A Bad Week for Romney, Does He Need a Game Change?

Obama Lead Widens
Days Until the Election: 93
Projected Popular Vote Total: Obama +3.8% (+3.5% from last week)
Projected Electoral Vote Total: Obama 332, Romney 206 (unchanged from last week)

The last time that I actually flipped a state on my electoral vote projection was June 30th.  For a race that is supposed to be neck-and-neck and back-and-forth, that is pretty remarkable...5+ weeks of essentially the same map.  And the map is not so kind to Mitt Romney - it shows a pretty resounding victory for President Obama.  Not quite the 365 to 173 whacking that he gave to John McCain in 2008, but a large enough cushion that if the election were being held today, Obama advisers wouldn't be worried about a state here or there.

No states flip this week either, but the trend is decidedly for the President over the course of the past week.  He picks up 3.5% in the average of national polls and moves up the strength of several states.  For the first time in a long time, he now has 271 electoral votes in either the "safe", "strong" or "likely" category for him.  This is big because it means that the President could lose every single close state - North Carolina, Florida, Virginia, New Hampshire, Colorado, Ohio, Iowa and Nevada, and still win the electoral college 271 - 267.

The reason for this, of course, is the state of Ohio, which now sits in the Likely Obama category.  It is virtually impossible for a Republican to win without Ohio.  No Republican has ever won the Presidency without winning Ohio, going all the way back to the founding of the party in 1856.  Romney HAS to win there to open up the map to possible paths to 270 for him.  If he loses in Ohio, as the present polling would indicate, it's game over early on.

Romney's bad week has been the result of several things.  His first foreign trip was more or less a disaster as he offended the Brits by saying they might not be prepared for the election, offended Muslims across the world by saying that Palestinian poverty was the result of an inferior culture (no, that isn't taken out of context) and his campaign advisers offended the Polish by cursing at reporters during a trip to a sacred burial site.  In short, Romney looked not ready for prime-time on the world stage, and not appearing Presidential is an important defect for a challenger.

Also starting to move the polls is massive spending by the Obama campaign.  Ironically, after caving into the congressional Republicans to extend the Bush tax cuts for all incomes this year, Obama is campaigning hard on NOT extending the cuts again.  And it seems to be working.  You may call it cheap class warfare (and I have at times), but the theme of "Romney is an out-of-touch rich guy" combined with "the rich need to pay their fair share" and "Romney is a repeat of the Bush policies" are having a meaningful impact on the race.

Finally, the economic news has been relatively good.  It certainly hasn't been the V recovery that I had hoped for (and erroneously predicted) 3 years ago, but the stock market is double what it was then and we had another month of significant, although not stellar job growth.

Put it all together and Romney has some work to do after the Olympics to regain a solid footing in the race.  Things are certainly not insurmountable for him at this stage - after all a 3.8% lead can evaporate in a few days if the right events happen, but he has to be careful not to let this race get too far away from him given the strength of the coffers and strategy of the Obama campaign.

Game Changing or Safe VP Pick?
Romney's inability so far to close the gap has many among the GOP faithful calling for a bolder pick for his VP.  Rob Portman and Tim Pawlenty are the two heavy favorites for the nod and both represent very safe picks - unexciting but unoffensive soldiers who possess solid, but not radical, conservative credentials and would widely be seen as qualified to be President on day one.

The call is for a pick like Marco Rubio or Paul Ryan, Rubio for his youth and the energy of support for him from the Tea Party, Ryan for his conservative budget credibility, something which could be a big help for Romney, who has struggled to articulate any kind of cohesive economic and budget philosophy.

My bet is still on the safe picks and probably rightly so.  I've made this point before, but it bears repeating - I cannot think of a single winning Presidential Candidate who won because of his VP pick.  VP picks generally can only hurt not help, so the first principle should be to do no harm.

Pawlenty seems like the best choice of the bunch.  Outside the beltway, conservative but mainstream, has run things and therefore buttresses the Romney argument of executive experience.  And he is not at all gaffe-prone.  But it's Romney's call, obviously, and how and what he decides will be our first big reveal into how he might govern.

If you like this site tell your friends.

The Wholly Ridiculous Perry Tax Plan, Did Tim Pawlenty Bow Out Too Soon?, Deficit Plan PR Wars

A Very, Very Bad Plan
There are some things to love about the concept of a flat tax.  Our current income tax system is overly complicated, causing a huge cost of enforcement, large scale fraud (or at least graying of the tax law) and places an efficient time and financial burden on tax payers.  A true flat tax, that eliminated all the itemized deductions and at least carved out an exemption for the first $20K or $30K of income (so we aren't taxing working class people into poverty) would probably be preferable to our current system, particularly if it was structured to encompass existing payroll taxes.  It has the drawback of, on face, making the system less progressive, but the reality is that our existing code really is regressive in many cases, because of the myriad of tax credits and deductions that distort the stated rates.  Besides, by exempting, say, the first $30K in income and setting a tax rate of say, 20%, the progressive nature of the code would be preferred, since a wage earner of $30K would pay an effective rate of 0%, an earner making $60K would pay an effective rate of  10% and an earner making $150K would pay an effective rate of 16% and so on.

So shouldn't I love Rick Perry's plan that applies a flat tax of 20% and exempts the first $12,500 in income for individuals?  Absolutely not.  Perry's plan combines all of the worst drawbacks of a flat tax while gaining none of the advantages.  His plan lets taxpayers CHOOSE between the existing system and his new system.  This means that all of the loopholes and carve outs stay for those who benefit them.  It doesn't get rid of the cost of enforcement, since any number of taxpayers may continue to pay under the old system, if it benefits them.  It doesn't reduce the burden on taxpayers for preparing their returns, since you would need to do your taxes both ways in order to determine which one was more beneficial.  Even in the "flat tax" option, it leaves carve outs to deduct state income taxes, charitable deductions and home mortgage interest. 

Worst of all, it would amount to a massive decrease in federal revenue.  How can I be so sure?  Think about it.  If I have an option between the old system and Perry's new system, which system would I choose?  The answer, of course, is the one under which I pay less taxes.  There would be no taxpayers that would pay more...and many who would pay less (those who would owe less under Perry's new system.)  It's simple math that you can't have no one pay more and lots of people pay less and not collect a lot less.

Worse still, Perry eliminates taxes on capital gains and dividends, meaning he is effectively not taxing the investing class and relying entirely on taxes on wages.  This makes the system massively more regressive than our existing system.

This is a far inferior system to Herman Cain's 9/9/9 plan, although that has flaws too, which I have previously discussed.  It is completely unserious.  He has absolutely zero in specific budget cuts to offset the revenue, instead only a broad statement that he wants to get federal spending down to 18% of GDP.  Even if that were possible without either massive cuts to military spending or serious changes to entitlement programs (one of those two would be necessary), to get to a balanced budget at 18% of GDP, we'd need Clinton-era tax levels, not rates even lower than the ones today.

It's fine to believe in lower taxes.  But lower taxes should be a byproduct of lower spending.  So if you want to cut taxes by slashing Social Security, Medicare or Defense, then say so.  There is no free ride.

Shame on the conservative blogosphere for embracing Perry's plan.  A flat tax debate would be a great debate to have in this country.  But let's debate a real plan, not a PR gimmick.

I probably shouldn't waste much more digital ink on Perry.  Between this and his ridiculous identification with birthers this week, I think he is pretty well done as a national candidate.  Frankly, I think GOP primary voters were done with him even earlier.


Where is Tim Pawlenty When You Need Him?
75% of the GOP seems to want someone other than Mitt Romney to be the nominee, judging by his stuck-in-neutral poll numbers.  Perry has effectively flamed out.  Michele Bachmann's brief surge is a distant memory.  Herman Cain looks unready for the national stage on many levels.

If he were still in the race, wouldn't Tim Pawlenty seem like a logical guy to go to?  Sure, he once supported Cap and Trade.  But his conservative bona fides are a heck of a lot better than Romney's and Pawlenty has the credibility of a successful governor.  Does anyone else think he would be a player if he hadn't dropped out so early?

A Tax Increase by Any Other Name...
The PR leaks around the deficit reduction super committee's work are coming fast and furious (perhaps a bad term to use after watching Janet Napolitano get grilled this week over the botched operation by that name.)  First, the Democrats leak that they had proposed a $3 trillion deal that included significant entitlement cuts but also significant tax increases.  Now the GOP leaks a $2 trillion counter proposal that contains a lot of the same cuts, but no tax increases, although it has some enhanced revenues from increased federal fees.

At least they are talking and passing specific proposals back and forth, but it seems like we are at the same log jam - the GOP simply won't accept higher taxes, no matter what.

How about some creative solutions to get to a solution that both sides can stomache?

How about a proposal that tax the cuts, doesn't raise taxes now, but includes a poison pill that would have tax increases kick in in 2013 or 2014 if the deficit isn't brought down to x% of GDP by those years?  The GOP still controls the House, so they could argue that they aren't really voting for a tax increase since they won't let spending drive deficits that high.  And Democrats could claim victory in that they kept tax increases on the table but just pushed them out to later to help the weak economy.

Some type of creative compromise will be necessary to get something on the table that can pass.  We'll see if the super committee is up to the task.

Bachmann Wins Straw Poll, Perry In, Pawlenty Out

Bachmann Beats Back the Ron Paul Machine
Ron Paul has a knack for good showings in straw polls, a fact evidenced many times over his previous attempts at running for President. His support base is obviously a minority of the Republican party, but they are highly enthusiastic, show up and Paul is always well funded. So it is not insignificant that Michelle Bachmann was able to show up as a Presidential newbie and beat Paul in the Ames Iowa Straw Poll, the first official test of GOP Presidential candidates in Iowa.

Front-runner Mitt Romney had basically not decided to participate, probably a savvy move since he was not going to win either the straw poll or the Iowa caucuses, which cater to the more conservative wing of the party. His strategy is to dominate the more moderate New Hampshire primary and ride that win to national victory.

Jon Huntsman was also not in the game, as an even more moderate candidate than Romney. His strategy is...well...I'm honestly not really sure. He has no shot that I can see against Romney in New Hampshire and will get swamped by the right wing in conservative states like Iowa and South Carolina. But I digress.

The results of the straw poll were as follows:
Michelle Bachmann -- 29%
Ron Paul -- 28%
Tim Pawlenty -- 14%
Rick Santorum -- 10%
Herman Cain -- 9%
Rick Perry (Write-In) -- 4%
Mitt Romney -- 3%
Newt Gingrich -- 2%
Various Others -- 1% (Jon Huntsman - 0.4%, Thaddeus McCotter 0.2%, etc.)

These results solidify Bachmann's standing as the Tea Party alternative to the more mainstream Romney, but she has to look over her shoulder at Rick Perry, a Tea Party darling who has actually governed.

So, in my book the winners are:
Bachmann -- solidified as a legitimate candidate.
Paul -- encouraging enough to him to keep running (although he has no shot at actually getting the nomination.)
Santorum -- 10% means that the underfunded Santorum will keep getting invited to debates although I give him zero chance of getting the nod.
Cain -- similarly, a 9% showing makes him a legitimate alternative, but again, with no chance of the ultimate prize

The big losers:
Pawlenty -- staked his campaign on a win in Iowa (more on that in a second.)
Gingrich -- it is obvious at this point that the conservative establishment Republican delights neither conservatives nor the establishment. He should probably drop out, but I think he is enjoying the stage.
McCotter -- okay, he wasn't getting invited to debates anyway. But betting your whole campaign on Ames and getting 0.2% is pretty pathetic for the a guy who actually holds elected office.

Perry Gets In
Rick Perry will be THE subject of the next Republican Presidential debate on September 7th. And he is instantly in the top 2 candidates. He brings to the race an unblemished economic and social conservative and a great economic story in Texas. His liabilities will be that he is far less polished and likely not to be as strong a debate performer as front-runner Mitt Romney and that he has expressed some views in the past that would be huge liabilities in the general election, including expressing potential support for Texas succession (although if you read the actual quote, it is less extreme than it is usually represented, but still bad) and a very absolutist view on social and religious issues.

His candidacy clearly hurts Michelle Bachmann as he is a more polished and accomplished representative of the same basic points of view. Bachmann inspired early and is still in the game with the Ames win, but it gets harder and harder for her, with the race looking a lot like a mainstream New England moderate pitted against a southern conservative, a classic GOP civil war.

Pawlenty Out
Recognizing the reality on the ground, Tim Pawlenty is exiting stage left. It's a shame, in a way. Pawlenty had a great record as a moderate governor of a purple state. He was smart and accomplished. But Pawlenty never established a core constituency, moderates were already aligned to Romney and conservatives far preferred Bachmann or Perry. Pawlenty bet the farm on the Ames poll, and after not being able to crack the top 2, exiting stage left this morning.

This is a three-way race between Romney, Perry and Bachmann at this point. The others will make a little noise, Paul with libertarians, Santorum with social conservatives and Cain with the populist talk-radio crowd, but none can win the nod.

Lots more debates and lots of time to come. Heck, Sarah Palin could even get in (although I'd advise against it, I think she'd get rolled against this field.)

Let the games continue.