Quote of the Day
Listen or thy tongue will keep thee deaf.
American Indian Proverb
Political Potpourri
Sixteen days until the midterm election. The RCP House scorecard over the past week shows the number of leaning/likely/safe GOP seats up by 1 to 212 (218 to clinch control) and the comparable Dem down by a handful of races, with a handful of Dem incumbent races moving to toss up. Only 2 of the 42 toss ups are currently held by the GOP (Djou (HI-1) and Kirk's open seat (IL-10), and even those two candidates are less likely to be affected by the foul anti-incumbent mood). Some predictions (e.g., by Rasmussen) are for gains in the 50's (i.e., a strong GOP takeover of the House). Here's how I see it: if you are an incumbent Dem, and you are polling under 50% (most of these toss ups), you are in deep trouble, because I think most Americans are frustrated with the direction of the Congress and they want to send a message. Not only do I think the GOP will convert a majority of these toss-ups, but I think they will get a few unexpected lean-Dem seats. Let's just take the IL-10 race where Kirk's successor Robert Dold is running against 3-time Dem nominee Dan Seals. Whereas one recent poll had Seals up by a significant margin, a We Ask America poll released Friday show political novice Dold up by 11%.
In fact, it seems more than 40% of former Obama backers are having buyer's remorse, according to a Bloomberg National Poll released about a week ago. It hasn't been lost on the electorate that the Dems have had control of Congress since BEFORE the recession, and the Dems in control of both the Congress and the White House seem impotent and clueless in dealing with sticky high unemployment and consecutive trillion-dollar-plus deficits.
It looks as though the Dems will probably hang on to control the Senate although in prior House turnover elections, there were unexpected ripple effects on Senate races, resulting in the Senate converting also. Blumenthal has led the open Connecticut Senate since surviving the initial credibility issue over his misleading representation of Vietnam era service; Linda McMahon, a pragmatic Republican, is putting up a valiant fight, but she's down by about 10 points fighting against a popular, multiple-term state attorney general. Lisa Murkowski, the Alaskan Republican Senate incumbent, is putting up the strongest write-in challenge for Senate in nearly half a century just slightly behind Joe Miller. Rand Paul and Marco Rubio, Tea Party favorites, seem to have a lock on their seats. The Delaware seat was lost the second that Christine McDonnell knocked off Mike Castle, a pragmatic Republican whom was regularly outpolling Chris Coons by at least 15%, and even the more optimistic Rasmussen polls have her down by over 10% and other polls have the margin at twice that. California veteran Democrats Brown and Boxer seemed to be pulling away a couple of weeks ago, but it looks like Whitman and Fiorina are battling back within 5% or so and still have a decent shot. Angle in Nevada and Kirk in Illinois have been trading leads with their opponents, and I like their chances given a highly-motivated base and independents and moderates whom are restless over the progressive, high-spending agenda of the Dems.
Plouffe, Obama's campaign manager, has made a laughably absurd, desperate attempt to manipulate expectations by arguing that anything short of a clean sweep across the board, say, for example, the Democrats' hanging on in the Senate, would be considered as a "failure" by the GOP. If the GOP loses any Senate race from Alaska, Delaware, Florida, Colorado, Kentucky, or Nevada, it will be due to the Tea Party Express sabotaging the GOP nomination processes. The Tea Party Express came within an eyelash of throwing away the retiring Senator Gregg (R-NH) seat as well. Under ordinary circumstances, none of the relevant Senate candidates would have a shot at winning the seat in a general election. I would argue, against Plouffe, that the Democrats' inability to carry ALL or even a majority these seats after a year of attempting to marginalize the Tea Party would be a complete Democratic failure, even if they manage to cling to a bare majority in the Senate. Plus, the GOP threw away its twin Senate shots in New York when Pataki and Giuliani took themselves out of the running.
The way I frame the election, what the GOP needs is to get a majority in the House and if they add a handful or more of Senate seats, Obama has completely lost. Why? Because tax/spending bills come out of the House, and Obama will not have the ability to try to peel off a couple of GOP senators to push through his progressive agenda. Hence, if I'm Michael Steele, and I get a solid majority in the House, and even 45 seats in the Senate, I'm happy; not as good as winning the majority, but Senate control by the Democrats provides the GOP with a change election setup in 2012 for both the Senate and the White House.
Finally, I don't think much of desperate Democratic House members trying to argue they'll vote to depose Nancy Pelosi after the election. Give me a break! Have people forgotten that 219 Democrats voted FOR the unpopular health care bill? Do the 30 or so Democrats who voted against the health care bill have a shot at defeating Pelosi in a caucus? Most of the Blue Dogs are probably on their way out this December. But it doesn't take a genius to figure out that the first casualty of a GOP House takeover this fall will be Pelosi's leadership position. It's a political fact of life: the Democrats have to find some symbolic way to show they heard the midterm electorate. The next Democratic Speaker or Minority Leader? Isn't it obvious? Even an armchair political analyst like me realizes that Steny Hoyer will be the next Democratic face in Congress; he has a more pragmatic, congenial reputation, which is exactly what the Democrats will be looking for post-election.
Be Careful of What You Wish For...
Progressive economists aren't upset by modest amounts of inflation; in fact, they think it just might be the ticket to sustained economic growth. In the Keynesian view, there must be enough slack in the money supply to accommodate businesses which must cover, say, increased labor and other component costs in the pricing of goods and services.
Classical economists note the correlation between money supply and commodities (e.g., gold). They discuss the short-term Phillips curve discussing an inverse relationship between unemployment and inflation, positing a natural employment rate. For example, in the superheated Internet economy in the late 1990's, businesses were so desperate for workers they were luring non-senior college students with salary offers of $40K or above; I was living in Silicon Valley at the time, paying significantly over $1000/month for a small, plain one bedroom apartment, and I had to stay in a hotel for weeks before I got that. A modest house like my parents' near San Antonio, TX would easily sell for 3 to 4 times the price within the San Francisco-San Jose area. Movie theater tickets went over $10 each for the first time, and I was spending 30-40% more for the same name-brand groceries I had been purchasing in Illinois. On the other hand, when there's a surplus of workers (high unemployment), there is a dampening effect on prices as workers are willing to accept lower wages and businesses cut prices to maintain or increase sales.
There are a number of paradoxical things going on, such as near-zero interest rates and yet very high savings rates. (This is counterintuitive, because one would expect that there would be a correlation between interest rates and savings. I think in part this reflects the fact that increased savings are not being driven by expected earnings, but more by a lack of confidence in current economic policy. Interestingly, the public does not seem to believe that price inflation is forthcoming or one would see some acceleration of purchases to beat expected cost increases. The same thing holds true in the labor markets, e.g., in hiring unemployed professionals with marketable skills.) Liberal economists like Paul Krugman argue that increased federal spending is needed to jumpstart demand; I think the distortion of short-term policy fixes are anticipated by the market. Among other things, I think policies are part of the problem--for example, the uncertainty of taxes; I don't think, for good reason, people believe that we are going to wipe out $1T to $1.3T deficits by spending cuts alone.
Caroline Baum of Bloomberg recently wrote a relevant op-ed which I think makes a number of valid points. She points out using the consumer price index is, at best, questionable. Commodity prices are exploding, we have an emerging bubble in junk bonds, the dollar is tanking in currency, and according to the Bureau of Labor Statistics, a dollar buys less than half of what it did less than 20 years ago. Ms. Baum argues that the Fed is only deluding itself if it thinks it can thread the needle on just the right price adjustments. (Remember how the Fed did in raising interest rates one too many times a few years back?) It's like trying to squeeze a balloon. I don't think a "beggar thy neighbor" constitutes sustainable economic policy. Let's just say I think rising commodity prices are the canary in the coal mine and I would like to see the Fed playing a more proactive role defending the dollar before inflation shows up faster and bigger than expected, leaving policy makers with some very unpleasant options in an already tough economy.
Political Humor
"Sarah Palin and Rush Limbaugh are President Obama's 10th cousins. Which means they are secret Muslims." –Jimmy Kimmel
[Poor Barack. First, Dick Cheney turns out to be a distant relative, and now Sarah Palin. Guess who is not showing up at his next family reunion...]
"People are saying that everything is Obama's fault – he hasn't dug us out of Bush's recession and two wars fast enough. That's the problem." –David Letterman
[Because Obama ran on getting us out of the "Bush recession and two wars" and hasn't improved things despite being handed over a stabilized Iraq and a $14T economy; he has now dug himself into a hole over his head. But you're right: that $10.6T ditch he was handed over is now $13.6T. It's going to be a lot harder to drive that car out of the national debt hole he keeps digging deeper every day.]
Musical Interlude: The "British Invasion" of the 1960's Series
The Troggs, "Wild Thing"
