James Pethokoukis

Politics and policy from inside Washington

Scott Brown the Black Swan

Jan 20, 2010 17:27 UTC

Ed Yardeni expands on my theme:

The political upset in Massachusetts yesterday may very well be one of those bullish Black Swans. In his 2007 book on this subject, Nassim Nicholas Taleb explained: “What we call here a Black Swan (and capitalize it) is an event with the following three attributes. First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.”

Brown’s upset victory certainly wasn’t expected even a week ago. No one seriously expected that the Democrats would lose “Kennedy’s seat” in the Senate. This development is bound to have a major impact on the political balance in Washington. This outcome certainly makes sense after the fact. It wasn’t predictable prospectively, but it is obvious retrospectively.

Last summer, I started to project that Gridlock might win in the Congressional elections on November 2, 2010. I certainly didn’t expect that it might win at the beginning of this year, and just in time to checkmate PelosiCare. The Constitution of the United States of America was written by lawyers. They intentionally designed a political system of “checks and balances” that dispersed political power among three branches of government. We call it Gridlock, which has a negative connotation, but that was the intended outcome more often than not. Our system works best when it doesn’t work for the promoters of policies that are not in the national interest.

COMMENT

See Federalist #51.

Posted by Johnba | Report as abusive

Brown win could spark Obama war on Wall Street

Jan 20, 2010 16:06 UTC

Scott Brown’s stunning capture of the Massachusetts Senate seat held for decades by Ted Kennedy was a political black swan, a near-unpredictable event.

The result ends the Democratic supermajority in the Senate and leaves key parts of the Obama agenda in deep trouble. But the biggest loser just might be Wall Street. Desperate Democrats may see anti-bank populism as a way of holding power as the November midterm elections approach.

The last days of the heated Senate race saw the first attempts at that political gambit. Democratic candidate Martha Coakley’s allies in Washington, both the White House and national Democratic officials, used President Barack Obama’s proposed bank tax as a cudgel to bash Brown via emailings and telephone calls.

But the game was probably over by then for Coakley. A combination of high unemployment, an unpopular healthcare reform bill and the candidate’s own lack of charisma and effective experience were more than enough to clinch an easy Brown victory.

A historic victory, really. It is hard to overstate just how “blue” a state Massachusetts is. Obama won it by 26 percentage points in 2008. Until now the state’s 10 U.S House members, two U.S. senators and all statewide officers were Democrats. The state hasn’t had a Republican U.S. senator since 1979. And, of course, the seat Brown captured had been held by the late Edward Kennedy since 1962.

Now Brown’s victory threatens the healthcare reform bill that Kennedy championed on his deathbed. Democrats could still ram it through before Brown makes it to Washington. But potential legal challenges make that unlikely.

As it is, Brown’s election is enough of a systemic shock to freeze the political process on Capitol Hill. Moderate Democrats in both chambers are nervous about their previous “yes” votes for healthcare. They may be unwilling to make any more. The prospects look even bleaker for cap-and-trade energy legislation, a bill with even less support than healthcare.

Financial reform legislation was already likely to get milder rather than stronger. But not so the rhetoric. Unable to trumpet the economy, hitting Wall Street is one of the few political bullets Democrats have left.

So expect the Obama administration to go all out for the bank tax with increasingly harsh words for big financial institutions. Democrats may also be more willing to consider controversial proposals banks hate, like letting judges rework mortgages. But given the Massachusetts precedent, it may not be enough to save the party from a wipeout in the fall.

COMMENT

The real Obama is coming out. He literally hates big business because he believes that most people are victoms of our capitalistic system. Profit is an evil thing. His definition of fairness is socialism. His programs will all be anti business and lead to more big government.

Posted by Mike B | Report as abusive
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