterday, a Public Policy Polling look at the Massachusetts Special Election, taken from January 7th to January 9th that showed Coakley and Brown in a dead heat for the seat (actually Brown was up by a point.) The storyline was a familiar one -- candidate B (in this case Brown) is surging and candidate A will soon be toast.

Not so fast.

First of all, Public Policy Polling is a partisan-affiliated polling firm. The thing that is a little odd in this case is that they are affiliated with the Democratic party. Nevertheless, their release of polls can be politically motivated and the numbers can be shaded to serve a particular purpose. This wouldn't be an issue if the poll wasn't squarely at odds with the other available data. But it is.

The Rasmussen poll released three days earlier showed Coakley with a 9 point lead, 50% to 41%. Certainly Scott Rasmussen has been accused of a lot of things in the polling world, but being overly favorable to Democrats is not one of them.

Secondly, a Boston Globe poll that run through January 6th shows Coakley with a 17 point lead. This is consistent with the trend of Rasmussen polls showing somewhat closer races than other polls that we have seen in recent months.

The PPP poll appears, at least at this point, to be an anomaly. I have no doubt there will be several more polls released in the coming days to give us a better understanding of the state of the race.

For now, I'm leaving this a Likely Democratic Hold.

Complete Latest Senate Rundown, The Jobs Deficit and John Edward's 2 Americas, Closing in on 1 Year

2010 -- Plenty of Reasons for the DEMs to Be Getting More Scared
The Pro-GOP or at the very least, anti-Democratic trend appears to continue to build. President Obama's numbers are stable, at least for now, around the +3% to +5% range...this is better than being negative, but puts him in a similar position to where President Clinton was leading into the year that saw Newt Gingrich's revolution that led to a GOP-controlled House and Senate. It isn't that bad yet, so let's take a look at where the races are tracking, with our new updates from this week:

Safe DEM Hold (6)
Maryland, New York (Schumer), Oregon, Vermont, Washington, Connecticut

Likely DEM Hold (5)
California, Indiana, Wisconsin, Hawaii, Massachusetts*

* Special Election January 19th

Lean Democratic Hold (2)
New York (Gillebrand), Illinois

Lean Democratic Pick-Up (1)
Missouri

Toss-up -- DEM Controlled (2)
Pennsylvania, Delaware

Lean GOP Pick-up (4)
Colorado, Nevada, North Dakota, Arkansas

Lean GOP Hold (5)
New Hampshire, Kentucky, Ohio, North Carolina, Arizona

Likely GOP Hold (5)
Georgia, Alaska, Kansas, Louisiana, Florida

Safe GOP Hold (7)
Iowa, South Dakota, Alabama, Idaho, Oklahoma, South Carolina, Utah

Total Projection: GOP Pick-up of 3 to 5 Seats


Best Case GOP (all leaners go to GOP): GOP +8 Seats

Best Case DEM (all leaners go to DEM): DEM +6 Seats

It certainly seems, given the national mood, that the Best Case GOP scenario is a heck of a lot more plausible than the Best Case DEM scenario at this point. This is because of all the states that fall in the "lean" category currently, the GOP is winning all but 3 of them. It does show, however, the vast impact a 5 point swing in the national mood can have on how races shape up.

The other things worth noting are that we do not have particularly recent polling in Missouri and Pennsylvania. One could surmise from the trend in other swing states that there is a reasonable probability that they will tip red when we do get such polling. This would push the GOP closer to their "best case" scenario.

Having said all this, I don't see a path to 51 for the GOP. In addition to picking up Missouri and Pennsylvania, they would have to win Illinois to get to +8, which is certainly possible, but probably no better than 50/50. On TOP of that, they would have to beat Gillebrand in New York (possible only if Pataki runs against her, and no sure thing even then), AND win at least 2 out of 5 in California (where they have a good candidate but are trailing), Indiana (where they don't even have a candidate yet against a well-liked moderate in Evan Bayh), Wisconsin (against Russ Feingold, seems like a no-hope race), Hawaii (when was the last time Hawaii sent a GOPer to the Senate?) and Massachusetts (closing fast at -9%, but still a long shot.)

So, the most realistic scenario to get there for the GOP would be to pull off the upset in Massachusetts, then win all the ones they are leading. Win the two toss-ups -- Delaware with Mike Castle and Pennsylvania with Pat Toomey. Win Missouri with Rep. Roy Blunt, New York's 2nd seat via convincing George Pataki to run. Finally, pull off the big upset with Carly Fiorna in California (hey -- they love tech celebrities there.) And you have 51 seats.

A long, long, shot, for sure. But for the first time I can actually construct a scenario where it could happen. First key, of course, is the Massachusetts special election a week from Tuesday, which I expect them to lose. But if they win that one, all bets are off.

In the House,
Democrats could be in huge trouble. Now, it's hard to tell, because we continue to be plagued by drastically different polls numbers (Rasmussen has it at GOP +9%, Gallup has it at DEM +3%), driven largely not by the fact that pollsters are asking the questions somehow differently, but more by the fact that they are making dramatically different modeling assumptions about who is actually going to vote in the mid-term. And the quagmire is real...after a massive turnout in 2008, clearly we all expect it to fall off for the mid-terms, but will it revert back to the normal for an off-year election? Will any of the newly registered voters in 2008 show up to vote for congress in 2010? We don't really know.

At any rate, my philosophy has always been that by building a larger sample poll, as well as looking at means and medians, we can mitigate the sample or weighting errors of any one given pollster. An our methodology produces a current projection of GOP +3.6%.

This leads to a House projection of: GOP +43 Seats

So, for the second projection in a row, I'm projecting a GOP takeover of the House. The margin is still slim, although it is 2 seats wider than it was last week. It could change obviously, with circumstances. But for now, the House Republicans are looking pretty darn strong. I doubt we'll see anything like Health Care reform moving through that chamber come 2011.

The Jobs Deficit -- John Edwards Was Right
I wrote about this some months ago, but I was struck recently by a personal experience. The company that I work for, which is a Fortune 500 company, was in the process of hiring entry-level engineers for a number of our factories, a process that I was involved in. We were recruiting principally for those who graduate this spring and conducted interviews over November and December, made offers in mid-December to 5 candidates and....were rejected 4 out of 5 times. Every single one of the 5 young engineers we were trying to recruit had multiple offers from multiple great companies. These are kids who are extremely intelligent, but let's face it, haven't actually DONE anything yet. And this punctuated my point -- the economy looks a lot different if you are a high school dropout who has been working at a factory in Michigan than it does if you are an Electrical Engineer from the University of Michigan.

The latest employment report, released yesterday, showed the unemployment rate remained flat at 10.0%, just a tick below the peak of 10.1% from two months ago. But the important numbers were even wore than that, with actually jobs declining by 85,000 and the unemployment rate only holding constant by virtue of people giving up on looking for work and dropping out of the work force, with this number rising to 929,000, it's largest level since 1985. So, with "normal" unemployment being in the 5% range, we have a gap of 7.6 million jobs, 8.5 million adding in the discouraged workers.

How does this relate to my story? Let's look at the unemployment rate by educational attainment one more time:
High School Dropout -- 15.3%
High School Graduate -- 10.5%
Some College or Trade School Graduate -- 9.0%
College Graduate with Bachelor's Degree or Higher -- 5.0%

The economy IS normal if you are a college graduate. Sure it isn't the heady days of the late 90s or the mid-00s when you could name your price, your location and your work hours. But you CAN find work if you have a degree and skills that are in demand. If you are a factory worker, however, your prospects are dim.

Which brings me to my point...we have focused so much on just creating jobs that we have neglected the other half of the equation...how do we raise the skill level of the unemployed to make them more productive and more attractive to potential employers? College tuitions continue to surge and achievement gaps between rich and poor school districts have sustained. How do we give the kid from Compton, rural Tennessee, Detroit or Mississippi a shot at being in the tier of people who are in demand? We have had zero political discussion in the past year about higher education and lifetime learning. And that's a crime.

In terms of what we have been discussing politically, we have the stimulus bill and we have the "jobs" bill creeping it's way through congress. The bill, which has been blasted by the GOP as "Son of Stimulus", would largely do more of the same that the American Recovery and Reinvestment Act did...that is the threefold approach of transfer payments to states to stabilize state governments (to "save" jobs), infrastructure projects (to "create" jobs) and temporary extensions / expansions of various social programs to provide money for the unemployed and needy (to generate consumer demand.)

The approach has its merits as a short-term buffer to an economy still dealing with the aftershocks of a massive financial crisis. My criticism is that the way the original stimulus was laid out, we haven't really had a chance to see how that program, which was designed as a 3-year reshaping of the economy, will really play out.

Here are the latest stats on the first stimulus bill:
Tax Cuts -- $92.8 billion out of $288 billion paid out (32.2%)
Spending -- $164.2 billion out of $499 billion paid out (32.9%)
Total -- $257.0 billion out of $787 billion paid out (32.7%)

With more than two thirds of the first stimulus bill left to spend, why craft another measure?

The answer simply is political reality. Congressional Democrats want people to see they are doing SOMETHING, even if the best course might be to simply let the tools that are already out there work. Liberal economist Paul Krugman, who never believed the first bill was nearly large enough, has been leading the charge for a second stimulus for some time. And it appears likely that SOME sort of jobs bills will pass in the new congress.

But the reality is that we will all have to wait and see whether what they did the first run around will actually work.

Almost 1 Year of Obama
The President of the United States will cross the 1 year in office threshold, 25% of his term, right as voters in Massachusetts are picking a Senator that will potentially represent the 60th vote in the Senate for final passage of health care legislation. It's almost time to break out the red pens and grade the President's year. Given the amazingly high bar he set for himself with his early speech to congress, I suspect when I sit down to write his review, he will have some significant short-comings. The President's inner-circle is fond of talking about him taking the "long view". But you do have to produce results at some point.

So, next up, our 1 year report card on President Obama. We'll look at my assessment of grades against his key initiatives. We'll look at his public opinion polls and the American people's grades of his performance. And we'll tap our old friends at Politifact to look at how well he is keeping his promises. Stay tuned.

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