Tuesday, October 28, 2008
There is a lot of talk in the markets that the fed will again cut interest rates tomorrow. I strongly think the fed should stand pat. The Federal Funds rate is currently at 1.5 %, so there really isn't much room to cut. I think it would be far far better for the fed to keep rates unchanged so there is room to make additional cuts if warranted, or if needed to respond to a future new crisis.
There is already a ton of monetary stimulus in the pipeline, from past interest rate cuts, and a fair bit of additional stimulus in the form of the various bail outs. The drastic drop in oil (and thus gas) prices also acts as a real economic stimulus. There is a lot of talk in Congress of another fiscal stimulus package, which I strongly favor. But the fed should hold off.
The markets, however, are nearly certain that the fed will cut rates by half a point or more. That is what I predict, but I would dissent if I had a vote on the Federal Open Market Committee.
As we wind into the home stretch of this campaign, which began when Hillary announced for President just 6 months after President Lincoln was assassinated in 1865, the talking points of the GOP, and many a pundit is, "the race is closing, the race is closing, THE RACE IS CLOSING. It isn't.
There were a bunch of national polls, counting tracking polls (polls which are continuously taken, and the previous 3-days' results released) released today. 9 of them. Obama is up an average of approximately 6 points. One of them, by Pew, had Obama by 15. That's so out of reach of the other polls, that I discounted it to 12 (I was probably being generous to Obama there). Anyway, the national polls may have tightened about 1 point in the last 3-4 days. Then maybe not. The margins are all about the same.
So the national polls were "favorable" to Obama only insofar as they confirmed his lead. Nothing changed.
The state polls, however, were generally favorable. Even where the polls were favorable to McCain, they were in states where the predicted electoral votes were most most unlikely to shift. By this I mean that if Texas moves from McCain + 10 to McCain + 17, that's a good poll for McCain but it doesn't matter. Ditto New York going from Obama + 26 to Obama + 17.
Arkansas: McCain + 10. Irrelevant, but a "good" poll for Obama.
Colorado: Obama + 8.
Florida: Obama + 7 (McCain has closed near to even in the Sunshine state, so this actually has real significance)
Indiana: Obama + 1 (Indiana is a tough get, so + 1 is reasonably good. Not great, but good).
Mississippi: McCain + 8. Ok, that's a good # for McCain. Although McCain is hugely likely to win Mississisppi, the margin of victory in the presidential race may decide one of the two Senate races, where the democrat needs a massive Obama turnout to win.
Montana: McCain + 4. This is a great result for Obama, making Montana in play in a landslide. It doesn't matter of course, Obama is terribly terribly unlikely to win narrowly and carry Montana.
Nevada: Obama + 4, + 10. Two polls, one good, one absolutely fantastic.
New Hampshire: Obama + 11, Obama + 25. Two polls, one very very good, one hugely outlying. Still, the fact that there have been no polls in competitive red states (Indiana, North Carolina, Missouri) showing McCain way way up, is telling to me. Obama is very very likely to win New Hampshire, but 25 points is laughable.
New Jersey: Obama + 15. Sounds huge, but that's about right for New Jersey. Actually very mildly disappointing.
North Carolina: TIE. A good result for McCain, most recent polls have shown Obama narrowly ahead in the Tar Heel state.
Ohio: Two polls: Obama + 4, Obama + 9. One good poll, one great poll.
There have been 28 polls in Ohio in October. McCain has led in 5 of them, by 3, 2, 2, 1 and 1. Obama has led in 22 of them (one tie), by an average of 5.9 points. He has led in each of the last 7 polls, by an average of 6 points. That's a big body of polling and it clearly (not decisively, but clearly) favors Obama.
Pennsylvania: two polls: Obama + 7, Obama + 9. Excellent results for McCain, but only compared to past results. In this now must win state for McCain, where he has spent probably the most resources in the last two weeks (yes, more than Florida or Ohio), Obama has led every poll in Pennsylvania since a tie released on September 17. That's 27 polls in a row, with 11 of them in double digits. So these results, though good news for McCain, almost certainly won't make Pennsylvania remotely competitive. Having said that, it does appear that McCain's huge effort in Pennsylvania has had some results in closing the state a little bit.
Wisconsin: Obama + 9. The second straight sub-double digit lead for Obama in Wisconsin. McCain hasn't led a poll in Wisconsin since May. Not a one.
Republicans all across the land are forming a circular firing squad, as they prepare to do what democrats normally do, and destroy their own. Its very real, its going to happen, and it WILL be pretty. Indeed, it will be a beautiful thing to watch.
The second most important reason I want Obama to win (behind only health care reform) is to encourage this very crack-up in the GOP. For too long the GOP has lost touch with reality and common sense, as Andrew has been beating into me for years. A big old fashion out-behind-the-woodshed whooping is just what the doctor ordered to get the party to rethink its principles.
There are many causes for the coming crack-up, but needless to say they center around the likelihood of McCain losing next week, and the magnitude of the likely upcoming GOP losses in both houses of Congress.
First, many Republicans are furious with the scatter shot nature of the McCain campaign.
One week the focus is on Obama's "shady" connections with domestic terrorist Bill Ayers. Despite Sarah Palin saying, and I quote, that Obama "pals around with terrorists," McCain has ruled off limits his 20-year long very real association with Reverend Wright. This bizarre decision has infuriated many Republicans (and rightfully so-- if you're going to do personal attacks, why do largely weak and ineffective ones and decline, presumably based on principle, to do the actually effective attacks?) After all, Obama had very little association with Bill Ayers, serving on some boards with him. In contrast, he undeniably had a long and close association with Reverend Wright. Wright married him and Michelle and baptised his kids! The baffling decision to leave Wright off limits has puzzled and infuriated Republicans.
The next week the emphasis is on McCain the "fighter." He fought and suffered in Vietnam, and he'll fight for you.
The next week Obama is young and inexperienced and untested. McCain is none of these things.
Now we've entered the Joe the Plumber phase of the campaign, where Obama has a secret plan to raise taxes on patriotic Americans (who of course live in red states, or red areas of blue or purple states, and emphatically NOT in blue areas of blue states). A lot of the emphasis now is on taxes. Not a bad theme for Republicans, keep lying through their teeth about taxes, its worked from them for years.
Nevertheless, it has been a theme of the week campaign.
In addition, there have been some strange resource allocation decisions. McCain made a big early effort for Michigan, then pulled out. I vigorously disagreed with this decision (from McCain's perspective) at the time, as I thought Michigan was the easiest state to flip from the ones Kerry won, and has 17 electoral votes.
The really insane decision was to keep competing in Iowa, where McCain has never led a single poll, in part because of his opposition to ethanol subsidies. I have commented on this before and have nothing new to add-- they are still spending precious time, and fairly precious money (if little money) on Iowa, which they not only won't win, but won't come within 10 points of winning.
In contrast, Obama has stayed vigorously on message:
a) Bush sucks;
b) McCain agrees with Bush on many areas;
c) I'll cut taxes on 95% of Americans;
d) I'll raise taxes on those over 200k or 250k.
There's been more to Obama's campaign, but by and large this has been the main theme since July. They have not shifted emphasis over and over again.
In any event, the great GOP-crack-up has begun. It had its clearest manifestation when Elizabeth Dole, incumbent Senator from North Carolina, ran an an in her Senate race strongly implying that Obama will win.http://politicalticker.blogs.cnn.com/2008/10/23/gops-argument-dont-give-president-obama-a-blank-check/
In this ad, Republican Liddy Dole says that if the democrat wins they will hold the White House and Congress, and thus get a blank check. Its a perfectly fair ad.
Needless to say, this is something which can't possibly please the McCain campaign. Now imho, McCain doesn't give a rat's ass about the GOP in Congress, and wouldn't really if he was winning! Still, party discipline is supposed to forbid these things. There's an old saying in politics, that Republicans generally take very seriously: you either hang together or hang separately. But individual Republicans right now are scurrying like scared children from what they perceive as the sky falling all around them.
In fact, The pre-obituaries have begun. A major article in the New York Times this past Sunday showed all of the different McCain messages during his campaign.http://www.nytimes.com/2008/10/26/magazine/26mccain-t.html?scp=1&sq=%22Robert%20Draper%22&st=cse
Similarly, David Frum wrote a piece in the Washington Post stating that McCain's lousy campaign has had awful consequences down ballot (Senate and House races).
In summary, as Politico put it, the GOP has formed a circular firing squad, with everyone blaming someone else.
Monday, October 27, 2008
According to the main Charlotte, North Carolina newspaper, as of Sunday October 26th, nearly 1.1 million people have voted early, as compared to 984,000 early votes during the entire early voting period in 2004. Not the comparable period, the entire period.
Now this isn't really surprising. In 2004, North Carolina was not a swing state at all, it was safely in Bush's column. In contrast, and to the surprise of nearly everyone who follows these things, the polls in North Carolina are almost dead even, and it has been hotly contested, with visits from all 4 people on the tickets.
Still, that is quite the increase. Of the early voters thus far, 58% are registered democrats, while 25% are registered Republicans. So clearly registered democrats are much more enthusiastic than Republicans. However, North Carolina does have many more registered democrats than Republicans. I estimate based on looking at January 2008 figures that the NC electorate is 48% democratic, 32% Republican, and 20 percent other. So the 58% number is far less stunning than it first appears. Still, its there.
In addition, as you might expect, black voters have disproportionately voted early. Approximately 28% of early voters as of now are black, even though they are just 21% of North Carolina's population and were 19% of North Carolina's electorate in 2004. That 19% number will certainly climb for 2008. It is precisely that increase which gives Obama hope in North Carolina, and may spell doom for Senator Liddy Dole (Bob's wife) who is in real trouble in her reelection bid.
There have been any number of stories recently about the fact that more than $150,000 have been spent on Palin's wardrobe. More interestingly, the highest paid person in the McCain campaign over the first two weeks of October was Palin's makeup artist, who received $22,800 for the first two weeks of October.
Now millions of Americans, including loyal reader and commenter Larry in California are particularly fond of the idea that Obama is an elitist while Palin and (7-house) McCain are ordinary "real" Americans. Now ordinary Americans don't spend $22,800 in 2 weeks on makeup artists. Trust me.
Having said that, apparently some big Republican donors were very unhappy to find out about the enormous clothing expenses. Now if I were a big Republican donor (a truly unlikely state of affairs, believe you me!) there are a million things that would piss me off about Palin. That she's nowhere near smart enough to run for major office, that she's incurious, that she lies all the time, that she divides Americans, that she's killing the McCain campaign. I could go on. But her clothing bill? Nope, that wouldn't upset me one tiny little bit. Sure, its hypocritical, given that she's running as a hockey mom. But a big part of her appeal is her ability to connect, and looking good/looking the part is a part of that, perhaps even more than usual because she's a woman (and attractive at that). She hasn't been in major office long enough to amass an awesome wardrobe, like say Hillary). She needs the kind of clothes that look good and can stand up to the rigors of campaigning.
This is a phony story, except insofar as it reveals the blatant hypocrisy of the entire GOP effort these days. We're for Joe the Plumber, but mysteriously, our plan has ginormous tax cuts for the very wealthy and for big corporations (which are owned primarily by the upper middle class, wealthy and very wealthy).
It does seem like a ton of money, and sure she's hypocritical, but again, would her huge clothing and makeup bills upset me if I were a big GOP donor? Nope.
Friday, October 24, 2008
I don't mean what percentage of the vote, I mean actual vote totals. I predict Obama will win the popular vote by 9 points, and receive 75.9 million votes, and McCain about 63.3 million. By way of contrast, Bush received 62.04 million votes in 2004, and Kerry received 59.03 million. Here's how I get to this astonishing prediction.
According to someone interviewed by CNN, 213 million people are eligible to vote this year (note, not REGISTERED, eligible to vote).
I have no reason to disbelieve that number, so I'll go with it.
Turnout was 60% in the 2004 election.
If turnout was the same this year, that would imply that a total of 127.8 million people will vote this time around. This is most unlikely. Turnout will be quite a bit higher. According to the above-linked article the high turnout election of 1960 (Kennedy squeaks by Nixon) had 64% turnout. The CNN article speculated we could beat that number. It wouldn't surprise me if we did. In fact, I predict that we will have a 66 percent turnout, tying the highest mark in American history, which occurred in the 1908 election!
66% of the above-referenced 213 million people yields an expected vote total of 140.6 million!
I have previously predicted an 8-point win by Obama. I now believe that my projected margin of 8 points was too conservative. I am now predicting a 9-point Obama win. Assuming that 3rd party candidates receive 1% of the total vote (its too large a number, but not by a ton and it simplifies things), Obama would win 54-45. 54% of 140.6 million is 75.9 million votes!! (Again, Bush received 62 million and change votes in 2004). I thus predict that Obama will receive 75.9 million or so votes, and McCain will receive approximately 63.3 million.
Obama receiving less than 70 million votes would surprise me considerably, whereas his receiving 80 million votes would surprise me but not shock me.
If this prediction of a high turnout election bears out, Obama will in fact win the 375 electoral votes I predicted recently, and may well win by more than my predicted 9 points. I have drank the Kool-Aid, big-time. Feel free to laugh and criticize if I'm seriously wrong.
I will write up after the election and see how all of my various predictions turned out.
Loyal readers will recall that I recently won my oil wager with Andrew in which I bet him a fancy dinner that oil prices would go below $80/barrel at some point before the end of this decade. Oil is well below $70 as of this writing, and I have now solidly won that wager.
In 2005, Andrew and I made a separate oil wager. Andrew bet me in 2005 that on the date of June 9, 2015 (10-years to the day after we made the bet), that oil will be higher than $75 in 2005 dollars. I have the low side, wagering that (adjusting for inflation) oil will be lower than $75 a barrel.
Well, as of this instant, I'm winning by more than $10 a barrel. I'm not exactly jumping for joy-- as of June I was losing in a rout.
This wager won't be decided until June 9, 2015, so you will all have to stay tuned to see who wins.
Wednesday, October 22, 2008
My democratic friends (to borrow a phrase often used by a certain Republican Senator), relax and believe. Obama will not only win, but win in a blowout. There will be no suspense on election night. As a result of the Obama landslide, the Congressional landslide may be even worse than I predicted in my post of 10-19.
The Blue states (won by Kerry) will be called early by the networks. Swing states, though not called right away (the networks desperately want to avoid a repeat of 2000 where they called Florida for Gore than retracted it), will be called fairly quickly for Obama.
Here is where I expect the race to end up.
As of now, Obama is up by 7 points nationally.
Obama will exceed whatever his national poll numbers are the Sunday before election day. He will actually outperform his polls, by 1-5 points. There are several reasons for this:
1) Even if the national poll numbers tighten from the current approximate Obama 7 point lead, as they well might, early voting prevents that from fully translating into election day vote. There have already been long lines at polling places, and election day is 2 weeks away! More than 1/3 of voters will vote before election day, according to estimates. In 2004, there were about 121.5 million votes. I expect more than 140 million votes to be cast this election day, possibly 150 million! Interest is considerably higher among all groups for this year's election, and of course black voter turnout will soar from sea to shining sea.
This 140 million estimate of mine means I expect more than 40 million people to have voted by election day, many of them by the middle of next week, thus blunting the impact of any move in the polls.
2) Obama will simply outperform his poll numbers in any event. This will represent (i) the enthusiasm gap; and (ii) Obama's superior ground game in literally every swing state. The enthusiasm gap means that some weak McCain "supporters" will stay home, while Obama supporters, particularly young and minority voters (not just black) will turn out from coast to coast in gigantic, unprecedented, colossal, breathtaking numbers, and will overwhelmingly support Obama. Young voters turned out in fairly big numbers in 2004, helping John Kerry receive 59 million votes, a number higher than I think his campaign anticipated. Bush just got even more people to the polls.
The superior ground game will be telling in swing states. The pollsters are having a very difficult time predicting which sporadic voters will bother showing up this time around. Obama's supporters will be more likely to show up than McCain's supporters, due to greater electoral enthusiasm, and the better GOTV (get out the vote) effort by team Obama.
In 2008, young voters will turnout at far far higher rates, everywhere. I have absolutely drank the Kool Aid on this point. Youth turnout will blow away everyone's projections. Worth at least a full point above the national polls for Obama.
Obama voters have always been more enthusiastic than McCain supporters. Palin radically decreased that gap, but did not eliminate it. She's still a rock star among the foolish GOP base, but as for independents, where McCain once held great appeal, not so much. On the other hand, Obama's supporters remain as enthusiastic as ever.
3) Yes, there may be a "Bradley effect" where people tell pollsters they're voting for the black candidate, but in the privacy of the voting booth don't. However, pollsters have largely debunked this effect for any elections after about 1992, and the factors above will simply outweigh a 1-2 point Bradley effect.
In summary, Obama is up about 7 points now. If he's up 5 the Sunday before election day (just taking a wild guess) he'll win by my 7-8 points, at least (I predicted an 8 point win back in my post of June 14th). If the national polls widen, and Obama's up by 8-9 the Sunday before the election, then you'll definitely have my landslide.
Since its fun, I'll now predict which states Obama will carry. I'm confident in each state predicted, except where noted.
I'll group Obama's states into 4 categories:
1. The blue states-- the states won by Kerry. Obama will carry every state which was won by John Kerry, all of them. I'm sure of it. These states are: Hawaii, Washington State, DC, Oregon, California, Minnesota, Wisconsin, Illinois, Michigan, Pennsylvania, Maryland, Delaware, New Jersey, New York, Connecticut, Rhode Island, Massachusetts, Vermont, New Hampshire, Maine.
These 19 states, plus DC, total 252 electoral votes.
2. The sure thing red states. These states were carried by Bush in 2004 and, I submit, are sure things for Obama. He will certainly win all of them:
Virginia (13). That Virginia's 13 electoral votes are now certain to go to Obama has caused abject panic, desperation and despair in the McCain camp, and caused them to make a desperate, pull out all the stops, put all your money on one spin of the roulette wheel play for Pennsylvania. Because Kerry's 252 electoral votes, plus Virginia's 13 = 265, plus Iowa's 7 electoral votes, which are also certain for Obama, put Obama over the magic # of 270, McCain simply must win one or more of the above blue states, or he has no chance at all of winning the election. Virginia has played an absolutely crucial role in this campaign. The size of the upcoming Obama blowout means its just one red state to flip among many, but it has had a hugely out sized role in the McCain camp's thinking. It seems a bit odd to say this, given that Ohio has 20 votes, and Florida 27, but McCain simply has no answer for Virginia. Its the swing state that would, along with Iowa, singularly swing even a tied election to Obama's favor. Who would have imagined that Virginia would play such a huge role in 2008? Oh wait, I did.
Colorado (9). The swing state everyone foresaw. Obama continues to run behind his national numbers here, but not by a lot. He has led every Colorado poll since a 2 point McCain lead on September 14th in one poll. It won't be a landslide, but Obama will win here.
Iowa (7). As I explained in June, McCain never had a shot here. It was tough for any Republican this year, but especially tough for McCain, who (correctly) hates ethanol subsidies. Obama is up 12 in the polls at the moment, and will win the state by that much or more. Iowa is the surest state for Obama that wasn't won by Kerry. The McCain campaign's decision to spend some time and money in Iowa was a mind-boggling error.
New Mexico (5). I was very doubtful about New Mexico in June, but it has polled hugely well for Obama. He's up more than 8 points now, and has led every poll but one since August. Its been locked up.
These 286 electoral votes are locked up for Obama (and thus the election). Even if the national polls tighten to a tie, Obama would likely win each of these states. I note that if the national polls tightened immediately to a tie, and stayed there, most most unlikely, Obama would win few if any of the states I give him below.
3) The red states which I predict Obama will win. These states could, conceivably, end up being won by McCain.
Florida (27). Obama is polling several points behind his national numbers, and even though early voting has just started, a quick, big, sustained move in the national polls in McCain's favor could turn Florida red. McCain's campaign has long been way behind Obama's in organization in Florida, but they are apparently getting their act together. Florida is # 2 on McCain's list right now (behind, incredibly, Pennsylvania), and the margin may be close here.
Ohio (20). Ditto Florida, except that early voting, in huge numbers, started last week.
Both Florida and Ohio have started early voting. In both Obama holds a very very narrow lead. In a landslide, both will go blue. In a race Obama wins but much narrower than I expect vote-wise, both will likely stay red.
Nevada (5). Nevada is polling very close, but I don't believe the polls here. Obama will win Nevada, and his margin will surprise.
North Carolina (15), Indiana (11) (probably-- I want hedge room on only one state, and Indiana is the one), Missouri (11).
I predict Obama will win each of these (with my fingers crossed). However, he will only win Indiana in a real landslide, and the same is probably true of Missouri and North Carolina. Since I predict a landslide, I predict he turns each of these states blue. Indiana is one of the reddest states going, and North Carolina's red as well. But in an Obama landslide North Carolina (and Missouri) are sure to turn blue, and Indiana is better than 50-50.
Of the 51 "states" (counting DC), I am most likely to be wrong about these last 3.
There it is. I've laid out my current (and likely final, barring a huge, huge event) predictions for the election and each state on the line. Except for Indiana, I'll take my shots if I prove wrong. I have Obama winning 375 electoral votes. That's 5 more than Clinton in 1992, and 4 less than Clinton in 1996. So my predictions aren't wild based on recent history.
Final thought-- long shots in an Obama landslide are West Virginia, Montana, North Dakota, Georgia and Mississippi. Very unlikely in all cases. I predict each of these stay red.
Monday, October 20, 2008
Its rare in history that a turning point is clear while it is happening. But that's the case regarding our economic calamity.
Now I'm not saying the market won't go down more, possibly a lot more. I'm not saying that there aren't big shoes to drop. There could be. There are certainly more little shoes to drop, like banks failing. But its becoming reasonably clear that the huge amount of action taken already, to invest in banks directly, invest in toxic securities, investing in commercial paper (essentially loaning money to companies) and various bailouts, among other things, has been sufficient to turn the corner. The chance of a huge meltdown and depression has plummeted. Its still there, but I think it would take serious policy mistakes for that to happen.
But after real initial reluctance to take decisive action, Paulson has pulled a personal and ideological 180 degree turn, and can't be activist enough. Bernanke lent weight today to another fiscal stimulus, which democrats are proposing on the Hill. And since this one will be on the spending side, rather than mere tax cuts, it is much more likely to actually do some real good.
We're running a ginormous deficit for this fiscal year, really big. That's Keynisanism on steroids. The old man is pumping his fist in his grave.
Now I don't mean that the economy will soon start growing. Most recessions last 9 months or so, and this recession will be worse than usual. So probably more than a year. Assuming it started sometime this Spring, we probably have quite a few months yet. But we've reached a turning point in that the seeds of recovery have been planted, watered and cared for.
Don't get me wrong, the US still has enormous economic problems. The stock market crash (yes, it has been a crash, albeit in slow motion), huge consumer debt levels, tons more foreclosures to come (enough to damage our economy, and not merely be a big hit to a lot of people), states' terrible economies and budgets, a still fragile banking system, and more. But we know how to fix these problems. Disappearing confidence in our financial system is a much bigger, and more dangerous problem. I think we've gone a large chunk of the way to solving that problem, leaving us with the normal problems we have in a recession, together with the accumulated failures of recent years, which is to say too much consumption, too little investment, too much borrowing. Put another way, the huge twin deficits of the late 1980s, the trade and budget deficits. They're back, and in fighting shape. Fixing these will take a long time, and probably sub par growth. Also a weaker dollar. The dollar has weakened quite a bit in recent years, though it has bounced back in recent weeks.
But these problems are very different from those leading to a depression, where economic activity is way below the economy's potential for a long time. I think that has been averted.
Sunday, October 19, 2008
Never too early to think about future elections, right?
A friend of mine just wrote to me and suggested that he/she thought that the GOP might have a shot at taking back at least one house in the 2010 midterms. I vigorously disagree, regardless of who wins the presidential election and (within reason) regardless of how well the democrats do in the congressional elections. I'd be absolutely shocked if the next president doesn't have a democratic House & Senate all 4 years.
First, even if McCain wins, and certainly if he loses, the Republicans are about to have a disastrous election. I have fully drunk the Kool Aid on this point. The Democrats, for the second election in a row, will have big gains, possibly huge gains, in both chambers of Congress.
As of right now, the democrats have a 51-49 majority in the Senate (counting Joe Lieberman as a democrat, because he caucuses with the democrats, meaning he votes for democrats to have the leadership positions. Following the upcoming GOP bloodbath, the democrats will have between 56-60 seats in the Senate, probably about 58.
Taking a shot at predicting individual races, I predict that the Republicans will not win a single democratic held Senate seat. That's a laughably easy prediction. The democrats are only defending 12 Senate seats, whereas the GOP is defending 22. This is because the GOP had big gains in the Senate in the 2002 elections. All of the 12 Senate seats currently held by democrats are extremely safe (99+% chance for the democrats to hold) with the exceptions of Louisiana (a red state in which Mary Landreau squeaked home in 2002) and New Jersey (Frank Lautenberg is quite old and not terribly popular). But both are way ahead in the polls, and appear to be shoe-ins.
In contrast, of the 22 seats that the GOP is defending, the democrats are essentially certain to take over the seats in:
1) New Mexico (open seat) (formerly Pete Domenici): Tom Udall is way ahead in the polls, and it looks like Obama will win New Mexico, giving him a bit of a boost.
2) Colorado (open seat, previously held by the entirely forgettable Wayne Allard): Mark Udall (yes, Tom's brother ) is out in front by 8. Obama is likely to win or at least be super-close in Colorado, so either a boost or no drag from the presidential contest.
3) New Hampshire (incumbent John Sununu). Sununu has never been popular in New Hampshire, a formerly swing state now fairly blue. Bush's name is absolute mud in New Hampshire, and the Iraq war hugely unpopular. His democratic opponent is former Governor Jeanne Shaheen. Shaheen is only up 8 or so in the polls so there's definitely room for Sununu to close. The disastrous news for him is the presidential election. Obama will win New Hampshire by more than 5 for certain, and probably more than 10. It will be very difficult for him to go against that strong a headwind. If he were popular, he could. He isn't, and he won't.
4) Virginia (open seat, formerly John Warner). Former Governor John Warner has been up by more than 20 in every recent poll. This race is a sure thing. As I predicted back in June. Incredibly, I wouldn't be surprised if the giant Warner victory gives OBAMA a point or two on election day.
These 4 seats are just about sure things for the democrats. Here are the other contested races, along with my predictions:
A) Minnesota: Al Franken barely leads in the polls over incumbent Norm Coleman. I predict Franken wins. First, Obama will win Minnesota by at least 8 and probably more. Second, there is an independent on the ballot who is likely to siphon off a few net percent from the GOP incumbent Coleman. But I'm not at all confident.
B) Alaska: Incumbent Ted (Bridge to nowhere) Stevens is currently on trial. The conventional wisdom is if he is convicted he's toast and if acquitted he has a real shot. I agree with the conventional wisdom. Stevens has been in office forever, and has universal name recognition. However, McCain will win Alaska big, which complicates things slightly.
C) Oregon: Incumbent Gordon Smith has never been real popular. Oregon is a blue state that Obama will win easily. Smith is nowhere near 50% in the polls, and as the incumbent, he should be. He's in a world of hurt, and Challenger Merkley will likely win here.
D) North Carolina: Incumbent Liddy Dole, up in the polls several weeks ago, is down nowadays. And Obama is pouring resources into NC. Dole's in real trouble, but don't count her out. 70-30 that challenger Hagan wins.
There are 4 GOP leaning seats where the democrats have a chance (Mississippi, Georgia, Kentucky and Texas). These will stay GOP absent an Obama blowout. If, however, Obama DOES blow McCain out, a few of these could surprise and change hands.
So I'm predicting a 7 or 8 seat gain by the democrats in the Senate, leaving them with 58 or 59, just short of a filibuster proof majority of 60.
In the House, the democrats currently have a majority of 235-199, or a 36-seat majority. There is talk of the democrats gaining more than 20 seats. The Evans Novak political report states that Republicans are hoping to keep losses to less than 20 seats. Let's use that 20 seat number. That would give the democrats a 56-seat majority. Even given that some of these will likely fall in a normal 2010 election cycle, as democrats would be winning seats in areas not really hospitable to them, that is an awfully big mountain to climb!
Yes, historically, there have been midterms that would have been sufficient to deal that kind of blow. But Obama's timing is almost comically good. The huge fiscal and regulatory efforts which have already taken place, and will take place in the future, together with the sizable fiscal stimulus that is coming, probably from the lame duck session to come after the elections, otherwise by 2/15, will lift the economy out of huge recession sometime in 2009 most likely.
Even if it is late in 2009, and even if the economy still feels weak deep into 2010 (certainly possible) I think its unlikely Obama will get much of the blame. If not, and barring of course any number of other things which can and will happen, like foreign policy crises, he's unlikely to be deeply unpopular. And with a 55 ish seat mountain to climb in the House and about an 8 seat mountain in the Senate, I just don't see it as more than 5% likely that the GOP captures even one house, because even IF the economy totally craters and Obama is at 30% popularity, it STILL would be a real mountain to climb, and still be unlikely (though then clearly more than 5% likely). I
In short, in a good case (economy recovers strongly, no cities disappear), almost no chance. In a reasonable case (outlined above) there is a very small chance that the GOP takes over either or both houses, as outlined above. In a poor case (outlined above) it is merely somewhat unlikely. In godawful case (depression, HUGE terrorist attack, huge congressional blunders ala 1994 health care) still well under 50-50 because of the size of the mountain. Even if MCCAIN WINS and limits GOP losses, its still a huge mountain. Plus, then he's the incumbent president.
I sayeth that it is HIGHLY HIGHLY likely that the democrats will control both houses of congress through least 2012. And if I'm mostly right about the timing of the economic recovery (begins around 3/09 or 4/09, and is a real recovery before the end of next Summer) the Ds could consolidate their hold, and thus maintain a stranglehold on the Congress through at least 2014. The upcoming electoral disaster is the real deal for the GOP, and their Congressional wing is headed right down the toilet. Good riddance.
Thursday, October 16, 2008
First some overall predictions. I still think Obama will win. Barring (god forbid) a terrorist attack or big foreign policy crisis, this election is over. Even with such a terrible event Obama is highly likely to win. This year is just too tough for a Republican, and the gigantic financial markets crisis and various bailouts, and McCain's inconsistent and erratic response to them, has sealed the deal. Obama will win, and probably by at least 8.
Second preliminary matter. Larry in CA asked what would happen if between now and election day either Obama or McCain were to die. Excellent question Larry.
The rules for who appears on a ballot are state laws, not federal. So as an initial matter, each state's laws would apply. But the national party would have a say. Both the democrats and Republicans have various rules regarding filling a vacancy on a national ballot.
So the short answer is that the parties would decide the matter. At a guess the democrats would nominate Joe Biden, and Hillary would be his Vice. I have no earthly idea what the Republicans would do. None whatsoever.
See this for more information.
Now to the purpose of this post. I refer back to my post of June 14. Here, I will lay out where I thought the various states would be then, and how they are polling now.
Conveniently, I predicted an Obama 8-point win. As of the moment Obama's up just less than 7 in the national polls, though I expect that to rise in the coming days to about 9. Anyway, he's ahead in the polls now by as much as I thought he would be when I wrote the June 14 post, so its pretty much an apples-to-apples comparison.
One quick note before I leap into the states. Every article recently that discusses money at all mentions repeatedly how big Obama's financial advantage has been. With odd exceptions, McCain has consistently been badly outspent in state after state, week after week. That huge Obama edge has worn McCain out.
1. Florida: June prediction: Obama by 3. Polls now: Obama by 4.8.
I actually have a reason why there is an error in Florida. From what I have read, the McCain campaign is in more disarray in Florida than in other states. Governor Crist, who enthusiastically endorsed McCain before the crucial GOP Florida primary, has kept his distance. The Chairman of the Florida GOP has been publicly apoplectic about the lack of a GOP Florida ground game. I can't begin to overstate how stunning this is. Any idiot knew that Florida would be a battleground. Yet the McCain campaign seems to have brought a knife to a gunfight. Actually, team Obama has apparently spent an absurd amount of money in Florida. They made a much bigger play for it than I anticipated, and it has shown in the polls. Apparently Team Obama is loaded for Bear for election day, the McCain campaign not so much.
Anyway, if the polls hold Obama will beat my 3-point prediction here and win by more like 5 points because of this disarray. But I was (as of now) within less than 2 points. Not bad.
2. Ohio: June prediction: Obama by 3. Polls now: Obama by 3.4.
*bows* The Obama people have played just as hard here as I (and anyone with 2 brain cells to rub together) expected.
3. Pennsylvania: June prediction: Obama by 14. Polls now: Obama by 13.6.
*bows*. The Midwest has moved very sharply towards Obama in the last month, more so than the national polls would indicate. As of now Pennsylvania is blue + 7.
On the other hand, I and a group of others visited northeast Philadelphia voters. Its a swing area. I met several undecideds who were not well informed about the issues (to say the least). There were also concerns expressed about race. On the other hand, each and every one of them were very dissatisfied about the economy (despite their well-manicured lawns and nice middle class homes). I can't imagine a huge % of these people breaking for Obama. On the other hand, I can imagine a huge % of them breaking for McCain even less.
Oddly, both sides continue to play hard for Pennsylvania, very hard. The day I went canvassing, I also saw Obama at a rally. He was at 4 Philly rallies that day. All sorts of surrogates are there, and a lot of money is being spent. I predicted that McCain would give up on PA. That prediction was way wrong. He should have. He's given up on some other Midwestern states, but everyone seems to insist Pa is closer than the polls. The last 7 polls all have Obama up by double digits. I don't understand the level of attention Pennsylvania is receiving.
4. Michigan: June prediction: Obama by 11. Polls now: Obama by 10.5
McCain very publicly pulled out of Michigan last week. Since then, the 2 major polls there have Obama up by 16. So it looks like my prediction, though accurate right now, will be well off by election day. Obama should win by north of 14 here. McCain's public pullout of Michigan is easily the stupidest state-by-state resource allocation of this election cycle. It is simply baffling. Obviously McCain couldn't win it if Obama is up 7 in the national polls. But he could have won it if Obama was up 2 or so, I think. At least made it in play.
5. Virginia: June prediction Obama by 7. Polls now: Obama by 8.6.
Yup, I'll take my bows here. I've been talking up Virginia as a key swing state/democratic pickup since May. Nonstop. And I'm hugely right. I basically promised in June that Obama was in Virginia and playing for keeps. I don't know that the McCain campaign really believed that until later in the Summer. Well, they believe it now. The Old Dominion is probably out of reach absent a huge change in the entire tenor of the campaign. Virginia hasn't gone blue since 1964, and its going to go blue by north of 5 points in 2008. Things really are changing (and yes, Virginia is changing).
6. Missouri: June prediction: Obama by 2. Polls now: Obama by 1.8.
*bows* Missouri has moved sharply recently, and the Obama campaign has leaked that its going to pour more money into it. I wouldn't, but it won't matter.
7. Minnesota: June prediction: Obama by 14. Polls now: Obama by 8.7
McCain has poured a ton of money into Minnesota and it shows here. This is the first of my predictions that, as of now, gets a giant raspberry. And I think its because of the huge amount of attention showed by the McCain campaign.
8. Wisconsin: June prediction: Obama by 13. Polls now: Obama by 10.4
To a lesser extent what I wrote about Minnesota holds for Wisconsin.
9. Colorado: Prediction: Obama by 10. Polls now: Obama by 5.8.
Oops. I have been all over Colorado as a crucial swing state. So has everyone else. The democrats didn't hold their Convention in Denver by accident. I'm a little surprised Obama isn't closer to my prediction. Still, he's up, and not by a little. Obama is running behind his national polls here. Is that really going to hold? I doubt it. I look for Obama to win Colorado by at least 7, probably 8.
10. Iowa: June prediction: Obama by 13. Polls now: Obama by 11.8.
*bows* 7 of the last 9 polls here have Obama up by double digits. One outlier has it tied. Incredibly, McCain continues to play hard here. It is the second most bizarre decision of state-by-state resource allocation. Because of McCain's correct and courageous opposition to ethanol subsidies, he has never been popular here. I told the world this in June, and I wasn't saying anything original in the slightest. I'm perplexed.
11. Arkansas: June prediction: McCain by 5. Polls now: McCain + 10.
But these polls are old. There has not been an Arkansas poll in October. My guess is a current Arkansas poll would show McCain with a 5-7 point lead. My June prediction may yet bear out. But who cares?
12. New Mexico: June prediction: Obama by 4. Polls now: Obama by 8.4.
Obama has consistently outpolled my prediction, and most observers think New Mexico's 5 electoral votes are safely his. The high % of Hispanic voters make this state tough to predict. But Obama seems to be doing quite well with them.
13. Nevada: June prediction: Obama by 4. Polls now: Obama by 3.
*bows* Obama's great polling success in New Mexico bodes well for his election day performance in Nevada. But Obama is still running behind his national polling numbers in Nevada, so this state is still very much in play. Obama's certain to win it in a landslide.,
14. New Hampshire: June prediction: Obama by 7. Polls now: Obama by 10.
McCain has lost much of his appeal here. Obama will win it by more than 7, even if he declines in the national vote. Although red compared to the northeast, New Hampshire is still in the Northeast, where Bush's name, and the Iraq war, are mud. By positioning himself fairly close to Bush on economic matters, he threw away his chance at New Hampshire.
15. North Carolina: June prediction: McCain by 3. Polls now: Obama by 1.2
Oops. I didn't expect Obama to play as hard for the Tar Heel state as he has. I guess the Virginia connection mattered. I still think McCain may pull North Carolina out. But in a landslide, North Carolina will come along for the ride.
Now for a few non-swing states, where I made predictions we can laugh at.
A. California: June prediction: Obama by 15. Polls now: Obama by 14.5.
Yeah, I got it. Big deal.
B. Texas: June prediction: McCain by 8. Polls now: McCain by 12.7.
Expect the final results to be single digits.
C. New York: June prediction: Obama by 26. Polls now: Obama by 22.7.
I'd call that a small miss if I cared.
D. Illinois: June prediction: Obama by 30! Polls now Obama by 18.
Now that's a miss!!! I am really surprised Illinois is polling 4 points redder than New York, given that its Obama's home state. Weird. Completely unimportant, but weird.
E. Georgia: June prediction: McCain by 6. Polls now: McCain by 7.
This will likely close, actually, as Obama begins to put more money into Georgia. And since it looks like black and core democratic turnout will be extremely high, Georgia could provide an election night stunner and turn blue.
F. New Jersey: June prediction: Obama by 16. Polls now: Obama by 11.3.
Wow, that's a real miss, as of now.
Despite a few embarrassing misses, and not even mentioning Indiana as a swing state, I had the 2008 election about right-- if current polls hold.
Wednesday, October 15, 2008
Barring a massive change in circumstances, Obama will win the election, and not in a cliffhanger.
Here are my thoughts on the debate. I think, analogizing it to a football game, that Obama won 18-6. No touchdowns. McCain kept turning the ball over, though he did move the ball some. Obama played it safe and kicked 6 field goals. He only got near the end zone once, but two holding penalties on the question dealing with whether Palin was qualified to be President (LAUGH), meant that possession was a field goal too. That's my opinion. Nothing at all huge, but Obama won.
Both of them looked great physically, especially Obama!
I'm stunned beyond belief by how little time was spent during the debate on the financial crisis, and even on the economy. The word "Ayers" was mentioned any number of times. The word "Paulson" or "Bernanke" was not to my recollection. This is hugely disappointing to me. Hugely. They spent just a ton of time on things many people don't care about much.Here's my blow-by-blow of the debate-- not everything, but what I thought was worth commenting on.
McCain lied through his teeth right out of the chute. He blamed Fannie Mae and Freddie Mac for the subprime mess. That's completely insane! Fannie and Freddie were barely a part of the cause of the huge subprime mess. They didn't write subprime loans, or securitize them.
Middle class tax cut, Obama says. Just what the doctor ordered given a massive and growing deficit. The unwillingness of either candidate to even nod towards fiscal reality is disappointing. Not at all surprising, but disappointing.
McCain names a specific plumber and claims Obama is raising HIS taxes. Much much better than his prior efforts. McCain overdid this later in the debate, but it came out really well to me in the beginning.
Obama repeats that 95% of families get a tax cut under his plan, and no tax increase. The d's have learned the value of repetition.
McCain quotes Obama as saying "spread the wealth around." I really like this from McCain's perspective. A lot. Won't help him a jot, of course, but I did like it. Of course, honesty compels me to admit that I do support using the tax code to redistribute wealth to an extent. As I do with programs such as Medicaid, Medicare, and, to a lesser extent, social security.
Obama mentions McCain cuts taxes for Exxon Mobil. Repetitive and dull, but fairly effective.
Scheifer: "Aren't you both ignoring reality" (regarding the huge budget deficit and their expansive and expensive plans). YES, THEY ARE.
Obama-- investments in health care coverage will save $$ in the future-- same with energy. Voters CNN had watching the debate LOVED these lines. So did I. Obama did very very well on health care.
McCain calls for alternative energy, including Nuclear. "Energy independent." GIVE ME A BREAK.
McCain-- across the board spending freeze. Then scalpel cuts. Stop growing government. Men LOVED this line according the the running CNN monitor. And veto all pork. McCain answers this question noticeably better than Obama. Of course, freezing spending hurts real programs. Less money for courts. Less money for parks. For environmental protection. For school lunches. And much, much more.
McCain says he can balance the budget in 4 years. LAUGH.
McCain LIED THROUGH HIS TEETH when he said Obama voted to raise taxes on people making 42k. He voted for budget RESOLUTIONS, which don't raise taxes on anyone.
McCain touts his good ratings by taxpayers unions and the like. No one cares. Not even a little.
Obama said he voted for tort reform. No one cares.
Obama makes a minor mistake. He says he DISPUTES that he voted for tax hikes on people making 42k. Don't DISPUTE it. Savage it.
McCain whines about how Obama reneged on his near-promise to engage in a bunch of town hall meetings. Its a fair shot. But no one cares. Fighting about process is a losing battle.
McCain asks Obama to repudiate remarks of John Lewis. I'm so tired of the manufactured outrage in all these campaigns. Its so open and obvious. But the people are stupid.
McCain hits Obama for going back on his word (ooh) about not taking public financing. I find it hard to believe anyone cares.
Obama cites polls stating that more people think McCain is running a negative campaign. WHO CARES?
As of 9:30 we've spent a fair bit of time on the negativity of the campaign. That's a sad waste of time.
Obama mentions the Lewis statement-- says his campaign had nothing to do with it and that it disavowed it. Whoop-de-doo.
Obama points out that statements at McCain rallies are that Obama was a terrorist, and no one repudiates those audience statements.
McCain says people at his rallies are responsible. No mention that PALIN was the one who said "pal around with terrorists." Obama goofed by not mentioning that it was PALIN who said this, not some non-surrogate.
Anyway, WHO THE HELL CARES?
McCain mentions Ayers-- we need to know the full extent of your relationship with Ayers and Acorn. Mentions his campaign gave Acorn $800k.
Obama details his connection to Ayers and mentions all of the esteemed people who served on the boards with Ayers. This strikes me as a very good response, and will make McCain look truly silly.
McCain looks silly raising all of his attacks and then saying his campaign is about the economy, tax cuts, etc... Several times McCain's transitions were really awkward, as though he just had to slip in his stump speech.
Ooh, a Biden vs. Palin question.
OMG, Obama he mentions that Biden's from Scranton and never forgot where he came from. Playing the GOP game... Fight for the little guy. And then manages to NOT MENTION HOW UNQUALIFIED SARAH PALIN IS. I'm stunned that Obama instead says that the question whether she's qualified is "up to the voters." McCain attacked Biden a LOT harder than Obama attacked Palin. That's just insane. Hitting her HARD is very low hanging fruit.
McCain says Palin's a breath of fresh air and will sweep out the old boy's network. Yeah right.
McCain says Biden's qualified, but wrong about some national security issues. MUCH better answer.
McCain-- we can eliminate our dependence on middle eastern and Venezuelan oil in his first time. What a joke! Alternative energy will take a lot of time and energy. Then he says, "within 8-10 years."
Obama says, "in 10 years." He agrees with McCain.
Obama: we need to "expand domestic production." But then he says we have 3-4% of oil reserves and use 25% of oil and can't drill our way out of problem. Ok, good.
McCain says drill now and it will have impact now. He's mostly lying.
I can't believe how much time has been wasted in this debate-- talking about Ayers, free trade agreements, Peruvian free trade agreements. Very little time on the economy, bailout and energy. INSANE.
McCain mentions that Obama will sit down with Chavez. WHO THE HELL CARES. People watching the debate gave it a raspberry.
Health care-- false choice between increased coverage and decreasing costs comes up. Well partly false choice. How do laid off workers get coverage. Real people worry about being sick and thus going bankrupt.
10:00-- I think McCain is mildly hurting himself so far. His ad homonym attacks are missing the mark, and annoying people who want to hear answers. Obama's winning because McCain keeps turning the ball over in midfield. Obama has kicked several field goals and is winning small.
Obama's health care statements were LOVED by the voters watching. Absolutely LOVED!!!!!!!!!! WOW!!
The voters liked McCain's early part on health care too, but HATED his tax cut for health care. HATED EXTREME. WOMEN LOATHED IT.
McCain: Obama's object is a single payer system." From his lips to god's ears."
Obama -- I EXEMPT small businesses from any health care fine. Very good.
Obama shows much more animation talking about health care than other issues. He was REALLY on, on health care.
McCain-- average cost of health insurance is $5,800-- THAT'S GROUP PLANS JOHN. GROUP FUCKING PLANS. GROUP PLANS! There's no way that's even close to the cost of an average family plan.
McCain-- seems to say that government is the problem in the health care area. I don't think America believes that.
Obama won the health care segment solidly.
Roe v. Wade-- McCain says it should be left to the states. Then he mentions his role of the gang of 14 and Obama was not part of it. No one cares.
McCain-- anyone who supported Roe would not be qualified, but no litmus test. Nice contradiction.
McCain mentions Obama's vote in Illinois against protecting a would-be aborted fetus born alive. Hard hitting. Mentions his votes of "present." This is McCain's best answer of the debate.
Obama-- NOT TRUE. Bill said life saving treatment, but would have undermined Roe. Already a law on the books that required life saving treatment. Not only me but pro choice Rs and Ds voted against it and doctors did not support it.
I am STUNNED by the lack of attention to the financial crisis, absolutely positively stunned.
Obama's responses on Education were off the charts positively received by the voters watching. Off the charts.
Sunday, October 12, 2008
I have so much to say I don't really know where to start. I suppose I'll just start at the beginning.
This crisis is hugely much worse than you think. Hugely. Its way way worse than I thought only a week ago. I really should have thought about it more. Credit markets of all kinds are frozen solid. Companies can't easily float commercial paper (short term loans) in order to borrow money needed for cash flow purposes-- to pay workers, etc. So the government has stepped in and offered to buy it. This is a spectacularly good idea. I am not being sarcastic. People are having getting car and home loans, even if well qualified, because banks aren't lending nearly as much as before the crisis. Companies and municipalities can't borrow money on Wall St.
All of this credit freezing up is really really really bad, as I keep saying. Its difficult to overstate just how terrible this is. Now we've been borrowing way too much as a people for way too long, so some retrenchment was welcome, even though painful. But this much retrenchment is like giving a dehydrated person water by the gallon. A real good idea, but easy to overdo.
Banks and other financial institutions are in iffy shape, with some surely teetering. But cash infusions have begun, happily. There is talk of much bigger cash infusions, as I discuss herein. Anyhow, the financial crisis is, imo, vastly worse than I thought before. The response of Washington Policymakers surely would not lead you to the opposite conclusion. The amount of money, creativity involved, and the sheer number of plans, rescues and dramatic speeches and votes is the clearest possible evidence of just how seriously the key policymakers on the Hill and in the administration are taking this mega-crisis.
There is a lot of talk as I write this about a coordinated global effort to inject massive amounts of capital into banks so that they're balance sheet (and thus solvency) concerns are allayed and they can begin lending again. This is a wonderfully good idea. I really hope this happens and fast. If it does, we could begin to see the credit markets unfreeze in a matter of days to a few short weeks. This would mitigate the economic disaster that we are in.
This crisis is now global in nature, having engulfed Europe. Iceland (of all places) is facing what its Prime Minister called possible "National Bankruptcy." Iceland has put in an urgent request to Russia for a $6 billion loan. I can't make this stuff up.
When Iceland, a rich (but small) country and NATO member is begging Czar Vladimir Putin for a lifeline loan to prevent national catastrophe, the crisis has officially spread. The UK has announced a massive $100 billion government infusion into its banks. Offering big banks up to 50 billion pounds ($88 billion) to shore up their capital in exchange for preferred shares. The Bank of England is also doubling the amount it lends to banks to 200 billion pounds. Its an absolutely massive and dramatic plan.
Many other countries have also taken fairly radical steps to shore up their banking systems, and a huge inter-EU fight has broken out within the EU on how far countries there should go. There will be (figurative) blood on conferences tables through Europe before all is said and done.
The scope of proposed solutions by Washington continues to astound me in their originality in terms of American history, in the sheer breadth in dollars, in their scope. And they may not be anywhere near sufficient. Which is why the truly radical (for America) idea of the US investing huge amounts of money in individual banks in exchange for stock ownership (we did it on a big scale during the Great Depression, but it sure isn't normal!) is now being discussed, as I mentioned earlier. Treasury officials have said they already have this authority. However, a new law passed by the Congress and signed by the President would be a very helpful step before such a dramatic and radical intervention. I would strongly urge Pelosi and Reid to come back into session and pass such a law forthwith, if it would be at all helpful.
I can't improve upon what the NYT said about this plan: "The American recapitalization plan, officials say, has emerged as one of the most favored new options being discussed in Washington and on Wall Street. The appeal is that it would directly address the worries that banks have about lending to one another and to other customers."
This is precisely correct.
Now to back up a few steps. I've been calling for a long time for really significant action by the fed and the treasury to deal with then burgeoning subprime mortgage crisis. In my post on December 1, 2007, I called on the fed to cut rates again. I massively underestimated the problems, like everyone else. I was worried about the scope of the problem early this year, but was again badly underestimating the problems faced by American financial institutions (like everyone else).
In my post of June 6, 2008, I tore the European Central Bank (ECB) a new one for being stupid enough to raise interest rates b/c of worries about inflation. I note that my worries were not about the stability of the European or American financial system, although it was in the back of my mind. Still, I was hugely right. The fact that just 4 months later the ECB joined the federal reserve and other central banks in the recently coordinated interest rate cuts, I think I can safely take my bows here. I'd bask in the glory of being so obviously and powerfully right about the ECB's rate hike if it wasn't so obvious at the time that I was right and the ECB brain-dead. Happily, I think the ECB's rate hike had zero to do with the troubles we are all in now.
Anyway, I, along with everyone else was worried about the impact of the spreading crisis on Financial Institutions, but not anywhere near enough. I'm in full blown panic about now. The only thing stopping me from predicting total disaster is the timing and strength of the massive actions already announced (and surely yet to come) from Washington. From 1929-FDR's inauguration in 1933, the government by and large stood by, as did the Japanese as their banking system went to hell in the early 1990s. Japan passed huge construction stimulus packages, but did very little to get their banking system back in order. We sure as heck aren't bystanders now. Instead, Paulson, Bernanke & Co are doing damn near everything in their power to get more money into financial institutions and more confidence into the system as a whole, and all of the participants in the system. They will continue to act very very aggressively and will, in my opinion, succeed. I just can't tell you when/how.
1: McCain pulls out of Michigan. Last week he pulled out of Michigan. Meaning he would no longer seriously contest the state. He pulled his television ad and transferred his staff to other states. This was a (to me) stunning and insane move. Kerry won 252 electoral votes, only 18 short of 270, which is victory. Michigan was 17 of those. Its a tough year for McCain, obviously, but still you want to take away some of the Kerry coalition if you can, making it harder for Obama to pick up the additional states he needs to win the election. The 2 states which Kerry won which McCain had the best chance to flip, imo, were Michigan and New Hampshire. New Hampshire is still theoretically in play, but has only 4 electoral votes. Michigan has 17! Michigan's economy turned down years ago under an unpopular democratic governor. McCain has been a friend to the auto industry. If I were advising McCain I would have pulled out of Pennsylvania, which will be harder for him to win, and pushed like mad for Michigan. It was and remains a baffling choice.
2: The (so far) unwillingness to use Reverend Wright as an issue--baffling. Now if they're saving it for the final week or two so its salient at the end, that would make sense. It really would. But if they leave this issue out of the campaign altogether, they're insane. Were they counting on the various other groups that advertise on their behalf to do it, so they could disavow it but it would be out there? I don't know what the thinking is here, and there may well have been sophisticated thinking, but right now Obama has built a clear lead and if I were managing the campaign, the next 2 big ad buys would be Reverend Wright related, and he would get a mention in stump speeches, which the media would cover for SURE!
After all the compromises McCain has made on his principles, what's one more?
3: The McCain campaign has spent a fair bit of time and energy on Iowa. This is an INSANE allocation of resources. Its true that Iowa went to Gore in 2000 and Bush in 2004, thus is an obvious swing state. But McCain didn't campaign there in 2000 or 2008 because of his vociferous (and brave and very correct) opposition to ethanol subsidies, which is a huge issue in Iowa.
There have been 27 polls covered by realclearpolitics.com in Iowa since November of last year.
McCain has not led in a single one of them, and there is only one tie (admittedly in September). Obama's lead recently is an average of 11.8 points. Iowa also borders Obama's Illinois. I admit these numbers are closer than I would have expected, but I still for the life of me can't understand why the McCain campaign didn't cede Iowa's 7 electoral votes and move on. Even in a close election it seems grossly unlikely that he can win there. I would have chosen to fight harder in New Mexico, Nevada, or even (at some risk of diminishing returns) put more resources into the obvious swing states: Florida, Ohio, Virginia, Colorado.
4: McCain has had several different messages at once. Obama's risky. I have a new economic idea. I'm a vet. etc. His campaign has been scattershot. Many pundits have criticized him for this, I am merely reporting that, and not contributing anything original.
5) Misuse of Palin. McCain makes a stunning pick of Palin. She roars out of the gate giving a speech for the ages at the Convention. McCain shoots up in the polls on the back of roaring poll numbers from white women, who swoon. The public wonders if she is a fool. She gives 2 interviews. Remember the old saying: better to be silent and thought a fool then open your mouth and remove all doubt? Well, she removed most doubt. But she did ok in her debate. But now she's solely an attack dog. Which of course makes no use whatsoever of her awesome gifts at connecting with people and inspiring them. Can't be inspired by a savage attack.
I realize this is a tough spot for the campaign. They MUST hit Obama and hard to have any hope, and the VP nominee's traditional job is to be an attack dog. And she's 100% into it! But it wastes the one talent she has (her strong ability to connect with ordinary people, especially women) leaving her virtually a 100% liability.
McCain, on the other hand, is lousy when trying to connect with/relate to people. Awful. Worse than Gore or Kerry, which is really saying something. But at least imho, he's pretty effective attacking Obama. I realize this is WAY outside the paradigm, but it may be the best tactic for McCain to be the attack dog and Palin to sell McCain and his "plan." The GOP is having a really tough time connecting with the middle and working class about now, social values are not a big issue these days. Palin's great at it but not doing it. McCain's lousy at it but flailing about trying.
Memo to McCain campaign-- switch their roles. Its your only shot, and will help.
Palin should also be the clear focus of their tv ads. She interests people, even those who think she lacks two brain cells to rub together. They'll watch the ad.
Friday, October 10, 2008
In my post of April 16, 2008, oil was at $113 a barrel.I made a wager with Andrew. I wagered a fancy dinner that Oil would drop below $80 a barrel before 12/31/09. Oil dropped today below $80.Having said that, I won only because of the massive financial meltdown. Now unknown unknowns (to quote Donald Rumsfeld) were a huge part of why I made the bet. But this is one massive unknown unknown. If the markets recover and oil shoots well above $80 quickly and don't again return below $80 before 12/31/09, the win will have been slightly tainted. But I still win.
During the last debate, both Obama and McCain were asked about possible treasury secretaries should they win. Obama mentioned Warren Buffet by name. I give his answer a C. Here is what an A answer would look like. I note that I thought all of this at the time:
"Warren Buffet is a key advisor of mine, and his counsel will be sought should I be elected president. I would consider asking him to serve as treasury secretary. I would first ask Robert Rubin, who was President Clinton's Treasury Secretaries for several years during the 1990s. As you all will recall, the 1990s were a time of great prosperity in the United States, and Robert Rubin was a big part of it. His advice, that budget deficits be reduced, interest rates be kept low and spending not go up too fast was taken by Bill Clinton and the results were great for the American economy, as the 1990s were a boom time.
Another man I would strongly consider for the job is Larry Summers, who succeeded Robert Rubin as Bill Clinton's Treasury Secretary following Robert Rubin. Larry Summers is a brilliant economist, and I have great confidence in his abilities and experience.
Fundamentally, we need to return to the economic policies which were so successful in the 1990s, as I have advocated. This means returning tax rates on the wealthiest of Americans, those earning more than $250,000 per year, to the rates as they were when President Clinton left office. This means restraint on spending, once this economic crisis is behind us. This means prudent regulation, rather than the radical deregulation which John McCain has always supported."
This is what an A answer looks like.
As for actual treasury secretaries, you have now seen a quick peak at my list. Robert Rubin tops the list, but he's 70. In the appearances I have seen, brief though they are, he appears to be really slowing down. Edit-- I saw him very recently on CNN and he looked great, like he hadn't slowed down one bit. Maybe he is still out of the job. He is, however, a bit out of touch with what has gone on in recent weeks. That criticism, however, applies to anyone other than the current participants.
Larry Summers is also a fine choice. Sure, he pissed off the feminists with some comments about Harvard about maybe the reason that more women aren't in the sciences because of innate biological differences). He didn't say this was his view, he was musing aloud.
Anyway, we're in a ginormous financial crisis, and if Larry Summers is the best person for the job (and he may well be, excepting only Rubin and Paulson (???), I'd be delighted if Obama stuffed him right down the feminists' throats (though I count myself as one). This is just too important to let relatively minor controversies cloud our judgment.
Other possible choices include keeping Paulson in the job. He's been tardy in his reactions to the spreading crisis, but of late his talk has been bold indeed. He's now apparently actively considering massive capital injections into banks, which he rejected only 2 weeks ago. He may be a Bush appointee, but as Paul Krugman, a certified Bush hater, and opinion writer for the Times, said at the time of his appointment, Bush was scraping the top of the barrel.
For a wildly out of the box pick, how about William Jefferson Clinton? Billy's not an economist to be sure, but he's quite knowledgeable, really, knows how to take good advice, is an amazingly quick study, and would bring ginormous cachet to the job at a time it really needs it. I actually think he'd do it for a year if Obama grovelled. And I think he'd be a real success providing he had competent help. But clearly Rubin or Summers would be much better, as they could hit the ground running in a way that Clinton probably couldn't.
I know picking Clinton sounds nutso. But try this. Imagine that America is as it is right now, but the Soviet Union never dissolved. And for the past 3 months we've been engaged in a nasty ground war with the Soviets in Germany. Many hundreds a week dying. No end in sight, and always the possibility of radical escalation. Under those godawful circumstances, could you imagine President Elect Obama asking McCain to serve as Defense Secretary? I could. In a New York minute. Desperate times throw all the rules out the window. And make no mistake, the current financial markets' situation is dire and desperate in the extreme.
Thursday, October 09, 2008
The AIG spa/massages story you have likely heard about isn't anything like the media has reported it. The media dropped the ball on this story, big time.
This even came up in the presidential debate!
Apparently, this conference was not attended by executives, but instead by high-earning insurance salespeople. Now I realize that even that looks terrible, but I for one have no problem with a company receiving bailout loans from encouraging their high earners to keep at it. In fact, that's just the sort of thing AIG should be doing.
Now if it turns out that executives attended, then I went the money back, firings, and jail time if possible, at least as much as the next guy. But if what I have heard on CNN and read in the above link is correct, I just don't have any problem with this myself.
Tuesday, October 07, 2008
Congress should pass, forthwith, a massive stimulus package. Something like $400 billion over 3 years. Bigger would be fine with me. Budget deficits be damned. The fact that some of it would be wasted on bridges to nowhere be damned. We desperately need a huge stimulus package, and FAST. And HUGE. And our nation's infrastructure can easily absorb this kind of spending without gigantic waste. Train service can be improved. Subways in the cities. Ports can be deepened and widened. Pipelines from Alaska can be built. Oil can be drilled for. Highways and bridges can be built and, more importantly, MAINTAINED. Bridge and highway maintenance isn't glamorous. No ribbon cutting ceremonies. But it is highly useful. Windmills and solar panels can be built. Money can be lent/given to states, so they don't need to cut spending and raise taxes to balance their budgets.
In states where it isn't a good idea to spend big bucks on train services, because the states are too big and too sparsely populated (the huge red states in the West), more money can simply be given to the states/their citizens. Where huge money can usefully be spent (big cities like New York, existing highway and rail systems, the Boston to Washington Corridor, New Orleans, the Everglades possibly, health care for the uninsured (!)), more money should be spent and less money given to the states/their citizens. The key is for the federal government to run an absolutely massive deficit for the next three years. This is now necessary, both as depression insurance, and a really good idea unto itself. Yes, the dollar would fall as a result of this, which has downsides. But it would put hundreds of thousands of workers, many in construction, back to work. The housing depression has left a handy dandy skilled pool of surplus labor waiting to put their hardhats back on and get back to building. But instead of building houses that the free market doesn't really demand outside of the now dead bubble, they can build and repair useful roads and bridges. And yes, inevitably some bridges to nowhere. Wasting money is simply not a big concern right now.
The huge financial rescue "bailout" package passed last week will take time to implement, and then more time to do any good. Probably months. We are currently in a very steep recession, probably the worst one since 1945. I don't know how long it will last. Perhaps only till the end of this year, perhaps a whole lot longer. What I do know is that we are in a deep recession and the markets are in full fledged panic about the whole thing. The fed has (with my full support) cut interest rates already, to 2%. This has not helped and will not until banks start lending again. So lowering rates further, which has been advocated, and which Bernanke hinted at today, is a hugely bad idea. It removes some key ammunition at a time when it is virtually guaranteed to do no good at all and perhaps harm (via what would be a newly tanking dollar). DON'T CUT RATES NOW BEN. Wait until the cuts would work, i.e. when the Treasury has bought a lot of the toxic assets, banks have begun lending again and the economy needs the stimulus. If these factors don't come together, keep rates at 2%. Plenty low enough.
But a massive stimulus package needs nothing from anyone to begin having an effect. No bank lending is needed. All that is needed is the political will. Allocate the money on a per capita basis, rigidly. Its not perfectly fair, because the huge non-populous states get screwed a bit that way, but once you tinker with the formula you have the mother of all political foodfights. Give the states a ton of input on how the money is spent. If the governor wants to favor a particular region she needs for her reelection, fine. Just spend the damn money, with as much of it as possible going to construction, because that creates jobs, almost immediately. Well, in this day and age of strict environmental regulation, soon. Repairs should begin creating jobs much faster. And direct aid to states will prevent job losses, almost as good. And prevent tax increases, which keeps money in people's pockets. Not as good as new spending, which is much more stimulative in the short run, but still better than the people not having the money.
Our economy is in a genuine crisis. The federal government has taken hugely decisive action to fix things. Time will tell if the actions taken, the bailouts, takeovers, and toxic asset purchases are the right fix, and are sufficient. But one more huge set of actions needs to be taken to finish the job, and that is a massive Keynesian style stimulus. I'm just not worried about all this being overdone. If it turns out that there is a quick vigorous recovery beginning next year (very unlikely in my opinion) and the stimulus turns out to be way too much of a good thing, you can cut spending elsewhere, eliminate additional tranches of money to states perhaps. Or the fed can shoot interest rates upward to slow the suddenly galloping economy. These seem very remote worries right now.
Friday, October 03, 2008
The upcoming vote in the House today on the financial rescue package (bailout) is probably the most important congressional vote in 40 years, and ranks among the most important votes ever. There is hugely high drama in the capitol today. Follow it. If the vote fails, Friday October 3, 2008 has every chance of being remembered as Black Friday, the day when the US economy went to hell in a handbasket.
As you all know, I'm hugely in favor of the big rescue. I'd do some things differently, but this is most necessary, and really soon. I hear over and over and over that the credit markets are completely frozen. Municipalities can't borrow, businesses can't borrow, and consumers are having trouble borrowing for houses and cars. If this continues for long, a very deep recession is in the cards, with a big shocking loss of output and jobs, sufficient to push the unemployment rate above 12-13% for the first time since the 1930s is definitely possible. I'm not saying these outcomes would be likely, but they would be possible. Our financial sector is unwinding from one of history's great bubbles. The government can't help that, and shouldn't create ANOTHER bubble, but can mitigate the worst of side effects. Banks and other financial institutions shrinking is good. Those same banks/FIs failing is another matter entirely, and is much more scary.
Back to the high drama. There have not been that many really important really close votes that I am aware of. But there have been a few.
1) Women's suffrage. This refers to the 19th Amendment, granting women the right to vote everywhere in the US The vote in Congress was not close. However, ratification of the constitutional amendment by the states was slow. Tennessee was the 36th state to ratify, bringing the amendment into effect. In the first roll call vote in Tennessee's state legislature, the ratification failed by a 48-48 tie. There was considerable feeling against the amendment in the remaining states, and thus every chance that the amendment would have failed but for Tennessee. A second roll call vote was taken, also tied. On the 3rd roll call vote, the youngest member of the Tennessee legislature switched his vote and Tennessee thus ratified the amendment by the slimmest of margins. It was reported that this young man had a telegram from his mother urging him to do the right thing and vote in favor of the amendment. High drama indeed; had the amendment failed it would likely have taken into the 1930s for it to pass again.
2) Renewing the draft in 1941.
It has long been reported that on August 12, 1941 the US House voted 203-202 to "renew" the draft and thus keep a much larger peacetime army than existed before. However, I have read an article which suggested that this bill merely lengthened the tour of a draftees duty, and was not nearly as critical as has been reported. Still, it was an important piece of legislation and passed by only one vote.
3) Clarence Thomas' confirmation. Admittedly not a critical vote for our Republic, but Thomas has mattered. Ask President Gore. The vote in the Senate Committee was a tied vote, and his nomination was reported out by Chairman Joe Biden without a recommendation. My understanding is that Biden could have killed the nomination then and there by simply declining to report him out of committee. The vote on the Senate floor was 52-48 in favor of confirmation.
4) Clinton's 1993 5-year deficit reduction plan. This budget balancing bill, which was quite important in my opinion to the 1990s economic boom, famously passed without a single Republican vote in either the Senate or the House! The Senate split 50-50 with Al Gore breaking the tie. The vote in the House was 218-216. Awfully close!!! I think the financial rescue package is hugely more important, but still this was a vital piece of legislation which passed by the very narrowest of margins. The deciding vote in the Senate was then-Nebraska Democrat Bob Kerry, who said at the time that he could not cast the vote which would sink Clinton's presidency.
The vote in the House later today could easily be a 1 or 2 vote margin, and is of huge national and international importance. Follow it-- the course of our nation will be affected. There will be awfully high drama on the Hill today.