It's a Crazy World, Waffling on Afghanistan?, More Obama Polls, Tracking NJ and VA, Health Care Plods Along, MA Senate Controversy

There has been a ton going on this week in the world of politics, so I'll get right to it....

Nutcases, Radicals and Dictators -- Oh, My! If there is one thing that the UN and G20 meetings has confirmed, it is that there are still a lot of crazies in the world....and that we need to keep an eye on the ones who could potentially get their hands on nuclear weapons.

From the re-emergence of Libya's nutty-again dictator Muammar al-Qaddafi, who, apparently has quite an axe to grind with just about everyone in the world, to Iran's illegitimately elected (probably), nuclear-ambitious, holocaust-dening, always-nutty Mahmoud Ahmadinejad, the world is quite a scary place.

Of the two, while Qaddafi's rambling, long speech garnered the eye of the media, it is Ahmadinejad and Iran's nuclear ambitions that deserve our attention. A nuclear Iran is a scary prospect indeed. While Iran lacks the technological capability to launch a nuclear weapon that could reach U.S. territory, they could certainly turn the middle east into a crater, Israel included.

A much harder line is needed with Iran. President Obama is right to declare their actions unaccceptable, but the world needs to stand together to do much more than talk. Iran should have zero access to capital, equipment or trade unless and until it abandons its nuclear ambitions. They are simply too great a risk. What purpose does the UN serve if NOT to stop rogue nations like Iran from acquiring the ultimate destructive weapon?

At the G20, a slightly more sane gathering of nations, things were considerably tamer. Sure, we had the normal protests from the usual anti-globalization radicals, but the tone inside was considerably more business-like. That said, no real break throughs came out of the session. The leaders declared it a success and agreed to some underlying principles on things like regulation of the financial markets and pollution control. Nothing really meaty though.

The international schedule has been crowded as of late, particularly with the aftermath of a global recession. Unfortunately, I fear the world is just nibbling at the edges of the causes of the near-collapse of the global economy. No one has addressed in a serious way, how to eliminate the risk posed by "too big to fail" institutions, which are at the root of the severity of the recession. And it appears unlikely they will as the crisis has passed.

Is Obama Shooting Straight on Afghanistan? From the onset of his campaign for President, Barack Obama made it clear that he viewed the war in Afghanistan as a "war of necessity" as opposed to the Iraq war, which he viewed as a "war of choice". He relentlessly criticized the Bush Administration for failing to commit adequate resources to Afghanistan and for taking its eyes off the ball by focusing so much troop strength in Iraq.

It is concerning, then, that the President seems reluctant to send more troops and appears to have held back the recommendation of Gen. Stanley Mcchrystal to send at least 10,000 additional troops to the country.

Is Obama caving in to the left-wing of his party?

The worst solution in Afghanistan is to maintain the status quo. We could have a reasoned debate about whether a continued American presence makes sense (I tend to think it does, although we need a great deal more clarity on the mission objectives and conditions for exit), but EITHER commiting more troops OR exiting the theater are preferable to maintaining the status quo. We learned our lesson in Vietnam, that half-pregnant wars do not work.

Let's hope President Obama takes a clear position in the next couple of weeks and if he chooses to continue to leave troops in Afghanistan, that he commits a sufficient number to do the job.

More Obama Polling
It is remarkable, given everything that has happened over the first 8 months of his Presidency, that President Obama continues to enjoy popularity at or above his November totals. The hope and change President has seemed far less inspirational and a lot less visionary over the past few months than many had hoped. Yet, on his ultimate scorecard he is still faring pretty well.

President Obama has continued to hold on to the modest gains that he had achieved following his late-August lows. He has yet to have a polling day below his November margin of 7.2%.


In the monthly data, President Obama actually has a chance for September to be the first month that he gains ground. His average as of today is +12.0%, just slightly below his August average of +12.3%, but his daily numbers are tracking above the average, so it certainly looks that, at worst, President Obama will have a flat month in September. Not a bad recovery after the disaster over the summer.




NJ/VA Governor Updates
It's getting down to crunch time in the 2009 elections, and the only ones of significance are the fights for Governor in New Jersey and Virginia. The GOP would still have to be considered a favorite to take both seats, but things continue to get closer.

In Virginia -- my latest analysis of polls puts this at a 4.4% margin for Republican Robert McDonnell over Democrat Creigh Deeds, while the RCP average has an identical margin. This is practically a pick 'em in a state race with over a month to go and Deeds closing at a pretty good clip (we were talking mid-double digits a couple of months ago.)

In New Jersey -- my latest analysis still has it a 7.5% margin for Republican Chris Christie over incumbent Gov. Jon Corzine (D) while the RCP average shows it a 6.6% race. This one is tightening too, although not as fast.

I'd been predicting from the get-go that Corzine would close in New Jersey, given its history of flirting with Republicans but electing Democrats. Could I have had this backwards? Might the DEMs pull it out in now-purple Virginia and get scortched in still-deep-blue New Jersey?

Health Care Bills Moving, But Not Too Fast
In the House, Nancy Pelosi is slowly moving towards a showdown on the floor sometime in the next month, basically negotiating only with Democrats. It appears likely that the bill will make it to the floor with a public option in it, as Pelosi has expressly rejected both co-ops and the "trigger" mechanism as alternatives. The problem Democrats face in the House, is that it is not clear that they can cobble together enough Democratic votes to pass a bill with the public option, and they will certainly get no GOP votes. It's also not clear that a bill that excludes a public option would attract enough liberal support. Back to the same problem -- the Dems are not on one page.

The Senate prospects, unbelieveably, actually look brighter than in the House. Despite lots of partisan committee votes, it appears that the Baucus bill will make it to the floor without major changes and with no obvious Democratic defections. If the Senate passes a bill without a public option, it will put major pressure on Pelosi and company to get the liberal wing in line and line up behind a similar bill.

Still a long tricky way to go on this one.

Hypocrites in Massachussetts
Governor Deval Patrick (D) has named Paul Kirk to fill in as an interim Senator until a special election is held in January to select the late Sen. Edward Kennedy (D). He made this appointment after the legislature rushed through a bill, changing the law to allow such an appointment. The Governor waived a normal protocol that laws in the state be deferred for 90 days before taking effect, prompting a GOP court challenge, which appears to have at least initially failed.

Gov. Patrick and company were probably within their legal rights here. But that's not the point. The point is the hypocracy that they delayed in making the change in the law.

Massachussetts had previously had a law which allowed temporary appointments to the Senate. In 2004, when Sen. John Kerry (D) was seeking the Presidency, the legislature promptly changed the law to allow only selection by special election, guarding against a GOP Senator from then-Gov. Mitt Romney (R). Now, when a 60th Democrat is needed for health care reform, they switch it back. Changing the rules of election to serve a specific political outcome is wrong and should be condemned.

And while we are on the topic, shouldn't we have a uniform selection of laws across the country for how Senators are selected in the event of a vacancy?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Progress happens slowly in the Middle East.

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