A Rebellion In The House

    Dan Tague

I finally figured out what the Republicans are up to with the debt showdown.  Republican Senator Tom Coburn said last week: “I would dispel the rumor that is going around that you hear on every newscast, that if we don’t raise the debt ceiling, we will default on our debt. We won’t. We’ll continue to pay our interest.”  The Government will be able to do that with their tax revenues, so the story goes.

By refusing to let the US Government borrow any more money, the Tea Party faction can force Obama to shut down everything except the military, social security, and interest payments on the debt.  No money for things they don't like, especially Obamacare.  When everyone wakes up on Friday to realize the world didn't end, Obama will have to negotiate, and the GOP can raise the debt ceiling for 90 days on Monday morning.  Crisis over.  The Tea Party faction will have pulled off a political masterstroke and finished the Reagan revolution.

Or so I am guessing.  Its taking brinksmanship into previously unknown territory, but its brinkmanship all the same.

If my guess is right, then the tea party types will do their damnedest to prevent any vote at all until they get what they want.  If they don't allow a vote, then Boehner can't fold and compromise with the Democrats.  With party discipline, nobody, not Obama, not the Senate, not the Courts, can stop them.  The House GOP will effectively run the country until at least January 2015.

For their ploy to work, Obama has to be able to pay for at least Social Security the military and interest on the national debt out of taxes and not be able to use any executive tricks to keep borrowing.  If the Tea Party faction are wrong about this, there will be an economic meltdown and a political showdown.  Nobody can say what would happen, but it wouldn't be good.

The Stretch

      Photo: Jason Reed Reuters

I haven't been posting about the US Election because there seemed to be too much going on for a good overview.  Now that the debates are done, things are clearer.  Just as everyone expected at the outset, it will be close.  Turnout is the game now.  Despite Republican claims, Obama should have the superior ground game.  He's put a lot of effort and money into local campaign offices, far more than Romney.  And he started with what many people think was the best organization ever in 2008.  In addition, he still has the Electoral math in his favour.  While the national polls are tied, Obama still has a lead in the swing state polls.  He's ahead by around 2 points in Iowa,  2 points in Ohio, 3 points in Wisconsin and 2 points in Nevada.  Virginia and New Hampshire are tied.  Florida and Colorado are leaning Romney.  Right now, Obama has 237 Electoral votes in the bag and needs only 33 more to win.  Romney on the other hand, needs 64 to win.  He really needs Florida and Ohio to do it. 

So I'm still expecting an Obama victory.  But it will be close.  How close depends on turnout, as I said.  It also depends on Republican election day voter suppression.  What kind of plans they have and how successful they will be is unknowable at this point.  But they've done it before, especially in Ohio.  However, this time they've lost multiple times in court, and vigilance is high.  Unlike Kerry, the Obama campaign have a lot of weapons.  So while shenanigans may occur, I doubt they can be as effective as 2004.  Karl Rove is still around, but he doesn't command the same army.

Lastly, I thought Obama wiped the floor with Romney at the third debate.  Mitt was red and sweating by the end.  He was lucky to get the China question at the end, for which he had a good answer.  Otherwise, it would have been a complete embarrasment.  But there was something else in the China answer that got me thinking.  What's the most effective way to reduce your debt level?  Inflate it away.  I'm wondering if Romney's math starts to make more sense if you put in a 4% inflation rate.  However, the economic conditions favouring inflation seem a long way away from the current situation. 

Key Factors in 2012 Election

From NYTimes, some great maps

Here is my list of the factors that will decide the US 1012 Presidential Election.  Obviously speculative.  I hope I'm not going to look like an idiot on Nov. 7.

The one thing that comes up again and again is turnout.  It looks to me like the one who gets their vote out and persuades the opposition voters to stay home is going to win.  


Demographics
The US is becoming less white.   This is a long-term trend driven by immigration and higher birth rates among immigrants.  This trend started the 1980's, and started becoming politically relevant in the last 10 years.  Nate Silver, who I follow closely at Five Thirty Eight, analyzes actual voting to see the numbers from 2004 and 2008.  Here are the break-downs:


Mr Silver makes the following points:

• This table is about turnout (based on exit polls), not the underlying demographics of voters.  Though the two are closely related.
• White voters dropped from 77% of the electorate to 73.3% between 2004 and 2008.  Though we cannot assume they will drop further this year.
• Bush's 2004 win depended on his taking an astounding 43% of Latino voters.  Currently, Romney is polling around 30% of Latinos.
• It isn't just turnout that matters, Obama's big margins with Black, Latino, Asian and Other groups gave him the edge in 2008.
• If Obama can generate similar turnout with these groups, he is likely to win again.

Electoral Math
After the conventions, National polling numbers become unimportant.  The action moves to the 50 state elections, where the Electoral College Votes come from.  The votes are awarded to states based on population.  Thus California has 55 Electoral College Votes, Delaware has 3.  270 votes are needed to win.  Its winner take all for each state.  Obama took 375 in 2008. 

Obama has a lot of Electoral votes locked up already and leads Romney 237 to 206 (sez NYT).  This based on states solid or leaning towards one of the two candidates.  Swing states are not included:  Florida (29 votes), Ohio (18), Wisconsin (10), Colorado (9), Nevada (6), New Hampshire (4), Iowa (6) and Virginia (13).  

Put another way, there are 95 votes up for grabs in the swing states.  Obama needs only 33 of these votes to win.  There are a variety of scenarios that can deliver those votes.  If he wins Florida, and any one of the other swing states, he wins the election.  He can also win while losing Florida.  Despite being considered up for grabs, Obama has a healthy shot at Nevada, Colorado, Ohio and Virginia.  That's 36 votes right there.  Romney, on the other hand, needs 64 votes to win.  He must win Florida or he doesn't stand a chance.  Even if he does win Florida, he still needs either Ohio or Virginia plus some of the others.

For comparison, here are the latest Electoral College numbers from different sources:

From this point of view, Obama is the man to beat. 


Money
As I said in an earlier post, money is one of Obama's biggest problems.  It is likely that the Republicans + SuperPACs will outspend Obama 2:1 or more this fall.  How this will turn out is anyone's guess because there has never been this much money thrown at a Presidential election.  In the usual election math, more dollars = more votes.  Team Obama needs a counter strategy, and its outlines are emerging.  First, Obama has spent a lot more money on ground teams than Romney.  As of last week, the Obama campaign had ~720 full-time employees, Romney ~220.  Team Obama has been working for months on building up the ground game.  It is too soon to say that Obama has Romney beat on the ground, but if he has, it would look like this.

Secondly, Obama's campaign spent a lot of ad money in the summer to attack Romney on his taxes, his business record and his likeability.  This was a gamble, but it seems to have succeeded, putting Romney on the defensive.

Thirdly, Romney has a control issue.  He does not control the majority of the money being spent against Obama this fall.  SuperPACs are disallowed by law from coordinating their efforts with candidates.  They are also not accountable to anyone except the SuperPAC's financiers.  If some crazy billionaire wants to run ads 24/7 saying Obama is a Gay Kenyan Muslim Crack Head, Romney can't stop them.  There are a lot of would-be king makers with money who may compete with the official campaign, like Karl Rove. 

Despite the prospect of being vastly outspent, the Obama campaign is doing pretty well with fund raising and I have the impression they will have at least as much money as 2008.  So they are not starving for funds.

Again, nobody knows how this will play out, but its not game over for Obama.

The Economy
This agreed by all to be the primary issue this fall.  Romney went into this assuming he would win an up or down vote on Obama's handling of the economy.  He has learned that it won't be so easy.  Reagan's "are you better off now than you were four years ago?" question doesn't wash to a clear answer.  In many ways Americans are a lot better off than they were four years ago.  The economic crisis of 2008-09 is over.  The markets have come back and restored the value lost in 2008.  The US Economy has grown 15% since 2008 (anemic, but an improvement nonetheless).  Housing prices have been rising for the last 6 months.

On the other hand, unemployment is very high by US standards.  Most of the manufacturing jobs lost in the recession are gone for good.  The deficit, thanks to Bush's tax cuts and starting 2 wars, is terrible .  But the rest of the world has the same economic problems, or worse.  If China, Japan and Europe were doing great economically, Obama would be in a lot more trouble.  But they are not doing well.  Bad economic news from abroad does Obama some good by providing context to the US numbers and reminding people he isn't solely to blame for their problems.

In addition, economic news could go either way in the next 60ish days.  One or two good reports, or bad reports would change the election momentum, or not.  In particular the job numbers for August and September could have an impact.

All in, the economy has not been the decisive force Romney expected.  But it may yet.  Americans by a wide margin have doubts Obama's handling of the economy. 

Psychology
Americans want to like their President.  They like Obama a lot more than they like Romney (latest poll from today puts Obama at 50%, Romney 30%).  They also give him higher marks as a leader.  His Presidential approval ratings have ranged from 50% to 38% since January 2011.  Most of the time he has been in the mid 40s and is 44% as of today.  These are on the low side for a sitting President and suggest he does not have this election in the bag.  He is vulnerable. 

However, in a tight election that comes down turnout, other factors come into play.  Rasmussen has voters believing 53% to 33% that Obama will win.  A perception of losing will depress Republican turnout.  In addition, Republican pollsters have said that Obama has lingering good will among voters disappointed by his Presidency so-far.  Many want to give him a second chance.  Also, when it comes down to raw political ability, Obama beats Romney hands down.  The Obama campaign has yet to make a major error.  Romney and the GOP are taking water on a weekly basis.  Barely has Romney had the chance to enjoy his modest convention bump when all the news is talking about Paul Ryan's marathon time.  Team Romney has trouble staying on message and on strategy.  Romney's speech last week was poor, IMHO.  He needed a home run and he got a stand-up double.  In particular, his invitation to scorn Global Warming was a gratuitous gesture to the base that will play badly among many potential swing voters.  It was a poor choice for the climax of his speech. 

As far as substance goes, Romney's campaign is leaning on lies.  Everyone in politics lies of course.  What's different here is that lies are the bedrock of Romney's message.  And they are not distortions or dissembling or half-truths, though he has those too.  They are outright lies.  For example the claims that Obama removed work requirements for welfare, that he raised taxes, that he closed that factory in Wisconsin, that he plans to cut $700 billion from Medicare.  These are all demonstrably false.  Even the US press is getting itchy reporting them every time Romney or Ryan start talking.

Lastly, the partial block of Ohio's vote suppression efforts by a Federal court dampens Romney's last hope.  Voter ID laws have also been blocked in whole or part in South Carolina and Texas, though both are solid Romney states anyway.  Ongoing cases in Pennsylvania (leaning Obama) and Florida (toss-up) could become crucial. 

In the turnout game, all of these factors are important.  Though which, if any, become decisive is unknowable at this time.


Summary
Overall, things look good for Obama.  He has the Electoral math and demographics in his favour.  He is more popular and more politically skilled than Romney.  He's spending a lot of money on turnout.  The economy hasn't been the drag people expected.  However, he remains vulnerable.  An unexpected piece of good or bad news could shift the momentum.  The Republican money advantage could prove decisive in some swing states.

Obama also needs a very good speech at the convention this week.  He needs to put the disappointment of the last four years in context and give people good reasons to vote for him rather than against Romney.  He needs to seal the deal with Independents and disaffected Democrats. He needs to give them a compelling reason to get off the couch and vote on Nov 6.  He needs turnout.  If he gets turnout, then a close election will seem a lot less close in retrospect.

A Crisis of Capitalism

 
 The Wages of Sin, Apparently

Among the scandals that have surfaced since the US sub-prime market came apart in 2008, the currently unraveling LIBOR (London Inter-Bank Offer Rate) fixing conspiracy is the granddaddy of them all.  The interest rates for inter-bank lending in London might seem remote, but LIBOR influences every credit instrument a consumer can buy.  Mortgages, car loans, credit card rates, home equity loans, almost everything with an interest rate is based partly on LIBOR.  So if banks were fixing LIBOR, you are paying for it.

The Economist, not exactly a bunch of Marxists, said that the scandal exposes “the rotten heart of finance”.  They posit that the resulting lawsuits could amount to hundreds of billions of dollars in penalties for the banks involved.  Some of the remaining too big to fail banks may fail as a result, leading to more bailouts.  And the list of banks being investigated is breathtaking; Barclays (who co-operated and got hammered in the press), Royal Bank of Scotland, Citi, HSBC, JP Morgan Chase, UBS and Deutche Bank.  That’s just for starters.  Even the Bank of Fucking England, and possibly the US Fed were involved.  Investigations are going on in the US, UK, Japan, Canada, Switzerland, and the EU.

LIBOR is supposed to be the shining example of what an efficient market can do.  Fixing the rate should result in market imbalances that attract arbitrage which re-balances the market.  Clearly, this did not happen.  Probably because too many people were in on the game, probably because the imbalances were being concealed as well.  Rather than being the proof of market efficiency (the key advantage of a capitalist system), the scandal proves that there can be no efficient markets without regulation and policing.  Pure Capitalism doesn’t work, just like pure Marxism didn’t work.  Both, it seems, devolved into utterly corrupt, unaccountable gangs of thieves that enriched themselves at everyone else’s expense.