Friday, September 26, 2008

Obama will very likely win.

Well, a few of my loyal fans asked me to quit it with the swing state nonsense and say who will win. Who's gonna put their hand on the bible on January 20, 2009, and who's going to be watching from the audience and pretending to clap.

Obama will very likely win. The three most likely ways McCain wins, in order of likelihood, are:

1) Racism. There is a HUGE as yet unrealized, reluctance to vote for a black man in states that are 80% + white. Ohio, Virginia, North Carolina, etc.

2) Obama comes across distant and weak in the debates. He is distant, and is at times a mediocre debater, not a ton of fire. But McCain is no Bill Clinton either. He has plenty of life, but takes things personally and can be nasty and sarcastic.

3) McCain is somehow seen as the savior of the bailout package being discussed now in Congress (more on that on a blog post near you coming soon) AND this bailout is tolerably popular. This is a most unlikely scenario, but he sure is trying to look like a president in waiting.

4) A major foreign policy incident, or, god forbid, an attack on the US. I still think there's juice in that card.

Could McCain win absent a big shift in world events? Yes. But Obama is much more likely than McCain to win if things stay as they are. The financial crisis almost has to help Obama. And he may not need the help.

Tuesday, September 23, 2008

An update on the swing state, also sometimes called purple states, as purple is a mix of red and blue.

I refer you back to my post of June 14th, where, in a novel sized post, I discussed, among other things, the various swing states (states that easily could go for either McCain or Obama). I'm going to update that post now.

Here, in order of their electoral votes, are the states that I consider swing states. I'll comment on how likely I think they are to go one way or the other.

First, a list of some excellent resources. (slate does a series on swing states)

Now onto my job.

As you recall, the 2004 election was won by Bush by a 51-48, or 3 point margin. When I say a state is red + 2, that it means it voted for Bush by 5 points, in other words, 2 points more Republican than the nation as a whole.

I will list each state and then after it will have in parenthesis the number of electoral votes and how it voted in 2004 (ex, New York, 31 evs, blue + 18).

At this instant, Obama is up about 2.3 points. Call it 2 points for simplicity.

So if a state is polling at a 4 point Obama lead, that means it is currently polling Blue + 2. As you know, past performance, or current polling, is no guarantee of future results.

Off we go:

1) Florida: (Red + 2.5, 27 GIGANTIC electoral votes). I predicted in June that it would be red + 5. It is now polling favoring McCain by 2, or Red + 4.5.

As of this instant, my prediction in June was a bulls-eye for Florida. I get few brilliance points. It is a very tough get for Obama if the election is very close, for a variety of reasons. He and Biden are spending serious time and money there, and the campaign can certainly move the needle a point or two (above and beyond any national movement). So Florida is certainly within reach. If Obama is up in the polls by less than 3 points nationally on the eve of election day, he'll very likely lose Florida. To win Florida he almost certainly has to win the popular vote, as Gore did. Probably has to win it by several points. I just don't think Obama can win Florida in a close election. Didn't in June, don't know.

Revised Prediction-- Within 2 points either way, but more likely McCain gets these 27 evs. If Obama does win in the Sunshine state, its all over, sing him hail to the Chief.

2) Pennsylvania (21 evs, Blue +5). I predicted in June that Pennsylvania would be blue + 9! This looks like a big fat MISS!!!! Right now Obama is up 2.5 in the PA polls, so it polls Blue + 0. 9 points is what we call in this business a real bad effort.!

I am more than a little puzzled why Pennsylvania should be so incredibly close at the moment.
I note that McCain hasn't been up in a Pennsylvania poll since April, which doesn't count. Then, Obama has no double digit leads in recent weeks.

I would be extremely surprised if Pennsylvania doesn't revert to its usual bluer tint. Maybe race is playing a big factor here. Or maybe Obama's new voters are being under sampled. The prototypical McCain voter, Married, settled, older, is always well polled. Maybe Obama's younger newly registered voter is under polled. I'm just guessing. I'm perplexed.

Still, blue + 0 is good enough if Obama wins the popular vote, and Pa being red + anything meaningful is just highly unlikely. Still looks good for Obama, but not nearly not NEARLY as safe as I thought in June, even allowing for the drop from a predicted 8 point Obama win to a current 2 point Obama lead.

Revised Prediction: Obama carries it, and by more than 5 points at that.

3) Ohio (20 evs, blue <1). I predicted in June that Ohio would be red + 4. It is now polling favoring McCain by 1.6, or red + 4.1. ANOTHER BULLS EYE.

This one I suppose I could take some props for. I always thought Ohio would be much easier for Obama than would Florida. I still do. I note that the polls are only .4 points apart, nothing. So the polls would not lead you to my conclusion.

When I was predicting an 8-point Obama national win, predicting Ohio in his column was pretty easy. Now that the polls have him up by only 2, its MUCH MUCH closer. When I close my eyes I still see Obama winning Ohio, in part because I see him winning by 4 or 5 points nationally. But take nothing for granted. If Obama only wins by < 2, Ohio will be very close, but will probably go red.

Needless to say, the campaign is fast and furious in Ohio. Whatever they say publicly, the McCain people know they probably can't win without Ohio, and will pull out all the stops. Ok, enough about Ohio.

4) Michigan (17 evs, Blue + 5). I predicted in June that Michigan would be blue + 6. It is now polling for Obama by 5, or only blue + 3. Another Midwestern MISS. At the moment anyway.

The McCain folks have made and will surely continue to make a HUGE push for Michigan. Other than New Hampshire and its 4 evs, they see Michigan as the best of the Kerry states to try and flip to red. And it probably is. Michigan has been a real recession for years, due to the slow motion demise of the auto industry, and a bit due to lousy democratic run state government. So blue + 6 may be a bit optimistic. But its a blue state, and Blue + even 2 should be enough unless McCain really storms ahead of Obama nationally.

Revised Prediction: Obama by at least 6, but not more than 11.

5) North Carolina (15 evs, Red + 9!) I did not even list the Tar Heel state as a swing state the last go-round, predicting it would be red + 11! Oops. As of now, McCain is up 4.2 points in the NC polls, making it as of this moment Red + 6.7. Incredibly, two of these polls are ties! Obama hasn't given up on NC yet, and may not.

I went to school in NC and know something about it. I just can't see Obama pulling it off absent a big national win. NC has a good chunk of black voters, and a good chunk of aspirational whites, which is good. It also has a lot of somewhat racist downscale whites, which is real, real, real bad. And a lot of military voters, which is also bad. Right now its red + 6.7. Even if that drops to red + 4, Obama doesn't win it absent a clear national win, in which case he doesn't need it. Spending real time here strikes me as a serious blunder. But two TIED polls are real encouragement. NC is tied with unreachable Georgia as the biggest ev prize in the south (except Florida, which is a special case). And Virginia is right next door. I certainly understand the attraction. But getting NC down to red + 2 would be a huge achievement, and still probably wouldn't carry it if he REALLY needed it.

Revised Prediction: McCain by only 3. This would be a superhuman effort by Team Obama, which, of course, would net him zero electoral votes. Unless of course it helped in.....

6) Virginia (13 evs, Red + 5). I predicted that Va would be red + 1 in the November election. t is currently polling favoring McCain by .4, or red + 1.6. That's a HIT.

Virginia, loyal readers will recall, was one of my 2 hot new swing states for 2008 (Colorado the other). I'm pleased to say that this prediction (made before others predicted it, I might add) has been a smash hit. Oh sure, the pros knew they'd be competitive. But a state in the south that hasn't gone blue since 1964 being THIS competitive? Nope, the pros I read didn't think it would be. I did. As of now I am right, RIGHT RIGHT.

With Colorado (discussed below) looking good for Obama, Virginia and Ohio are ground zero for the 2008 election. Virginia! Virginia!

Where does VA go from here? I dunno. What I do know is that Obama will NOT abandon it! He will fight for VA until the bitter bitter end, and force McCain to do so. Watch the last 2-3 days of this campaign. Obama will spend part of at least one of them, if not MORE, in Virginia. This swing state is the real real deal. Remember, if Obama wins all of the Kerry states + Virginia + Iowa, he's sworn in. This is the emergency path I think Obama's advisers have in mind if McCain wins the popular vote. If Obama wins Virgina, and hold the big Kerry states, he'll win. Va. will be, as I predicted, HOTLY contested all the way.

Revised Prediction: Obama by 2.

7) Missouri: (11 evs, red + 4). I predicted that Missouri would be red + 6. As of now McCain is leading in the polls by 4.7, making Missouri red + 6.7 as of now. That would be, as they say in the biz, a WIN! I was right, Missouri is a good sized reddish tint. Its out of reach absent a big national win. I'd pull out of Missouri today. I think Obama has as good a chance in North Carolina, which has 4 more electoral votes. I think he has a better chance in Florida, to say nothing of Ohio, Virginia and Colorado. I don't know how hard Obama will fight for Missouri. He is highly unlikely to win it.

Revised Prediction: McCain by 4.

8A) Indiana (11 evs, red + 17!)

I didn't even discuss Indiana the first time around. It was, after all, red + 17, and is a notoriously red state. Indiana borders Obama's Illinois, however, and Obama has persistently polled well here. As of now, McCain is up by 2.3 in the polls, so Indiana is red + 4.3. That's not a ton. I just don't for a minute believe Obama can win Indiana absent a national landslide. But I've been wrong before.

Indiana is particularly odd when you consider that Obama is under polling my predicted blue bias in so many Midwestern states (see Pennsylvania, above, and Minnesota and Wisconsin below). Strange that Obama does (relatively) very well in Indiana, and not so (relatively) well in these states.

PREDICTION: Nope-- McCain wins it.

8) Minnesota: (10 evs, Blue + 3). I predicted Minnesota would be blue + 8. It is now polling at
Obama by 2.8, call it blue + 1. Yet ANOTHER big Midwestern as-of-now MISS. I'm sticking by my guns on Minnesota. I stand by my blue + a bunch prediction, and still do not believe it will be all that close, no matter the popular vote. The blue tint will reassert itself.

9) Wisconsin: (10 evs, blue + 3). I predicted Wisconsin would be blue + 5. Now polling at Obama + 3.2, or blue + 0.7. Yet another big underperformance by Obama in the midwest. Wonder what is going on here. If he fixes it and wins EITHER Virginia or Colorado, he wins. If he DOESN'T fix it he might well win anyway, but might not.

REVISED Prediction: Obama by 5.

10) Colorado (9 evs, Red + 2). I predicted Colorado would be BLUE + 2. It is at the moment polling at Obama + 4, or blue + 1.5. (*bows ostentatiously*). Yup, I nailed Colorado and Virginia perfectly as of the moment. Obama held the convention in Colorado, a brilliant move. He's up in almost every poll there. Its close, and any minor thing could blow this all up, but as of this instant, Obama stands to win Colorado's 9 precious evs. Florida or Ohio would be better, but you take any ev you can get, especially 9 of them. Of all the swing states on this list that voted for Bush (other than Iowa), I think Obama is most likely to win in Colorado. TONS of aspirational whites, very environmentally conscious, and he has always polled well here.

REVISED prediction-- Obama by 5.

11) Iowa (7 evs, blue + 2). I predicted Iowa would be Blue +5 (but was supremely confident Obama would win it). It is polling at Obama + 9.2, or blue + 7. Its in the bag because of the ethanol issue. McCan can't win here. Its done.

12) New Mexico (5 evs, blue + 2). I predicted New Mexico would be RED + 4. Oops. Its polling at Obama + 6, or blue + 4. Oops. I don't want to award Obama these evs just yet, as I am Iowa, but blue + 4 is a real effect. Narrow, but real. Obama has to be considered a favorite here.

Revised Prediction: Blue + 0.

13) Nevada: (5 evs, blue + 0). I predicted Nevada to be red + 4. It is polling at McCain + 1.7, or red + 3.5. Wow, got this one, as of now. Wish I could say it was my superior analytical skills. Really do. This state will go down to the wire.

Revised Prediction: I dunno.

14) New Hampshire: (4 evs, blue + 4). I predicted New Hampshire would be red + 1, owing not to its demographics (like say Florida or Missouri) but because of McCain's great popularity here. The polls have Obama up by 1.7 points, or red + 0. Close enough. New Hampshire will surely be razor close in a razor close election. I boldly predict that the winner of the popular vote, however narrow, will narrowly win New Hampshire's 4 evs. Any tie goes to Obama because New Hampshire is still in the northeast, where the GOP brand is the most damaged.

Friday, September 19, 2008

The latest in the ongoing financial crisis.

First, serious props to my friend Ann. She's been telling anyone who would listen, for years that big financial institutions ("FI's") were overleveraged, that this would cause a lot of problems and pain in the financial system, and that these problems and pain would likely spill over into the real economy. Three Cheers for Ann! She's my financial guru, my financial Andrew if you will!

Indeed, on her website, linked to below, she has an e-mail or letter from Larry Lindsey, former economic policy assistant to President W, and a former member of the Federal Reserve Board. Of course, as a prominent Republican in money matters, he has long lied through his teeth about many things, but still, this is a hugely accomplished man. Other movers and shakers commented as well. Ann is a former Hedge Fund manager (to my understanding) and has a real insight into the deeper and darker workings of the financial system.

Oh, one other minor detail. If you read Lindsey's letter to Ann, which was quite critical of her proposed paper, it seems clear that she and not Lindsey got the best of the argument.

This is not real surprising to me. Ann has an enormous amount of horsepower in her brain, Lindsey not so much. Ann I hope you read this, and do be gentle with me. My knowledge in these matters is solidly intermediate, but I'm not an expert. And my blog is intentionally written so that a smart motivated person with little or no knowledge in the policy area I am discussing can really benefit from what I have to say. That my target audience.

Ok, onto the financial crisis. WOW.

Starting from the top. There are two major, related problems, which threaten to bring the US financial system to its knees, and have a slim but not zero chance of causing a collapse leading to a bad recession or worse. These problems are a credit crunch and a loss of confidence. Basically, people with money are about as scared right now as anytime since the end of WWII. They fear that the value of various securities, particularly mortgage back securities, will sharply decline, and that more banks and financial institutions will collapse, causing the collapse of others, and thus all sorts of other losses. Banks similarly have these fears of course, and are very reluctant to lend money to anyone, even other banks (usually a very safe borrower, bank failures are truly rare events in America since FDR, with a few odd exceptional periods). This causes what we call a credit crunch-- credit becomes unavailable at any reasonable price, or at times at any price at all. Quoting Paul Krugman, "This [decision not to lend money to borrowers where there is any risk] has cut off credit to many businesses, including major players in the financial industry- and that, in turn, is setting us up for more big failures and further panic. Its also depressing business spending, a bad thing as signs gather that the economic slump is deepening."

Rather than simply react to events, Bernanke and Treasury Secretary Paulson have decided to get ahead of the curve. Thus the HUGE HUGE "bailout" you've heard about since yesterday. This HUGE "bailout," costing potentially several hundred BILLION dollars, or even more (though I doubt that) isn't a bailout per se. The government is not simply lending money to banks/FIs. Instead, what will happen (assuming what we've heard about becomes law, it needs congressional and presidential approval because it is so vast in size), is that the government will buy securities which are valued based on mortgages, including subprime mortgages (mortgage backed securities) from banks/FIs. A lot of banks and other financial institutions still own these securities. It is in no small part losses in these instruments which caused the gigantic losses you have heard about in various FIs.

The government will be buying securities which almost certainly are worth something (perhaps in the end well more than the government will pay for them, more on that later). However, no one really knows what they are worth if you hold them for a bunch of years and let the housing and economic corrections play out. I note that we do know what they're worth in the marketplace today; not much. In order to get a good handle on what these securities are worth, you really have to make estimates on (a) when housing prices stop falling/start rising again; and (b) the length and depth of the economic downturn. These things are crucial because the actual value of these mortgage backed securities depend on how many homeowners eventually default on the mortgages on which these securities are based. And this, naturally, depends on how much further housing prices fall, and how bad the economy gets and how long it is bad.

Do you know the answer to these questions? I sure don't. Not a clue. My hero Ben Bernanke doesn't. My new second hero, Hank Paulson, doesn't. Ann doesn't (I'm speaking for her). No one does. Any guess could be not merely wrong, but really badly wrong.

So with all of these unknowns, NO ONE wants to buy these securities. There is very low demand for them. So the prices on the few sales that have taken place have been fire-sale prices (assuming that housing doesn't fall 30-50% from here, in which case these securities really are just about worthless in many cases).

Until there is some visibility regarding when housing prices stop falling and how bad the downturn/recession will be and how long the downturn will last, why on earth would you BUY securities based upon loans to Americans to buy houses, particularly subprime loans?

You wouldn't. But so what? Why does it matter that banks and other FIs have these toxic securities sitting on their books?

Two reasons; accounting and reality. Under US accounting rules, known as mark-to-market, banks/FIs have two lousy choices: (a) sell them, at fire sale prices, or (b) hang onto them, and recognize, and continue to recognize going forward, the big losses the banks/FIs have taken on these securities, which they bought when prices were very much higher.

The accounting matters because with these losses on their books the banks are both less willing and less legally able to lend money. Even other FIs, which aren't as regulated, are more reluctant to lend, as they just don't have as much money lying around as they would like.

The reality, that banks/FIs are out lots of money because they bought these bonds say at $100, and could only sell them now for $20 (I'm making the numbers up). That's $80 the bank doesn't have to lend that it had when it bought the securities -- the bank loaned that money out when the bought the security and can't now get "repaid" (because they can't sell the bonds for anywhere near what they paid for them.

So for these two reasons, banks/FIs are really really hurting, and unable/unwilling to do much lending. This is a key cause of the credit crunch you have heard about. It is the credit crunch that is one of the two devastating problems in our financial system right now (with a loss of confidence in general being the other). If banks don't lend, people can't get mortgages or cars, and business can't get credit to expand, or even plain old working capital. This is real, real, real bad.

The idea behind this massive "bailout" is that if banks/FI's get rid of the especially toxic securities, they will be able to go back to the markets and raise capital (the markets will be far less worried that the bank/FI will fail) and the banks/FI's can go about their normal businesses, with banks lending money again.

This sounds like a hugely good idea to me, and I am in full support of it. As I often say, I tend to the critical/skeptical when it comes to government actions. To say the least. But this sounds like just the right move, in a massive enough size to easily matter, at arguably the right time. Maybe its even later than it might have been. But this move makes all kinds of sense to me, and might well work.

As for the purchase of these toxic securities by the government, a possibly analogous model, as you may have heard, is the Resolution Trust Co. (RTC) which bought and sold a lot of real estate from failed Savings and Loans (remember the S&L crisis of the 80s/very early 90s)? Back then, the government took over failed S&Ls, thus becoming the proud owner of their assets, typically real estate. The RTC then sold off the assets, reaping what it could in the sales. Similarly, the idea here is that the government can buy these toxic mortgage backed securities and can afford to wait until market conditions dramatically improve before selling them. The United States government is so big that it can afford to have several hundred billion dollars tied up in toxic assets if need be. Then, when (I hope its not if) market conditions improve, the government can slowly but surely sell these securities, for at least as much as it paid for them if not more in many cases.

In theory the government could make a handsome profit out of this "bailout." Don't laugh, we made a nice profit from the Chrysler and Mexico bailouts, both of which were liquidity driven problems rather than a failed business model (like GM today or Enron of 2001). Both needed a ton of money, yesterday. Both Mexico and Chrysler got big money from Uncle Sam, both paid their loans off early, with interest.

This "bailout" is much, much trickier, but still, a profit isn't wildly unlikely, and a situation where the government gets back say 70% of what it lays out is, in my somewhat ill-informed opinion, reasonably likely, as these securities have already come way way down in price. The government would be buying cheap. Yes it would be buying trash cheap, but still cheap. In addition, this big action, together with other actions, increases the chance that the recession I believe we are in will not last more than 6 more months.

There are other aspects to this "bailout" including the fact that merely by entering the market for these toxic mortgage backed securities the government will probably put a floor under the price that these securities are trading at, at least for the time being. But the principal effects were as I've described above.

Questions? I plan a follow up post. I also plan a post where I discuss the failure of Lehman Brothers and comment briefly on the bailout of Fannie Mae and Freddie Mac.

Thursday, September 11, 2008

GOP election outrage:

Well, the GOP dirty tricks machine is at it again. Not in the presidential race, but in a Mississippi Senate race. There are actually two Senate seats at issue in Mississippi on election day. One is not in doubt, Republican Thad Cochrane will easily win reelection. And his race is at the top of the election day ballot, where it belongs. No problem there.


Mississippi state officials voted to put the other Senate race, technically a special election to complete the unexpired term of Trent Lott, near the bottom of the ballot. The reason presumably was to make it more difficult for the elderly and first time voters, disproportionately democrats, to find the race. A state Judge has blocked this ballot design, but the case will likely be appealed.

In what should be no surprise, this race is highly competitive, with the democrat, former Governor of Mississippi Ronnie Musgrove running very close behind the GOP candidate.

Apparently the state official involved argued that "because the Wicker-Musgrove race is a special election to fill the remainder of (Trent) Lott's term, he is free to place it at the bottom, below state and county races."

If anyone believes this outrageous explanation, I have a bridge in Brooklyn to sell them, cheap. It is nothing more than an attempt to steal an election by ballot trickery.

Republicans everywhere have a moral duty, a duty to their party and country, to speak out against this sort of disgusting dirty trick. Until a price has to be paid for these sorts of actions, Republicans (and some democrats) will continue to engage in this sort of activity.

Wednesday, September 10, 2008

McCain's Post-Convention bounce.

A one-sentence summary: Following the conventions, white women have hugely moved towards McCain; it won't last, at least not entirely.

Well, a stopped clock is right twice a day. I liked McCain's speech and LOVED Palin's, and wrote in my last post, "I suspect the GOP will win the battle of convention bounces, and possibly by a lot. If I'm right, this race will be truly even going into the real campaign, which begins in earnest now."

I was right, if conservative. The first 3 national polls taken following the GOP convention. had McCain leading by 1, 3 and 10 points respectively! The 10-point McCain lead is hugely likely to be just a fluke. An average of polls taken since the GOP Convention has McCain up by about 2.5 points. There have been a bunch of them, so this is real. There have been 8 polls taken since Palin's (and McCain's) speech. Two of these are tied, Obama leads by a puny 1 point in one, and McCain leads in the other 5, by 1, 2, 2, 5 and 10.

At this instant in time, McCain is up around 2.5 points nationally! Oddly, the electoral college is much, much closer, and may even favor Obama, but never mind. Although possible, it is very difficult for someone to win the popular vote by more than two points and lose the election. Gore for reference won the popular vote by only .5%. If McCain wins the popular vote by 2.5 points, he'll find a way to get to 270 electoral votes and win the election.

Since Obama was up around 3.5 points in polls taken before the conventions (when not that many people were paying close attention) and McCain is up 2.5 points now, (when people are paying a lot more attention) it is crystal clear McCain got the bigger poll bounce, and not by a little. This is 100% due to Palin in my opinion. As of now she represents easily the most significant VP pick since at least 1960 (LBJ), and one of the very most significant in the history of the Republic. For the ever more Bush-like John McCain to bounce so significantly in the polls is an amazing testament to Palin's appeal. She is an absolute mega-phenomenon as of right now. But it is reasonably obvious that the effect she's had on the race won't last. At least not entirely.

Approximately 40 million people watched Obama's speech. Amazingly, 38 million watched Palin's. That says nothing of people who watched it on-line or at least paid close attention to media analysis of her speech. There was enormous curiosity about this young woman new on the political scene, and as I told you she gave a speech for the ages (on style only, but substance is overrated). Or, put another way, images are powerful things. As I said in my September 5th post, Palin's speech, "was AMAZING. I am NOT being sarcastic. Anyone who can watch that speech and not be inspired by what that remarkable lovely, and just plain remarkable woman has done, well I can't really help them. I am VERY biased AGAINST the GOP and still found her speech enormously inspiring on a certain level. She was, in fact, ELECTRIC."

I have a tendency to exaggerate, but I understated people's reaction to Palin's speech. Her speech, as of now has fundamentally changed the presidential contest. Underestimate her at your peril.

Two obvious questions arise:

A) How do I know it was solely Palin's speech that changed the dynamic of the race, and which voters were swayed; and

B) How durable is the bounce McCain received?

1) How do I know McCain's poll bounce was due to Palin's speech and which voters were swayed

Before the Conventions, Obama was up about 3.5 points. The democratic Convention began on Auugst 25th, so just check the polls taken immediately before August 25th. Scroll down.

Since McCain is up by 2.5 points now, that represents about a 6-point swing to the GOP after both conventions. A big swing, but I don't think its historic. I'm not taking the time now to find out.

Where did this 6-point swing come from? That is to say, which voters have moved in the polls from Obama to McCain? White women.

In 2004, Bush won by 3 points, which is extremely close to McCain's current lead. In that election, white women (who constituted 41% of voters) went for Bush by a 55-44 margin, or 11 points. (Women overall went for Kerry 51-48, continuing a gender gap that has been in place in American politics for at least a generation). Non-white women went for Kerry by an absolutely staggering 75-24. Non-white women represented 12% of voters.

If non-white women don't represent slightly more of the electorate in 2008 than in 2004, I am a monkey's uncle. New Hispanic voters. Higher black turnout. Figure it out. If that number goes to from 12% to 13% (I'm making this up, sounds like too big a jump as I think about it), and the 75-24 holds, that would be a gain of 3/4ths of a point for Obama. One percent is probably too much. Ok, let's not get that micro.

According to Harold Meyerson of the Washington Post, who has been around the block and who I greatly respect,

an ABC News Poll showing McCain with a 2 point lead had white women favoring McCain by 12 points. Sounds exactly like Bush's 11 point win among white women and sounds like cause for pushing the panic button. However, before the conventions Obama was up 8 points in this group. Thus the Palin effect (you have to imagine this 20-point swing was entirely due to Palin and not McCain, but I am just guessing), was sufficient to cause a 20 point swing in 40% of voters (I'm dropping this number from 41% to constitute the increased voter participation among non-whites, and for simplicity-- the change from the 41% in 2004 is trivial, but I am making it up). 20% of 40% is an insane 8% of the overall vote!!! Thus the change in white women's voting preferences more than explains the entire shift of the race from before the conventions-- all other voting groups very slightly moved towards Obama. I am assuming this poll is consistent with the various other polls.

The poll is found here.

In other words, if all else stayed the same and this Mt. Everest sized Palin effect disappeared entirely, McCain's 2.5 lead becomes an Obama 5.5 point lead. Which would put him further ahead then he was before the conventions, but not radically so. But the Palin bounce disappearing entirely is a daring assumption, and one can't casually make it.

As of now (and this can and very possibly will change so hugely as to make this post completely irrelevant, with possible factors including racism, new revelations about Obama, foreign policy crises, and something no one is even thinking about), the $64,000 question in the 2008 election is how much of the Palin bounce among white women stays going forward. Usually any bounce is reduced in time. Picking numbers completely out of the air, if half of the Palin bounce stays through election day and the voting preferences of all other voting groups remain as they are today, that would give Obama a thin 1.5 point national lead, close enough that the 2008 election would be too close to call, might well come down to Ohio again, and would leave the country closely watching the election returns on election night for the third cycle in a row.

I'm actually optimistic that a lot of this bounce, perhaps even all of it, will disappear. The Myerson article linked above states that new polls have shown that "before the conventions, (white women) preferred Obama on the economy by 12 points; now, they prefer McCain by 10."

So white women prefer McCain on the economy by 10? This is obviously merely a result of their attraction to Palin, and is virtually 100% certain to fade. Especially if Obama hits McCain hard on the economy. Hillary can be very very helpful here. Hitting this issue hard can, I think, work to reduce/eliminate this bounce.

I note that Myerson added that other national polls also show a narrowing of Obama's advantage on the economy. He doesn't specify whether the narrowing was primarily among white women, but I imagine it was.

B) How durable is the bounce McCain received?

The short answer is that while I don't have a great feel for this, I find it hard to believe that all of the bounce will be maintained, and discount entirely that Obama's status among white women will worsen. I would be very surprised if at least some of this bounce among white women didn't go away. If half of it does Obama's in a narrow lead, as I said above.

People rely on gut instinct and images. Images are powerful things. Palin understands people like me. She and Johnny Mac will be fine on the economy, better than untested Obama and foreign policy Joe. A very sizable percentage of the 8% of voters who have changed preferences are "thinking" like this. Images are powerful things, but new images are softer and fleeting than long-held durable images (McCain sacrifices for country, Bush is strong on national defense, Hillary is shrill and negative, etc). This new image is likely to evaporate some on its own, but the democrats will need to work at it and work hard. And dirty. And nasty. And negative (as well as concrete and positive).

Myerson says, in words that neither Andrew nor I could improve upon, "If Obama and his strategists can't reclaim the economic issue after eight years of Republicans presiding over the first recorded recovery in American history that failed to boost family incomes, and now over a slowdown that has its roots in the GOP's mania for deregulation, they ought to find another line of work. They need to ask John McCain at every turn: What Bush economic policies do you repudiate? Where have you broken with Bush on the economy?"

The Obama campaign is in a near panic over Palin's huge effect on the race and are attacking her, including Obama personally attacking McCain's Vice. This is precisely the wrong approach.

Myerson is just hugely right. McCain must be absolutely savaged for agreeing with Bush up and down the line on economic matters. Its not enough to say, "Bush-McCain" or "third term." That doesn't pass the smell test by itself. McCain has a Maverick/Independent image, and Palin has dramatically fortified this. Instead, ads must say, "Bush cut taxes on the wealthy creating a huge deficit and a slow economic recovery that failed to lift family incomes. McCain wants to do more of the same." Over and over and over and over and over and over. And commentary on housing/mortgage issues and energy.

Surely some of those white women mentioned above are busy juggling very tight family budges and can understand that McCain despite some appearances is loudly promising more of the same failed Bush economic and regulatory policies and Obama isn't. If Obama can make the 2008 election about this issue, he wins.

These sorts of attacks can help diminish the Palin effect. Watch Oprah on this. Her show is watched by gigantic numbers of downscale and mid scale white women, and her impact on the 2008 election may be reasonably significant.

A few months ago I predicted an Obama 8 point victory. While that is still possible, and still far more likely than a McCain 8 point victory, such a relatively easy win no longer seems very likely at all. I still think Obama is 80% + to win, but I wouldn't go much further than that. Some of the Convention bounce will disappear, and pretty quickly. The debates will be hugely watched, all four of them (3 presidential and one vice presidential). Interest in Palin will likely continue to be absolutely enormous. I wouldn't be surprised if north of 60 million people watch the Vice Presidential debate. So lots and lots of things will move the polls prior to election day. And this movement is highly likely to favor Obama, as I have spelled out. How much remains to be seen.

If I absolutely positively had to call the 2008 election today, I'd predict that Obama wins by 4. But I can definitely envision McCain winning which I really couldn't in June (absent a big foreign policy shock or truly enormous revelations about Obama). McCain could now win without either of these things occurring. This is a remarkable change of affairs, and is 100% due to Palin. But having this much of your hopes pinned on an untested political rookie who is probably at her popularity high water mark is not where you'd really like your campaign to be. I'd much rather be in Obama's position than McCain's, despite McCain's current poll lead.

Friday, September 05, 2008

McCain's incredibly cynical VP pick, Palin's speech and McCain's speech.

This post is now REALLY long, but bear with me, I do have some useful things to say here.

I've got three things on my mind:

1) McCain's speech (I mostly liked it, I expect that it will, along with Palin's, hugely help the McCain campaign in the polls, at least in the short run. I think the GOP has probably won the battle of the conventions.

2) Palin's speech (I loved it except that it wasn't at all substantive);

3) Just how utterly cynical a choice Palin was as a VP (extremely)

In that order:

1) McCain's speech.

I mostly liked it, though it was at times short on actual specifics, and those specifics he did give us were in most cases harmful policies, like tax cuts. Still, the speech was much more the old McCain than the new Bush-McCain. As the New York Times said in today's editorial, he's vigorously trying to have it both ways, running as the Maverick he really once was while supporting the policies of the modern GOP machine, as well as their tactics.

The end of his speech, recounting his horrors in North Vietnam, was awfully AWFULLY good! Really really good. And of course only so relevant to being president, and not at all relevant by itself to solving our nation's problems.

In my opinion this portion of his speech was hugely effective. It will show in the polls, very very quickly. I suspect the GOP will win the battle of convention bounces, and possibly by a lot. If I'm right, this race will be truly even going into the real campaign, which begins in earnest now.

I, however, do not like how he has used his experience in Vietnam. His survival of torture has long been his get out of jail free card. He helps Bush enshrine torture in the CIA playbook? Can't question him, he was tortured. Wrong on Iraq? This is a man who understands a tough fight. Its difficult for the democrats to take advantage of this, but I sure don't like him using it as a get out of jail free card. General Wesley Clark was enormously impolitic but correct when he said that getting shot down (and being tortured, he could have added) does not qualify you to be president. Not in the least if you actually think about it. Does it go to character? Sure. Is character important? Sure. But as between character and a president who believes in solving America's problems in ways that make sense, I'll choose the latter every day of the week and twice on Sunday. See, e.g., Clinton comma Bill.

McCain either didn't mention Bush, or barely did. You'd swear there was some unnamed democrat in the White House the last 4 or 8 years.

He did look good, and vigorous. Old, which he is, but still, very vigorous. On appearances, he came out reasonably well. McCain's not a natural speaker. Ok, the teleprompter is his enemy. He's fine in small crowds, but set piece speeches are not his thing. Palin's new on the national scene, but is much the better natural speaker (to say nothing of Obama, or Bill Clinton, or Reagan).

During his speech, McCain said, "we were elected to change Washington and Washington changed us!" This is remarkable self-criticism for a Republican! Both parties grew government. Pretty amazing stuff for a GOP nominee. You'll note there was no applause at all on this theme. Zippo. None. Except at the very very end of this, and it was pro forma. GOP activists, the ones that will be all over the administration, simply don't think that too too much went wrong the last 8 years. We're winning in Iraq (laugh), we cut taxes, and who cares about bridges to nowhere. That lack of applause is as good an indicator of why you should vote for Obama as anything I can pour out onto my blog. I'm 100% stone cold serious.

"We believe in letting people keep the fruits of their labor, a strong defense." Well ok, that IS a policy. No word on believing in PAYING for government, but at least that's not vacuous. And what a strong defense means is of course well open to interpretation.

"We believe in the values of families, neighborhoods and communities." Now THAT'S VACUOUS. Its this kind of baloney that the GOP has been foisting on the public for YEARS. We're for you, the dems are weirdos, French, wind surfers, elitist. They're not for you. If I had to name the single reason Bush "won" in 2000, and won in 2004, that's the reason. The dems are weirdos, and don't care about real people, we god-fearing Republicans do. Its amazing, they are selling the belief they're for the little guy, and people buy it. Never underestimate the ability of the American people to believe in stupid things. Or, put another way, images are powerful things.

"I will cut government spending." LOL. LMAO. Where John? Cutting Medicare? Medicaid? Social Security? You seem to want to increase defense. Where are you cutting, other than pork, which is less than 1% of the budget. This is fine in a Convention, of course, but it will be repeated during the campaign, and the media, which knows better, will not call him on it. THAT is infuriating.

He's for judges who don't legislate from the bench. Well ok, but does that mean an anti-Roe litmus test? I sure hope they ask that in debates. He'll lie, but at least he'll have to.

"I will open new markets for our goods and services. My opponent will close them." Fair enough. McCain's always been a real free-trader, and Obama sure did flirt with protectionism in the primaries, although Obama has been running 100 mph from his anti-trade position he staked out in the primaries. Still, no one is messing with the general gist of free trade.

"My tax cuts will create jobs." John, we cut taxes a ton this decade, and had the slowest job growth of any decade since the 1930s. WAY slower than the 90s. Slower even than the troubled 70s, by a ton. Anyone going to call him on this?

"My health care plan will make it easier to find health insurance. . . . His plan will force people into "government run systems where a bureaucrat stands between you and your doctor."

Now THIS makes my blood boil, for a variety of reasons.

1) I don't have a doctor. I'm uninsured. Better a bureaucrat gatekeeper than no doctor John!!!

2) Ever heard of HMO's? Many Americans already have such gatekeepers. This mythical ideal of an American and her doctor making decisions unfettered by others is almost entirely false. Insurance companies, HMOs, governments in the case of the VA, Medicare and Medicaid. That's pretty well everyone John.

3) MOST IMPORTANTLY-- Hey John, ever heard of MEDICARE? Its a GOVERNMENT run program where a bureaucracy stands between you and your doctor! And MILLIONS of seniors who vote VOTE VOTE, love it. I'd run ads using this exact line, with a voice over saying that Medicare works, and McCain voted against Part D, the new prescription drug bill. Yup, McCain voted against it. This is the one and only issue that gives Obama any hope in Florida, but only if they use it ruthlessly. In addition, the populations of Ohio, Pennsylvania and Michigan are older than the national average. There are also new retirement communities in Virginia and North Carolina where this pitch may help. But fundamentally, with care and caution not to go overboard, the Obama campaign can paint McCain as a questioner of Medicare.

Cutting the second highest business tax rate in the world will help. Ok, I guess. Cutting health care costs on business would have the same effect of course, as well as have a zillion other benefits.

Same old GOP BS. Cut taxes, cut taxes. Reagan and dem congress did-- huge deficits ensued. Bush and GOP Congress did-- huge deficits mysteriously ensued. This is NOT a coincidence, nor is it rocket science. Clinton and a dem Congress raised taxes on the rich-- deficit fell, economy boomed. Its astounding that the GOP can still get away with the demonstrably false claim that cutting taxes helps the economy grow. They can if circumstances are right and marginal tax rates are very high (early 1960s). But the incentives in cutting rates from 39 to 35 are very very minor.

He's for choice in schools. So am I. The GOP is right on this crucial issue, and the democrats are largely wrong. Of course, the GOP has long been unwilling to spend the money needed to actually provide schooling.

McCain barely mentioned the word "Bush" and his campaign is focusing a lot of time and energy on distancing him from Bush. I predict this will very largely work, for a wide variety of reasons. The Obama campaign has to do more than reinforce this.

I would spend 5-10%, at least, of the Obama ad campaign, on the following ad:

"John McCain helped George W. Bush defeat Al Gore in 2000." (cut to clip). "We all make mistakes. John McCain helped George W. Bush win reelection in 2004." He did more than just endorse George W. Bush, he campaigned for him here, and here, and here (naming states) and raised X $$ for him. You've heard the saying, fool me once shame on you. Fool me twice, shame on me. John McCain helped George W. Bush push through the Iraq war. He said, "insert quote about ease of victory." That attacks McCain where he's perceived to be strong, national security. It lashes him to Bush. And its utterly factual and can't be rebutted effectively. Of course, the Obama campaign won't do it. They think they can coast to victory. And they're likely right in 2008. Of course, we tried this in 2000 (when we shouldn't have been able to lose) and 2004 (when we should have won) and it didn't work then, either. Playing not to lose hasn't worked too well, has it?

When he says he'll veto pork barrel spending, he has immense credibility. Won't make even a dent in our fiscal problems, but it looks good on television. When he says he will name and shame the congresspeople, he also has real credibility; he's done it before. Of course, to get anything done he'll have to compromise. But he's 100% entitled to gloat and brag about his record against pork. 100%.

Its true that he's getting back to running as John McCain the Maverick reformer. And she does fit well on that score, very well. Of course she was for the Bridge to Nowhere before she was against it, but still, she IS a reformer, who has taken on the Alaska GOP. McCain's always been at his best running against Washington, and now he's doing it again, which is great to see. But in recent years he's been a real part of the problem, helping Bush on Iraq and torture, and flipping the full 180 degrees on taxes for political reasons.

One other thing before I shut up. McCain's people seriously believe that Iraq is a positive for them. They mention all the time that he was right about the surge (he was in many ways) while Obama was wrong on the surge (he was, in many ways, if you simply leave out the costs of accomplishing what we did in the last 8 months weighed against the benefits). But OBAMA WAS RIGHT ABOUT GOING INTO IRAQ. AND MCCAIN WAS WRONG. Very very wrong. And unless you think its just ancient history, well, Iran is a live live issue.

Obama should be relentlessly arguing this point. I agree with the moribund Obama campaign that this election will be about economic and not security issues (absent a big change in the world). Doesn't mean you can't make this point. Letting McCain get away with claiming to have had the better judgment on Iraq is beyond the pale.

I was for the war at the beginning, strongly. I was wrong. WRONG. If you can't admit these things you can't learn and move forward. You also lose all credibility. I hugely underestimated both the difficulty of the post regime-change task and the venality/incompetence of the Bush administration. I would tie McCain to that vote and decision so tightly he couldn't breathe.

2) Palin's speech:

Well I'll jump right in. It was AMAZING. I am NOT being sarcastic. Anyone who can watch that speech and not be inspired by what that remarkable lovely, and just plain remarkable woman has done, well I can't really help them. I am VERY biased AGAINST the GOP and still found her speech enormously inspiring on a certain level. She was, in fact, ELECTRIC.

As for her merits, her nickname aint Sarah Baracuda for nothing. It may have been given to her when she was a High School basketball star, but it fits. Underestimate her at your peril.

She was greeted like a rock star. The activists at the Convention are in MAD PASSIONATE love with her. Which is why she was chosen, as I discuss below.

To her speech. She looked great, and I don't just mean beauty. Smart, poised, confident, and able to be angry without making you want to just shoot her. Hillary should do so well in terms of delivery.

In terms of substance, however, not so much. Her speech was brilliantly written and very well delivered. Of course, it was about almost nothing. "The difference between a hockey mom and a pit bull? Lipstick." Great line. Who cares. But that line was alas typical.

She did give some substance on attacking wasteful spending in Alaska. Ok, very good. A trivial problem in terms of our massive deficit and debt, of course, but still, her and McCain's record is phenomenal here. So this was some substance. But that was about it.

As for energy (she is governor of Alaska), a natural gas pipeline is going to help us get towards energy independence. Gimme a break. The pipeline may make sense, but the GOP now lies about energy just as effortlessly and seamlessly as they do about money matters. To listen to the GOP we're going to drill our way much closer to energy independence. That's just insane.

She did repeat the administration's talking points about nuclear power, geothermal, wind, etc. Brief lines, but these I have no problem with.

So she was substantive-ish on energy and largely wrong.

As for problems? She seems to think that, to quote Reagan, government isn't the solution, its the problem. Obama wants to raise taxes. They're going to keep lying about this and lying about it, and the Obama campaign has to tell everyone they are not telling the truth. Obama's tax hikes almost exclusively hit the rich, super rich and Bill Gates rich. But the GOP has small town values. How many rich and super rich in a typical small town of 5,000? 8? Seriously, not nearly as many as a random block in Manhattan. Literally.

Speaking of small towns, Palin spent a LOT of times talking about small town values. These are honest god fearing Americans you understand. Never mind that big cities and suburbs subsidize small town America. Never mind that Blue states hugely subsidize red states. Its one of modern America's great ironies. Blue states, being much richer than red states on average (MUCH), send more money to Washington than they get back. By definition if you have any redistribution from government, as we do (and should in my view). Never mind a lot of things. The democrats CANNOT again let the GOP position itself as the friend of "normal" Americans. Bush cleaned Kerry's clock, just destroyed him, in small town and rural America. These people earn less than the average American and benefit little from the huge tax cuts Bush gave (and McCain opposed, before he was for them) primarily to the rich, the super-rich and the Bill Gates rich. But the GOP is for them. How does the GOP help them get better health care and schools (bigger problems in small town America than the suburbs for certain, and the cities too to an extent? Well, not so much.

To conclude, her speech was mostly about nothing, and of course hid her views on abortion (wants to repeal Roe) as this you see is not what swing suburban mothers in Ohio or Colorado or Minnesota or where ever want to hear. But as a speech introducing her to a public that had never heard of her a week ago, it was a grand slam home run.

3) Just how utterly cynical a choice Palin was as a VP.

She was picked because the McCain people thought they were losing and needed the media attention. Its a stunningly cynical pick, really. McCain has referred to Islamic fundamentalism as, "the transcendent challenge of our times."

(search for "transcendent"). Given that THE issue of our times, in his world view (I vigorously disagree) is Islamic fundamentalism, and he's 72 and a cancer survivor, the person best suited to deal with this challenge is ......... SARAH PALIN, first term governor of Alaska? The rank selfishness/hypocracy is obvious. McCain has carefully cultivated an image of putting country before self. The Palin pick is only the latest example of how far he has strayed from that credo in his campaign. As I like to say, images are powerful things. His pick of Palin, along with his HUGE flip flop on the Bush tax cuts are two prominent examples of his acting in self-interest first, the country's interests be damned. I used to have a lot of respect for McCain. I don't any longer.

I note in passing that this "transcendent" threat was barely mentioned in McCain's speech.

Its obvious to anyone with a brain that she was picked because she is young, female and telegenic, and would give a jolt of excitement to the base. The idea that she's the best man/woman for the job? Well, that reminds me of what Bush 41 said when he nominated Clarence Thomas to the Supreme Court. He said he was the best qualified person for the job. Many a republican got a good laugh out of that one.

The Palin thing was also a naked play for Hillary supporters. See, she's a chick, Obama picked a guy, I picked a chick, vote for me. They have run ads and really tried to egg on the wrath of the jilted Hillary voter. Woman scorned and all that. That won't work, democratic unity is well on the way following the Democratic shindig in Colorado. But for her other assets, she is a real win for the McCain campaign as of right now.