The 2012 Race Is On, Obama's Approval, Iraq Withdrawal and Bipartisanship

2012 Race -- Let's Get It On!
So, I know this is unfair. President Barack Obama has been in office a mere 40 days -- just 2.7% of his term. We haven't even issued a report card on his first 100 days yet. But heck, this site is called Electoral Vote Predictor and let's face it, with Gov. Bobby Jindal's (R-LA) response speech to the President's address ot a joint session of congress (by the way, if anybody knows why this was not a State of the Union Address, please e-mail me and let me know as I can't find any constitutional reason why it wasn't as the constitution dictates no schedule for State of the Union Addresses), the 2012 race is on.

Here is our first poll results from CNN/Opinion Research on the 2012 Republican Nomination:



Okay -- so clearly the best known politicans in the Republican Party (Palin, Huckabee and Romney) head the list early -- this poll probably underestimate's Jindal's potential (as it does other potential 2012ers such as Gov. Tim Pawlenty (R-MN)), but it probably means more for the Republican Party than it would for the Democratic Party. Republicans, as I've written in the past, have a much greater tendency to nominate the "next guy in line" than do the Democrats.

Think back to the past few cycles and who the non-incumbent nominees were:
1976
Democrats Nominate: Jimmy Carter
Background: A virtually nationally unknown Governor from Georgia

1980
Republicans Nominate: Ronald Reagan
Background: Well known Governor of California who had previously run for President and even received a protest electoral vote in 1976

1984
Democrats Nominate: Walter Mondale
Background: The Minnesota Senator was known reasonably well to political insiders, but not well known nationally.

1988
Republicans Nominate: George Bush
Background: Universally known sitting Vice President, 1980 Presidential candidate
Democrats Nominate: Michael Dukakis
Background: Governor of Massachussetts, well known in New England and the Northeast with limited national awareness

1992
Democrats Nominate: Bill Clinton
Background: Nationally unknown Governor of Arkansas

1996
Republicans Nominate: Bob Dole
Background: Long-standing Senate Majority leader and former Presidential Candidate (in 1988)

2000
Democrats Nominate: Al Gore
Background: Unviersally known Vice President
Republicans Nominate: George W. Bush
Background: Governor of Texas, member of one of the most famous American political families

2004
Democrats Nominate: John Kerry
Background: Long-standing Massachussetts Senator, somewhat known nationally

2008
Democrats Nominate: Barack Obama
Background: First-term Illinois Senator, known nationally for 2004 Democratic Convention speech
Republicans Nominate: John McCain
Background: Perhaps the most-known Senator in the country, former Presidential candidate (from 2000)

As you can see, Republicans have, since 1976 (and further back if you recall Nixon, Eisenhower, etc.), generally nominated very well nationally known politicans.

By this measure, it appears at this point highly likely that the nominee will be one of the top 3 candidates listed in the poll (Palin, Huckabee or Romney.)

Let's analyze the strengths and weaknesses of each, as well as Jindal:
Gov. Sarah Palin (R-AK)
Strengths: Likeable, very popular in Alaska, reformer record, attractive, strong support from right
Weaknesses: Ghosts of 2008 -- questions linger about her intellectual horsepower and whether she harmed McCain's run, no foreign policy experience

Former Gov. Mike Huckabee (R-AR) Strengths: Extremely funny, superb interviewer and debater, excellent campaigner, social issues credentials with the right
Weaknesses: Economically more liberal record, extreme conservative views on issues like evolution

Former Gov. Mitt Romney (R-MA) Strengths: Smart, attractive, well-spoken, business cred, good record in Democratic state
Weaknesses: Major flip-flops on social issues, displayed a bit of a mean streak in the primaries, Mormon faith could be a risk

Gov. Bobby Jindal (R-LA) Strengths: Popular governor, great personal story, conservative credentials
Weaknesses: Looked foolish in refusing stimulus money, then accepting 98% of it, very flat appearence on national stage last week.

In all, my money is on Romney if he makes another run. If economic issues are the order of the day, then a guy with economic cred would seem like the way to go and conservatives by and large seem to not be concerned with his flip-flops on abortion, gay rights and gun control.

But we are a long way off and given the carnage that has hit the Republican Party the past few years, I wouldn't be totally surprised if they go a completely different path from the past 30 years and pick a man or woman who is not well known, such as Pawelnty.

Tracking Obama's Approval 40 days in, Obama continues to post strong numbers. A sample-weighted composite of all opinion polls shows him with a 39% approval - disapproval rating (0% would be neutral approval.) While there has been some erosion from the huge numbers he was posting immediately after the innauguration (+56%), it has been in the 39-44% range since January 27th (since his the post-innauguration high wore off) and is well ahead of the 7.2% he won the election by in November. You expect in a President's first 100 days for him to show pretty well, as people tend to root for a new President to succeed. These numbers will obviously fall off as President Obama handles contentious issues such as Health Care, Cap and Trade and the budget. But this clearly shows why he is pushing so much, so fast -- he has the wind at his back in terms of public support and he will probably never have another opportunity this strong to get major legislation passed.

Note: I am using the same methodology for this poll that I used for tracking the national results in the 2008. I correctly and exactly predicted Obama's national margin of victory at 7.2% in the final count, so I'm very confident in the methodology (we did slightly less well in the state-by-state picks, where less data were available, correctly predicting 48 out of 50.)

Iraq Withdrawl & Bipartisanship
President Obama this week announced his plans to withdraw combat troops from Iraq by August 2010. This is notable for several reasons:
(1) It is 3 months later than his campaign promise
(2) The President announced his intent to leave 35,000 to 50,000 "non-combat" troops for support beyond this timeframe. The agreement with the Iraq government requires all troops to be gone by the end of 2011.

This is, ironically, probably not that different from what a John McCain Iraq plan would have looked like. In fact, Sen. McCain (R-AZ) stated initial support for the plan outline, while many congressional Democrats are outraged at the slow pace.

What did we expect? Obama left Robert Gates in place at Defense and has been adjusting course with input from the Commanders in Iraq.

Calm down, Dems -- we are getting out of Iraq -- don't fret over 3 months. And don't fret over some trainers for the Iraqi government left behind. We wanted to get out, not to kick the roof in on our way out.

This issue shows the interesting thing about this concept we have been talking about called "bi-partisanship". Republicans do what Republicans do -- they support the President when he takes more conservative positions and oppose him when he takes more liberal positions, vice versa for Democrats. So, the only ways we achieve "bi-partisanship" is if we compromise in the center, as Bill Clinton did on welfare reform. There is potential for this on issues like immigration reform and education, but let's face it, Republicans are not going to support universal healthcare or cap and trade. They aren't supposed to. They are Republicans.

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President Obama's Amazingly Ambitious Agenda, Is Bobby Jindal Ready for Primetime?, Solis Confirmed, Locke a Lock, What the Stock Market Means

President Obama's Ambitions
By any account, these are tough times. The economy has been plunging for at least 8 months and possibly as many as 15 months, depending on what measure you look at. The Federal Government is headed towards the highest deficit since World War II. It would seem like a logical time for the President to be dampening expectations. Not President Obama.

First a comment on the speech itself. It was an amazingly well put together and delivered speech, as we have come to expect. Even by his high standards, it was strong -- better than both his convention speech and innaugural speech, in my opinion and on par with the 2004 Democratic convention speech that vaulted him to the national stage.

Now, on to the content. Talk about an ambitious agenda! By my tally, Obama committed to:
(1) Universal Health Care in the first year of his administration
(2) Cap and Trade, also in year one
(3) Increased investments in Green Energy
(4) Increased investments in Education
(5) Tax increases on those making over $250K / year
(6) Cutting the deficit in half by the end of his first term

Oh yeah -- and we are going to cure cancer!! (no joke!!)

Can he possibly get all of this done? #1, #3 and #4 will be very costly, particularly #1. Cap and Trade could be structured to be a big gainer in revenue if it is structured as a government auction for carbon credits. Clearly tax increases on those making over $250K per year will also raise revenue. But these two things will be insufficient to fund the just-passed stimulus bill, the next phase of TARP and do #1, #3 and #4. Very insufficient. More cuts or taxes will be needed.

To that end, Obama talked of:
(1) Reducing farm subsidies
(2) Reducing military spending on Iraq and cold war-era weapons

He stated in his speech that his team has already identified $2 trillion in potential cuts although it was unclear over what time period that number referred. If Obama is serious about taking on farm subsidies, one of the worst forms of corporate welfare in existance, I'm all for it. But he'll run into a buzzsaw from rural Senators of both parties. He can allow the Bush tax cuts to simply expire in the 2010 tax year. Sources indicate he plans to present a plan to be out of Iraq by mid to late 2010. But I still am having trouble with the math. I will need to see the details of his plan.

Regardless, President Obama has set a high standard against which he will be measured in year 1 and the balance of his term.

A great speech, an ambitious agenda -- now he must deliver. Oh yeah, and a Health and Human Services Secretary would help if the President is serious about getting Universal Health Care done this year.

Jindal Falls Flat
Clearly Gov. Bobby Jindal (R-LA) was given the role of response to President Obama's speech by the Republican Party because he is a rising star, a potential 2012 candidate and a successful Republican Governor, the only area where Republicans have been succeeding as of late.

Gov. Jindal had a very tough task. Following one of the great orators of our time, who had a live audience and the trappings of the office of President was going to be a very tough task to meet.

Even in that context, I found most of Gov. Jindal's speech very flat. Hurricane Katrina is an example of private industry trumping government intervention? Can we have the $50 billion that the Feds have spent in your state? How exactly would Katrina reconstruction have looked like funded from private industry?

Stylistically, I also felt a little for the first half of the speech like I was being treated like a 5-year-old.

I don't mean to be too tough -- Gov. Jindal has a very compelling personal story, has been a successful governor and is probably the closest thing the Republicans have to a true star that they could run in 2012. But he has a long way to go to hold the stage with Obama. This falls well short of many politicans national "coming out" -- think Sarah Palin's convention speech last year or Obama's 2004 speech.

Solis Confirmed
Down to 2 cabinet vacancies (Commerce and HHS.) Hilda Solis was finally confirmed yesterday. The vote was right in the range I had predicted (I've been doing pretty well of late in reading the likely vote totals) with a strong 80-17 margin supporting approval. Voting for Solis were all the Democrats, both Independents and about half of the Republicans (including both moderates like Sen. Collins and Sen. Specter and conservatives like Sen. Cochran, Sen. Grassley and Sen. McCain.) Conservatives had some abrehension about Solis' liberal views on labor and had raised questions about back taxes from her husband's business. But this was a fairly resounding vote of confidence.

Gary Locke for Commerce
Third times the charm at Commerce? After having both Bill Richardson (for ethics investigation concerns) and Judd Gregg (for philosophical differences) withdraw from the Commerce seat, President Obama is hoping former Washington Gov. Gary Locke for the seat.

Locke is not a well-known national figure. He was the first Chinese-American Governor in the US, who had a largely moderate record on fiscal matters during his terms from 1997-2005. He is a Yale-educated lawyer with little private industry experience.

Locke appears to be a qualified candidate who will have a clean and quick nomination. But I wish that President Obama had selected someone with more of a private industry background for this key post.

No word yet on an HHS pick. Sebelius still appears to be the lead pick, although I don't believe an internal decision has yet been made in the administration.

What Does the Stock Market Mean?
The stock market hasn't been doing so well lately, as anyone who has opened a 401K statement or watches the news knows.

Since last May, the S&P 500, the measure of the market value of the 500 largest companies in the US and broadly considered the bellweather of the overall market, is down 47%. The market had been declining since May and hit a low point last November before slightly rebounding. That rebound has been lost again and the S&P is down again near its November lows.

So what does all this mean about the economy?

Contrary to common belief, the stock market is not a measure of current economic conditions. It is a measure of the market's collective belief about present AND future economic conditions. It is what traders believe is the future earnings that will come from the companies traded. Therefore, it tends to be forward looking.

In December, when the market rallied back some, it showed some hope on the part of Wall Street that the recession would be relatively short and the economy would rebound. Of late, those hopes appear to have faded and the pessimism of last fall has returned. The stock market generally leads the economy out of recovery, so this means the collective wisdom is that we are more than 6 months away from the start of the recession recovery.

The good news is that the market can be wrong. Let's hope it is. But brace yourself for things to get worse before they get better. But get better they will. Fundamentally, the US still has the world's most productive workers and a well-functioning currency system. We are just paying the debts we ran up over the last 20 years and it may be painful for a while.

Incidentally, because it is a forward-looking measure, stock market changes over a President's term are actually a good gauge of a President's economic performance. It is imperfect, because, as I said, the market can be wrong, but it is more accurate than looking at economic growth figures as those include things set in motion before a President takes office and excludes the impact of things a President sets in motion after he leaves.

In a future blog, I'll examine the stock market performance of the Post-World War II President's. President Obama's performance so far on this measure? Not good so far -- but it is too early to tell -- his policies haven't taken hold yet and the market is guessing at this point.

Let's hope great speeches translate into bold and successful action.

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Are We Headed Towards Socialism? A Fact-Based Look

It's been a relatively slow news cycle the last couple of days with congress on vacation. Rather than continue discussing Eric Holder's remarks or look at Hillary Clinton's trip to China, I thought we'd take a look at a common theme being drummed up by conservative commentators -- that this country is on a path to socialism.

It's an interesting question, so I thought we'd take an in-depth look at federal expenditures over time. Let's start by analyzing the basics -- what the government spends money on. The graph below shows the breakdown of Federal spending for 2008.

Our top two areas of expenditure -- both at 21% of the budget are Defense and Social Security. Defense spending, while a huge portion of the overall budget, is actually at a relatively historically low level. Since the Vietnam war, Defense spending has averaged 5.0% of GDP. It peaked in the height of the Cold War in 1986 at 6.2% of GDP (remember all of Reagan's initiatives to beef up our defense as part of the arms race that some contend ultimately bankrupted the Iron Curtain.) It's low point was at 3.0% of GDP from 1999-2001 -- remember the "peace dividend" that Clinton spoke of in his years. Clearly our wars in Iraq and Afghanistan have beefed up military spending significantly, but at 4.3% of GDP in 2008, it is below its historical average.

Social Security, on the other hand, has been a relatively constant expenditure. In the past 40 years, it has averaged 4.2% of GDP. It peaked from 1992-1994 at 4.6% of GDP, it stands at 4.3% of GDP today. The data are actually fairly surprising, given that there has been much talk of the growing cost of Social Security -- when, in fact, it has not really grown much over the past 40 years, relative to the size of the economy.

Our next two blocks of budget, at 16% of the budget each are Domestic Discretionary and Medicare. Domestic Discretionary incorporates all non-entitlement domestic spending -- things such as education, infrastructure, etc.

Domestic discretionary spending is in line with historical averages for the past 40 years, standing at 3.4% of GDP, versus an average during that period of 3.5% of GDP. Spending peaked in 1978 at 4.8% and was lowest in 1999 at 3.0% following welfare reform.

Medicare, on the other hand, is at its highest level ever at 3.2% of GDP. It has steadily grown over the past 40 years from 0.7% of GDP 40 years ago to today. Overall rising healthcare costs have been a major contributing factor, as was the Bush prescription drug benefit, with costs rising 50% in the 8 years of the Bush administration alone.

Those 4 spending categories account for 74% of spending. The other categories: Medicaid, Unemployment Benefits & Food Stamps, Disability Benefits, Other Entitlements and Foreign Aid are all small.

So, from a budgetary perspective, we can see that most categories have been relatively stable over the past 40 years, with the exception of Medicare, which has seen a cost explosion. Clearly a future budgetary issue that we aren't talking about today.

But the claim of Socialism probably has less to do with WHAT we are spending money on vs. HOW much we are spending.

So what is Socialism, anyway? There is no firm definition, but the primary implication is that it is government control of the economy, although less so than Communism.

So, let's establish a rough scale:

If government spending is at 0% of GDP, we have anarchy as we have no government.
A purely capitalist system, with only Defense and a small amount of law enforcement covered by the federal government would involve 5-10% of GDP.
A "protected" capitalist system, where we have a social safety net for retirement, unemployment, health care, etc., would involve 10-15% of GDP.
Spending above 15% of GDP largely involved government involvement in areas like education, commerce, etc.

So when do we become "socialist"? My best definition would be that for the government to "control" the economy, it would need to account for the majority of economic activity, or in other words, comprise > 50% of GDP.

A purely communist system would involve the government accounting for 100% of GDP.

So, where have we ranked at what track are we on?


As you can see from the graph, we have been very steady in the past 40 years, with government spending moving between 17% and 23% of GDP. We are right near the center of that range today, at 20% of GDP. Spending peaked in 1986 with the Reagan defense expansion and was at its low point in 2000 following Clinton's welfare reform and peace dividend.

So we are a LONG way from being socialist.

But will Obama take us there? The $780 billion stimulus package, spread over approximately 3 years, will tack on about 2% of GDP. The second half of the bank bailout, assuming it is all spent in one year, will add another 3% of GDP. So, we could easily see 2009 expenditures in the 25% of GDP range, at the high foor the last 40 years. Universal healthcare could add more if, in fact, we see a bill in the next couple of years.

But the bank bailout certainly and the stimulus bill probably are temporary measures. I doubt we are on track to hit the 50% mark in the Obama administration. But the real test will be when President Obama unveils his budget proposal on Tuesday. He intends to present a 4-year plan, so we'll see what will happen to expenditures.

The bottom line is that I seriously doubt discretionary spending will lead us to socialism. It represents too little of the budget. Keep in mind, based on overall spending, Reagan was the most "socialist" President of the past 40 years, Clinton the most "capitalist".

But fundamental structural changes are happening to our economy in this recession. We'll have to stay posted and see what Obama unveils.

Site Update
Since adding a site traffic counter on January 24th, this site has received 345 hits or an average of about 12 visitors per day. That's great for a site that posts no advertising and has been spread entirely by word of mouth.

Keep sharing the word and tell your friends about this site and as always, I invite you to join in the dialogue.

I'll keep you posted with site statistics as time passes. I expected that we will peak closer to elections.

Our Ailing Economy, The Totally Predictable Burris Woes, Holder Speaks Out

The Economy is the Pits, The Government Acts, We All Hope it Works
The economy continues to struggle and there is finally some movement on the governmental front. Wall Street is not impressed, at least not yet, with the major indices now down again near their November lows, which are 40 to 50% off their highs of just 12-18 months ago. Indications are that unemployment will be up again in February, although the rate of increase may have slowed modestly from the past two months. Bottom line, it's still getting uglier out there.

On Tuesday in Denver, President Obama signed into law H.R. 1 The American Recovery and Reinvestment Act, a broad and sweeping spending and tax cut bill designed to both jump start the economy and invest in infrastructure. Conservative voices view this bill with a high degree of skepticism, to put it mildly. The President and congressional Democrats (and a small group of Republican Senators) insist it is the medicene we need.

So will it work? Nobody knows for sure. I'm not impressed with the tax cuts in the bill -- our experience last year is that in a credit crunch, tax refunds are more inclined to be spent on paying down debt than on consumer spending, which will not have a stimulative effect. The silver lining in these tax cuts is that they are fairly targeted at lower income individuals, who will likely be more inclined, out of necessity, to spend the money quickly. Regrettably, the most expensive provision, the revision of the Alternative Minimum Tax at a price tag of $70 billion, impacts mostly upper-middle class individuals and will likely have no stimulative impact.

The spending in the bill is a mix of things which may stabilize but will likely not improve the economy (direct aid to states), things which could have a very positive impact (infrastructure and alternative energy spending) and things that will not have an immediate impact (over half of the spending will take place after October.)

This bill is far better than nothing but far from perfect. By itself it is not enough, but I believe it will help some.

The second, and probably more important pillar of Obama's economic policy, his plan to stem mortgage foreclosures was unveiled by Obama himself today. Obviously, Tim Geithner has been shoved to the background after his poor performance in his first public event last week. Obama's plan invest $75 billion in aid to allow banks to renegotiate payments on troubled mortgages and restructuring underwater homes. This is a good plan and with a lot more detail than Geithner shared last week. It is also not enough -- we will need a solution to the banking crisis to deal with more than the immediate concerns.

Also back on the front-burner is the auto industry with GM and Chrysler asking for an additional $21.6 billion in federal aid and promising to layoff 50,000 workers. Does that sound like a good deal to ANYONE? I was very skeptical about the first auto bailout and I'm even more skeptical now. GM and Chrysler do not have sustainable business models, are burning through cash at a dizzying rate and keep coming to the table to ask for more money. I hate to say it, but former President Bush may have been right, an orderly bankruptcy may be the best option here. I think there are only two real options here: nationalize GM and Chrysler (Ford will likely survive on its own) or let them restructure in bankruptcy. Would it mean more unemployment if we let them go Chap 11? Yes. But it may just be pulling the band aid off quickly and dealing with what is inevitable.

Blago's Senate Pick a Perjurer? Say It Ain't So!
It appears our new friend Sen. Roland Burris (D-IL) may have lied to investigators about conversations he had with Gov. Rod Blagojevich's brother Rob about potential quid pro quos around campaign contributions in exchange for the Senate seat. You didn't really think Blago picked Burris without asking for something in return, did you?

No evidence yet that Burris agreed to such an arrangement, but it may not matter. If Burris perjured himself in such a high-profile corruption case, he should go. Blago never should have appointed President Obama's Senate replacement in the first place, although as I said earlier, once he did, there was really no constitutional choice but to seat him. If he turns out to be a felon, there will absolutely be a constitutional choice to expel him from the Senate.

Burris loudly attests his the charges to be false. We'll see.

Good ol' Blago, the gift that just keeps on giving.

Holder Speaks Out
Attorney General Eric Holder, in his first widely publicized speech commemorating Black History Month stated: "Though this nation has proudly thought of itself as an ethnic melting pot, in things racial we have always been and continue to be, in too many ways, essentially a nation of cowards."

I must admit that when I first heard these remarks, they struck me as slightly odd. We are a nation that has just elected our first African-American President by a fairly wide margin (including wins in former slaves state such as Virginia and North Carolina.) We had a profound dialogue about race just last year when the specter of Jeremiah Wright reared his ugly head. Holder stated in his speech that there is an unwillingness to openly discuss racial issues.

I disagreed with Mr. Holder when I heard his remarks.

Then I looked more broadly. Neighborhoods, schools and churches are largely still segregated in this country. There is large-scale segregation in socialization.

These facts are not true for many people -- but they ARE true for many more.

Mr. Holder's remarks don't strike me, on further reflection, as an indictment of white America. It is an indictment of our lack of dialogue, black, white and other. I don't buy Mr. Holder's worldview wholescale, but I think anything that provokes us to have this conversation is probably a good thing.

Stimulus Passes -- Signing Likely Monday, Solis Nomination Moves Forward, The DC Voting Rights Act

Stimulus Passes
The biggest single piece of legislation that President Obama had targeted in his first 100 days is now slated to become law Monday, as both the House and the Senate passed his stimulus package Friday.

In the House, as with the first round of this legislation, no Republicans voted for the package. 97% of Democrats supported it with 7 Democrats voting no and 1 Democrat (Rep. Lipinski) voting "present". In total, the final vote was 246-183-1 (1 present vote.)

In the Senate, with Ted Kennedy back recovering in Florida, there was zero margin for error. The bill needed 60 votes to survive a procedural point of order on emergency legislation. Harry Reid kept the voting open for a full 5 hours to allow Sen. Sherrod Brown (D-OH) to fly back from his mother's wake on a plane chartered by President Obama to cast the 60th vote. The final role call was 60-38 with all Democrats and both Independents (Sen. Lieberman (ID-CT) and Sen. Sanders (S-VT)) voting in favor and joined by the same three Republicans (Sen. Snowe (R-ME), Sen. Collins (R-ME) and Sen. Specter (R-PA)) that brokered the original compromise. Recall from my earlier post that in the last congress, these were #3, #4 and #6 on the most moderate Senators list. They, along with other moderate senators like Sen. Lugar (R-IN) and Sen. Voinovich (R-OH) will likely be crucial in future legislative compromises to break fillibusters.

President Obama intends to sign the bill into law on Monday.

So, in his first month in office, Obama will have signed a 57% expansion in children's health insurance, a strong anti-gender discrimination law and this bill, the largest single expansion of government spending since the Great Society. In addition, he has issued major executive orders around government transparency, contracting and treatment of prisoners. Not a bad start, if it weren't for the mess his cabinet selection has been.

Solis Labor Nomination Moves Forward
Also this week, the nomination of Rep. Hilda Solis (D-CA) to be Labor Secretary moved out of committee in the Senate with only 2 Republicans voting "nay". A cloture vote on her nomination is scheduled for the middle of the week after next, and all indications are that she will win confirmation with probably only around 20 "nay" votes in the full Senate. Her nomination had been held up by Republicans who disliked her liberal views on labor and asked questions around lobbying activities and her husband's business taxes.

This still leaves Obama with two major vacancies in his cabinet -- Health and Human Services and Commerce. HHS he has yet to announce a replacement for Tom Daschle's withdrawn nomination. In Commerce, he has to try a third time after both Bill Richardson and Judd Gregg withdrew.

Obama mind as well take a little time at this point. Congress is on its President's Day recess until February 23rd, so he can take next week to make his new picks and announce them. I'm sure at this point, Obama just wants to get his team in place and move on.

The DC Voting Rights Act
Also on the congressional docket the week after next is the DC Voting Rights Act which would give Del. Elanor Holmes Norton (D-DC) full voting rights in the House of Representatives.

Let me lead off by saying that I think it is a silent crime that Washington DC is subject to federal income taxes and has no voting representation in congress. Territories such as Puerto Rico, Guam and the U.S. Virgin Islands also have no representation, but it is largely by choice as they do NOT pay federal income taxes. Taxation without representation is a fundamental underpinning of our government and to have half a million people in the seat of the DC government without voting representation is awful.

Having said that, the DC Voting Rights Act is clearly unconstitutional. The constitution stipulates that the seat of government cannot be a state and that only states can have Representatives in Congress. DC is entitled to electoral votes in the presidential election, thanks to 23rd Ammendment, but no such Ammendment has been passed surrounding congressional representation. Such an Ammendment should be passed out of basic fairness to the people of DC, but until it is, the DC Voting Rights Act is unconsitutional and will likely be struck down by the courts.

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Gregg Withdraws, Geithner Bombs, No Room for Error on Stimulus Compromise, Israeli Stalemate

Buy That Man Some Flip-Flops
Sen. Judd Gregg (R-NH), after actively lobbying both Senate Majority Leader Harry Reid and President Obama for the Commerce spot just a short couple of weeks ago, has suddenly and unexpectedly withdrawn his nomination. Sen. Gregg was gracious to Obama but basically said that he had realized that he couldn't be himself and 100% on board with the Obama administration.

Let's see: You saw his other nominees, you saw his stimulus package, you saw his proposals in the campaign and you still lobbied for the job and NOW you withdraw?

Graciousness aside, I think this reflects very poorly on Sen. Gregg and his judgement. I questioned his commitment to the administration when he insisted on a deal for a Republican successor and then recused himself from the stimulus vote. President Obama never should have appointed someone who had such ambivalence.

Which brings me to two central points:
(1) Bipartisanship has its limits
President Obama, attempting to keep true to his campaign themes, has made a lot of effort to be bipartisan. He appointed Republican Rep. Ray Lahood to Transportation Secretary. He retained Republican Robert Gates at Defense. He reached out aggressively to Republicans about the stimulus package. He broke bread with conservative commentators.

So why isn't all this working?

Because people join opposing parties for a reason. Republicans have a different governing philosophy than Obama does. Bipartisanship in the sense of seeking ideas broadly, listening to opposing viewpoints and trying to incorporate good ideas is a good way to go. Bipartisanship in the sense of giving the opposition veto power over your agenda is not. Obama needs to learn the difference.

Honestly, at least for the next two years, he doesn't need broad Republican support. He needs a few moderate Republicans to break fillibusters (expect Senators Specter, Snowe and Collins to have a lot of power in the months to come), but that's it. He should lay out his agenda, maintain dialogue and open communication with Republicans, but not count on or expect their support.

Incidentally, I'm extremely disappointed in the behavior of Republicans thus far. Remember a few years ago how Republicans were so righteous about the overuse of the fillibuster? Remember how they were even talking about abolishing it? Funny thing is, there wasn't even a question about whether they would fillibuster the stimulus package. Expect a lot more of that digging in.

The Republican problem is that they are likely to be on the wrong side of things come the next election. If the economy improves significantly by 2010 and 2012, do you really want to be in the group that tried to block the President's agenda?

Obama's problem is that it is starting to look like ameatur hour in the cabinet department. Richardson, Daschle, now Gregg. Solis nomination in limbo. Two key vacancies almost a month in with no resolution in sight. All will be forgotten if he gets his team in place, gets the stimulus legislation signed into law and puts forward a real plan around the credit markets by the end of his 100 days. But he is expending a lot of political capital putting forth and withdrawing nominees.

I think this development also puts Sen. Gregg cleanly in the crosshairs in 2010. He may not run, but if he does, he is likely to be target #1. This race probably rates as a toss-up now.

"My Treasury Secretary Will Present a Plan in Great Detail"
In his first big event as Treasury Secretary, following a bruising confirmation fight about tax indiscretions, Timothy Geithner absolutely bombed. Just the night before, in his primetime press conference, President Obama had committed Geithner with the quote above. It had been widely publicized for weeks that this was the day that Geithner would roll out THE PLAN for the remaining $350 billion in TARP funds. What we got was nothing close to that.

Geithner laid out some broad principles about how he believed the TARP money should be spent. He clearly had no detail and no functional implementation plan, only a vague promise that details would be developed in the weeks to come.

The market reaction was swift and severe -- the major indices lost in excess of 5% in the aftermath of his press conference, it's worst loss of the year.

Okay, 5% is not the end of the world -- after all, the S&P and Dow are both down about 40% since the recession began. But this is an ugly start for Geithner. I was left wondering, did we really just say a couple of weeks ago that we should overlook tax indiscretions because this guy is so brilliant? He looked like an academic hack.

President Obama desparately needs credible voices in his administration to be able to speak for him. He has been carrying all the PR load so far and that won't work. Geithner is the most critical of those voices with the economic needs being so pressing. Geithner MUST do better for the administration to be successful.

Zero Error Margin Stimulus
Since the Senate passed the stimulus package on Tuesday (with an identical 61 yea votes to the cloture vote), there has been rapid-fire bargaining to produce a conference report that can pass both houses -- most critically retaining at least 2 of the 3 Republican senators that voted for the bill on the first pass (Specter, Snowe and Collins.) Now we have word that due to his ongoing health concerns, Sen. Ted Kennedy (D-MA) will be unavailable for the final vote. What this means is that the bill needs all 3 of those Republicans to invoke cloture. But still has to retain enough of the content to keep all the Democrats on board. Add to this that the Republicans have expressed that they do not want to cast the decisive 60th vote (understandable, given likely primary challenges from the right), but it is tough to see another pass unless Harry Reid can win over another Senator -- want to make some amends, Sen. Gregg?

The deal that has been announced is a smaller bill than either the House or Senate version ($780B vs in the $820-$830B range) in part to appease those Republicans. Some Democrats are griping about some of the cuts, but they are likely to remain onboard.

The final text of the conference report is still being written, but it is likely to go to a vote in the House tomorrow -- expect a cloture vote in the Senate over the weekend. The Senate is rushing to get to its President's day break starting Monday and this one is likely to go down to the wire. It is another week's delay if it doesn't pass before the Senate adjourns.

I think the real hero in all of this is Senator Arlen Specter. Of all the supporters of the bill, he is taking the most political risk. He faced a tough primary challenge from Rep. Pat Toomey (R-PA) in 2004 and likely will face another in 2010. It would clearly be in his self-interest to vote against the bill, as he is a virtual lock to win the general election if he wins the nomination. But, he has taken a stand on principle and worked with Democrats to craft a compromise. As I mentioned in a previous blog, I voted for Sen. Specter in 2004 when I lived in Pennsylvania. Glad to have my vote validated and I am strongly inclined to endorse his reelection as well.

So what's in this bill anyway?
It's about 35% tax cuts, including a working tax credit of $400 for most individuals and $800 for most couples. There is a fix to the alternative minimum tax, which was originally designed to impact only high income individuals, but due to inflation and lack of revision, was slated to impact many middle income families. There are also first time home ownership tax credits.

Of the 65% that is spending, the highest categories of spending are: #1 Infrastructure, #2 Direct Aid to States, #3 Upgrading Public School Facilities, #4 Alternative Energy Investments and #5 Extension of Unemployment benefits.

Will it all work? I am hopeful but I don't know. But I know doing nothing surely won't. This is nothing resembling a perfect stimulus bill -- there is too much spending in out years and not enough money that gets quickly and directly into the economy. But it is a lot better than no stimulus and there are many components that will have an immediate positive impact on the economy.

Israeli Election Stalemate
Neither the right wing Likud party or the centrist Kadima party came anywhere close to winning the Israeli elections outright, meaning a coalition government will need to be formed for either to rule. It appears more likely than not that Likud, despite winning one less seat, will prevail, as the third place winner in the elections was the nationalist Beiteinu, who is more likely to join a Likud government.

Have right-wingers in charge in Israeli will make the middle east peace process a lot harder and likely further entrench the already perilous situation in Gaza.

Stay tuned.

It's Not So Bad, Mr. President
I've been pretty tough on President Obama over the last few weeks. I've criticized the continuing drama in his cabinet picks, his lack of early assertiveness on the stimulus bill and the poor performance of Tim Geithner. But, here's some perspective: Obama is well ahead both in terms of legislation and executive action of any of his predecessors. His start has been a lot less bumpy than Bill Clinton's (remember how Clinton could get a $17 billion stimulus package passed 3 months into his term?) and certainly more effective than either George W. Bush's or George H.W. Bush's.

So why all the criticism? Expectations are a lot higher this time. There is no time for OJT, we need action. Fair or not, Obama has to deliver. But he isn't off to a bad start -- he's just hit some bumps along the way.

Cloture in the Senate, Obama Speaks Out, Remarkable Poll Numbers, The Demonization of Smokers

Cloture Vote Succeeds
As was widely expected following the compromise deal struck with a few Republican Senators on Friday, the Senate voted 61-36 to block a Republican filibuster and move forward with a vote on passage of the stimulus bill, now scheduled for tomorrow. Voting in favor were every Democratic Senator, both independents (Sen. Sanders of Vermont and Sen. Lieberman of Connecticut) and the 3 Republicans that brokered the deal with Democrats (Sen. Snowe and Sen. Collins of Maine and Sen. Specter of Pennsylvania.)

This essentially ensures that the bill will pass tomorrow as everyone who voted for cloture is expected to vote for passage of the bill.

What remains is the House/Senate Conference that will have to iron out the differences in the bills the two houses passed. Passage of the conference report is virtually assured in the House, but the Conference Committee will have to be careful to craft something that can pass the thin super-majority in the Senate and retain the 3 Republican supporters (or at least 2 of them.)

Obama Speaks Out
A primetime news conference -- it has been a damn long time since I remember a President taking questions from the press in prime-time. Bush gave many prime-time addresses but saved the Q&A for mid-morning.

Obama was forceful, pointed and on-message. I wish he'd done this two weeks ago.

No major shockers, other than that the Washington Post would use it's one question to ask about A-Rod's steroid use. And that the Huffington Post has a seat at the table.

The Remarkable Obama Polls
President Obama retains remarkable public support three weeks into his administration, in spite of all the cabinet flubs and fighting over the stimulus package. While recent polls show different absolute numbers as the wording of the questions evokes more or fewer "unsure" reponses, Obama's ratio of approve to disapprove is at 3.3:1 in the latest CNN poll, 3.8:1 according to Pew Research and 2.9:1 according to Gallup. Suffice it to say, there are 3 people who approve of Obama for everyone 1 who disapproves. The only time I've seen poll numbers like this before are the first Bush during the midst of the Persian Gulf War and the second Bush immediately following September 11th.

As far as the stimulus is concerned, the ratio of support to oppose is at 1.5:1, according to the Pew poll, CNN had it pegged at 1.8:1.

While support for the stimulus is not as strong as support for Obama, both set of numbers are frankly overwhelming. Republicans had better hope for a long-run strategy, because in the short-run, they are battling a very popular president and a popular program from a position of weakness.

The Demonization of Smokers
I promised to write about this after discusisng how the expansion to the SCHIP program was funded by a 60-something cent increase in the federal excise tax on cigarettes. Opposing taxing smokers to fund children's health insurance is a tough sell. I'm a strong proponent of SCHIP expansion, just not the funding mechanism. This will no doubt make me very unpopular with a lot of my readers, but oh well.

Smokers today are demonized, taxed and outcast in American society in a way that we would never tolerate for obese people, alcoholics, stunt bikers or race car drivers. They are taxed insanely -- combined federal and state taxes in most states now amount to in excess of 100% on cigarettes. They are charged more for health coverage at work. They are pushed out of bars, restaurants, work places, casinos, hotels and in some place, apartments, beaches and city streets. They are banned from smoking in their cars with children. And again this year, they are being asked to pay more.

Let me talk about the primary arguments that anti-smoking advocates make for these laws and rules:
(1) Non-Smokers Represent 80% of the Population and Want Public Places to Be Non-Smoking
I don't doubt that this is the case, but this is a simple matter of letting the market work. You didn't have to outlaw smoking in hotels to get Marriott to go non-smoking, they simply had to assess the needs of their clients. Nor did McDonald's need a law to go non-smoking. The economics are simple -- if non-smoking is an important requirement for your bar, restaurant or hotel, don't patronize the places that allow it. What would have naturally developed would have been non-smoking establishments catering to non-smokers and smoking establishments catering to smokers. Everybody gets what they want.

(2) Non-Smokers Must Be Protected from Second Hand Smoke
Contrary to everything you have heard, the evidence on this topic is FAR from conclusive. Over 50 comprehensive studies on this topic have been conducted globally in the past 20 years. Of these, only TWO have shown statistically significant increases in smoking-related diseases for those inhaling second-hand smoke and ELEVEN have shown an actual decrease. This is hard to believe at first, with all the propaganda that has been put out. Penn and Teller did an excellent show on this topic a few years ago. Search the internet, read the research, draw your own conclusion. But read ALL the research, not just one or two cherry-picked studies.

(3) Smokers Deserve to Pay More Because They Cost The System More in Health Care
While there is dispute around the impacts of second-hand smoke, there is no dispute that smoking increases incidence of lung cancer, accelerates the onset of heart disease and contributes to a number of other serious health conditions. The best medical research that I've seen shows that for moderate smokers (1 pack / day), life expectancy is shortened by at least 3 and as many as 7 years.

But how does this increase costs to society? The diseases that smokers get early place a burden on the health care system, the argument goes. But everyone dies, and incurs medical costs when they do. Smokers don't die more, they just die SOONER. Everyone incurs medical costs when they die. But smokers earn less from pension funds, social security and require less years of Medicare on average because they don't live as long. It's morbid, but smoking SAVES society money.

Tobacco repression is a repression of the basic freedom of lifestyle choice that Americans have. We'd consider it repugnant to tax fat people, pregnant women and senior citizens extra, but they all cost more to care for. Singling out one social factor for excessive taxation because it is an unpopular habit is wrong. Excessive tobacco taxes are regressive as smokers tend to be less economically well off than non-smokers. It's easy to pick on smokers but wrong.

I welcome your comments as always.