Saturday, November 29, 2008

The latest federal efforts to restart our financial system

Another day, another record breaking, unprecedented, potentially insanely expensive, federal rescue.

Earlier in the week, while we were all making travel plans for Thanksgiving, the federal government announced that it was purportedly pumping up to $800 billion into credit markets, with the goal of making it easier and cheaper to get a mortgage, as well as student loans, small business loans, and, incredibly, credit card loans.

The closer I look at this seemingly breathtaking program, the less I see.

The government isn't getting into the lending business. Instead, the federal reserve "plans to purchase in coming months up to $600 billion of debt issued or backed by Fannie Mae, Freddie Mac and other mortgage finance businesses. The idea is that with this debt off of the balance sheet of these financial entities, they could more readily make mortgage loans.

I'm not opposed to this happening in a vacuum per se, but I think its hugely overblown. Are there really masses of people with reasonably good credit itching to buy a home but unable to because they can't get a mortgage? I'm willing to be persuaded, but based on what I know (which is very little) I find that really hard to believe. Perhaps the reason that home prices have plummeted is, um, because they rose so far so fast and people aren't rushing out to buy houses about now? Or because a lot of people that might have bought a house in 2008 bought it in 2006? Or because with a deep recession upon us people are waiting to make such big purchases?

By purchasing these securities, the government is hoping to lower mortgage rates as paid by would-be homeowners. That's a fine goal generally, but one thing our economy does not need about now is any incentives for additional housing stock. We already have a pretty significant overbuilding of residential real estate. Politicians are obsessed with helping homeowners, because homeowners vote, but in terms of our nation's problems, sadly, helping people buy new homes, or stay in the ones they have is actually pretty low on the list. That sounds creul, and it is, but if more houses by far were bought and sold and built that fundamental demand would require, as is 100% certainly the case, why encourage a return to the merry-go-round? Traditionally, recovery begins with a housing market revival. Happened in 2002-03, 1992-94, 1984-5, etc. That's not going to happen this time, at least I hope not. If the recovery of 2009-10 is housing led, god help us all. I say that becuase it would represent the building of another bubble rather than an expansion on solid footing.

As I have said before, Paul Krugman has said, and now Obama and many democrats, government spending, primarily on infrastructure, should lead us out of the recession. Then private investment and perhaps international trade can follow. Housing should still be a drag on the economy for at least another year and a half, and when it recovers it is highly unlikely to be a robust housing recovery.

Back to the debt securities the government is set to buy. Now this debt was implicitly backed by the government anyway. Everyone assumed it. So if the federal reserve can put it explicitly on the federal balance sheet without losing the ability to spend huge amounts of additional money if that proves necessary (and it will) that's fine by me. But for the reasons I have outlined above, this just will not be a panacea of any sort whatsoever. Where it may do some good is because mortgage rates have been dramatically lowered (they have in the last week) a new refinancing boom is underway. This will put cash in people's pockets, some of which will be saved (which is a good thing in and of itself!) and some spent, which is, right this instant, an even better thing.

The other part of the new announced program from this past week is that "the Fed will provide up to $200 billion in financing to investors buying securities tied to student loans, car loans, credit-card debt and small-business loans." (emphasis added) This part of the package I approve of, for the most part, although lending money to investors to buy these securities, as opposed to the government buying them itself, seems like a needless step. Now the government is a lender, rather than an asset purchaser. Someone explain to me why this is radically better?

Anyway, this country probably needs more student loans and small-business loans. Car loans are trickier. Car sales were quite high until recently, but have fallen off the cliff, to their lowest levels since the early 1990s. This profound shock, coupled with the myriad other problems they already had, have, as you all know, driven the big 3 to the wall (no pun intended). So a case can be made for subsidizing car loans about now. A case could be made against it, but again, I'm comfortable. The government won't lose anything like $200 billion buying these securities. Even assuming rising defaults, which seem certain, the fed will be able to recover some-most of the money it is spending, perhaps even make a profit.

Financing the purchase of securities linked to credit card receivables is a whole other matter. I'm ignorant right now, and willing to be persuaded, but at first blush that seems just nuts. Does America need more credit card lending, or does it need less? Isn't that a drug we need to wean ourselves off of? Cold turkey if necessary?

Next, I note that, "The central bank is taking several steps to avoid [certain risks]. The Treasury has agreed to absorb the first $20 billion of losses on the new $200 billion lending program for car loans, student loans, and other consumer credit." The central bank is to lend money to investors via various banks. Investors can then use the money to buy AAA rated securities tied to consumer debt.

http://online.wsj.com/article/SB122761978389056335.html?mod=todays_us_page_one

So even though it isn't purchasing the securities for its own account, the government is guaranteeing the first $20 billion of losses (the losses most likely to occur!) I wonder what interest rate the federal reserve will receive on the loans it makes to investors. This seems like a crazy, unnecessary step. What value are these investors adding, exactly, above and beyond the purchase of the securities, which the fed could do all by itself?

Finally, it is highly noteworthy that the federal reserve is paying for these new announced facilities by simply increasing the money supply! Actually printing more $20 bills is so 1980s. Now the fed will simply issue electronic credits. But the effect is absolutely identical to running the printing presses and simply printing hundreds of billions of additional dollars. It is a sign of the times that this critical fact is barely remarked upon by the press. I note that I am not too concerned about it right now. The big risk to printing more money, obviously, is inflation. And higher inflation is a real risk down the road, and we'll need to be mindful of it. But right now, not so much. A mass deflation is a bigger and vastly scarier risk. So let it be said that I approve of printing additional money as the means to pay for all this, but even I'm seriously concerned about the precedent, and about the direct harm which could come. Team Obama is going to have a hell of a job on its hands for a long long time. Even if, happy happy joy joy, the economy recovers towards the end of next year and recovers strongly, there is still going to be a massive financial mess to clean up. Bush 43 has left a terrible pile of steaming brown stuff in his wake.

Monday, November 24, 2008

More Euphoria over comments by democrats.

Various democrats have tossed around gigantic amounts as the amount of money to be in Obama's stimulus package.

At a press conference today, Obama praised Summers as one of the great economic minds of our times. Even his harshest detractors will concede that.

A few months back, Summers called for a big stimulus package. Specifically, in September he testified before the House Budget Committee in favor of a second fiscal stimulus. This was before the worst of the economic/financial crisis. In October, he wrote in the Financial Times, "In the current circumstances, the case for fiscal stimulus -- policy actions that increase short-term deficits -- is stronger than at any time in my professional lifetime."

In his House testimony, he advocated infrastructure spending, aid to state and local governments, assistance with affording heating in the winter, investments in energy and renewable energy and aid to lower income families, like increased food stamps and unemployment insurance extensions.

And recently, at a conference, Summers cited a report by Goldman Sachs that suggested that the stimulus should be in the range of $500 to $700 billion, a range that I favor.

The only bad news is that in the past Summers has advocated much smaller dollar amounts than I would like, much much smaller. Since the economy and financial system is very much worse off than when he was advocating smaller amounts, I am highly confident he will quickly adapt to the new reality and be an advocate of a large stimulus.

Summers will apparently be the main architect of Obama's plan. I'm in heaven.

In another sign of panic appropriately spreading to democrats, Chuck Schumer, New York's senior Senator, said on ABC's Sunday morning talk show, said that he thinks the stimulus package has to be big, "has to be between $500 and $700 billion, and that's because our economy is in serious, serious trouble."

Wow, he gets it. Schumer's never impressed me, but these are just the numbers we should be talking about. Particularly since a smaller compromise number may in the end be necessary, we should sure as hell start big. And $500- $700 billion is big. Really big. Big enough to actually help, especially given that it will take a long time to spend that kind of money, as a fair bit of it will be for construction projects that simply cannot begin instantly.

My friends, recovery may not be right around the corner, but we can begin to glimpse its outline. Ben Bernanke, at my urging, dropped rates far and fast. I disapproved of his recent interest rate cuts on the grounds that he should keep some ammunition lying around rather than make all the cuts he can, but given the market instability, it appears that he was right and I was wrong. I would now, were I voting member, vote for an additional quarter point cut, and would thus retroactively endorse the earlier cuts.

In any event, massive monetary stimulus (as yet wholly unfelt because the financial system is all gummed up), massive assistance to the financial system (already being felt, but the job is nowhere near done) and, if all goes well, massive fiscal stimulus. The only thing that would prevent a serious recovery beginning between late Spring-Summer 2009 and Winter 2009 would be if the financial system goes from awful to god-awful. Heaven knows that's possible!!!! But if it doesn't, I'm confident we can begin a recovery. The shape it will take I know not, because it cannot be consumer driven, as many past recoveries were, is unlikely to be housing driven, as the recovery of 2003-2007 was, and the government will have to retrench after 2010. But the odds of a depression, higher than at any time since 1945 in recent weeks, are dropping fast. The appointment to the Treasury, and Summers advising Obama, materially lower those odds.
Citigroup rescue


Ho hum. Another day, another historic, enormously complex and expensive financial rescue, this time of Citigroup, the most important company in the world to the US economy, oil companies excepted.

I've always thought, since I was 18, that the failure of a big bank could unleash the 4 Horsemen of the Apocalypse, as the other financial institutions they owe money to (called counterparties in the jargon) suffer from not receiving monies owed from the big failing bank. After all, if Citigroup owes Bank of America $500 million because of the expiration of a derivative contract, or because it borrowed that much money to meet reserve requirements, Bank of America can absorb that loss. But a medium sized bank would be pushed to the wall. The knock on effects when that medium sized bank can't meet its obligations, coupled with the grave uncertainty that would ripple through the financial system (worse than what's going on now, believe you me) would be devastating.

Citigroup had "more than $2 trillion in assets as of the end of the third quarter and has operations in more than 100 countries."

http://money.cnn.com/2008/11/23/news/companies/citigroup/index.htm?postversion=2008112400

Whats' more, Citigroup is widely rumored to have more than $1.2 trillion of assets off of its balance sheet.

Let's run that again. Citi has assets equal to something on the close order of 20% of the entire national debt, not counting the off-balance sheet assets! In fact, I just checked, and according to one website, the national debt is 10.6 trillion. http://www.brillig.com/debt_clock/ I just checked the Treasury Department's website, this number is correct.

Anyway, the government clearly and wisely agrees that Citi is too big to fail, and announced a massive rescue package. Here are the particulars:

1) The US Treasury and the FDIC will backstop losses against more than $300 billion in troubled assets.

2) Treasury will make an additional $20 billion investment in Citi, on top of the $25 billion it already invested as part of the $700 billion bailout passed in October. So a total of an insane $45 billion has been invested into one private company. Far more may yet arrive.

The government is receiving preferred shares as compensation. $20 billion for its direct investment, and $7 billion as compensation for guaranteeing more than $300 billion in troubled loans.

According to money.cnn.com, Citi itself is on the hook for the first $29 billion in losses on the covered assets, including "mostly loans backed by residential and commercial mortgages." Citi is responsible for 10% of losses above that amount, with the government shouldering the rest of the losses. So Citi is still on the hook for potentially huge money, but the government is taking 90% of the risk. I wonder what the estimated total loss is on these loans.

In terms of the scale of the bad debts/troubled assets, According to the Wall Street Journal, Citigroup and the government have identified a pool of about $306 billion in troubled assets."

http://online.wsj.com/article/SB122747680752551447.html

I know there would be a wide range of uncertainty, but I would like to know whether we are expecting, as of now, for the government to shell out $5 billion (*yawn*) or $100 billion (OH MY GOD)?

In any event, as you can tell from my earlier comments, Citi simply cannot be allowed to fail, whatever the costs! I am not in a position to say whether I support the specifics of the investment/bailout announced, but I support the general principle.

We are living in the most dangerous economic times since 1945, by far. By FAR. Let's hope Bernanke and Paulson can keep the wheels on until the adults take over on January 20th. Where have you gone Robert Rubin, Larry Summers, etc.

Saturday, November 22, 2008

Democrats' actions cause joyous optimism.

Now there's a sentence that has rarely if ever been written. Flying Pink Unicorn readers, incredibly good news is in the air all around us. This news is based on the fact that many of the members of Obama's cabinet have been either formally announced or leaked, and that congressional democrats have taken a series of encouraging steps.

First, the cabinet/White House staff. I will discuss the good news out of congress in a later post.

Right out of the gate, Obama thrilled with the appointment of Rahm Emanuel as Chief of Staff. As I wrote on November 7, I, along with a lot of others, absolutely LOVED this pick. He signalled that Obama's choices might be a lot bolder than was expected from the cautious Obama on the campaign trail. And Obama has been bold.

To start with the most significant posts in the Obama administration. # 1, obviously, is Treasury. I wanted Robert Rubin, or Larry Summers, who succeeded Rubin as Clinton's Treasury Secretary. Yesterday, to some acclaim, Obama instead went with Tim Geithner, the president of the New York Federal Reserve Bank, and by all accounts an eminently qualified man. Geithner worked in the 1990s on bailouts of Mexico, South Korea, and Indonesia. Since the first 2 of these worked spectacularly well, he has seen financial crises resolved happily. What really makes my heart sing is that his mentor is Larry Summers.

http://www.washingtonpost.com/wp-dyn/content/article/2008/11/21/AR2008112102811.html

Summers apparently will serve as a senior economic advisor to Obama. So if I'm not getting precisely my wish of having Summers or Rubin in the post, I'm getting the next best thing, and am getting Summers as an advisor to. Color me pleased.

The second critical appointment of late may have escaped your notice. Tom Daschle, the former Senate Majority Leader (before the democrats lost the Senate majority and before Daschle lost his South Dakota Senate seat) was named as Secretary of Health and Human Services. Now why is that important, you might rightfully ask? HHS is usually considered a backwater cabinet post. Why would a former Senate Majority leader, who once had presidential aspirations, take that post? And why is it a monster huge deal? Health care reform. The Daschle appointment is hugely significant for three reasons. First, he can be of tremendous help on the health care issue of health care reform (he wrote a book about health care in the US, entitled, "Critical: What We Can Do About the Health Care Crisis). He knows his stuff. But policy knowledge is overrated.

Second, Daschle is a master politician. He knows the Senate inside and out, and knows all the players. As complex as health care reform is as a policy matter, the politics are far more important. Nancy Pelosi can pass most any health care reform she wants, short of a single payer system. She'll likely even get some Republican votes. The Senate is far trickier. There have been whispers of the Senate Democrats putting health care reform on the floor in such a way that a filibuster would not be permitted! Needless to say, for the administration to have the expertise of Daschle on the politics and the people involved is invaluable.

Third, the appointment of such a prominent figure sends a loud, clear signal that Obama is deadly serious about health care reform. I just can't believe that Daschle signed on without strong private assurances from Obama on this. Obama is telling anyone listening that he's hugely serious about a major battle for a major reform of our health care system. Emanuel is perfectly suited to lead that battle from inside the White House. Daschle is well suited to lead the political battle. Nancy Pelosi and Harry Reid seem ready for the fight. And from what I can tell, Obama will egg them on! Its very difficult not to be very optimistic, and I'm not prone to fits of wild optimism!

Of course, we couldn't seriously discuss health care without mentioning Hillary's role. As you've heard, she has apparently decided to accept the Sec State position. Now in my view although her formal qualifications are a little light, she'll be excellent. She's Hillary. She's brilliant, she knows everyone, she thinks, she talks to Bill, she'll be fine. My problem is that I wanted her leading the health care fight, and doing so from the Senate floor! This is the one area of late which was cause for pessimism, her failed attempts to gain a "promotion" within the Senate.

The long and short of it is that she sought to cut the line-- to get a far more prominent position in the Senate than her seniority would allow. I should have blogged on this, but I strongly supported her effort. Ted Kennedy (an early Obama supporter, who has never gotten along with the Clintons) and Harry Reid, would have none of it. They are smaller men for it. Kennedy, the Chairman of the Senate Committee on Health, Education, Labor and Pensions is, unfortunately, dying. It would have made all the sense in the world for him to step aside and allow Hillary to Chair that committee, seniority be damned. ( I note that Kennedy threw her a bone by asking her to lead a task force to develop a Senate Democratic Health care proposal. Lead a task force? Um, didn't she ALREADY DO THAT? At this point, she and a few staffers could write the damn report, in 3 days).

Anyway, a few weeks back, it came to light that Hillary asked Kennedy to create a special health care subcommittee for her to head, and Kennedy said no.


http://www.nypost.com/seven/11092008/news/politics/kennedy_kills_hills_hope_to_be_top_heale_137860.htm

This personal slight is a blow for health care reform, and silly at that. Thanks Ted. To the extent that Hillary was attempting to grab power for herself and away from Obama, well, so what? Obama's fine, don't get me wrong, but who's the real health care expert? Yes, I'd much rather have Hillary design my health care system than Obama, or pretty much anyone else.

What I really wanted, and which was never even discussed, was for Reid to step aside and for Hillary, despite her junior status, to become Majority Leader. She has the clout, the knowledge of the players involved, etc. She'd be a huge improvement over Reid. But that was never even discussed, apparently. *sigh*

But back to the good news. Hillary becoming Secretary of State creates Bill problems, as all of his dealings reenter the news to no good end. But Obama's chief rival becoming his face to the world, a 1/2 black man entrusting the best known woman on earth to represent the United States abroad, has all sorts of positives when you think about it. Forgetting the damn symbolism, Obama gets the benefit of Hillary's thinking and experience. And the world is told, in clear terms, that Clintonism is back. This symbol isn't so important, Obama's winning kind of turned the page on Bush. But Hillary being Sec State goes 1/2 a step further, by reclaiming Bill's legacy of working with the Europeans more, engaging with the Israel-Palestinian situation more, engaging China (one policy area I thought Bush got exactly right) and more.

Eric Holder as Attorney General is fine. I don't really know a lot about him, but he sure seems fine from what I've heard.

I object to Janet Napolitano as Homeland Security Secretary, slightly. As governor of Arizona, she would have been well positioned to challenge McCain for reelection in 2010, possibly the only democrat who could. I know little of her qualifications to head homeland security, so I can't comment.

We haven't heard a leak on defense yet. I assume Gates, the current Sec Def, will be asked to stay on. Fine with me. He's not a loyal Bushie Kool-Aid drinker. Far from it. He's serious, he's fully able, and he'll be an asset as Obama seeks to get out of Iraq (which I think Gates really wants himself) and to win in Afghanistan (where winning is in fact possible, and where I think Gates in fact wants to win). I am entirely comfortable with Gates sticking around.

Bill Richardson will be Commerce. Talk about a booby prize. This is what he gets for shilling so obviously for Hillary back when he and so many others thought she would win. He's badly overqualified for the position. I would have preferred to see him as Sec State, with Hillary leading in the Senate. Ah well, you reward your friends and punish your enemies. This is a minor reward for an enemy turned friend. Commerce is a doesn't matter, so I don't care. Its a waste of Richardson's foreign policy talents, but what can you do?

One possibility I can think of is that Obama, if all goes well, plans to dump Biden in 2012 and have Hillary be his VP. Then Richardson would move up to state.

Anyway, don't lose the forest for the trees. The media will tell you that Hillary is the most significant. She's a superstar, she's a she, State is high profile. The media will tell you that Treasury is critical. (Well, the media's dead on there). But the REALLY critical recent appointment, even more so than Treasury, where it was obviously going to be Geithner, Summers, or Rubin), the main value I have added in this post, is Daschle. Its difficult to overstate how excited I am about the Daschle appointment!!!! Obama knows the obstacles to health care reform are almost exclusively in the Senate. And his point man will be the best person he could possibly have chosen, except for maybe Hillary. Its a jolt of good news.

Monday, November 17, 2008

I agree with 3 blue Dudes, F*** Ralph Nader and his supporters.

http://3bluedudes.com/uncategorized/fuck-ralph-nader-and-fuck-his-supporters/

3 blue dudes is, as you may have guessed, a democratic, left leaning blog. Like them, I rarely simply post someone else's opinion. I'm trying to add value here, not be a mere compiler of news/opinion. But sometimes an opinion is just so right, I feel the need to post it.
I read a piece about what the author felt were myths surrounding the 2008 presidential election.

http://www.washingtonpost.com/wp-dyn/content/article/2008/11/13/AR2008111303287_pf.html

I wrote the author of this piece an e-mail, in which I take issue with his claim that the impact of black voters on the election has been overstated. Here is that e-mail:

Mr. Cillizza: I enjoyed reading your piece, and mostly agree with it. I am an amateur left-leaning blogger (www.flyingpinkunicorns.blogspot.com), and I followed the election very closely.

I agree with your fundamental premises that:

(a) Bush was a huge drag on McCain and would have been a huge drag, and almost certainly a fatal one, on any Republican nominee; and

(b) that the election, though a solid repudiation of the GOP, was not the wipeout some have reported.

I do have a few points of criticism, however.

In 2004, Kerry received 48% of the vote. In 2008, Obama received 52.5% of the vote (as of this writing, votes are still being counted as you know). Thus Obama received approximately 4.5% more of the vote than Kerry did. Accounting for this 4.5% is a useful exercise.

1) You wrote that the widely reported wave of black voters and young people was not key to Obama's victory. This proves to be a highly debatable point at best.

As you point out, the percentage of the electorate which was black increased by two points in 2008 as against 2004.

Since 95% of black voters went for Obama, that constitutes an additional 1.9 percent of the vote for Obama. Thus, the increased share of the black vote, by itself, constitutes 42.2% of the reason for the additional 4.5% of the popular vote that Obama received. I'd certainly call that significant, hugely so. I realize that this is not perfectly valid, as surely many of these additional voters would have stayed home had Hillary been the democratic candidate for President, as opposed to voting for McCain. Looking at this another way, Kerry received 59 million and change votes, whereas Obama has received 66.7 million votes as of now, a difference of 7.7 million votes. Projecting the final electorate at 128 million votes, these additional voters, constituting 2% of 128 million, or 2.56 million votes, yielded Obama an additional 2.43 million votes, or 32% of the increase in votes Obama has received over Kerry.

You correctly point out that Obama did 7 points better than Kerry among black voters. That fact brought Obama an additional 8 tenths of 1 percent of the popular vote (.07 x .11, as I have already accounted for the increase from 88% to 95% in the additional 2%). Or in terms of raw vote totals, the 7 point improvement from Kerry to Obama in the black vote meant an additional 985,000 votes for Obama. Thus the increase from 11% to 13% of the electorate coupled with Obama outperforming Kerry among black voters resulted in a total of 2.7 points of additional vote for Obama, representing 60% of the increase in the popular vote from Kerry to Obama!! Or in terms of actual vote totals, Obama probably received 3.55 million more black votes than Kerry did, representing 46% of the 7.7 million additional votes that Obama won compared with Kerry.

Had black voters voted in the same proportion of the electorate and at the same 88% rate as they did for Kerry, McCain would have won Florida (narrowly, but he would have, I just worked it out), North Carolina (by more than 2 points) and Indiana (because Indiana was so close, any change would have tipped Indiana to McCain even though black voters were but 8% of the Indiana electorate), and Ohio and Virginia would have been much closer. In fact, by my back of the envelope calculations, Ohio would have been a nail biter, within 1 point for certain, and possibly within half of a point. Thus instead of winning 365 electoral votes, Obama would have won 312, and had to sweat Virginia and Ohio. Obama still would have won the election, but I think you underplayed the significance of the black vote.

2) Although the increase in the electorate from 11% to 13% sounds like far less than what one might have expected given the breathless media reports; (a) The categories of Latino, Asian and other also increased from a total of 12% to a total of 14%. So the increase in the percentage of the electorate which was black occurred with other minority groups increasing as well; a bigger portion of a growing and expanding pie. I realize this argument cuts both ways, as other groups increased as well. However, the number of Hispanic and Asian citizens of voting age is increasing as a percentage of the overall voting age population, significantly so, whereas (as I understand it) the same is not true of black citizens.

3) While the percentage of voters aged 18-29 only increased by one point, from 17% to 18%, this is in the context of an aging country. I do not have the pertinent demographic information at my fingertips. Suffice to say that your point that there was not a surge in young voters is not weakened by the exit polling data. However, it is abundantly clear from the anecdotal evidence that Obama benefited far more from young volunteers than did McCain. This clearly enhanced what I think everyone agrees was a superior ground game/GOTV (Get Out The Vote) effort. I can't sit here and say how many votes that added to Obama's column, but it would appear to have been fairly significant, particularly in the swing states of Pennsylvania, Ohio and Florida. I speak from experience when I tell you that Obama had an absolutely massive ground game in Pennsylvania, reaching multitudes of voters. Indeed, the exit polls for 2008 reflect that more voters reported being contacted by the Obama campaign, with 26% of exit polled voters reporting they were contacted by the Obama campaign and only 18% were contacted by the McCain campaign. 80% of voters contacted by only the Obama campaign (13%) voted for Obama, while 82% of voters contacted only by the McCain campaign (6%) voted for McCain. I would not attribute these votes directly to the ground game on a 1 for 1 basis, (if one did so the impact would be massive, potentially enough to swing the election) but surely there was a significant impact. Enthusiasm among young people had to be significant in the final vote totals. I look forward to an analysis by you, Jay Cost of Realclearpolitics, or someone far more able to analyze this point than I am.

4) As for whether a new progressive era has begun, only time will tell. You are surely right that many democrats are in somewhat marginal districts, where the national democratic brand is viewed with great suspicion, and will have to fight quite hard to maintain their seats. Being seen as Nancy Pelosi or Harry Reid's toady will not help these democrats at all. However, the margins that the democrats will have suggest that they will have votes to lose, and I would not assume nearly the monolithic Republican voting bloc as we have seen in recent years on certain issues. Freed from the need to toe the line for their leadership, more than a few Republicans in blue states, and even some in red states may decide that we need a national health care system after all, etc. I think it is very likely that the GOP will play ball on a big stimulus package, aid to Detroit, winding down the Iraq war (to the extent that Congress is relevant here), an increased minimum wage, increased regulations, and some other areas. Whether this constitutes a "progressive era" is, I concede, a debatable point.

Thursday, November 13, 2008

Reviewing my election predictions from my huge June 14, 2008 post

Slightly revised on 11-28-08 to reflect a 7 point Obama win, as he is now up 6.7 points in votes counted as of now, so 7 is closer than 6 (which is what I used when I first posted this entry)

In that endless post, I predicted results for a ton of states. Needless to say, that post was made well before the selections of Biden and Palin, the worst of the financial crisis and before the campaign had begun in earnest.

That post assumed my prediction of an 8-point Obama win. As of this writing he is up by 6.7 points (votes are still being counted even though the winner obviously is not in doubt), so my state-by-state predictions are valid-- had Obama won by only 1, my state-by-state predictions of Obama's final margin would have been worthless.

Once again, here is my terminology. In 2004, Bush won by 3. A state that went for Bush by 8 points is red + 5: 5 points more GOP than the nation. A state that went for Kerry by 10 is blue + 13.

Obama is (as of this writing) up by about 6.7 points, 52.8 to 46.1. I am rounding up to 7 points. So a state that went for Obama by 3 is red +4.

I note one big embarrassment before I begin. I did not even consider the possibility of Indiana being a swing state. It has historically been very red, being red + 18 in 2004. I just didn't think Illinois bordering Indiana was worth anything remotely like that. I was, needless to say, badly wrong, as Indiana ended up going for Obama by less than one point, thus moving Indiana to red + 6.

1)Florida: 27 electoral votes: 2004: Red + 2.5.

My June prediction: Obama by 3 (thus red +5)

Actual results: Obama by 2 (thus red + 5)

That went well! I realized that Florida would be harder than other swing states due to a relative lack of Obama's best demographic groups (upscale professional whites and black voters). Frankly, everyone else that looked at this election did as well. I may have hit Florida almost perfectly, but its difficult to take too too much credit for seeing what everyone else saw.

Florida went exactly as expected. Both campaigns fought hard, McCain took a small lead when he was up a touch nationally, Obama regained the lead as he pushed ahead in the national polls, and maintained a small but very consistent lead in polling from Mid-October on. Florida went EXACTLY as the polling expected, in roaring high turnout.

2) Ohio: 20 Electoral Votes: 2004 Red + 2.5
My June prediction: Obama by 3 (thus red +5)
Actual results: Obama by 4 (thus red + 3)

Oops. Ohio went better for Obama than I expected. I was frankly mildly concerned about race here. Like Florida, Ohio was expected to be mildly difficult for Obama, was, and went almost exactly as the polls said it would. Obama was consistently up low to mid single digits in Ohio. I suppose McCain outperformed his polls by a tiny bit, but not by enough to begin to matter. My Ohio prediction was conventional wisdom 101, and we were all a tad off.

3) Pennsylvania 21 Electoral Votes: 2004: Blue + 5.
My June prediction: Obama by 14 (thus Blue + 6)
Actual results: Obama by 11 (thus blue + 4)

I predicted in June that McCain would abandon Pennsylvania fairly early on, because its blue, and expensive. I was hugely wrong here. McCain abandoned Michigan early, but fought like crazy in Pa, sending Palin in every 20 minutes and very often appearing himself. The McCain campaign spent huge amounts of money here. And what did they get for their troubles? Nothing. It was blue + 5 in 2004, and after all the campaigning and phone calls and events and tv ads, it was blue + 4 in 2008! I think its fair to say I was very right in June and Team McCain was wrong. Pa was just a bridge too far. I note that I predicted that, "the polling will favor Obama solidly here." On that prediction I was very very right. Pennsylvania polls consistently put Obama up by low to mid double digits until the final week of the campaign, at which time the McCain efforts showed up in the polls, where Obama led in the mid to high single digits. But the final result, in low double digits, was entirely consistent with my June prediction, and with the polls. The Pennsylvania gambit was a good idea by the McCain campaign as of mid-October, as they just had no way to win without it. Not that they really could have won with it, but when you have lemons, you make lemonade.

4) Michigan: 17 Electoral Votes: 2004: Blue + 5.
My June prediction: Obama by 11 (thus blue + 3)
Actual results: Obama by 16 (thus blue + 9)

Oops. I blew this prediction, from start to finish. So much for a race-related problem. I predicted McCain would make a big push in Michigan, and would more than likely abandon it early in the Fall. Well, I was right about that, yet missed the victory margin by 5 points. Or, put another way, I missed the skew towards the democrats by 6 points. That's a ton in a seemingly predictable swing state! In the end, I thought Obama would win Michigan by more than he won the nation by, and he did.

My reasoning was that the Michigan economy had been in the crapper for ages, and maybe there McCain could say hey, try something new here, your democratic governor has messed things up. And he had polled well in Michigan. But literally days after McCain pulled out he was down mid double digits in the polls, instead of high single digits. And that's where the vote ended up. I still think Michigan was a better choice than Pennsylvania. I may have missed my prediction, but the McCain campaign missed the choice.

5) Virginia: 13 Electoral Votes: 2004: Red + 5.
My June prediction: Obama by 7 (thus red +1)
Actual results: Obama by 6 (thus red + 1)

Ah, Virginia. The Old Dominion. There's very little I like better in life than being hugely right. And, well, when it comes to Virginia I was right start to finish. Spectacularly, presciently right.

Not only was I very right, but Virginia mattered hugely in the campaign because of the electoral math. As I have said in other posts (and the Obama campaign said early on), if Obama carried every Kerry state (which he was favored to and did) (252), and Iowa (which he was favored to and did) (7), flipping Virginia alone (13) would win him the election, even if he lost in Ohio, Florida, Colorado, and everywhere else. This nasty fact caused 2-months of abject panic by the McCain campaign, once they realized how serious Obama was about Virginia, and, in my opinion, was by far the largest reason for the McCain campaign's seemingly strange insistence on campaigning hard in Pennsylvania and somewhat in Iowa. Virginia was the 13 electoral votes that terrified Team McCain.

Unlike Florida, where I was just as right, but really so were a lot of other people, I broke against the great weight of conventional wisdom when I wrote my June post. At that time, most pundits agreed that Colorado was a legitimate swing state, but that Virginia was a bridge too far. The conventional wisdom was that Obama would play there, then back off, and McCain would ultimately win it, even if he lost the election. Not! In the end, it was demographics. As I noted, "Virginia has been moving towards the democrats almost by the hour for the last 12 years." Specifically, as I noted, "Virginia was Red + 11 in 1996, and Red + 8 in 2000, so it has trended blue for a while now. It moved 3 points towards blue from 1996-2000, 3 more points from 2000 to 2004, and could easily have moved that much or more since." And that's what happened. In conjunction with a monster Obama campaign effort and monster black turnout, Virginia shifted 4 more points towards blue. Why?

To put it simply, a huge chunk of voters who vote basically like Maryland (which went for Obama by 25 points) has moved in, in slow motion, since about 1995. All I predicted, in the end, was that this demographic trend would continue, that Obama would play hard for Virginia, and that any race effect in Appalachia would be cancelled out by his huge popularity in northern Virginia, where the people that vote like Maryland moved. And, as everyone else predicted, black voters would turn out in breathtaking numbers.

I also predicted that Mark Warner would win his Senate seat huge, possibly by as many as 20. That counts as a miss; he won by 31. One former governor beat another former governor by 31 points. I wonder if that's ever happened before in a Senate race.

In conclusion, Virginia went precisely as I thought it would for precisely the reasons I thought it would. When I wrote the June post, the polling average nationwide had Obama up by 3.9 points, and in Virginia, McCain was up by 1.3 (or red + 5.2). I looked past the polls, saw the demographics, predicted the all-out effort by Obama, and got the final result almost exactly right.

6) Missouri: 11 Electoral Votes: 2004: Red + 4.
My June prediction: Obama by 2 (thus red +6)
Actual results: McCain by less than 1 (thus red + 7)

I predicted Missouri would be tough for Obama, but he'd win it if he won the popular vote comfortably. So did everyone else. Everyone else predicted that Missouri has moved somewhat to the red side and is no longer a true bellwether. I even got the partisan hue, red + 7, almost exactly right. We were all correct, except that he lost it by a hair instead of winning it by a hair. Moving on.

7) Minnesota: 10 Electoral Votes: 2004: Blue + 6.
My June prediction: Obama by 14 (thus blue + 6)
Actual results: Obama by 10 (thus blue + 3)

A 3-point miss. No big. I predicted that McCain would abandon it. He largely did. The GOP held their convention there, but they still realized the inevitable. Interesting that Minnesota continues to move red. I have no idea why, I need to learn that.

8) Wisconsin: 10 Electoral Votes: 2004: blue + 3.
My June prediction: Obama by 13 (thus blue + 5)
Actual results: Obama by 13 (thus blue + 6)

Not bad I'd say! All I predicted here (as in many other states) was that the partisan hue of the state from 2004 would continue. Obama always polled well in Wisconsin. He whipped Hillary in the primary there. Anyway.

9) Colorado: 9 Electoral votes: 2004: Red + 2.
My June prediction: Obama by 10 (thus blue + 2)
Actual results: Obama by 9 (thus blue + 2)!!!!!!!

Bingo. WOO HOO. As with Virginia, I was hugely right here. Now unlike Virginia, everyone and their grandmother predicted Colorado was a swing state in 2008. But most people thought it would be much closer. Here, as in Virginia, I correctly predicted that demographic trends moving the state towards the blue side of the ledger would continue, and I was very right. Colorado was blue +2. Colorado was blue +2. Colorado's been red for a long long time, for it to be blue + 2 is astounding. According to the exit polls, Hispanics in Colorado went huge for Obama, 61-38, but that's actually a tad lower than the national results. Black voters made up only 4% of the voters. What happened in Colorado was, incredibly, Obama won the white vote 50-48. That is absolutely incredible. By way of comparison, the white vote in deep deep blue New York was only 52-46 Obama. Whites in Colorado, a traditionally red state, voted at nearly as high a rate for Obama as in blue blue blue New York. WOW.

Colorado was a part of a larger story, where the west moved hugely blue in 2008. Even the 3 west coast states, all Kerry states, moved blue. And Colorado, Nevada and New Mexico moved sharply blue.

As I wrote back in June, in 1996, Colorado was Red + 10, in 2000 it was red + 9.5, but in 2004 it shot up to red + 2, a 7 point move towards blue (and with the same GOP candidate, Bush). I figured it would go 4 more points towards blue, and it did, exactly 4 more points.

10) Iowa: 7 Electoral votes: 2004: Blue + 2.
My June prediction: Obama by 13 (thus blue + 5)
Actual results: Obama by 9 (thus blue + 2)

Ah well, I suppose being three points off on the partisan hue isn't that bad, but I feel like I was wrong here. I predicted that McCain would abandon Iowa because of his brave opposition to ethanol subsidies. I was badly wrong about that-- he even visited in the weekend before the election. I wonder if the somewhat vigorous McCain campaign in Iowa accounted for the partisan hue remaining at blue + 2 rather than than my predicted move to blue + 5. Or I could have just been plain wrong. No way to tell. But I'm taking Iowa on the chin because I was so confident that ethanol would play a gigantic role here, and it looks as if it really didn't.

11) Arkansas: 6 Electoral Votes: 2004: Red + 6
My June prediction: McCain by 5 (thus red + 13)
Actual results: McCain by 20 (thus red + 27)

Well, if you're going to be wrong, you may as well totally blow it! That's really embarrassing. At the time I wrote the June post, McCain was up 15-20 points on Obama in the polls. I thought that would drastically close. Obviously not. Obama stank up much of the south, losing former swing southern states by gigantic margins. Obviously race played a real factor, as Kerry certainly wasn't popular in Arkansas, and he hugely outperformed Obama! Instead of holding near red + 6, or maybe ticking up to red + 9, Arkansas shot up to red + an astounding 27. I knew Arkansas wouldn't really be a swing state, but being that wrong on the margin of victory is, well, not ideal.

12) New Mexico: 5 Electoral votes: 2004: blue + 2.
My June prediction: Obama by 4 (thus red + 4)
Actual results: Obama by 15 (thus blue + 8)!!

Western Oops, part I. I missed the partisan color of New Mexico, a swing state, by a mere 14 points!!! Oops!! You'll forgive me if I hide under the covers! At least I knew I had no real idea about how New Mexico would end up.

No one else as of June predicted anything like a 15 point Obama landslide in New Mexico. I badly underestimated how well Hispanics would rally to Obama. According to the exit polls, the Hispanic vote was 41 % of the vote in New Mexico! Obama won it 69-30!!! The immigration debate of 2007 did huge harm to the GOP brand among Hispanics, particularly Hispanics living near the Mexican border. This harm has the potential to be generational, like the harm done to the GOP brand by its opposition to civil rights in recent decades.

I said in June I had no confidence in my New Mexico predictions. Needless to say, to paraphrase Churchill, my utter lack of confidence was well founded. For what its worth, the conventional wisdom predicted a fairly close race in New Mexico until about the last 2 weeks, and even then almost no one was predicting the 15-point massacre handed out to McCain and Palin.

13) Nevada: 5 Electoral Votes: 2004: Blue + 0!
My June prediction: Obama by 4 (thus red + 4)
Actual results: Obama by 12 (thus blue + 5)!

Western Oops, part II. Another Las Vegas sized MISS. See New Mexico, above. The west and the south were the dramatically changed regions in 2008, with much of the south moving hugely towards McCain (more on that in a future post) and some of the west moving hugely to Obama. I thought Nevada would be very tough for Obama, and was, obviously, spectacularly wrong. Again, no one predicted anything like a 12-point win in Nevada, not even in the last few days of the campaign. But just because no one else had a clue doesn't mean I shouldn't have.

One other note on Nevada. Hispanics went for Obama by a staggering 76-22. But they were only 15% of the vote (again all this is according to the exit polls). So these 15% of voters gave Obama about a 5-point statewide lead. Black voters made up 10% of the Nevada electorate (I'm surprised it was that high!) and went 94-5 for Obama, thus giving him 4.5 additional statewide points. White voters only went for McCain 53-45, which was a touch closer than in the rest of the country. In the US as a whole, white voters went for McCain by 55-43. That Nevada whites would be bluer than the rest of America tells us something about the GOP brand out west.

14) New Hampshire: 4 Electoral Votes, 2004: Blue + 4
My June prediction: Obama by 7 (thus red + 1)
Actual results: Obama by 9 (thus blue + 2)

I was correct that McCain competed there till the bitter end. I slightly underestimated just how badly tarnished the GOP brand was in New Hampshire, a state which got to know McCain better than any other state except Arizona.

Here are the non-swing state predictions I made.

A) California: 55 Electoral votes: 2004: Blue + approximately 14.
My June prediction: Obama by 15 (thus blue + 7)
Actual results: Obama by 24! (thus blue + 17!)

To miss by that much in a state so huge is embarrassing. Its a stunning monster landslide! Why was I so badly wrong?

Apprently a fair bit of the GOP base stayed home. Even that doesn't account for the huge margin by which I was wrong. I was predicting a 7-point change in the partisan hue, which was daring. Still....

B) Texas: 34 Electoral votes: 2004: red+ 20
My June prediction: McCain by 8 (red + 16)
Actual results: McCain by 11 (red + 18)

Plenty close enough. I'm declaring victory and moving on.

C) New York: 31 Electoral votes: 2004: Blue + 22.
My June prediction: Obama by 26 (thus blue + 18)
Actual results: Obama by 25! (thus blue + 18!)

Now THAT'S what I call knowing your home state! Predicting a big landslide in New York for Obama was child's play. That I hit the partisan hue exactly is satisfying.

D) Illinois: 21 Electoral votes: 2004 Blue + 14.

My June prediction: Obama by 30 (thus blue + 22)
Actual results: Obama by 25 (thus blue + 18)

A slight miss. I guess I overestimated the home-state effect. Put another way, there are always a certain percentage that just are NOT going to vote for you.

E) North Carolina: 15 electoral votes: 2004 red +9
My June prediction: McCain by 3 (thus red + 11)
Actual results: Obama by less than 1 (red +7)

Wow did I badly underestimate how much North Carolina had changed! In June, I advocated Obama going after North Carolina, but didn't think he'd get there. I guess I've been away from North Carolina since 1996, and don't really know it anymore. Still, do note that it was red + 7. Still a long way from being a national bellweather, unlike Virginia, which is at this instant in time the closest thing we have to a national bellweather. Sorry Missouri. No love for you, Ohio.

F) Georgia: 15 electoral votes: 2004 red + 14

My June Prediction: McCain by 6 (thus red + 14)
Actual results: McCain by 5 (thus red + 12)

Not too shabby. Still, for Georgia to be red + that much means it is unlikely to go blue anytime soon, absent a big national landslide.

G) New Jersey: 15 electoral votes: 2004 blue + 9
My June prediction: Obama by 15 (thus blue +7)
Actual results: Obama by 15 (thus blue + 8)

New Jersey is right next door to my New York, and simply hasn't changed much in recent years. It wasn't too tough to predict, though of course getting the partisan hue within one point and change is satisfying. Not difficult, mind you, but still satisfying. I knew McCain wouldn't play for New Jersey, despite saying he would on more than one occasion. The McCain campaign may at times have been stupid; competing for New Jersey, requiring the expensive New York tv market, would have been suicidal. They weren't suicidal.

Wednesday, November 12, 2008

The Dow is very near its lows reached just after 9-11.

The Dow Jones closed today down 411 points to 8,282. As everyone surely knows, the markets have gone to hell in a handbasket recently, on the financial crisis, the recession already underway, and fears of a godawful nasty recession.

Adjusting for dividends and splits, the Dow Jones is now lower than the adjusted level it was at shortly after 9-11.

Let me run that again. In the 7+ years since the market reopened following 9-11, the Dow has basically treaded water. I thought we were told that up until recently the economic record was good, no?

In terms of stock market returns, Bush 43's record is godawful.

The Dow, adjusted for reinvested dividends and splits, is slightly more than 20% lower than it was on Bush's inauguration day, and is only the tiniest little bit above the adjusted level immediately after it plummeted following 9-11.

Although not unprecedented, this is quite the lousy stock market performance. I remember the days when conservatives used to say that the market made a fine unbiased and merciless judge of our nation's economic policies. By that token, Bush would receive a D, and Clinton an A+. I await the first prominent conservative making that (perfectly logical) argument).

Now of course, some of my GOP oriented critics will say that 9-11 wasn't Bush's fault and the huge financial meltdown wasn't entirely his fault. Let's leave 9-11 blame for another day (I don't really blame Bush, but his people did squat beforehand). The financial crisis, on the other hand, occurred at the tag end of 8 years of GOP White House control, with the congress under GOP control for the bulk of that time and in the control of unusually cowardly democrats for the remainder. Bush got most of what he wanted on the tax, budget and regulatory front. And the results are, well, not splendid. Greenspan was a bipartisan affair, but the regulators were all GOP, all the time. Congress mostly. And we had, failure, men and women, failure. Under Clinton the dollar soared (I can remember Rockefeller Republicans talking a ton about preserving the store of value in the currency). Under Bush not so much.

When Bush took office, the dollar was at .93 dollars to the Euro (the Euro was slightly stronger than the dollar). This was basically unchanged just after 9-11, at about .92 dollars to the Euro.

The dollar closed yesterday at 1.25 dollars to the Euro. The dollar has rallied significantly since the financial crisis began, as it has hit Europe quite hard as well. Though it is powerfully interesting that the dollar RALLIED as the US-centered financial crisis exploded.

Anyway, after 2 terms, the dollar has tanked under Bush and GOP Congressional leadership.

And no wonder. Big and now MASSIVE budget deficits, big trade deficits, diminished private savings, and presto, you have a dollar rout. The wonder is that it isn't worse, and if Obama and the donkeys in Congress don't hop to it, it could get a ton worse.
GM: Thomas Friedman is precisely correct

Well I've been meaning to blog on exactly what the terms of any GM bailout oughta be. And I had an outline in my head. Then Thomas Friedman wrote exactly what I was going to say (seriously) but wrote it better. And he added in the fine idea of having Steve Jobs go run GM, which is in fact a spectacular idea, which I hadn't thought of. So I link to his column, which I would encourage you to read. I simply have nothing to add.

http://www.nytimes.com/2008/11/12/opinion/12friedman.html?_r=1&ref=opinion&oref=slogin

Tuesday, November 11, 2008

Seriously stubborn democrats

Several news reports have stated that Bush offered some movement on the stimulus package that the democrats wanted in exchange for help in passing a free trade agreement with Colombia. Even more interestingly, there was talk of Bush asking the UAW for help on the same free trade agreement in exchange for more federal assistance to the automakers.

The democrats in congress have been noncommittal.

Incredibly, the UAW publicly rejected any such help on a free trade agreement in exchange for aid to the automakers.

http://money.cnn.com/news/newsfeeds/articles/djf500/200811111153DOWJONESDJONLINE000413_FORTUNE5.htm

The UAW spokesman said, "Colombia had the worst record in terms of murdering trade unionists and the violence has been continuing. . . . . We don't think we should be doing free-trade deals with countries that are murdering people because they're engaged in union activity."

I find it extremely hard to believe that principle is motivating the UAW. I'd like to see a poll of UAW members on this one. Gee, let's see. Government help to my employer in exchange for an insignificant free trade agreement. Not rocket science to a line worker in Michigan, is it?

The UAW has a goodly share of the blame for the looming bankruptcy facing GM, and probably Ford. They blithely negotiated salary and benefits far in excess of market rates. Now a union's job is to get the best deal for its members that it can, so my anger is not unlimited, but despite huge job losses since 1980, the UAW still seems to think that GM is the golden goose that will keep laying golden eggs. It has been more accommodating in recent years, but not nearly as accommodating as conditions would appear to require.

Of course, GM management has an unbroken record of terrible decision making and general overall idiocy since the mid 1970s. Whether it was tens of billions wasted on robots, agreeing to the insane union deals, fighting fuel standards rather than getting ahead of the problem (as the auto industry did with mandatory seat belts/air bags), keeping stodgy brands like Oldsmobile around far too long, underfunding its successful Saturn decision, and so on and so on and so on, GM management has thoroughly screwed up the company for decades. However, continuing to agree to very generous retiree benefits, and continuing to pay dividends in recent years, achieved a level of stupidity I didn't think even GM's management could manage.

GM's back is to the wall. It publicly announced it would go bankrupt next year without massive federal government assistance. I predict that such assistance will be forthcoming. I oppose such assistance, because this is not a liquidity crisis, wherein a big profitable company temporarily can't borrow any money and thus runs out of cash. Rather, this is a terribly troubled company with a thoroughly uncompetitive cost structure. In exchange for any aid, I would demand that the union contracts be torn up and renegotiated at a massively lesser cost. If the union strikes (a real possibility) I'd just shut down the company, and they'd get zip.

I find it highly unlikely that a newly sworn in President Obama would be anywhere remotely near this tough on a union. If he is, I'll be astounded, and my estimation of him will soar.

Sunday, November 09, 2008

American-European relations

I've been thinking. President Obama will present an interesting and perhaps pleasant problem for Europe. From 2004-2006 Bush was the President Europeans (and their governments) loved to hate. Since 2007 there has been a charm offensive, meaning the administration has tried to be nicer. This has worked somewhat with the European GOVERNMENTS, but the people of Europe not so much. They are as anxious to see Bush go away and never come back as those Americans fortunate enough to live in blue states.

Fast forward to February 2009. President Obama is on a conference call with Angela Merkel, Prime Minister of Germany, Nicolas Sarkozy, the President of France, Gordon Brown, the British Prime Minister (who has severe political problems himself) and says, "ok boys and girls. We were stupid as all hell and very nasty to you to boot. We screwed up Iraq every which way but loose. We said do it our way or else, and you all said, "we won't." Well, Bush is back in Texas and you'll never see him again. You can pinch yourself, the nightmare is over. I just got elected easily. Now I'm asking you for more police and help in Iraq, and more TROOPS in Afghanistan. I know that more troops fighting in Afghanistan isn't popular in Europe. But its the right thing to do, so how about it? Yes, Sarkozy, that means troops ready to fight and die, not just look pretty. I just got through lecturing the Canadian Prime Minister about that, please don't make me repeat it. This is a good fight, a war that had to be fought, and now should be won for the people of Afghanistan. You too Gordon. Get your nose out of your own newspapers for a minute. You too Angela. 1945 was a long time ago. We're over it. Your turn.

Oh, and by the way Merkel and Sarkozy, I'm not finished with you. Bush was right about Iran. Just because he said it doesn't mean it wasn't true. We can't let those nutjobs get nuclear weapons. Remember, Paris is in range and all. Moscow and Beijing aren't going to pull our chestnuts out of the fire on this one. But if you three threaten hard sanctions on behalf of the EU unless Iran gets out of the nuclear business, and then follows through, that will get Iran's attention. No one wants another war in the middle east, but we really need to make sure the Iranian government doesn't get nuclear weapons. So how about it? Can you get past all of the anger and pain caused by Bush? I know its only been a few weeks, but how about you all get over it. I'm the American President, and I'm saying, America needs you. The world needs you. Please help us make the world safer and a better place. We'll work with you on global warming, now that the global warming deniers (the Republicans) are gone. What are your other priorities? We'll work with you. Want to see us squeeze the government in Sudan harder? Works for me. Can the 4 of us work together to strengthen the still critical European-American alliance? Or are all your words about how wonderful it was that I am president and Bush is gone just words?

Don't worry, I'm a patient man. I'll give you all 48 hours to give me a full and complete answer. :-)

Friday, November 07, 2008

New stimulus packages, take II

As loyal readers know, I've been advocating big stimulus packages for almost a year now. And I sure as heck haven't changed my mind.

The (un)employment report, released today confirms what was already very obvious. We are in a deep recession. I suspect that it will end by around May, possibly earlier. There is already a good bit of stimulus in the pipeline. The shape and strength of the recovery, however, is yet to be seen. I am looking for stimulus packages not to end the recession, because I think it will end on its own fairly soon, but to ensure a more vigorous recovery than the last two we have had. Following both the 1991 and 2001 recessions, we had unusually slow and weak recoveries, both properly derided as jobless recoveries. Businesses order books started expanding, but they made do with the same number of workers they had, and didn't hire any new ones for quite a while, because they didn't have to. The best way to deal with that isn't big new tax breaks for new employees, as Obama proposed; all that does is make an otherwise unprofitable new hire profitable, a lousy economic policy (if not too too harmful of one). Much better is to give a quicker/sharper increase to the order books of business. And government knows precisely how to do that. Spend, spend, spend. NOT tax cuts-- these are too often saved in bad times. But government SPENDING.

Oh, one other not so minor thing. GM announced today that it would likely run out of cash early next year.

http://money.cnn.com/2008/11/07/news/companies/gm/index.htm?postversion=2008110714

Although not really a surprise, this is a disaster for the Michigan/Ohio area, and a real problem for the nation as a whole. GM and Ford are both burdened with awful labor contracts, which require wages well above what the competitive market would bear, and, worse, generous benefit packages for retirees. Since both companies have massively downsized in recent years, they both have a high number of retirees for each current worker. So the benefit payments, for pension and especially health care, are crippling the companies. Causing both to face bankruptcy early next year absent major federal help. That the lack of a national health care system that makes any sense would cause GM and Ford to go to the wall is ironic. I've been saying, since literally 1989, that they would be the biggest beneficiaries of a national health care system. They got there, but only in recent years. Management of both companies is godawful. This shouldn't be news.

Anyway, here are my stimulus plans.

Speaker Pelosi said after the election that she is hoping for Congress in an upcoming lame duck session (that is, the old Congress, not the newly elected congress) can come back and pass a stimulus package (which would have to be signed by Bush, not Obama).

http://www.sunjournal.com/story/290501-3/Business/Pelosi_weighs_stimulus_package/

The GOP apparently is dead set against any big spending package. This must must must be done, at all costs, jammed down their throats if necessary. The democrats should make the GOP actually filibuster, that is force them to actually do speeches, for weeks on end. Imagine the spectacle of the GOP inveighing against government spending and increased unemployment benefits at a time of a deep recession.

The article above spoke of possibly a $100 billion package in the lame duck session followed by a bigger one after Obama is sworn in. That works for me.

Barrack, Nancy, Harry: Here's what you should do.

1) Take what you can get from the lame duck congress. Spend as much as you can, get as much increased unemployment insurance benefits as you can. Few if any tax cuts, and only to the middle class.

2) When Obama takes office, mission number one is a massive stimulus package, heavy on infrastructure spending. My target is $400 billion over two years. A monster package. I would be willing to go up on that figure if it would help it pass. It simply has to be absolutely massive to do any real good.

The US infrastructure has been falling apart for years, much of the money would be well spent. Subways in New York City. Highways/bridges where they are needed. Road/bridge repairs. Port upgrades. Rail upgrades. Spend, spend, spend, all over the land. Don't sweat the inevitable waste. Minimize it, but don't sweat it. All these new construction and other workers will need new clothes, shoes, equipment, etc. Its the best way to quickly increase demand in the economy, which is just what the doctor ordered right about now. This recession will probably get a little worse before it gets better. Massive government spending may not be able to prevent that, but it can sure as heck make a recovery much more vigorous. Any inflationary risks are acceptable, to say the least, in an economy this bad with a still very weak financial system.
The latest "jobs" report.

At 8:30 this morning, the government announced that a whopping 240,000 jobs were lost in October, and the unemployment rate shot up from 6.1% to 6.5%. The job loss numbers are a staggering number for a single month, and more than 1 million jobs have been lost this year, a big big number. Its now 100% clear that we are in a deep, deep recession.

Of course, anyone with 2 brain cells to rub together has known that for several months, and anyone who really thought about the matter has known that for a few months before that. I was advocating for interest rate cuts and big spending-side stimulus packages for many many months, and was on the early side in terms of doing so. If Congress had passed the kind of massive spending increases that I advocated earlier this year, the recession we are now in would be less deep.

There has been talk of 2 upcoming stimulus packages, a small one in the upcoming lame duck session of congress (the old congress, and president Bush), and a new, much bigger one, with the new congress and President Obama. I am all for both of these.

In fact, I've decided that the first item Obama should take up as President is a BIG stimulus package, centered mainly on construction spending. I'd target around $300-$400 billion over the next two years. Unlike the huge amount spent on the various bailouts, which was stimulative in the sense that it prevented the financial system from hurtling over the abyss, but did not increase government outlay into the economy per se, this new huge spending package (which Speaker Pelosi has alluded to being possibly in favor of) would drastically increase federal spending which would go directly into the economy.

Anyway, this godawful (un)employment report should greatly help the cause of big stimulus packages.
Obama's Cabinet


Rather than wasting time predicting Obama's cabinet and other personnel choices, I'll comment about on what I'd like to see.


The first big post became official yesterday when Rahm Emanuel accepted the position of White House Chief of Staff. I'M IN LOVE! Emanuel was a key advisor to Bill Clinton from 1993-1998. He was famous in the Clinton White House, and outside of it, as being an angry partisan warrior ready to "kill" his enemies. He has been in the House since 2003, and has enhanced his reputation as a man who is happy and ready to bury any opposition, GOP or otherwise.


So the first key appointment is a guy who knows where all the bodies are buries, and buried a seriously disproportionate number of them personally! He's been around, he's a partisan warrior and a big believer in growing the number of democrats on the Hill. In short, he's everything Obama says he's not. No post-partisan BS for Emanuel.


WOO HOO!!!!! On a scale of 1-10, I give the Emanuel appointment a 10. Literally. There isn't a man, woman, child or pet in America I would have rather seen named to the Chief of Staff slot. Now of course I have no idea how Obama intends to use him. But clearly it is a loud signal to democrats all across America that he won't be all sweetness and light. Look, sweetness and light has its uses, and if it can be useful for getting comprehensive health care reform, serious energy reform, and the other liberal and flat out left wing goals that I have (and that Obama ran on, in part), then I'm for it. But the GOP isn't going to roll over and play dead, they will fight much of any Obama agenda every step of the way, and friends must be rewarded and enemies punished. And if you're a Republican about to be punished, Rahm Emanuel is about the last guy in America you want to see.


Secretary of the Treasury was a big deal in many administrations, including Bush 41 (his close friend Jim Baker) and Clinton (Lloyd Bentsen, Robert Rubin, Larry Summers) and a backwater in the Bush administrations, which made all (disastrous) economic decisions from the White House, and informed the Treasury Secretary, until the varied crises of 2007-08. It is destined to be a huge deal in the incoming Obama administration, alas. According to the latest political news, there are two finalists for the job. One is Larry Summers, who's been there, done that, doesn't suffer fools gladly, doesn't always play well with others, and has angered feminists by suggesting that maybe there aren't as many women in science because women aren't as skilled in the sciences as men are. Now I have no idea whether they are or are not, but I couldn't begin to care at the moment. The nation faces gigantic economic problems, and if Robert Rubin is unavailable, my # 2 choice for dealing with them is Larry Summers. So he'd make me swoon just like Rahm Emanuel does.


http://www.politico.com/news/stories/1108/15391.html


The other guy listed on the finalist list is New York Federal Reserve Chairman Timothy Geithner. I personally know nothing of him. The article says he's been involved in the current crisis. I just don't know enough about him to form an opinion one way or the other. Needless to say, I'm rooting for Summers.

As for Secretary of State, John Kerry is apparently lobbying for the post. My first reaction was an emotional "NO!" Then I calmed down. Kerry was an early supporter of Obama, endorsing him on January 10, 2008. Rewarding early supporters is good. Now SecState isn't a position you just hand out to reward someone, but Kerry's capable. I could think of people I'd rather have, and these do not include Republicans Dick Lugar and Chuck Hegal. I'd be happy enough with Richard Holbrooke. Kerry'd probably be fine. Well, mediocre actually. His instincts are cautious. Adequate.

For Attorney General, Huffington Post has mentioned Arizona Governor Janet Napolitano. With John Edwards, the obvious choice, out of the running for running for president while having an affair and lying about it, (ever seen that one before?), there's no one obvious choice. Hillary doesn't want it. Napolitano's more politician than legal brain, but that's ok. She's up to the job.

For Defense, a lot of people think Obama will keep Robert Gates, Bush's guy, on. That's actually fine with me. Gates is unique in Bush-land, a guy who is highly competent, well grounded in reality, and not a political hack. I'm comfortable keeping him on. I'd be fine with Chuck Hegal or Colin Powell, two Republicans that have been mentioned. God help me, I think my preference is for the current SecDef, Gates.

More on Obama's staff and cabinet posts coming soon.

Wednesday, November 05, 2008

How were my predictions?

Let's go prediction by prediction and see how I did:

1) Electoral college:

I predicted that Obama would win 364 electoral votes. BINGO. Assuming that North Carolina is in the end called for the democrats, as appears highly likely (The Raleigh newspaper has already done so), I will have hit the electoral college numbers exactly.

I predicted, "Obama will win every state Kerry won, plus Ohio, Florida, Virginia, North Carolina (by a whisker), Missouri (by a smaller whisker), Iowa, Colorado, New Mexico and Nevada. My last prediction had Obama winning 375 electoral votes. The only state on which I've changed my mind is Indiana, which now looks somewhat red."

I thus got every state correct except for reversing Missouri and Indiana. I knew these states would be extremely close (as did everyone else), so in terms of getting the states right I had a great night.

After predicting President Gore and President Kerry, I'm living proof that a stopped clock is right twice a day.

2) Popular vote: I predicted that "Obama will win the popular vote 53.8-45.2, or by 8.6 points."

As of this writing, and votes are still coming in, Obama won the popular vote 53-46. So I was quite close. However, there are, as of now, far fewer total votes than were expected, leading me to think that a lot of votes yet to be counted. The coming days will tell if that is true, or if instead nearly all the votes have been counted.

3) I predicted, "Obama will receive 75.9 million votes(!!!), and McCain 63.3 million (still more than Bush received in 2004!)."

I'll have to wait a week or more to be sure, but this looks way, way off. As of now, 9:50 p.m. the day after election day, Obama has 63.9 million votes and McCain has 56.4 million. Oops.

4) Senate seats: I predicted that the dems would pick up 8 Senate seats. Nope. As of now the democrats have picked up only 5. Oregon my end up with the democrats, and Georgia may end up in a runoff, so its too early to tell, but 8 seems very unlikely, and even 7 is unlikely. Its looking like 6.

5) House seats: I predicted the democrats would pick up 25 seats. That looks good right now. It'll actually be a month until we know the precise number, but as of this moment the democrats have picked up 20, and 21 or so looks like a good final number. So this one worked out.

I'll have a few more posts in coming days discussing why/how Obama won, how little the map really changed, and a few other things.

Tuesday, November 04, 2008

Election day thoughts

1. Martin Luther King is celebrating in his grave. MLK famously said, "I have a dream that my four little children will one day live in a nation where they will not be judged by the color of their skin but by the content of their character."

America is poised to elect a partially black man president, and not in a close vote, either. Indeed, it it looks like Obama will get more of the white vote than did either Kerry or Gore on his way to winning. That sounds like it qualifies to me!

2. Turnout is apparently pretty high. There have been a long series of anecdotal news reports of really long lines. Bill Richardson has predicted 80-85% turnout in the swing state of New Mexico. John Corzine has predicted 80% turnout in the non-swing state of New Jersey. Long lines in Florida despite a lot of early voting. Long lines in Virginia. Long lines in New York, not exactly a swing state!

The only question is whether turnout will be really high (130 million votes) or enormously high, like I predicted (140 million votes).

Pennsylvania is, unsurprisingly, expecting really high turnout.

3. A GOP affiliated group began running ads mentioning Reverend Wright about 3 days ago. Insane how long it took. This is after a metric boatload of voters voted in the key swing states of Florida, North Carolina and Colorado, among other places. Obviously McCain was fighting tooth and nail against this, but still someone did it anyway. I'm shocked it took them so long.

4. As I wrote in an earlier post, media widely reporting on calls and fliers telling voters that some people were to vote Wednesday. We hear about this every election, and it stinks every time. Doesn't look like too many people are buying it, to say the least, but its still beyond dirty.
There are anecdotal reports of breathtaking turnout today.

http://apnews.myway.com/article/20081104/D94876R80.html

CNN has been reporting all day on long lines in places as varied as New York (machines are old), Virginia (machines broke in heavily black areas amidst breathtaking turnout), Florida, Pennsylvania and Tennessee. Many states (but not New York) had early voting, and tons of people voted. Here are some of the most amazing numbers:

"In Colorado, the number of ballots already cast this year equals 74 percent of the state’s total turnout in the 2004 election, according to data compiled by Michael McDonald, an associate professor at George Mason University. Voting in Georgia has already reached 60 percent of the 2004 mark, and in nearby North Carolina, the figure is 73 percent."

http://www.iht.com/articles/2008/11/04/america/04campaigncnd.php?page=2

Now clearly the turnout in each of these states will easily exceed 2004 turnout, but this is still absolutely amazing.

CNN and MSNBC have periodically reported on all of the hoaxes about how certain people or precincts vote on Wednesday. I know it seems like no one in their right mind would believe this, but someone thinks some people will or they wouldn't bother with the hoax. Curiously, all of these hoaxes appear aimed at minorities or registered democrats. What a coincidence. Or not.
First election day results go for Obama, big.

The tiny town in Dixville Notch traditionally votes at midnight on election day. It has gone GOP since 1968. This year it went for Obama, 15-6. As a poll this is virtually worthless, but its not a mere curiousity either. People who knew the country would be watching and take politics seriously, voted for Obama overwhelmingly. Interesting.

Monday, November 03, 2008

Final predictions post.

I have made various posts predicting the outcome of the presidential and congressional elections. This post is an attempt to organize them all. Virtually none of my predictions have changed.

To sum up, I predict that Obama will win the popular vote 53.8-45.2, or 8.6 points. I predict Obama will receive 75.9 million votes(!!!), and McCain 63.3 million (still more than Bush received in 2004!). I predict Obama will win 364 electoral votes, way more than the 270 needed to win. The election should be called early, as California and its 55 electoral votes are a sure thing for Obama and thus there's no need to wait for them to call the election. As I said in my post of October 19, I predict the Democrats will pick up 8 Senate seats. I have no basis for a house prediction, but since everyone else is doing it, I predict the democrats will pick up 25 seats (up from 20 in my October 19 post). So Obama gets 364 electoral votes, democrats gain 8 Senate seats, leaving them with 59 (counting Joe Lieberman), and democrats gain 25 seats, giving them a 260-174 majority.

Obama will win every state Kerry won, plus Ohio, Florida, Virginia, North Carolina (by a whisker), Missouri (by a smaller whisker), Iowa, Colorado, New Mexico and Nevada. My last prediction had Obama winning 375 electoral votes. The only state on which I've changed my mind is Indiana, which now looks somewhat red.

In a huge night, Obama wins some or all of Indiana, Georgia, North Dakota, Montana, and maybe even Arizona. All these states matter for is the margin of victory.

The only Kerry state which might be close is Pennsylvania. Obama will win it, but the margin is very uncertain-- he could win by 3-5, he could win by 10. I have no idea.

Shortly after the election I will draft up a post seeing how my predictions worked out. I note again that I was wrong in 2000 about president, wrong in 2004, and consistently wrong during the primaries. Predicting the future is hard. Still, I've paid a ton of attention to this race, and I think I've been able to add some value.

On June 14th, I predicted an 8-point (or more) Obama victory, and went over a bunch of swing states, and made predictions. I completely missed Indiana's new status as a swing state, but did properly discuss a bunch of others. After the election, I'm going to go back to the June 14th post, and see how I did, almost 5 months out.
A long national nightmare is coming to an end

Election day is tomorrow. Tomorrow night Obama will be declared the winner and McCain will concede. Democrats will gain a bunch of seats in the Senate and House. And press articles will declare the end of the Reagan "revolution."

In today's McCain stump speech (in Tennessee, very near the Virginia border) (delivered with great passion to a very enthusiastic crowd), he had the following applause/boo lines:

1) Obama has said that any new coal fired power plants would bankrupt the utility that built it. McCain, of course, is for such new plants, as they will have clean coal technology.

Well, given that the world has a fever (as Al Gore famously put it) building more coal power plants is the very first thing the doctor ordered us NOT to do. Good for Obama.

2) McCain pointed out that Obama said this to, "Guess who? A San Francisco newspaper." The crowd booed. No only in GOP land are certain people more "American" or "Pro-America" than other areas. Of course, the pro America areas are the red states, or at least the red areas of blue states.

This form of politics has poisoned our body politic for far too long, and tomorrow is probably the last day we're going to see it at the national level for quite a while, since it is finally failing.

I note that which areas are the least pro America by this standard? New York State, New York City. California. LA. San Francisco. Illinois/Chicago. Baltimore. Washington DC. Northern Virginia (explicitly from Palin). Philly.

Know what these areas have in common besides being very very blue? They're rich. That is, successful. They pay WAYYYY more in taxes than they get back in government services. Way, way more. They, to borrow a phrase, redistribute wealth, and disproportionately to red states and red areas of blue states. They have lower crime rates than the rest of America. Yes, they have more gays. This is bad why exactly? Well, in warped, twisted GOP thinking, that's bad.

3) Joe the Plumber. Democrats don't care about people like Joe. We do. Well, if huge tax cuts to the rich, the super rich and the Bill Gates rich show caring for Joe, well the GOP cares all right.

I could go on, but it wouldn't be any more productive for me as it would be for you.

Sunday, November 02, 2008

Big Obama rally in Cincinnati.

I just finished watching a big rally in Cincinnati. Circa 25,000 people largely filled up the University of Cincinnati football stadium. I think that was the venue in any event. The crowd was raucous for an Obama crowd, showing a lot of energy. Obama was on, and full of energy. Still not quite the energy at a McCain or Palin rally, but plenty of enthusiasm.

Nothing I hadn't heard from Obama before, except a few small witty lines, and a lot of catering to Ohio. Lots of statements about how McCain will continue Bush's economic policies. A reminder that he proposes people under $250,000 of income receive a tax cut. No word about where the lost revenue is to come from.

Anyway, this was a really energetic rally, more than I am used to from an Obama rally. And Obama is showing more life as the campaign winds down.
Report on rallies the weekend before the election.


On the Saturday before the 2000 election, I was at work at the big law firm I worked for. I had a few hours of work, but nothing urgent, and was following the election. So I brought my work into a conference room which had a large projection screen tv, and watched a few Bush and Gore rallies.


The Bush rallies were pro-forma and even a bit on the subdued side. He read from his script without any deviation.


The Gore rallies were totally different. Gore was screaming, nearly at the top of his lungs. None of the wooden, passion-less Gore. The crowds were going absolutely wild.


There was an obvious contrast. I note that Gore was in Tennessee and Florida on the day I watched.


I've been watching McCain and Obama rallies the last couple of days.


The McCain rally I'm watching right this instant (2:45 p.m. Sunday) in Scranton Pennsylvania, is typical. I can't tell how big the crowd is, but it is loud. Raucous and boisterous. McCain, who looked a bit tired yesterday (can you blame him?) is as awake and alert right now as it is possible to be. It is, in short, an awfully successful rally.


McCain trips over more words than Bush, let alone Gore, double let alone Obama. The English language is not McCain's very very best friend.


The Obama rallies I have seen, on the other hand, have been hugely attended, but not really loud. In fact, like the rally I attended a few weeks back in Philadelphia, the applause was almost polite, as opposed to raucous. Obama was more lively then I had seen him on tv, but not nearly as energized as McCain is. Of course, that's Obama's personality, to be understated. McCain varies between calm-ish/sarcastic, to the new "fighter" personae, which is highly, highly energized.


I'm not saying that the personality of a rally is a predictor of the upcoming vote, but it could conceivably be. The rallies I have seen for McCain in Pennsylvania have been hugely energized. Worth a note.