James Pethokoukis

Politics and policy from inside Washington

The aftermath of NY-23

Nov 4, 2009 21:43 UTC

Jon Henke applies his own analysis to the NY-23 race:

The story of NY-23 is not “conservatives beat moderates” or “conservative loses to Democrat”.

The story of NY-23 is “the Right starts dismantling the Republican establishment.” This is about how the Republican Party is defined and who defines it.

Right now, the movement wants the Republican Party to be defined by opposition to big government. Gradually, as new leaders arise, we will demand that the Republican Party be defined by its own solutions, as well, but rebuilding is an incremental process. We can hammer out the policy agenda and the boundaries of the coalition later.

For now, our job is to disrupt the establishment GOP.  If we beat Democrats while we’re at it, great. But the first priority is to fix the Drunk Party – the Living Dead establishment Republicans. They’re history. They just don’t know it yet.

NY-23 was the first shot in that war.  It was a direct hit.  Next year, we start storming the castle.

Me: Next up, Rubio vs. Crist and DeVore vs. Fiorina.

COMMENT

Republicans had to choose between a liberal Republican and a very conservative candidate – most moderate Republicans were unhappy with both choices. Perhaps that’s why the Democrat won this three-way race.

Posted by Camron Barth | Report as abusive

An economic counter-factual

Nov 4, 2009 21:39 UTC

Scott Grannis, the Calafia Beach Pundit, outlines a different “stimulus path”:

Meanwhile, though, the unemployment rate is going to remain uncomfortably high, especially for all those politicians who argued so fervently early this year that dumping a trillion dollars of tax rebates, transfer payments, make-work projects and general government largess into the economy over a period of years would guarantee a quick economic turnaround. As the evidence accumulates, we see instead that it would have been far better to just let the economy follow its own course. Better still, we could have used the money in a much more intelligent fashion by making permanent cuts in marginal tax rates that would have quickly resulted in more work and more investment.

COMMENT

But the banks needed the money.They NEEDED it! You know: to get money flowing again.or throw down with more Monster Bonuses.6 of 1… It all trickles down, right?

Posted by bryan | Report as abusive

Political reality makes it unlikely ObamaCare will cut deficits

Nov 4, 2009 21:36 UTC

Here is OMB Director Peter Orszag at NYU yesterday:

Our fiscal future is so dominated by health care that if we can slow the rate of cost growth by just 15 basis points per year (that is, 0.15 percentage points per year), the savings on Medicare and Medicaid would equal the impact from eliminating Social Security’s entire 75-year shortfall.

Right now, we are further along toward our goal of fiscally responsible health reform than ever before. I believe that in the weeks to come, the President will sign a bill that gives those with health insurance stability and expands coverage, and does so while boosting quality and reducing long-term deficits.

But there is mounting evidence that ObamaCare won’t do enough to reduce deficits. The Peterson Foundation just released a study on the Baucus bill that it commissioned from the Lewin Group. The findings:

1) The impact on the Federal budget deficit is positive only if the reductions to reimbursement levels are maintained. More than half of the $404 billion in savings over the 2010 through 2019 period is attributed to reductions in the rate of growth in payments to providers for health services, plus reductions in hospital DSH payments.

2)  Without providing new measures to control the growth in costs, the study estimates that total health spending would rise from about 17 percent of gross domestic product (GDP) in 2010 to 25 percent in 2029.

3) The federal government’s health spending would increase by almost $400 billion over the next 10 years and $1.6 trillion over the 20-year period.

Me: The context here, of course, is that Congress just tried an end-around to make sure doctor reimbursements aren’t cut. Actually, if the cuts were actually made, you would save enough that you would not have to raise taxes to pay for reform — though the goal is to make sure reform actually results in less red ink.

What the polls say about Obama, one year since being elected

Nov 4, 2009 18:21 UTC

Scott Rasmussen crunches the numbers:

As president, Obama lost the support of Republicans in February during the debate over the stimulus package. Over the summer, economic concerns and the health care debate cost the president support among unaffiliated voters. By October, a month-by-month review showed that Obama’s overall job approval had slipped to 48% among Likely Voters.

This morning, on the anniversary of his election, the president’s Approval Index rating is at -13, just one point above the lowest level yet recorded and down 41 points since the Inauguration.

1)  Economic conditions have played a role in dimming Obama’s support. For much of the past year, voters continued to blame George W. Bush for the economy, but the blame is more evenly divided now between Bush and Obama.

2) The core promise made down the stretch to voters by candidate Obama was a pledge to cut taxes for 95% of all Americans. Now, more than 40% expect a tax hike and hardly anybody expects their taxes to go down. Not surprisingly, 74% of voters now view the president as politically liberal.

3) Just 33% believe the stimulus package has helped, and most opposed other economic initiatives including the takeover of General Motors and the cash-for-clunkers program. Among the priorities established by the president, voters consistently see deficit reduction as the most important but least likely to be achieved.

4) The health care plan proposed by the president is struggling and is supported by just 42% of voters nationwide. Confidence in the War on Terror spiked during the first weeks of the Obama administration but has now fallen to the lowest level in nearly three years. On a related topic, one of the president’s earliest initiatives, his promise to close the prison camp at Guantanamo Bay, initially received mixed reviews but is now opposed by most Americans.

Sixty-five percent (65%) of voters now expect politics in Washington to become more partisan over the coming year. That’s up 25 points since Inauguration Day when a plurality believed politics might become more cooperative.

The president himself remains more popular than his policies. That gives him some good will to draw upon. However, as was shown in yesterday’s election results, the president’s ability to help other Democratic politicians may be limited.

‘Permanent Democratic majority’ begins to unravel

Nov 4, 2009 18:10 UTC

America’s “permanent Democratic majority” ran smack into the economy’s apparent “new normal” of high unemployment and big deficits. Score one for the economy — and for Republicans.

Now the Democratic spin on losing the governorships of Virginia and New Jersey is this: All politics are local. A weak candidate in one state, an unpopular governor in the other. Plus voters are cranky about the economy.

No broader conclusions should be drawn. Now let’s move forward and go pass healthcare, OK, America?

But the political reality is not nearly that sunny for Democrats’ political fate or the Obama domestic agenda. Jon Corzine lost in deep-blue New Jersey — a state Candidate Obama won by nearly 15 percentage points — despite outspending Republican opponent Chris Christie by some three to one.

And not only did Republican Bob McDonnell lead a GOP landslide sweep of major offices in swing-state Virginia, his 344,000-vote victory came against an opponent he defeated by just 360 votes in 2005 for attorney general.

And it wasn’t just the bad economy. Yes, exit polls showed great voter anxiety about high unemployment. But also notice huge Republican margins among New Jersey and Virginia independents, voters traditionally suspicious of government spending and budget deficits. These are the sorts of folks who left the GOP in 1992 to vote for Ross Perot and parted ways again in 2006 and 2008 because they felt Republicans had morphed again into big spenders.

(And the unemployment rate isn’t even that terrible in Virginia: 6.7 percent versus 9.8 nationally.)

Voter revulsion at trillion-dollar deficits and impatience about unemployment is creating a toxic environment for the Obama White House and congressional Democrats. Major legislative items like healthcare, energy and financial reform are already slipping into next year.

History suggests that incumbent parties who get big things done, get them done in the first year of a presidential term, such as the Reagan tax cuts or Clinton’s successful push for NAFTA. Midterm election years are where big policy dreams turn into nightmares, such ashealthcare reform in 1994.

It’s hard to imagine that the 84 House Democrats from districts won by either John McCain in 2008 or President Bush in 2004 are now more inclined to support either an expensive health plan or a cap-and-trade energy plan. Already Democrats are hinting at shrinking the former and putting the latter on the backburner. (One policy that might get more attention is a second stimulus package to create more jobs.)

Tuesday’s election results are a roadmap for political gridlock in Washington and a possible Democratic electoral disaster in 2010.

A respected political forecasting model by Ray Fair Yale University calculates that Democrats and Republicans should split the 2010 vote because of the economy. If that scenario unfolds, then David Wasserman of the Cook Political Report, according to an interview with The Hill, thinks “Republicans will probably be winning back the House.”

Did Candidate Obama really transform the American electorate a year ago? Perhaps. (Though, then again, having the economy collapse right before Election Day may have helped artificially inflate his vote totals just a bit.)

But dissatisfaction at the policies of President Obama looks to have quickly transformed it right back.

COMMENT

Can you say – “REAGANOMICS”?

Posted by Jim | Report as abusive

Elections in Virginia, New York and New Jersey show shift in political landscape

Nov 3, 2009 23:24 UTC

First, a few obsevations:

1. Democrats are getting hammered in swing state Virginia. It’s not just Bob McDonnell, down ticket, too.

2. Independents (very deficit-phobic) look like they are flocking to VA GOP.

3. Economy isnt that bad in VA, just 6.7 percent unemployment. So more than just anxiety about job loss.

4. Blue Dogs will look at VA and fear for their seats, especially if McCain in ’08 or Bush in ’04 won their districts.

5. #4 is is bad news for Obama agenda. Already it looks like healthcare will slip into 2010.

6. Spending, spending, spending is freaking Americans out. “Trilion” has a powerful, visceral impact.

7. All the candidates in NY, NJ and VA ran as low-tax, control spending types. But McDonnell in VA was able to successfully paint Dem Creigh Deeds as a taxer and spender.

8. NY a sign that me-too, moderate Republicanism is a non-stater in party. Hofffman will encourage more primary challengers and boost folks like Rubio in FL and DeVore in CA.

9.  Will Blue Dogs revolting and GOP emboldened, Obama agenda as currently constituted is in bad shape.

10. Blaming Bush for economy is done as a political weapon. New polls show 49% blame Bush, 45% blame Obama. Give that number another year of high unemployment. This was Jon Corzine’s strategy vs. Chris Christie. Good thing for Corzine that he had Dem machine in his corner, plus outspent Christie by 3-to-1.

Bottom Line: While there were local factors as play, this election day is looking like a rejection of  big-spending Washington that seems to be doing little to fix the economy. And certainly using the weak economy as crisis to be exploited is at an end. Sorry, Rahm Emanuel. Just another data point, of course. But a significant one.

COMMENT

You make some interesting points, but it seems like we hear the same lines after each election. like the above commenter, whatever the results it seems like the conservative and liberal media just trade scripts. this blog from georgetown does a good job of explaining why this election may not really say that much about the results of 2010. http://gnovisjournal.org/blog/crunching- numbers-media-polling-spin-zone-meets-el ection-2009

Posted by trish | Report as abusive

Speaking up for big banks

Nov 3, 2009 20:43 UTC

Former Bush WH deputy press secretary Tony Fratto gives it his best shot:

Over the decades, large, complex financial institutions —big banks— have been unquestionably beneficial to the U.S. economy, and to the global economy. Big banks efficiently facilitate cross-border trade and investment on a global scale, resulting in benefits that have consistently accrued to consumers and improved standards of living for people in all markets.

Large U.S. financial institutions have also contributed to the development of deep, liquid capital markets here in the United States, ensuring unique access to global financing for U.S. firms. Scale and scope are needed to sustain global trade and finance, and big U.S. banks are leaders in delivering those services.

There are ways to increase the safety and soundness of big banks – to prevent the kind of explosion we saw with Lehman Brothers, but breaking up our big banks is the wrong way to go. Initiatives to raise capital levels, improve capital quality, decrease leverage and improve liquidity – across the entire global banking system – make sense.

Me: But I guarantee you that plenty of GOPers in 2010 and perhaps the 2012 nominee are going to call for breaking up the banks and paint the Ds as the party of Wall Street. The party will not be pro-Big anything

COMMENT

“Big banks efficiently facilitate cross-border trade and investment on a global scale, resulting in benefits that have consistently accrued to consumers and improved standards of living for people in all markets”Where are the benefits you speak of? Do you mean the technologies and conveniences created by business capitalized by the banks? This is not benefit. So we have nice toys. What’s the value in that if you have to spend your life trying to keep from loosing what you have?Looking around the world right now where do you see this so called “benefit”? The people have been screwed by their leaders and the merchants. Even this very article only talks of money as a benefit. People are getting evicted from their homes. People are going sick and dieing because their insurance plan doesn’t cover X treatment.Yeah…. it’s great over here.

A different take on Buffett’s new bet

Nov 3, 2009 19:10 UTC

Michael Mandel of BW doesn’t think the Oracle’s purchase of Burlington Northern Santa Fe should be interpreted as a positive economic sign:

Let’s take a look at what Burlington Northern carries. Its major freight revenues (as of 2008) come from coal (23% of revenues); agricultural products (20%); international intermodal shipments of consumer products, which is probably mostly imports (16%); construction and building products (14%); and petroleum products (4%).

In essence, Buffett is betting that the next ten years will look a lot like the last ten: A lot of growth in imports, construction, energy and agricultural products. If he thought that innovation was going to be the driver of the next ten years—biotech, energy, and infotech—he wouldn’t be buying Burlington Northern.

I’m not saying that Buffett is wrong. His skepticism about the tech sector in the late 1990s, and innovation in general, turned out to be right on the mark. Berkshire Hathaway stock over the past decade has risen by 84%, whil the S&P 500 is down by 18%.

But his “all-in wager on the economic future of the United States” paints a remarkably gloomy picture of where we are heading.

COMMENT

I think Buffett and GS are co-conspirators to make money by deception. Why the anouncement today ? The market was going to tank. Also GS longed Burlington couple of days ago and Buffett is in it.
Remember when he lobbied Obama to approve TARP? It was a stunt to make his holding in GS pays off.
That old fart is becoming a GS hit man.

Posted by Dr Georgy | Report as abusive

A tale of two economic recoveries

Nov 3, 2009 18:38 UTC

Which one do you believe? John Hussman sketches them out:

1) One possibility, which is clearly the one that Wall Street has subscribed to, is that the recent downturn was a standard, if somewhat more severe than normal, post-war recession; that the market’s recent strength is an indication that it is looking forward to a full “V-shaped” recovery, and that the positive print for third-quarter GDP is a signal that the recession is officially over. Applying the post-war norms for stock market performance following the end of a recession, the implications are for further market strength and the elongation of the recent advance into a multi-year bull market.

2) The alternate possibility, which is the one that I personally subscribe to, is that the recent downturn was the initial phase of a more prolonged deleveraging cycle; that the advance we’ve observed in recent months most likely represents mean-reversion – qualitatively and quantitatively similar to the large and often abruptly terminated “clearing rallies” of past post-crash markets; that major credit losses are continuing quietly but are going unreported thanks to changes in accounting rules by the FASB this past spring, which allowed for “substantial discretion” in accounting for loan losses and deterioration in the value of securitized mortgages; that a huge second-wave of mortgage losses can be expected from a reset schedule on Alt-A and Option-ARMs that has just started (following a lull in the reset schedule since March) and will continue into 2010 and 2011; that intrinsiceconomic activity remains abysmal; that recent GDP growth is an artifact of massive fiscal stimulus that is unlikely to have sustained follow-through; and that recent market valuations are not representative of those observed at the end of most post-war recessions, but are instead similar to those observed at major market peaks prior to the mid-1990′s.

COMMENT

How about a middle ground? My take is the 3.5% GDP number took the v-shaped recovery off the table. As you pointed out in a previous blog entry, that number is quite low compared to the first quarter of recovery after previous downturns and therefore should have been interpreted as a disappointment.

Having said that, I’m not sure I can buy off on an overly gloomy picture going forward. I’ll take Hoffman at his word regarding the credit problems he listed, but does all of that translate into an economy that has only one place to go — down? I’d say it translates into an economy that still faces some headwinds. But headwinds or not, it’s usually been foolish to bet against the American economy. And oh yeah, don’t fight the Fed.

So my vote is for a modest recovery going forward, but recovery nonetheless.

Posted by Bill, Fairfax, VA | Report as abusive

Barney Frank’s wrongheaded assault on the Fed

Nov 3, 2009 18:20 UTC

When you’re a nation getting ready to borrow $10 trillion or more over the next decade, you don’t want markets questioning your central bank’s commitment to controlling inflation.

But Congress continues to risk just such a scenario, whether through aggressively questioning Federal Reserve Chairman Ben Bernanke or pushing a bill to audit Fed monetary policy.

Now Representative Barney Frank, the chairman of the House Financial Services Committee, has suggested curbing the authority of the 12 Fed regional bank presidents.

As Frank sees things, monetary policy should not be influenced by “inappropriately placed private businessmen — or women, occasionally — picked by other private businessmen, and occasionally women.”

Drill down a bit and it’s clear that what really bugs Frank is not so much that regional bank presidents are selected by a nine-person panel, six of whom are elected by bankers. He just thinks they’re too hawkish.

Frank even commissioned and publicized a study that found that 97 percent of the hawkish dissents at Federal Open Market Committee meetings during the past decade were from the regional bank presidents.

Of course, higher rates would have been a good thing, given that the Fed’s extraordinarily easy monetary policy was a huge contributor to the financial crisis. And going forward, the Fed will face the economically and politically challenging task of withdrawing monetary stimulus when economic growth may well be sluggish and unemployment high.

But such medicine may be necessary to prevent an inflation outbreak. Congressional threats and bullying will make a hard job even more arduous.

Moreover, one reason the Fed has a decentralized structure is because of historic concerns about monetary policy serving only Washington and Wall Street.

Yet citizen concerns about the concentration of financial power are as alive today as they were in 1913 at the Fed’s creation. Monetary policy set solely by a presidentially-appointed and Senate-confirmed Board of Governors should certainly set off alarm bells with bond vigilantes concerned that Washington may try to inflate its way out of its debt problems.

If Congress wants to look at how the Fed conducts its  business, better to focus on better ways to make monetary policy reflect forward-looking market gauges such as commodity prices rather than the unemployment rate or output.

Ultimately, though, the Fed’s problem isn’t too much influence from bankers in Kansas City or Atlanta or Chicago. It’s too much influence from politicians in Washington.

COMMENT

The Federal Reserve & its system of usury is the greatest scam in world financial history & I can’t understand why highly educated people & economists fail to see the bare truth for what it is. As an irony, not too far into the future, the common masses may well become more aware of what the Fed truly stands for, while educated MBAs continue to argue in vain.

Posted by Mike | Report as abusive
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