The Voting Booth

Is 47% the Tipping Point for Romney?

2012-09-18T09:56:00.000-07:00

We are just a few weeks after a less than extraordinary Republican Convention missing the military but including a scene from "Old Man and the Chair" and a somewhat more energizing Democratic Convention showing why the Twenty-Second Amendment is the only thing that prevented Bill Clinton from a 3rd and perhaps 4th term. Most probably due to this difference in Convention outcomes (and probably unrelated to the release of the new iPhone 5, I think), President Obama now enjoys a roughly 5% gap in most popular opinion polls on the 2012 Presidential Election. Removing the undecideds for a moment (do they actually ever vote or do they just stay home on Election Day?), this would give us a roughly 53%-47% split in the popular vote should the election be held today.

That 47% number for Mitt Romney has unfortunately for him been echoed in what may well be the most damning words spoken by him yet. The webosphere is overwhelmed by articles analyzing Mitt Romney's claim that:

There are 47 percent of the people who will vote for the president no matter what. All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it. That that's an entitlement. And the government should give it to them. And they will vote for this president no matter what…These are people who pay no income tax.

This video and several more sections of Romney's talk to rich donors earlier this year are now posted on the Mother Jones website:

There are many reviews of the numbers, but here is an article in the Daily Beast that points to a lot of the factual analyses: http://www.thedailybeast.com/articles/2012/09/18/who-are-the-47-percent-7-facts-about-the-americans-mitt-romney-attacked.html

The bottom line is that although Romney paints a picture of 47% of Americans not paying taxes, most of those still incur payroll taxes. Many of the 47% are elderly living only on Social Security, military or students not making very much from summer jobs, etc. Most of the rest earn under $20,000 per year.

Beyond all that, of the ten states with the highest percentage of people not paying income taxes, eight of them are traditional Red States and Florida has been a battleground state for many years.

This video has the potential to not only incite Democrats who as a whole are called out, but also many rank and file Republicans who through no fault of their own do not pay income taxes. It is difficult to imagine a speech ticking off such a broad spectrum of people in this country.

A gaff or a damning video by itself won't necessarily cause damage. In national elections, it often takes a few cracks in the same area before enough people notice and change their minds on a candidate. As was mentioned on electoral-vote.com:

"A report that Romney had an affair with a staffer would get zero attention because nobody would believe it was true."

However, the story about Mitt Romney being an uber-rich snob who likes to fire people and doesn't care about those who aren't rich had already received some traction adter many hits. To hear and watch him say a lot to reinforce that branding could have a lot of traction. With only seven weeks left in the election, not only could this create a wedge that is tough to overcome, but there is very little about Mitt Romney that helps him overcome a public opinion that he really doesn't understand or care about people who don't make a lot of money.

The numerical cry of this election had been 99% vs 1%, but the actual Tipping Point of this election may have actually been close to the midpoint - 47%.

Lehman Moment Turns Four

2012-09-15T17:09:00.000-07:00

Four years ago today, on September 15, 2012, Lehman Brothers filed for Chapter 11 bankruptcy and failing to find a buyer, hurtled toward liquidation. On the same day, Merrill Lynch sold itself (and its bull logo and statues) to Bank of America.

Soooooooo, are we better off now than we were four years ago?

The answer will be different for individual people, but from a macroeconomic sense, the answer is an irrefutable "YES".

As an Economics and Math major, I had the unfortunate reality of understanding the financial precipice we stood on that day, the potential 'next shoes to drop' and the impending domino effect. For the first time in my adult life, I was scared. Not scary movie scared, seeing the apocalypse in front of your eyes scared. No matter what I and my family did, we would be the victims of whatever was about to happen. Not unlike citizens of post-war Germany who saw hyperinflation change prices dramatically overnight.

We should not underestimate the macroeconomic 'guesstimate' efforts that brought us back from the brink, have provided us with a 'new normal' stability, and the markets have responded with new highs.

Part of the credit should go to President George W. Bush, who against the stand of some from his party, chose to accept and implement the recommendation for the program known as TARP. This was instrumental in preventing our economy from looking like the last remnants of bathwater circling down the drain. Although TARP has had many detractors, realists know it was the unpleasant but necessary action that saved our economy. The fact that we have gotten a substantial portion of the money back due to the way it was structured will be appreciated more and more as years go by.

However, since the plug was put in the bottom of the bathtub, there have been two other major decisions and several smaller ones that have stopped the disaster from getting worse and begun to move us closer to our pre-recession existence.

The Auto bailout and the Stimulus have received a ton of bad press and frankly neither one is something to feel proud about. However, they were needed. No, there were essential in preventing extended 15% unemployment. The fall of GM and Chrysler would have resulted in the failure of many of their suppliers and other vendors. unemployment would have increased by several million. The Stimulus was watered-down and smaller that what was truly needed, but the right package would not have passed Congress. Tax refunds ('Making Work Pay' tax credit) felt good (or should have), but as most economists will tell you, don't have as large an impact as other measures. However, the 20+ consecutive months of job growth can be attributed at least in part (the percentage is debatable) to the Stimulus.

Are we where we need or want to be? No. Was this the perfect plan. Definitely not, but politics often prevent perfection. Is the US economy better post-Stimulus? Yes, and frankly anyone who would make a claim otherwise is unlikely to have gotten beyond Economics 101.

The events of 2008 sucked. Big time. The actions that were taken were painful. However, we are now able to calmly discuss the merits of these actions because we have substantial stability in our economy. There is no way to overstate how important that is and how close we came to not having it.

When you make your decision on who to vote for in the Presidential election this year, you really need to ask yourself the question - if we ever had to stare down into the economic abyss again, which candidate would we want to make the tough but long-term decisions, the ones that were unpopular in the short-term, but were necessary for the continued existence of the US economy?

I've got my choice made. Some times we focus on the small stuff or a single item rather than looking at the big picture. The roll of the President is to always look at the big picture regardless of what everyone else is looking at.

Does Walker Retention Portend Presidential Election Outcome in Wisconsin?

2012-06-06T05:47:00.001-07:00

Although I don't like the way Walker handled it, as governor, he does have the right to find ways to balance the state budget. I have never been a big fan of recalls. Elections are where voters are supposed to make their choices and live with the consequences. Perhaps if voters realized they had to live with the outcome of an election, they might be more invested in making good choices and getting others to do the same.

Assuming that the outcome of this recall election with a low turnout foreshadows the outcome of the 2012 Presidential election outcome in Wisconsin is being overly simplistic. A better, but still not conclusive indicator would be the exit polling from the recall election which shows that the same voters who gave Walker a 53-46 win, also indicated a preference to re-elect President Obama by a margin of 51-44. This 7 point spread falls right in the middle of the most recent Wisconsin presidential polls which were conducted during the second half of May, 2012.

Again, since the portion of the Wisconsin electorate that participated in Tuesday's recall election may not reflect the same demographic sampling that will show up to vote in November, it is questionable whether there are any take-aways from Tuesday to predict the November election. However, that 14 point swing between the recall election outcome and exit poll preference for President when Walker and his supporters outspent Barrett $30M to $4M may indicate that the flood of money being spent against President Obama this election thanks to Citizen's United may not have very much impact.

Back to the Midwest

2012-03-20T10:06:00.002-07:00

Ah, the Deep South creates primary problems for Mitt Romney and today (probably) the Midwest will make him look inevitable again.

last week's primaries in Alabama and Mississippi stalled for at least the moment, the claim that Newt Gingrich and/or Rick Santorum should drop out of the Republican primaries. Actually, with only second placings in both states, New Gingrich should have considered dropping out as he now has no reasonable path to the nomination. But that isn't why Newt is running and perhaps never has been. Newt said last week that he is in it for the duration, and I believe that no amount of third and fourth place finishes in the upcoming primaries will deter him from that manifest destiny.

However, for the benefit of the Romney camp, today is the Illinois primary with most polls showing Mitt to have a double digit lead over both Rick Santorum and Newt Gingrich, with a recent PPP poll showing Mitt beating the combination of their two vote shares.

Will this be the beginning of the end?

I think it will increase the talk about it, but I kind of doubt that either Rick Santorum or Newt Gingrich will decide to withdraw anytime soon. No folks, I think this game plays out for a while longer.

Gingrich is the Republican's Best Hope

2012-03-13T07:29:00.005-07:00

OK, so now that I have your attention, what on earth do I mean. Certainly, you say to yourself, he can't mean that Newt Gingrich has the best chance of the 4 remaining Republican candidates to beat President Obama in the general election. With that assumption, you would be...correct.

As opposed to being the Republican's best general election candidate, Newt Gingrich is the Republican's best hope that Mitt Romney manages to hang on and win the nomination. If Gingrich were to drop out, there is a good chance that Rick Santorum would win enough of the remaining primaries to make it very difficult for Mitt Romney to collect enough delegates before the Republican Convention. A mano-a-mano competition (sorry Ron Paul), would not be an easy road for Mitt Romney, even with some upcoming winner take all primaries in large states with significant urban populations.

Instead, Newt Gingrich continues to split the conservative vote with Rick Santorum, allowing Mitt Romney to continue to win primaries while not attracting more than 40% of the votes. In all polls, Mitt Romney stands the best chance against President Obama in the November general election.

So in his own twisted, self-centered way, Newt Gingrich is once again doing everything he can to bring the Republican party back to national power. Today's primaries in Mississippi and Alabama may be a very close three way battle. If Mitt Romney were to win both, even by the smallest margins, it would probably indicate to all financial backers of Santorum and Gingrich, that the party is over. Without money, they would need to fold their campaigns very shortly. If Romney had to compete against only Santorum or Gingrich, he would lose in both states, and perhaps by double digits.

Also for your reading pleasure today, this poll from Public Policy Polling for the Republican primaries in Alabama and Mississippi. Skip down to questions 22 and 23 for both states and try not to let your jaw hit your desk. Not only is Barack Obama believed to be a Muslim by 3 to 4 times as many people who believe him to be his professed faith as a Christian, but in both states, at least 60% DO NOT believe in evolution. They were not asked if they believed in evolution as opposed to Creationism, just whether or not all of the science books they read and are being read by their children in school were accurate or fabrications. Evolution and the belief that God created humans are not mutually exclusive. In fact, of those who are members of the 12 largest religious denominations in the US, approximately 80% belong to churches who SUPPORT the concept of evolution. Perhaps this is unfairly targeting these two states as a poll referenced in the Wiki article linked above shows that nationwide there is a 30% difference in support for evolution between Democrats and Republicans. However, as a guy who grew up in the north and in the first grade of a Catholic elementary school was taught evolution and religious studies in the same day, this high percentage of scientific ignorance or intolerance is pretty stunning.

Will the Republican Tuesday remain "Super"?

2012-03-06T09:37:00.002-08:00

Ever since states started to collaborate on holding their primaries on the same day to increase their power relative to the early states (Iowa, New Hampshire, etc.), the Republican nominee has been effectively determined upon the outcome of "Super Tuesday". Will the trend continue?

In 2008, with a relative split in the delegates won on Super Tuesday, it became readily apparent that Barack Obama and Hilary Clinton were going to be battling until the last primary vote was cast. A substantial split of the delegates among Republicans on Super Tuesday 2012 would probably do the same.

However, it appears that with his narrow Michigan win last week, Mitt Romney may have enough momentum to avoid losing too many states today. Notice, this isn't a ringing endorsement of the strength of his popularity among Republican voters. When you only win by a few percentage points in your home state to a candidate who's views are anything but mainstream and who is very underfunded, that isn't a clarion call to your inevitability. But, it might be enough for Mitt. The concept of Mitt Romney losing his birth state of Michigan was so prevalent that when he held on to win, Mitt Romney seemingly beat expectations. Similarly, if Mitt Romney wins the iconic battlefield of Ohio today, almost regardless of the results in other states, it will announce the likelihood of his nomination.

A win today in Ohio and an accumulation of delegates today in the high 100s out of the 400+ available will not so much make Mitt Romney seem like the victor as much as it will make everyone come to the conclusion that neither Rick Santorum, nor Newt Gingrich, nor Ron Paul have the ability to beat Mitt Romney. Kind of backing into the nomination.

If this was the Democratic Party, I would say that the race for the presidency 2012 is over. However, the Republican Party has an uncanny ability to hold their nose and emphatically support a candidate they do not like because they realize they hate him less than his opponent, President Barack Obama.

I believe Mitt Romney will win the most states and delegates today, but both Rick Santorum and Newt Gingrich will win one or more states and 10-20% of the available delegates today. Mitt Romney still will not be very far ahead of the delegate count. But it will be all but over as to who will be the Republican nominee, even if nobody drops out of the race. Once they get to winner-take-all primaries, coming in second place won't matter and Mitt will coast to the convention.

Will the Real Republican Nominee Please Stand Up?

2012-02-28T05:34:00.002-08:00

Today we get the Michigan and Arizona primaries and this surprisingly cloudy Republican primary campaign might get clearer. Or not.

Most pundits had expected Mitt Romney to have broken away from the field at this point in the campaign season given his experience from the 2008 Presidential nomination race as well as his substantial advantages in money and organization over the other candidates. As most of you know, the 2012 campaign has been a series of "Who is the Not-the-Romney today?". The last man (or woman) standing in that situation comedy series is Rick Santorum. Former Pennsylvania Senator Rick Santorum, who lost his last campaign trying to hold his Senate seat by double digits, is somehow leading in most national polls. (BTW - Ron Paul, although durable and perhaps the only person other than the eventual nominee who will contest throughout the campaign season, will likely never wear the crown as Not-the-Romney of the day.)

However, despite leading in national polls, the Presidential nomination race is won state by state and perception by perception. Surprisingly, the actual delegate count rarely matters until there is only one candidate remaining. If Mitt Romney wins today in Michigan, which is his birth state, he will have at least stopped the talk of him not being the nominee until Super Tuesday on March 6th. However, if Rick Santorum manages to win Michigan, this will be a wide open race and may go all the way to the convention.

Interesting, the Republican nomination campaign hinges on the state that had its major industry bailed out by the Obama Administration. This bailout was and continues to be hammered by all remaining Republican candidates. Michigan is also a state where you can be registered in one party and vote in the other party's primary (although you are then recorded as having done so).

An interesting outcome and momentum shifter rests in the Great Lakes state today.

Jon Huntsman, We Hardly Knew You

2012-01-18T05:49:00.000-08:00

Although he was perhaps the most qualified candidate in the field to do the job of President in the Twenty-teens, and perhaps most able to appeal to moderates, Jon Huntsman's campaign never got off the ground. His third place finish in moderate New Hampshire after putting most of his chips on that primary made it undeniably clear that it wasn't going to get any better.

In another time, with a different Republican electorate, Jon Huntsman may be the right candidate. But not today, not in 2012. It isn't clear what today's Republican electorate wants. There have been enough clear messages that they don't want Mitt Romney, although that is who they are about to nominate, having not found the stomach to vote for anyone else.

Jon Huntsman seems to be a good guy, a smart guy, a guy with substantial international affairs experience, in particular with China, the single most important expanding economic power in the world. However, Jon still hasn't figured out how to master the TV/Internet sound bite, and that might doom his ability to ever ascend to the Presidency.

However, I put him on the short list for a cabinet position if Mitt Romney wins. That might actually be a more important position that would be a better use of his abilities and experience. How does Secretary of State Huntsman sound?

When the Expected Occurs and Surprises Everyone

2012-01-13T05:43:00.000-08:00

Mitt Romney won the Iowa Caucuses by 8 votes, well kind of. One week later, he won a decisive double-digit victory in his 'practically home state' of New Hampshire. He thus became the first Republican non-incumbent to win both of these first two votes.

While Romney winning Iowa would have been considered a surprise a month ago, he had led all polls recently and having a narrow at best win over streaking Rick Santorum hardly seems like a defining moment. How different would the outcome have been considered if a doze votes went to Santorum and Romeny finished second? After a win in Iowa, Romney's margin of victory in New Hampshire was on the low side of expectations.

So, despite these less than overwhelming performances, Mitt Romney now appears to be a South Carolina win away from being ushered in as the Republican candidate to face President Obama in November's Presidential election. If recent polls showing Romney leading by a comfortable margin are even close to correct, that is pretty much what will happen. Even though Ron Paul will probably stay in the race and despite Newt Gingrich wanting to give Mitt Romney a payback for the negative ads in Iowa, this campaign is very close to being over.

Whereas the 2008 Democratic Campaign went pretty much to the end, the 2012 Republican Primary season may not be in doubt come Groundhog's Day. If that occurs, we will review the implications of a quick decision on a nominee and how it will impact the Fall campaign.

He Who is Last Shall Be First, Almost

2012-01-05T04:54:00.000-08:00

The long-awaited and long-written-about Iowa Caucuses are over and they produced the closest and perhaps most confusing result in their history. After all the votes were counted once, Mitt Romney edged out Rick Santorum by just 8 votes. There are no recounts in the Iowa Caucues because, well, precision isn't really that important. The Iowa Caucuses votes are only the start to a multi-tiered process that determines the delegates to the Republican National Convention. Even then, they are allowed to vote for whomever they chose.

But a win is a win and for the longest time during the campaign, it didn't seem like there was any way that Mitt Romney would be the top vote-getter in Iowa. From Palin to Trump to Bachmann to Perry to Cain to Gingrich to Paul, there has always been someone else who it appeared would be the winner of Iowa. So winning the Iowa Caucuses, going 'home' to New Hampshire where Romney has a big lead in polls and having by far the largest success in fund-raising would normally be the ingredients to an early decision in a primary campaign.

Not so fast. Those 8 votes were an important divider between first and second, but perception is everything. Coming in second after spending most of the pre-caucus time battling Stan Hunstman for last place among those being allowed into the debates, was none other than former Pennsylvania Senator, Rick Santorum. How on earth did that happen? I mean, as late as mid-December, you could have gotten tremendous odds predicting that Santorum would finish in the top 2 in Iowa. This is the same Rick Santorum who lost his Senate seat in 2006 to Bob Casey, Jr. by 18%, the largest loss for a standing US Senator in history. What change in gravitational forces and metaphysical dynamics commenced over the holidays that made Rick Santorum the hottest candidate on the Republican campaign trail?

As the biblical reference in the title, "he who is last shall be first". Each of the other Republican candidates or almost-candidates mentioned above who were leading in Iowa polls at some point did get to spend some time in the middle of the circular firing squad of Republican candidates and have all of their statements and former misdeeds given substantial media time and space. Many candidates have looked good on the surface, but once the hood was raised and tires kicked...well, not so much.

However, as almost every other candidate (save Jon Huntsman) got their turn at the top of the heap only to fall down and break their chance at winning the crown, there were very few Not-the-Romneys remaining. Newt Gingrich was the last candidate to have a meteoric ascension to the top of the Iowa poll. After a few weeks in that position as people had more of a chance to hear Newt speak outside of debates, the entire state of Iowa proclaimed, "Oh, THAT Newt Gingrich!" and his ratings tumbled.

The loyal Not-the-Romney supporters looked into the bullpen of relief candidates, looked sensible, intelligent, experienced Jon Huntsman in the eye, looked away and said, "Rick Santorum, you are our man!". But with the shortness of time and impending holidays, the other candidates and the media didn't have much opportunity to let potential voters know why Santorum belonged with the other former Not-the-Romneys. So in this case, being the last Republican candidate before Iowa to win the favor of the more conservative Republican voters was a winning (or almost winning) strategy.

What happens from here? Well, that is one reason why political campaigns are fun, at least from the outside. Nobody knows for certain what will happen. It is most likely that Mitt Romney will win big in New Hampshire next Tuesday, Jan 10th. However, it will be more interesting to see how large the gap will be, who will be second, and if Santorum isn't second, how far down he finishes. Campaigning is still a money and organization game. Romney has both, Paul has both, Perry has money. Rick Santorum is going to have to get a lot of money and organization in South Carolina and Florida in a hurry if his Iowa showing is to become more than a political footnote.

Is This Heaven? No, It's Iowa

2012-01-03T09:40:00.000-08:00

January 3rd, note even long enough into the new year that you remember not to write 2011 for the date. But today, we officially begin counting votes that kind of count toward determining the Republican nominee for President in 2012.

Everything up to this point has been noise and there has been a lot of it. The jostling back and forth in the polls has seemed a lot like a horse race and the folks at Slate have helped us visualize the lead-up to the Iowa Caucuses:

CLICK
But the entire race until this point is essentially meaningless. Today, at various places around Iowa, people will stand up and talk about the candidate they support and then folks will go to vote. Unlike the Democratic caucuses in Iowa, there are not several rounds of voting with candidates receiving less than a threshold of votes being removed and their supporters being coaxed by others to join their group. However, candidates who spent a lot of time in the state and have a good ground game (Santorum and Paul), may wind up with a higher percentage of total votes as their supporters stand up and speak on their behalf.

The actual results today don't even necessarily wind up determining the distribution of Iowa's delegates at the Republican National Convention. As Electoral-Vote.com clarifies:

"Note that this is only a preference for delegates to the 99 county conventions in March. The people who go there elect the delegates to the congressional-district conventions and so on up the tree to the RNC. These people can change their mind as time goes on. In 2008, for example, John McCain came in fourth in the first round but ended up getting all the delegates to the RNC in the end."

So, why do we care what folks in Iowa do today? Good question. But the answer is that for better or worse, this is the first truly defining moment in the 2012 Republican Presidential Primary race. Financial supporters and local organizers are the life-blood of a campaign. Until now, every candidate has a chance to be the nominee. After the reality of today, for some, not so much. Michele Bachmann's campaign is on life-support and as a native Iowan who won the earlier Iowa Straw Poll, a 4th or lower finish today is probably the punctuation mark at the end of her campaign. Rick Santorum is also very light on money and support, but at least in recent polls, he has been the anti-Romney flavor of the month and a strong showing today could give him the influx of dollars that can keep him going at least through the South Carolina primary on January 21st. Stan Hunstman and Rick Perry are unlikely to place near the top in Iowa, but they both have a good amount of cash for the moment and will stay in for a while. Hunstman is counting on a good showing next Tuesday on January 10th in New Hampshire and will decide whether or not to continue at that time.

Mitt Romney and Ron Paul are likely to be among the top 3 in today's Iowa Caucus and despite occasional media comments to the contrary, are likely to continue even if they had a bad showing. However, a win would be very big for either candidate, regardless of how small the margin.

That leaves us with Newt Gingrich. Newt, Newt, Newt. I could write an entire year of blog posts recalling the path that took Newt Gingrich to arrive at this point in his political career, but that would be a waste of electrons. Newt could eek out a top 3 finish in Iowa, but its not clear that even that would do much to fortify his coffers. Only a few weeks ago, Gingrich soared in polls both in Iowa and nationally and led Mitt Romney by double-digits. Newt's fast rise and flame-out will make the others (Trump, Bachmann, Perry, Cain) seem prolonged by comparison.

So we'll see what the citizens of Iowa communicate to the rest of the country and we'll report back on it during the week.

In case you were wondering, the title of today's post comes from "Field of Dreams".

Recoveries Aren't for Wimps

2011-06-18T19:10:00.000-07:00

Recoveries aren't for wimps, and this is a recovery from the worst recession since the Great Depression.

It isn't as if anyone knows exactly what economic actions will work the best since we've never really faced anything quite like this. Even though the Great Depression was a more serious financially distressed situation, it was for very different reasons. We have had a collapsed bubble of real estate, with a lot of collateral housing/mortgage damage still dangling in the system. We had a total pull-back of the lending system which is still being historically tight. Companies pulled back substantially on investment in equipment, technology and people and are still squeezing ever ounce of productivity out of their existing assets before they hire and make capital expenditures.

You may also hear that companies are holding back because of uncertainty of increased taxes and/or health care costs. Any business owner who says this is either pulling your leg, looking for an excuse, or doesn't really understand business and is lucky to still be in it. There is never certainty on any of these things. There are congressional elections every 2 years and presidential elections every 4 years. Health insurance companies have been raising rates an average of 7% per year for the last 2 decades and that is just the average. It is not unusual for small companies especially to get a 20-30% increase in one year which is why they usually find themselves shopping around for a new insurer every 2-3 years. Businesses hire if that next employee has a better than even chance to bring in more revenue directly or indirectly than it will cost to employ them (salary, benefits, taxes, office space, etc.). The so called 'uncertainty of taxes and health insurance costs' are just a fraction of the total costs to employ an individual for a year. So estimate a bit high and see if that person will still bring in more revenue for the company. Besides, the only taxes seriously being discussed recently are the marginal tax rates for individuals and couples who have more than a quarter of a million in taxable income. I have previously posted a more detailed analysis, but basically, for a family who have an income of about $400,000, this amounts to perhaps as much as an additional $3,000 per year in federal income tax. If that $3,000 stops a small business owner from hiring an otherwise profitable new employee, they don't deserve to be in business very much longer.

This recovery won't be quick, steady or painless and nobody, absolutely nobody is able to implement plans that would make it so. There aren't people sitting on the sidelines with all the answers. There are some very intelligent, experienced people discussing options at great length with one another. There are differences of opinion. Good! This isn't a simple problem and only by discussing all possibilities will we have the best shot at coming up with plans that are more likely to produce the desired results. Even with this process, there are still no guarantees that the chosen options will work. Nor is there even a guarantee that there are any options that will produce the desired results. It isn't easy to live comfortably with this ambiguity, but that is how you get through tough times.

It is OK to be unhappy that it is taking so long to get back to 'normal', but claiming the recovery should be faster just because you want it so isn't based on any economic reality. This recovery would be very difficult regardless of what party is in the White House or leading Congress. Given statements that were made during the 2008 campaign, it is unlikely that we would be in a better place if John McCain and Sarah Palin were now in the White House. The House of Representatives is now run by the Republican party for 6 months and it does not appear that any steps have been taken during that time that have brought us closer to a full recovery.

This recovery isn't easy and it will take smart, courageous people not afraid to make mistakes and be blamed for trying what they think is best and possibly losing their jobs in the process.

Recoveries aren't for wimps.

Unemployment Issues for President Obama in Key States?

2011-06-13T12:36:00.000-07:00

In a recent Wall Street Journal article, it is pointed out that some state-specific unemployment numbers could cause particular problems for the Obama 2012 campaign:

In four states that may prove key to the Obama re-election strategy -- Florida, Nevada, North Carolina and Michigan -- the jobless picture is bleak. In three of the four, the rate tops 10%.

This is a great example of statistics that don't tell much of any story. There are different stories in each of these four states.

Many in Michigan know that unemployment could be far worse were it not for the auto bailout. Whereas most of the other 49 states is split on whether or not the Obama Administration should have propped up GM and Chrysler residents of Michigan know that it had a big impact on their employment reality. So even though many are unhappy about the current absolute level of unemployment in the state, it is unlikely many will blame that on President Obama.

Nevada has been trending more blue recently, even as unemployment has risen. The Reid campaign machine showed last year that they have some impressive power in Nevada. Although the 2012 Republican Presidential Nominee is unlikely to be as soft an opponent as Sharron Angle, it will take more than an elevated unemployment rate in Nevada to turn it back to "R".

Unemployment in Florida is a legitimate problem for the Obama 2012 Campaign. However, thanks to Governor Rick Scott, Republicans aren't too popular in Florida now either. I think Florida will be closer than in 2008 and could easily turn Red, but it will take more than the unemployment rate for the Republican nominee to win there. Florida has one of the highest concentrations of people on Medicare and the Ryan Budget Plan will affect more Floridians than the unemployment rate.

If North Carolina is even in the discussion of voting for President Obama again, the Republican candidate, whoever they are, has no chance of keeping President Obama under 300 Electoral Votes. If North Carolina is in play, then as Bill Murray famously said in the forgettable movie "Meatballs", "It Just Doesn't Matter":

One No Trump

2011-05-17T08:33:00.000-07:00

This should have surprised precisely nobody, but I am sure that there were some puzzled, disappointed and relieved people Monday when Donald Trump announced that running for President wasn't worth giving up saying "You're Fired!" each week on national television.

The title of this post is a bridge term and Donald Trump is a bridge to very few things other than perhaps turning the 2012 Republican Nomination race into the ultimate Reality TV Series. I would have paid very good money to see a debate between Trump, Sarah Palin, Newt Gingrich and Michelle Bachmann. Nobody else, they would just get in the way of the insanity. Newt still provides the possibility of some amazing debate banter, but other than lying and changing his political position, he does have a verbal filter that slows down and sometimes stops his brain from saying things that are insulting and hair-brained when the cameras are rolling. Donald Trump has no such filter to stop him from saying things that even a comedy writer couldn't come up with.

Don't get me wrong, I love Donald Trump and I am a regular viewing of whatever flavor of The Apprentice he is unleashing on the viewing public. But my love of watching Trump is similar to watching an impending train wreck. It's sick, I know, but I...just...can't...turn...away.

Mainstream Republicans (I know, there is an entire article waiting to be written on whether that term is an oxymoron) probably breathed a sigh of relief when Trump announced his decision not to run for the Presidential nomination. However, they really need to be thankful for Trump. Here is a list of his accomplishments:

1) Trump made it clear that Birthers are unstable and should not see the light of day. His craziness did force President Obama to publicly show that yes, they were all crazy. This will stop being an issue for the Republican party to defend itself against.

2) Trump showed that Obama can take out anyone. Heck, in one long weekend, he wiped out Bin Laden and Trump. Each got 2 bullets. OBL got the traditional type and Trump got a Long Form Birth Certificate and a Comedy Roast. Other potential Presidential candidates with the potential to damage the reputation of the entire Republican party may look at this and decide not to run. Sarah Palin and Michelle Bachmann have to be realizing that if they ever went one-on-one with Obama, they may wind up not even being employable by Fox.

3) The Republican Presidential Race was becoming an episode of a Looney Tunes cartoon. The best way to make sure everyone realizes that certain people are crazy is to put someone even more crazy next to them. I am reminded of a wonderful episode of the TV series "Ed" when John Slattery as Dennis Martino, the school principal, ran for Student Council President from the "Jackass Party" to show how useless the leading candidate was running for the "Party Party". In a very perverse and occasionally disturbing way, Donald Trump returned the Republican Presidential Race to sanity by taking all the craziness with him.

The biggest losers from The Donald's announcement, in fact, perhaps, the only losers are late night show comedians and Saturday Night Live. But I have no doubt they will come up with something.

Will Osama Help Obama?

2011-05-11T07:52:00.000-07:00

Even now a week and a half removed from the announcement that the combination of CIA and Navy intelligence combined with the resourcefulness of a Navy Seal team, took out Osama Bin Laden after almost 10 years of searching, there is still a buzz in the air. People seem to be walking with a little more jazz in their steps, almost as if silently and perhaps unknowingly people are thinking, "That's right, don't mess with the US, we're tireless and eventually we'll find you."

President Barack Obama does seem to have received an 'Osama Bounce' in public opinion polls, although it is somewhat more muted that many expected, perhaps only 4-6 points. Will that be enough to guarantee him re-election in 2012?

If you have read even a few of my previous posts, you know I firmly believe in the James Carville 1992 mantra of "It's The Economy, Stupid" as the most supreme prognosticator of Presidential Election outcomes. So if the economy tanks or even if gas prices are in the $4.00 plus range at election time 2012, it might not matter if President Obama took out every past, current or future terrorist, he would have difficulty winning re-election.

So, for argument's sake, let's assume the economy is OK but not great. Unemployment is in the 8% range, but not rising, gas is in the $3.75 to $4.25 range but holding steady or dropping slightly, the markets are steady or slightly rising and inflation hasn't reared its big, ugly head yet. What impact will the extinguishing of Osama Bin Laden have on the 2012 Presidential Election?

The glow from Osama being laterized will most certainly be gone. We, the American public, have an amazingly short attention span and no matter how big a deal it is now, we just do not have the ability to keep something like this actively on our minds for the 16 months between now and Election Day 2012.

However, there are some impacts that will make the road much easier for President Obama to not need a moving company in 2013. Most notably is the ability to keep some potentially powerful Republican Presidential candidates on the sidelines. It has become very clear that in most likelihood, the entire outcome of the 2012 Presidential Election will turn on the state of the economy. International Affairs will not be a battleground where a Republican candidate can make any ground. In fact, Republicans will probably focus solely on domestic affairs out of fear that spending much time on foreign affairs may remind voters how Presidential Barack Obama has acted in his first term. Basing your chances just on the economy is a real crap-shoot that nobody has much control over. Any candidate with very solid general election potential (read Hunstman and Daniels) has to be wondering seriously if they want to go belly to belly with Obama on something which the laws of economic gravity indicate are more likely to improve than worsen in the next year.

Huntsman and Daniels each have the potential to make a run at Obama in 2012 EVEN if the economy is good. No other potential Republican candidate has the ability to overcome an incumbent Obama in a good economy. But that window of opportunity for Huntsman and Daniels has just gotten narrower and they each have to decide if their Presidential aspirations are better served by waiting until 2016. They may decide that 2012 is the time to get better known nationally but they don't have much of a chance to win the nomination in the current Republican climate. It is difficult if not impossible for someone to be their party's candidate and lose a general election and then get nominated again in a future election. Everyone has at best one shot at it, so Republican candidates have to decide if it is better to let a patsy take the fall in 2012 and help their chances to win the nomination in 2016 or if they have a really good shot now and only now.

Stan Hunstman Will Be President...Someday.

2011-05-04T09:10:00.000-07:00

The more I learn about Stan Huntsman, the more I like him. He is the kind of Republican a moderate Democrat like me could seriously consider voting for. He is smart, affable and has leadership and diplomatic experience. He has been taking positions currently unpopular within his party, but in the areas where public opinion is moving to (gay rights, climate control and market-based health care reform). He is young (turns 51 this month) and having been ambassador to China and being a fluent speaker of Mandarin, he is ready for the future as it evolves toward a point where someone like Huntsman would have a significant advantage in dealing with the realities of international politics.

But 2012 may not be the time.

If somehow he was able to get the Republican nod, he would be as formidable a challenger as the Republicans can put forward against a strong candidacy by President Obama. If the economy stagnates or falters again, Huntsman would have an outstanding chance to collect enough independent votes to win the electoral college.

However, winning the Republican nomination in the current climate is quite a challenge. He is sooo moderate (almost liberal in fact), that it is difficult to imagine him being in the top 3 vote-getters in Iowa, South Carolina, Nevada and other early, particularly conservative Republican state primaries/caucuses. He has a somewhat more amenable voter climate in New Hampshire, but 1 spot is already reserved at the top for Mitt Romney and another will be taken by whatever conservative candidate ran strongest in Iowa. If he can hang in for a while (and his family financial resources may allow that to happen), he might be able to win some of the middle and later races and become the party favorite.

But make no mistake about it, there is a better than even chance that at some point in time, there will be a President Huntsman. He may just need to wait until the Republican Party decides they want to put forward the candidate with the best chance to win the general election.

When in Doubt, Revisit James Carville

2011-01-24T05:49:00.000-08:00

The most spot-on and eternally accurate statement ever made in Presidential politics:

"It's the Economy, Stupid"

The rallying cry of Bill Clinton's 1992 Presidential Campaign made popular by his campaign strategist, James Carville, was initially just one of 3 campaign mantras and was intended for internal use only (without the leading "It's"). It helped galvanize public opinion in favor of Clinton and turned George H. W. Bush's popularity upside down from a Gulf War high of 90% down into the 30s. As much as we pride ourselves in being part of a nation that fights for world peace and democracy, most of the time, what is in our pockets is our greatest motivator.

With this in mind, the prognosis by many economists of the next 2 years does not bode well for Republican Presidential hopefuls. While many economists are calling for GDP growth in 2011 & 2012 to be in the mid 3% range, Mark Zandi of Moody's Analytics is calling for 4.4% GDP growth in 2011.

Perhaps more importantly, as there are an increasing number of signs that the economy is recovering and a double-dip is unlikely (5% increase in holiday sales, 10%+ increase in December auto & truck sales over previous year, factory output increases, etc.) has seemed to create a more positive economic outlook on the minds of business owners and consumers. In economics as in many things in life, perception of reality creates reality. There is a lot of cash on the sidelines and businesses and consumers have been holding off buying things and hiring more until they were more confident about the future. The pressure of delayed purchases has built to a level that it will not take very much good news for a spending wave to be unleashed. As a positive reinforcing cycle, the news that others are spending will make businesses and consumers even more willing to spend and all these injections into the economy will produce GDP growth numbers and employment numbers that make everyone more confident in the economy.

This trend started to late and slowly to help Democrats in the mid-term elections, but the delayed impact is likely to make it almost impossible to unseat President Obama. The economy will be the biggest issue in the 2012 elections. The improving economy will still be a new enough story that the public won't discount it and move on to non-economic issues. Health Care either will not be a determining issue or will turn against Republicans slightly as they will be continuing to oppose and attempting to overturn/defund a law that will continue to slowly grow in popularity. International Affairs either positive or negative are not likely to overwhelm the impact of the state of the economy. Social issues only take center stage in times of steady prosperity and it is unlikely we will already feel steady in just 22 months.

Nope, James Carville got it right and before anyone spends too much time over-thinking how the 2012 elections will turn out, they best return to that phrase made popular almost 20 years ago.

As Lame as a Fox

2010-12-21T05:08:00.000-08:00

Barack Obama and the Democratic majority House in its last few days not only passed a substantial Tax break plan (that will dramatically increase not only economic growth, but perhaps more importantly the perception of impending economic growth), but also got through some other, very substantial legislation during one of the most athletic "lame duck" sessions in history. Among the other initiatives are:

•A repeal of the ban on gays serving openly in the military, which Obama signed Wednesday. Military leaders will need months to implement it.

•A $4.2 billion measure that will benefit rescue workers who toiled at the World Trade Center in the weeks after the 9/11 attacks. It offers health assistance for those sickened by dust and debris. Congress passed the bill Wednesday after trimming its cost from $6.2 billion.

•A sweeping rewrite of the nation's food-safety laws that will give the Food and Drug Administration more power to inspect food production facilities and issue mandatory recalls of tainted products. After a phase-in period, high-risk food facilities will be inspected every three years.

•A $4.5 billion child nutrition plan that will expand the school lunch program and allow the government to set new standards for school meals, including in vending machines. The measure, championed by first lady Michelle Obama, would increase by 115,000 the number of low-income students who qualify for free or discounted meals.

It does make you wonder why all of this had to wait until after the mid-term elections especially when public opinion on these laws are very favorable. However, public impression of President Obama has seemed to improve and it would not be surprising for his public opinion ratings to move north of 50% and stay there for the remainder of his term. It is nearly impossible to defeat a sitting president with those ratings, so these legislative victories may have some additional long-term effects.

Tax Breaks and the Comeback Kid

2010-12-17T05:42:00.000-08:00

The report of Barack Obama's demise is a bit premature. In fact, I think he just needed to lower everyone's expectations. Nothing does that in politics quite as well as getting trounced in midterm elections and losing the House.

Few expected the lame-duck session in this environment to provide compelling results, and yet if you scratched below the surface, this is exactly what you should have expected.

The Dems were in the final weeks of having control of the House and will lose several voting seats in the Senate. There were also several items on the Dems to-do list still in the hopper and the President felt strongly about several of them.

As I mentioned in my post Stand or Deliver, the President began the lame-duck session needing to pass some legislation that provided tax cuts for the Middle Class. He had to give in to Republican desires to also provide them for marginal taxable income above $250,000 for families, but was able to negotiate several other key Dem benefits that would have been impossible come January. In fact, they should have been impossible in December since the Repubs could have just kept saying no and then passed something in January when they had a strong majority in the House.

The Senate passed the Tax Cuts by a resounding 81-19 and after some chest-pumping by House Dems attempting to modify the new Estate tax rate (35%) and exemption level ($5 million), the same legislation passed the House 277-148 just before midnight.

If this were it, I would say Obama may have paved his path to re-election, but in the waning hours of this session of Congress, he stands a good chance to get his desired repeal of the Don't Ask, Don't Tell law, get additional health coverage for 9/11 responders and to a lesser extent may also have a shot to get the START treaty passed. Not only is Obama getting more Dem-centric legislation passed in his first 2 years than almost any previous president, he is starting to get Republican votes and moderate voters love a president who can do that.

For the second time this month, I am posting a link to an article written by Charles Krauthammer, this one on Obama's Comeback. If Mr. Krauthammer and I can see eye-to-eye on things, perhaps this bipartisan stuff has a chance.

Stand or Deliver

2010-12-09T10:58:00.001-08:00

The situation behind today's post makes about as much sense as the 1980's song/video by Adam Ant, Stand and Deliver.

President Obama had a choice, STAND on his belief that the top 2% of wage earners should not have the decrease to their top marginal tax rates extended, or DELIVER a package of benefits to the low and middle class including a 2% payroll tax decrease in 2011, a 13 month extension of extended unemployment payments, the extension of college tuition tax credits and a business investment depreciation waiver that would highly incent businesses to spend money now. Obama chose the later.

For the first time in his presidency, Barack Obama is hearing the combination of praise from the Right and outrage from the Left. Today, House Democrats passed a resolution saying they reject the deal brokered by Obama and House Republicans saying they will not bring it to the floor for a vote. I kind of doubt that. Maybe the House Dems will negotiate some small changes and bring that up for a vote, but one of the first things a good negotiator does is understand who has leverage and how much. In a few weeks, the 112th Congress will be seated and the Republicans, not the Dems, will be in the majority. They are most certainly going to bring the extension of the Bush Tax Cuts for all up for a vote and it will pass. There is also no reason to believe they will be as generous in also providing the above-mentioned tax benefits for the middle class. That is called leverage. The Dems know it or at least should know it. Everything else has just been grandstanding for their constituents.

If Nancy Pelosi believes she can get a modified plan agreeable to the Republicans that doesn't include Bush Tax Cut extensions for taxable family incomes over $250,000, by all means have at it. If she thinks she can get the Republicans to agree to modifying the Estate Tax proposal from a $5Million waiver and 35% tax on amounts above that level, go for it. (I think the level should be somewhere between $3-$5Million, but feel strongly that that Estate Tax should not be higher than the highest marginal income tax rate, so I am good with 35% right now.)

Despite all the sturm and drang from Dems on the Obama Compromise/Capitulation on taxes, this is the very best deal the Dems could have dreamed to get in the last month of their majority in the House. In fact, Charles Krauthammer, who I so rarely agree with you would think one of us is intentionally choosing an opinion that is directly opposite that held by the other, is calling this Obama Tax Compromise the Swindle of the Year. I agree with him so much, that for what undoubtedly will be the only time in history, I will show the opening lines of his recent editorial in the Washington Post:

Barack Obama won the great tax-cut showdown of 2010 - and House Democrats don't have a clue that he did. In the deal struck this week, the president negotiated the biggest stimulus in American history, larger than his $814 billion 2009 stimulus package. It will pump a trillion borrowed Chinese dollars into the U.S. economy over the next two years - which just happen to be the two years of the run-up to the next presidential election. This is a defeat?

Krauthammer maintains and I certainly agree that "...the package will add as much as 1 percent to GDP and lower the unemployment rate by about 1.5 percentage points. That could easily be the difference between victory and defeat in 2012." I could quote more to reinforce my points, but please go to the article and read for yourself.

So the Republicans, led by Tea Party supporters, swept into the House and Senate with a big push for lowering the deficit. Of all the outrage I am hearing and reading about, strangely, very little is coming from the Right on the deficit increase. Democrats, long the sponsors of taking care of the middle class have before them perhaps the largest stimulus legislation ever affecting the middle class and they are complaining that high wage earners are getting to keep an additional 3-4% of their taxable wages above $250K for another 2 years.

It does appear that we are cursed to be living in interesting times.

Dollars, Taxes

2010-12-03T05:40:00.000-08:00

That is what the current debate in DC is all about really. No, not the city with a team that has a star on their heads, the conflict between dollars owed as part of the National Debt and the concept of maintaining tax cuts put into place 10 years ago that expire at the end of this year. These "Bush tax Cuts" were passed through Reconciliation (attached to the budget which can't be filibustered, only voted up or down) and therefore have a 10 year expiration date. At the time, there were no budget cuts made to offset the tax cuts so they have added a nice chunk to the current National Debt.

Which is one reason why we are where we are today.

Our National Debt is at an all-time high and projected to continue growing. However, Congress is battling over whether to maintain tax breaks just for taxable income levels up to $250,000 or to extend them for all levels of taxable income. That is right, the measure passed by the House (with no Republican support) does provide the continuation of the Bush Tax Cuts for everyone. It just stops the benefits at a taxable income level of $250,000 for families ($200,000 for individuals). The plan passed in the house would increase the margin tax rate on dollars above the $250,000 level by 3-4%. So, 100% of all taxpayers get to keep a tax cut. For 98% of all taxpayers, they get the exact same amount of tax cuts as passed by the 2001 and 2003 Bush Tax Cuts. It is just the marginal taxable income above $250,000 for the highest earning 2% of the population that Congress is arguing about. It seems counter-intuitive that we can talk about suffocating debt throughout the Fall campaign season and then be willing to make it bigger just a month later, but that is where we are.

President Barack Obama campaigned on not raising taxes on those making less than $250,000 (in some conversations he said 95% of the American public). In fact, he has lowered taxes already for a little over 95% though the Making Work Pay tax credits of $400 for an individual and $800 per family in 2009 and 2010.

In some Democratic circles, there is the desire to call the Republicans bluff and make them filibuster for this extra tax cut for the top 2% of earners while holding tax cuts for the lower and middle class hostage. People harken back to when preisdent Bill Clinton called the bluff of Newt Gingrich and the Republican Congress on the budget and shut down the government. People became outraged and called their local congressman. A budget had to be passed at some point and Clinton was able to draw a line in the sand and stay there until Congress was forced to come back to him and accept his budget. The same cannot be said about the current Tax Cut situation. The Republicans would be quite OK with letting the tax cuts subside because they know that more harm would be done to Obama than to them. So Obama and the Dems do not have a strong bargaining position. I think the Dems could have played chicken with the Repubs if they had brought this bill to the floor much earlier in the year, but that luxury is gone.

The National Debt will still be a problem 2 years from now regardless of what bill does or doesn't get passed now, but the tax cuts are a big deal now. Also on the table are the continuation of extended unemployment benefits.

The sign of a good negotiator is one who realizes what they can't get, and uses that to maximize how much they get. At this point it is very likely that President Obama realizes his only choices are the temporary extension of all Bush Tax Cuts or none of them. He doesn't want the lower and middle class to be worse off, so he will settle on the 2 more years of tax cuts for taxable income above $250,000. The mark of how good a job he does in negotiating is to see what he gets in return. I assume there will be a 1 year extension of extended unemployment benefits, but it would be interesting if he is able to slip in anything else as well. Stay tuned.

Do Deficits Matter?

2010-11-16T10:26:00.000-08:00

This is a classic question posed to Economics students for several decades. In fact, I can remember being asked that question in Econ 1 in 1978. Most of the students said yes, the professor answered "not really". A better, although less precise answer would have been, "it depends".

First some terminology so we are on the same page. A deficit is the amount of money spent in a year that is more than revenue. This amount gets added to the national debt, which is the accumulation of all annual debts and surpluses over the years. Sometimes, perhaps because they both begin with the same letter, they are used interchangeably. We will actually use both terms to help give some depth to the discussion.

The graph below measures the entire national debt as a percentage of GDP (Gross Domestic Product) or the amount of goods and services produced in the US in a year. I like this measure because it gives us a sense of how big the debt is compared with our economy and also effectively adjusts the amount for inflation.

(Numbers courtesy of presidentialdebt.org)
As you can see by looking at the graph for 1978, my professor was probably more correct than the students as that level of 34% is lower than the level for almost any year since. We would be very happy now to get our Debt/GDP ratio down to 34%. This ratio floated up from a low of 32.9% at the end of 1981 to 67.1% at the end of 1993. At that point it hovered and then dropped during the Clinton Administration. However, only the only surplus was in 2000 (drop of 2% in actual dollars). In the preceeding years, the debt just didn't rise as fast as GDP, and therefore became a smaller percentage.

While that might seem like it is obscuring debt increases (and to some extent it is), it is giving a better picture of the impact. To get a better look at it, imagine that we are running a deficit and adding to the debt every year for 10 years and that each year, our GDP grows by 3%. However, our annual deficit is only a single dollar. At the end of this 10 year period, our deficit will be $10 larger (insignificant on a $13 Trillion debt) but our GDP will be almost 35% larger. Our national debt as a percentage of GDP will have shrunk by about 25%.

So again, why is that important? Well, assuming that our Government Revenue (read taxes) as a percentage of GDP remains fairly constant, our ability to pay the interest on our national debt is relative to our GDP. If the debt becomes too large as a percentage of GDP, the interest payments begin to take on too large a percentage of our tax revenue, thereby squeezing out other expenditures and/or increasing the debt even further. In fact, the US has among the lowest ratio of tax revenue to GDP among developed countries. This chart also includes state and local taxes and shows that almost all of Europe is higher than the US with only Mexico, Turkey, Korea, and Japan lower.

So what is the correct level of debt/GDP? Well, assuming that there is no reasonable way we can make this 0% anytime within our lifetime, it appears that bringing it back to a level under 70% would be prudent. Once we are there, we should attempt to find non-draconian ways to bring it back into the 50% range which is the long-term post-WWII average.

So now that we have that question answered, how do we make that happen? Well that is a topic for at least a few future posts, but just a few comments and a nice toy for you to play with. I am happy the Republican Party with a large assist from the Tea Party has gotten religion about deficits. I won't slap them about that belief running in stark contrast to their last 30 years of leadership because I really hope they mean it this time. I think they will be in trouble in 2 years if they don't follow through on it this time, so, for their sake and the sake of the country, I hope they are good on their word. They will also have to face the fact that you can't reduce the deficit significantly without increasing taxes and making reductions in defense spending and Social Security and Medicare benefits.

However, you can make adjustments to Defense, Social Security and Medicare and make some tax adjustments that don't seem devastating. Want to play King of the World (or at least Chief Poo-bah of the US Economy? Try your hand at this nifty interactive toy from the New York Times that lets you figure out how to balance the budget. Let me know what percentage of tax increases and spending cuts you come up with by leaving a comment. Enjoy.

2010 Mid-Term Elections Review

2010-11-11T07:31:00.000-08:00

Well, not too bad a prediction job by The Voting Booth.

We called the Senate final tally on the button 51(+2) - 47. We were a little bit low on the number of seats Republicans would take in the House. We said 55 and they have picked up 60 to date with a few more seats still being determined by recounts.

Definitely a wave election or at least a swinging of the pendulum back to somewhere around the levels prior to the 2006 & 2008 elections. The Senate is still a little more Democratic than prior to the 2008 elections, but is a little more Republican than prior to the 2006 elections. 2012 shapes up to be a very interesting election on all fronts.

First, a congratulations to the Republican Party. Just two years ago, it seemed more likely that the party would be disbanded than that they would take back the House and make major gains in the Senate. Republicans are just better at the political game than Democrats. Occasionally, in situations like 2008, the Dems can message and GOTV equal to or better than the Republicans they have a registration advantage over. However, 2010 proved to be a storm too big for a good GOTV hampered by horrible messaging.

As in most election years, if the economy is an issue, it will bury the party in power. Combined with a mid-term trend away from the party in power probably explains 50-75% of the outcome. Regardless of what they did, there was no way Democrats were going to lose less than 30-40 seats in the House or less than 3-4 seats in the Senate. The remaining difference was created by a brutal, ruthless and persistent messaging from Republicans starting from when they got their breathe back in early 2009. True, it was filled with fact stretches and outright lies (see Death Panels, "useless" Stimulus and Bailouts, etc.), but they were made believable at least to enough people who were motivated to vote and pull the "R" lever. It may not have much to do with statesmanship, but it was textbook politics.

A special mention goes to the Tea Party, who can reasonably claim to have put the lift back in the step of Republicans, generate anger and organize it. They can also be blamed for loosing the Senate as their primary wins in Delaware, Colorado and Nevada removed more mainstream candidates who would almost certainly have defeated their Democratic opponents. That would have made the Senate Dems 48(+2) Reps (50) and the chance for the Reps to pull Lieberman or one of the conservative Dem senators would have been pretty significant. Also a shout out to Lisa Murkowski for apparently winning the Alaska Senate seat as a write-in after she lost the Republican primary. By far the biggest slap in the face for Sarah Palin who despite some significant successes supporting Tea Party candidates during Republican primaries failed in the overwhelming majority of races on Nov 2nd against the Democratic candidates. The Tea Party giveth and the Tea Party taketh away.

Calling the 2010 Election

2010-11-01T06:08:00.000-07:00

The Pendulum is swinging back.

For good or bad, the last 2 elections have swung dramatically in the direction of the Democrats taking the House, Senate and White House from the Republicans. During the last 2 election cycles, Democrats have gained 52 seats in the House and 14 seats in the Senate, giving them significant majorities during the past 2 years, larger than most differentials since the landslide elections of 1964. Under almost any circumstances, especially being the party in the White House, the Democrats could have expected some significant losses in the 2010 elections as the pendulum swings back a bit. Add to that an economy that continues to be bad, marked by almost 10% unemployment and a great deal of underemployment and those who have just plain left the workforce and you will get substantial losses. On top of all that is the politically wonderful (but in many cases morally deplorable and dishonest) job the Republican Party has done over the last 2 years, fighting the President on almost every issue and winning the message wars on almost every action taken by the Obama Administration. All this despite the fact that Republican Party has lower favorables than the Democratic Party and far lower than President Obama.

The question is not whether Republicans will have a very good day nationally on November 2nd, the question is how large will it be? Predictions are all over the place, but here is my call:

Republicans take the House gaining 55 seats to take a 17 seat majority (226-209)

Democrats lose 6 seats, but hold onto the Senate 51-47 with the 2 independents caucusing with the Democrats for an effective 53-47 edge.

This brings the House pretty much back to the balance that existed just prior to the 2006 elections, but the Democrats still have a slightly larger majority in the Senate than they had entering the 2008 elections. There are a lot of Democratic Senate seats up for reelection in 2012, so unless Obama wins convincingly in 2012 and has some coattails, the Senate could turn Republican in 2 more years. even if it doesn't happen Nov 2.

The Price of Bad Communication

2010-10-28T13:20:00.001-07:00

By most accounts, the Democrats can expect to loose a lot of seats in the House next Tuesday, almost certainly putting the Republicans in the majority. Control of the Senate is still up for grabs although it seems that the Dems may hold onto it thanks perhaps to the Tea Party in Delaware.

In most election years, over 90% of House members are safe, leaving only 40 or so to scurry around campaigning for their jobs. This election cycle that number has at least doubled. While there are probably individual cases of (unusually) poor performance by a sitting House member, most in danger are not the cause of their problems. The country, by and large, is fed up with those in charge and most specifically, the Obama Administration.

So, I ask why? Why all the disdain? Why all the concern over the deficit now and not 2 years ago (or 4 or 6 or 8...). Why all these complaints on rising taxes when federal taxes have actually dropped over the last 2 years and are at their lowest level in many years? With unemployment hovering just under 10%, many are concerned about losing their job and with it their health insurance. So why are so many people angry that Health Care Reform just guaranteed that even if they lose their job, they will still be able to get health insurance, and for many at discounted rates? For those on the Far Left, didn't you just get more legislation passed that met your hopes and desires than at any time since the Johnson administration? For everyone else, what were you expecting?

53% of those voting in the 2008 Presidential Election selected Barack Obama over John McCain to lead the country for the next 4 years. His policies and opinions were pretty clear at that time. Here is the shocker...Obama has done pretty much what he said he was going to do. So where is the surprise? Granted, he didn't get as much through in the health Care Reform bill as he advocated, but that was the political sausage making and frankly that should only potentially upset the far left. The Stimulus Package wasn't as big as he wanted it and although many economists have complained that is why we are still mired with unemployment at this level, the general public isn't complaining that it wasn't big enough.

So what gives? It turns out that although the Obama team was historic in getting out their message in the 2008 election, they are pretty miserable in selling their story once in power. A lot of really good things have happened in this Administration:

We were at the precipice of an economic disaster that could have made the Great Depression look like a bad hair day. I was trained as an Economist and for the first time in my life, I was actually scared about the financial future of this country. If 9.6% unemployment sounds bad, put a "1" in front of it, because that is about what we would have seen. The auto industry would have collapsed as well as every company supporting them, dealers, parts manufacturers, etc. As bad as Detroit is now, it would have been apocalyptic. But few people understand what 'could' have happened, only what they see. "You stopped me from running into the oncoming car, but I scraped my knee." But Christine Romer kept harping that unemployment would stay below 8%. Bad, bad, bad move. I understand not wanted fear to set in, but you never win by setting high expectations. If statements had been made that untouched, unemployment would reach 14%, but we believe we can take actions that will keep it under 10%, the Obama Administration might be considered heroes now, because that is exactly what they have done.

The Health Care Reform Bill provides health coverage to 32 million uninsured Americans, enables those under age 26 to stay on their parents plan, prevents discrimination against "pre-existing conditions", eliminates the annual and lifetime benefit cap and according to the CBO will actually SAVE $143 Billion over the next 10 years. It is tough to be against any of these things. Those opposed usually site the cost of $1 Trillion dollars, and don't acknowledge that the cost reductions exceed the cost creating a net savings. Several previous presidents have tried unsuccessfully to accomplish this and failed. By not harping over and over again on the benefits and the cost savings rather than the cost and explaining it in terms that people could understand and cling to, this monumental social change program will be vastly underappreciated for a very long time.

Tax Reduction - Not a term associated with the Obama Administration and yet, that is what they have done. The Making Work Pay provision provided almost half of the $240 Million in tax cuts created by the Obama Administration providing a $400 per year credit for individuals and $800 for married couples. This benefit accrued to individual filers with taxable income under $75,000 and couples filing jointly under $150,000. Don't think you got it? Pull out your 2009 return and look at line 63 or look here for the IRS information. The actual calculation was done on Schedule M.

Handling 2 Wars - All combat troops have been removed from Iraq with about 50,000 peacekeeping troops still there, that number declining over time. There was a large buildup in Afghanistan with a scheduled pullout next year in an attempt to stabilize that country. Obama came through on his promise on Iraq. He went against the wishes of many of his supporters on Afghanistan, but it may very well have been the right choice. A very difficult and unpopular one, but perhaps the best for long-term considerations.

There are a few other items covered quite well in this article in Rolling Stone. Not a place I normally recommend for even handed political coverage (and it does have its rah-rah moments), but overall a pretty decent characterization of where we are.

This recent poll by Bloomberg shows that "...by a two-to-one margin, likely voters in the Nov. 2 midterm elections think taxes have gone up, the economy has shrunk, and the billions lent to banks as part of the Troubled Asset Relief Program won’t be recovered." All of which is wrong. Americans are generally not very educated in history, but these are current events. Granted there has been a concerted effort by the President's detractors to accentuate the problems and misdirect or outright lie about current issues, but the facts are on the side of the Democrats and yet they run away from them.

If the Obama Administration were as good at telling their story as the Reagan and Clinton Administrations, the Democrats might have still held on to the House and Senate. But split government isn't the worst thing. Everybody has their neck on the line. If nothing gets done, everyone is to blame, so they have to find a way to play nice at least long enough to have something to claim during the run-up to the 2012 election. If not, then Obama gets to run his 2012 campaign against a "Do Nothing" Republican-led House and history tells us that has worked pretty well.