Governor's Race Spotlight, Appropriations Malaise Continues, Countdown to a Healthcare Deadline

Down to the Wire in New Jersey and Virginia
We are 16 days from the elections for governor in New Jersey and Virginia, two races that because of their off-year nature (these are the only two states that elect their governors in odd-numbered years) always receive a disproportionate amount of attention.

So let's check out where we stand;
In, New Jersey, we now have an extremely close race.

I'll break down the numbers a few different ways.

The most commonly used average in political circles is the "RealClearPolitics" or RCP, an average generated by the site realclearpolitics.com which uses a pure average of recent polling data. I personally think there are potential issues with this average as there are vast differences in the polling sample of different polls and therefore their accuracy. In the New Jersey race for instance, there is a current New York Times Poll that sampled 475 voters and a Quinnipiac poll that sampled 1,264 voters. Clearly, in my mind, the Quinnipiac poll should be given more weight because they talked to more people. So my methodology has always been to combine the poll results into one "megapoll" by aggregating the responses. The effect of this is that the Quinnipiac poll has 2.66 times the weight in this example. If the poll numbers are all similar, this is an academic point, but if the poll numbers vary widely, this becomes an important distinction.

The second set of numbers I'm going to look at are with and without polling results from the firm Rasmussen Reports. My practice has always been to look at polling results from all non-partisan polling firms (I exclude results from partisan-affiliated firms such as Strategic Vision for the Republicans and PPP for the Democrats as they inherently run the risk of polling bias). Rasmussen Reports has been a respected, independent polling firm. Their results in the 2008 election were in line with those of other polls as well as relatively close to the final results. However, it is difficult to ignore that their methodology has deviated significantly this year from that of other polling firms. Their Presidential Approval polls have been regularly showing a 10 to 20% gap versus all other Presidential Approval polls. To me, this calls into question the sampling methodology that they are using. Now, we don't have emperical results to validate this -- it is possible that Rasmussen has it right and everyone else has it wrong, but we won't know, at least until we get some election results. So, for completeness, I'm looking at numbers with and without the Rasmussen results.

Finally, we'll look at the numbers both way based on the "median" poll. This theory is to throw out high and low outlier polls until we get to the poll that is "in the center" of the numbers. If there are two polls, in the center, we will take a pure average of the two, as is typical in median calculations.

Averaging all three of these methodologies is how we did the Presidential prediction model last year, which had some pretty darn good results.

So, based on all of this, NJ stands as follows:
All Non-Partisan Polls Without Rasmussen
Weighted Average Christie +1.1% Christie +0.2%
Pure Average (RCP) Christie +0.8% Corzine +0.3%
Median of Polls Christie +1.0% Christie +1.0%
Average of Averages Christie +1.0% Christie +0.3%

So, with or without the Rasmussen polls, any way you slice and dice the data, this one is extremely close. Christie holds a tiny lead over Corzine, but Corzine has been closing fast with a huge spending blitz, and as we've discussed before, New Jersey tends to tilt blue at the very end. This one rates a Toss-Up going into the final 16 days.

As a reminder, I endorse Independent Chris Daggett in this race. His current polling shows as following:
All Non-Partisan Polls Without Rasmussen
Weighted Average 13.6% 15.0%
Pure Average (RCP) 13.6% 15.0%
Median of Polls 14.0% 14.0%
Average of Averages 13.7% 14.3%

Okay, so Daggett is extremely unlikely to win. 14% is a pretty respectable showing against two well-funded, establishment candidates.

In Virginia,

Utilizing the same methodology:
All Non-Partisan Polls Without Rasmussen
Weighted Average McDonnell +8.7% McDonnell +9.3%
Pure Average (RCP) McDonnell +8.8% McDonnell +9.3%
Median of Polls McDonnell +8.5% McDonnell +9.0%
Average of Averages McDonnell +8.7% McDonnell +9.2%

Note that in this case, the Rasmussen Reports poll actually helps Democrat Craigh Deeds.

Any way you cut it, this is a Likely GOP Pick-up.

As a side note, I'd like to endorse moderate Democrat and likely loser Craigh Deeds for the post. Deeds is a reasonable guy who will pursue the same type of centrist policies that the Virginia Democratic Party of Mark Warner, Tim Kahne and Douglas Wilder has long been known for. Regrettably, it does not appear that he will get the change.

I'll keep up with regular updates as the races progress over the next couple of weeks.

Why Is This So Hard and Who Is to Blame?
Job number one of Congress is to pass a budget for the federal government each year. Why else do we have a Congress but to determine the size and spending priorities for the executive branch?

So why can't we seem to get this done in anything resembling an on time fashion?

Okay, I admit that this is better than last year, when the Democratic Congress and President Bush couldn't find any common ground and kicked the can down the road for 6 months until finally passing a pork-laden omnibus spending bill that President Obama signed. But we have a Democratic Congress and a Democratic President. Nobody is even hinting that Obama is picking any fights or threatening any vetos. So why are we almost three weeks into Fiscal 2010 (which started in October) and we still don't have most of a budget?

The chart below shows the current status of all the major appropriations bills:
As you can see, the only bill to actually become law so far has been the legisilative branch appropriations bill, which also contained a continuing resolution, which kept the government open by extending Fiscal 2009 spending policies for one month (through October 31st.) Beyond that, two bills have been passed by congress and are expected to be signed by the President shortly. Still, massive chunks of the federal budget remain an unknown.

So who is to blame? Harry Reid and the Senate Democratic leadership. As you can see from the chart above, the House of Representatives (where all the bills have to start out, per the constitution) passed every major appropriations bill by the end of July. This left all of August and September for the Senate to pass its versions, the conference committees to get together and iron out the differences and both houses to pass the conference report.

The Senate simply didn't get the job done. There are STILL 8 major cabinet departments for which the Senate has not passed a version of appropriations. At this pace, we are sure to have another continuing resolution for some departments while the Senate continues to work at a snails pace.

How sad and incompetent. Can you imagine running a household budget without knowing what your paycheck is going to be? That's what we are asking of the cabinet secretaries at the moment. Think about how many poor decisions, large and small are probably being made as a result of this.

Health Care Looms Large
The wide consensus in Washington is that for health care legislation to happen during this congress, it would need to pass this year, as the session in 2010 will undoubtedly be difficult to navigate with mid-term congressional elections looming large.

Congress has a "targeted adjournment" date of October 30th, meaning that they were originially shooting for October 30th to be the last day that the chambers met for the year. Clearly, this isn't going to happen, as there is a ton of unfinished business to deal with this year. However, even using December 31st as the marker of the end of this year's congress, there isn't much time left to pass a health care bill.

There are 74 days left in the year, during which congress would have to:
(1) Pass health care bills through both the House and the Senate
(2) Iron out differences in a conference committee
(3) Pass the conference report in both houses
(4) Pass all the remaining budgetary items (a ton as you can see from above)

This is to say nothing of dealing with Cap and Trade, which has passed the House, but still must be dealt with in the Senate and a conference report passed, if something is to happen this year.

Recall, that President Obama articulated three goals for this year:
(1) Legislation to stabilize the economy
(2) Universal healthcare
(3) Environmental reform including cap and trade

#1 was accomplished early, at least as the administration defined it (we have and will again debate how effective the stimulus has been), with the American Recovery and Reinvestment Act signed into law on February 17th.

#2 and #3 both seem very elusive. The odds of getting Cap and Trade done this year seem like they are less than 25% and health care still seems a 50/50 shot at best.

The trouble for the Obama Administration is that if the can gets kicked down the road, not only will it be tough to do something in 2010, it will get even harder in 2011 and 2012, where, if my projections hold, he will face a congress that, while still a Democratic majority in both houses, is to the right of the existing congress.

Tall hills to climb. Time for some leadership, Mr. President.

Stimulus Update
To date, $288.5 billion of the stimulus funds have been authorized (57.8%) and $116.0 billion spent (23.2%). The tax cuts, which took effect in May, will automatically roll through December, 2010.

The adminsitration's figures show a ton of jobs "saved or created" by the bill -- almost 16 million. All of this is pretty fuzzy math and I would pay it much credence.

The real measure of the effectiveness of this bill, which was as much an investment and reshaping of the US economy as it was a stimulus bill, will be in the economic growth rates over the next 3 years. We will need time to assess whether the bill worked or not.

President Obama's Promises
Today is day 272 of the Obama Administration. He is 18.6% of the way through his elected term as President.

So how is he coming against the long list of promises he made?

According to the tracking at politifact.com, President Obama had 505 documented promises during the campaign.

Of those 505, he has kept 47 of them, partially kept 12 of them and broken 7 of them. This means that about 13% of his promises have been acted on in some way and giving him half a point for the partially kept promises, a full point for kept promises and no points for broken promises, of the ones he has acted on he is doing what he said 80% of the time.

Not bad. But those were the easy promises. The hard ones are still in the unacted column. And, with almost 19% of his term gone and only 13% of his promises acted on, he is falling significantly behind schedule if he is going to do everything he said in his term.

Of course, you could look at those promises as 8 years worth of promises rather than 4. But that would be rather presumptuous. We are a long way from understanding the dynamics of the 2012 elections yet.

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A Tale of Two Governor's Races, Health Care Finance Comittee Vote Tuesday, Budgeting Rolls On, Don't Call It a Stimulus!, Tracking Site Visits

The Only Legal Left Turn in New Jersey, Right Turns on Red Allowed in Virginia Those who live or visit my home state of New Jersey know full well the odd road design that persists throughout the state. In many places, left turns are simply not allowed on New Jersey roads. In their place, New Jersey has designed a series of "jug-handles", right lane off-ramps that loops around to take traffic to the left.

While left turns are not legal on the roads in my state, they are all the norm in statewide races over the course of the past 20 years. The cycle goes thusly: New Jersians get mad every cycle about high property taxes, government corruption and runaway spending. They flirt with Republican candidates who surge out to double digit leads in early polls. The media swarms around how "blue" New Jersey may elect a right-winger to a major statewide office. Slowly as the election approaches, the Democrat runs a series of ads portraying the Republican as an enemy of education, a token of the social right and an incapable leader. Everyone is suddenly shocked as the polls tighten to break even. Then, on election night, the Democrat wins by a solid margin.

Is the cycle repeating? You betcha.

New polling in the New Jersey Governors race? My average: Christie +1.7%. RCP average: Christie +1.8%. Both the closest the race has been all year.

A Corzine win in November? I sure wouldn't bet against it.

Virginia, by contrast, was one of the first states to legalize right turns on red. And right turns in politics are the norm, although the state has certainly had a purplish hue of late, with wins by Barack Obama, Mark Warner, Tim Kahne and Jim Webb as proof of a new, sudden, Democratic dominance.

It is not to be this year. The latest in the Governor's race there? My average: McDonnell +9.6%. RCP Average: McDonnell +8.5%.

Put this one in the bank for the GOP. Deeds is toast, barring a major, late-breaking scandal.

The Baucus Bill -- It Saves Money and Will Get a Vote on Tuesday Maybe Max Baucus is crazy like a fox. After being scorned by the left for dropping a public option and shunned by the right, who universally turned their back on Baucus' compromise Health Care proposal, it may ultimately be proven that he has successfully threaded the needle to navigate a health care bill out of committee.

The CBO analysis of the amended Baucus bill gave it two major talking points: it's new expenditures are well below the $900 billion over 10 years that President Obama had set as a target in his address to the nation. And, perhaps more importantly, the CBO projects that the Baucus bill will REDUCE the deficit by $80 billion over that time period while covering 94% of Americans.

Now will these points cause Republicans en masse to endorse the bill? Absolutely not. There are 1, maybe 2 Republicans in the Senate that appear "gettable", our favorite moderate Senators from Maine, Olympia Snowe and Susan Collins. But it does give cover for the 58 Democrats and 2 Independents to support the bill with less fear of reprecussion about runaway spending.

Now, this debate is obviously still far from over. Assuming the bill survives the committee vote (I predict it will pass with all Democrats voting "aye" and Sen. Snowe joining but no other Republicans), it will have to be "melded" with the other bills coming out of the various Senate comittees and then brought to the floor where it will be ammended, attacked and fillibustered. But make no mistake about it, this is a big step towards getting a bill through the Senate.

No word on when a bill will make it to the House floor, although Speaker Pelosi still says "soon", whatever that means.

Still Working Through a Budget
The Senate and to a lesser extent the House and the conference committees continue to slowly make progress on appropriations. The latest bill to move completely through the congress, the Agriculture bill, passed in a slightly less partisan fashion (although still not particularly bi-partisan) than the first bill, the Legislative Branch appropriations bill.

The meat of the spend (Defense, DOD/DOE Construction, etc.) are still moving through the process. I'd be hopeful that congress gets done by the time the first continuing resolution expires October 31st, but given the pace so far, I'm not counting on it.
A Stealth Stimulus?
The Obama Administration is walking a tightrope on the stimulus. On the one hand, the White House is feeling the heat of needing to show more progress on job creation. On the other hand, proposing a second stimulus would be tantamount to admitting that the first stimulus was either a failure or insufficient, something the President has been unwilling to do.

So what is the White House doing? Quietly proposing small "stimulating" activities -- continuing to extend unemployment benefits, extended the first-time home buyer credit. This kind of small ball stimulus is a play straight out of the Clinton playbook -- do small, managable initiatives that you can tout the success of if conditions improve and are small enough not to draw public outrage if they fail. It is, frankly, a very un-Obama strategy, as the President has thus far shown a preference for the big, bold and splashy. But it might be a wise move until unemployment starts dropping.

Extending unemployment has hit a snag, however, as Senators from states with higher unemployment rates argue with Senators from states with lower unemployment rates. The key issue is whether all unemployment benefits should be extended for a shorter period of time or benefits in states with high rates be extended for a shorter period of time. Obviously which state you are in drives your opinion there.

Afghanisoon
I've received a number of e-mails on my relative lack of coverage of the debate within the White House around the strategy in Afghanistan. I HAVE written previously about the choices facing President Obama and the need to commit, one way or another, to a clear strategy of either "all-in" or "all-out". I don't really have a lot more to say on the topic until the President reaches decision, which I will critique in full. Two options, Mr. President, you need to choose one.

Who's Reading This?
1,581 people since February, according to the tracking. I initiated tracking of site visitors in late January, which was largely just as the political season was slowing down, post-innauguration. From there, the number of visitors held relatively constant from February-May, spiked up in June when I did some advertising on electoral-vote.com (still one of the best political sites on the web) and has slowly declined since then, to a low of 140 visitors in September.
So is the readership drying up for this site? Not really. It's the political slow season, I haven't advertised, and as you can see from the green line, a lot of the decline has been driven by my posting less as I have been busy with the business of life and traveling a lot.

For those of you who read frequently, thanks for reading. And let people know about us. There is never a charge and I try very hard to bring you analysis that you won't find anywhere else on the web, at any price. From innovative poll-aggregation techniques (which I believe are provably more accurate than sites like realclearpolitics) to tracking of the budgeting process (which is scarcely mentioned on many political sites) to commentary, I think people will like what they find here, regardless of their political stripes.

As always, I welcome your thoughts and suggestions.

2009 Update, Is Obama at Turning the Corner?, Mixed Economic Signals

2009 -- Still Looking Good for the GOP, But Small Reasons to Hope for the DEMS
Will the GOP sweep the New Jersey and Virginia governor races in 2009? It still looks likely, but perhaps slightly less likely than it did a few weeks ago -- especially in New Jersey.

Let's begin in Virginia. McDonnell still leads Deeds by 8 to 15%, depending on which poll you believe. Deeds has scarcely led at all since his come-from-behind win over the much better known Terry McAullife, leading only one poll (an early June Rasmussen poll.) The Real Clear Politics average shows McDonnell at +9.8%, my own sample-weighted methodology puts it at +9.0%. Either way, this one still seems to be a likely GOP pick-up, as Virginia does not historically turn left at the last minute.

In New Jersey, unpopular Gov. Jon Corzine (D) still trails upstart conservative Republican Chris Christie by 5-10% depending on your poll. The RCP average shows Christie +6.5%, my own methodology has Christie doing even better at +7.9%. But this actually shows a significant tightening, as Christie led by double digits throughout all of July and the first half of August. I see a familiar pattern that has played out many times in New Jersey over the past 20 years -- tax-angry voters initially favor the Republican outsider, then, on closer reflection, swing back to their natural blue tendencies. I'll rate this as lean GOP pick-up for now, but I wouldn't be surprised at all if I were calling this a pick 'em by October and projecting a close Corzine win by November.

All-in-all, the GOP has nothing but upside (they are fighting for two seats currently held by Democrats) and still seem poised to take at least one and possibly both of them. But the possibility of massive routs that would have an impact on national policy seems to be waning.

Stabilizing Obama
After almost two months of solid free-fall that cut Obama's approve minus disapprove from +28.3% on June 27th to a low of +8.7% on August 30th, the President's scores have been spiking int he past few days and sit at +11.7% as of September 3rd, a full 3 point improvement in 4 days. This has largely been driven by significant improvements in the Gallup (+9% in 4 days) and Rasmussen (+7% in 4 days) tracking polls, which show wildly divergent overall results (Rasmussen has Obama at -1% today, Gallup at +17%), but a similar trend. Whether this is just a blip, a stabilization or the beginning of a recovery in Obama's numbers remains to be seen. But he still hasn't crossed the 7.2% margin of his November victory...yet.


In his monthly totals, you can see just how big a toll the summer took on Obama's numbers. In 2 months, his monthly averages (which flatten out the spikes and dips) dropped by 14%. September has started slightly lower than August, but for the first time in a long time, the President's daily numbers are ahead of his monthly numbers, which would typically project an increase in his monthly numbers, at least in the short term.

Can We Be Recovering with Unemployment Spiking?
The BLS today announced that the unemployment rate in July had surged by 0.3% to (another) 26-year high of 9.7%. Include underemployed and workers who have given up and you have 16.8%.

So how can I be saying we are in recovery?

As I've said before, unemployment languishes for long after a recession ends (and make no mistake, I believe this one ended this summer.) It is likely the unemployment rate will reach low double digits before it starts declining, towards the end of the year. And the decline may be slow. We "only" lost a little over two hundred thousand jobs in July, which would typically equate to a 0.1% bump in unemployment. The rate went up more, because more of those "given up" workers who don't count in the official tally, have no re-entered the work force. Expect more of the same. But note the stock market actually rallied today on the news, which was slightly better than expected.

Protracted unemployment still poses a huge political issue for the President. The explanation above is not something that President Obama can easily give in a way that is accepted by people. As long as people are out of work and hurting, they won't feel the recession is over.

So, let's get moving on this stimulus!

Latest numbers from recovery.gov:
Estimated Tax Cuts Paid Out: $62.5B (21.7%)
Spending Authorized: $217.0B (43.5%)
Spending Completed: $88.8B (17.8%)

$4.2 billion in stimulus spending happened last week, far above the average since the bill was passed. Still, at that pace, it would take 98 more weeks, almost two years at that pace, to complete spending. That won't be acceptable unless unemployment falls.

Inflation, Pfft
Among the dizzying theories about the end of the recession (is it V-shaped? Or W-shaped? or U-shaped? Or square-root shaped?), one that I don't buy at all is the theory that all this government spending and loose monetary policy will lead to massive inflation.

Inflation occurs when demand significantly outstrips supply of something. With unsold business inventories, house prices way off peak, oil at under $70/barrel and factories way under capacity, I can't see what that thing will be, at least for the next several years.

Sure, the Fed has to be careful to tap the brakes when the time comes...but that time is probably 18 months from now. Inflation risk is very small in the near-term.

Clearly the investing public things so too. The 10-year bond is yielding under 3.5% and the spread between 10-year and 30-year bonds is only 0.7%, implying very little investor fear about inflation, even over longer time horizons. TIPS, which pay a fixed rate over inflation, are yielding 1.8% plus CPI on a 10-year bond, meaning that the investing community has pegged 10-year inflation at a 1.7% rate (the spread between Treasuries and TIPS, which contain all the same risk-aspects, save for the inflation factor.) Hardly the late 70s and early 80s. Inflation may come out higher than that, but inflation under 5% is generally not an inhibitor of economic growth. And I'm not worried that the market is THAT wrong.

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