Follow the FreeStater Blog by Email

Thursday, July 29, 2010

President Obama and Independent Voters - A Marriage of Convenience Heading for a Nasty Divorce?

The always great William Galston takes a look at just how much public opinion of the Democrats and Republicans has shifted among Independents. Galston considers the recent PEW poll
"On the whole, 58 percent of voters see Democrats as liberal or very liberal, while 56 percent see Republicans as conservative or very conservative; no surprise there. But voters now place themselves much closer to the Republican Party than to the Democratic Party on this left-right continuum. Indeed, the ideological gap between the Democratic Party and the mean voter is about three times as large as the separation between that voter and the Republican Party. And, startlingly, the electorate places itself a bit closer to the Tea Party movement (which is well to the right of the Republican Party) than to the Democratic Party. All this represents a major shift from five years ago, when mean voters placed themselves exactly halfway between their ideological perceptions of the Democratic and Republican parties."
Many political insiders have wondered why the Democrats and the Presidents are in such dire straits considering the success they have had enacting legislation - the stimulus, health reform, regulatory reform - by many measures this Congress and President have had one of the most productive sessions in years. Yet with each new bill approval of Congress seems to fall more and the President's approval rating is stuck in the mid 40s.

Why? Consider two more points from Galston:
  • "In May 2009, after Obama had taken office and the broad political debate had shifted away from social issues and national security toward the economy and federal regulation, Pew found that Independents had begun to move toward the Republican Party."
  • "Democrats are far more ideologically diverse than Republicans. Twenty-four percent of Democrats describe themselves as conservative or very conservative, while only 5 percent of Republicans call themselves liberal or very liberal."
Barack Obama's campaign for the presidency was a campaign very much lacking in specifics. He spoke of health reform, tax reform, financial reform - but offered few details. His campaign was also quite centrist - Obama criticized Hillary Clinton's health reform proposal for containing an individual mandate to purchase health insurance. He criticized John McCain's proposal to tax employer based health insurance like income as "extreme." Candidate Obama spoke the language of Centrism when he problems absolutely no tax increases for any American earning less than $250,000 per year. He tapped into growing voter concern over America's rising debt and deficits and promised to reduce both and put us on a path to a balanced budget. Finally, he rightly sensed voter anger over special interests, corruption in Congress, and cozy relationships between the Bush Administration and corporate interests by pledging a transparent and ethical administration that would not hire lobbyists.

Obama's message spoke directly to the concerns of Independent voters and they supported him on Election Day by a margin of 52% to 44%. In 2004 Bush and Kerry split Independents 48% to 49%. Independents also increased their share of the electorate between 2004 and 2008 from 26% to 29%. So Independents have become more crucial to a presidential candidate and they helped deliver the White House to Obama.

In July of 2009 Gallup reported that Obama's support among Independents stood at a strong 56% - that was after the passage of the stimulus bill, but just before the summer of health care reform townhall meetings that would foreshadow the tough reform battle in Congress. Today, Obama's approval rating among Independents stands out 38% - an 18 point decline in one year.

Why the decline? Because Obama's legislative successes have turned Independents away. The economic stimulus bill added more than $800 billion to the national debt - on top of the $800 billion bank bailout passed in the waning days of the Bush administration. As a result, the nation's deficit for 2009 totaled $1.4 trillion and the deficit for 2010 is estimated to reached $1.5 trillion - simply staggering figures.

Just as concern over the debt was reaching a critical mass las summer the health reform debate began. Estimates placed the cost of reform at $1 trillion over ten years - triggering more debt concerns. Other elements of the reform proposals caused more concern - the individual mandate that Obama had opposed during the campaign was now part of the mix as was a proposal to tax employer health benefits. The individual mandate included a tax penalty for failure to comply - so the two proposals that candidate Obama had criticized were now on the table and the pledge to not raise taxes was pushed aside.

The manner in which health reform passed further antagonized Independent voters. The use of budget reconciliation to pass the bill in the Senate following the surprise election of Republican Scott Brown in Massachusetts and the brief flirtation with using the "deeming" process to pass the bill in the House so as to avoid politically painful votes struck many Independents as more of the "politics as usual" that Obama had promised to change. Worse, subsequent news accounts reported that the cost of reform may well be more than initially estimated - and in fact may well worsen our deficits and increase costs.

Promises of transparency have been undermined with recent news regarding financial regulation and word that it exempts the Securities and Exchange Commission for freedom of information act requests. Add to this the fact that Obama administration issued an executive order prohibiting the hiring of lobbyists and then went about issuing multiple exemptions to that order so that lobbyists could be hired.

Adding more fuel to the debt fire a just released report from the Congressional Budget Office warns that unless serious actions are taken - significant spending cuts, dramatic tax increases, or both - "growing budget deficits will cause debt to rise to unsupportable levels... In only one other period in U.S. history—during and shortly after World War II" has our debt reached its current levels.

But the CBO warns that tax increases "would discourage work and saving, further reducing output and incomes."

In sum, President Obama and Congressional Democrats have scored considerable legislative successes - but many of those successes contained elements that directly broke pledges made by the President during the 2008 campaign - pledges that were central to his gaining the support of Independents. This means that Democrats cannot go into the midterms touting their accomplishments. Instead, indications are that they will base their campaign not on why they are worthy of support, but rather on why Republicans are unworthy- including portraying Republicans as racist Tea Party fanatics. It's a desperate and risky tactic, but it's the only option they have. They cannot win back the support of Independents in the near term, so instead they are trying to depress their support for and turnout on behalf of Republicans.

It's a sad state of affairs and speaks to how much the Democrats' fortunes have changed in the last two years. Between 2002 and 2006 unified Republican government drove Independents into the arms of the Democrats. Four years later Democrats appear to be driving them right back. It remains to be seen whether the result will divided government, and if so, how Independents will react to that.

Tuesday, July 27, 2010

New Poll Offers Cause for Concern for Ehrlich and O'Malley

Maryland political junkies have been treated to a slew of statewide polls lately - we've been treated to 4 new polls in as many weeks. In general, the polling data released during the first half of the last four weeks mostly suggested that Governor Martin O'Malley is in danger of losing his job and that former Governor Bob Ehrlich is gaining momentum in his quest to reclaim his old job. But the two most recent polls paint a far murkier picture - combined, the four polls confirm that the Maryland gubernatorial race is a pure toss-up (and that's usually considered to be worse news for the incumbent).

Polls by Rasmussen Reports and Magellan strategies, release in late June and the first week of July, each should Ehrlich with a narrow lead. The Rasmussen survey showed Ehrlich erasing what had been a O'Mally lead, and the Magellan poll showed Ehrlich running strong among Democracts - a necessity in a state where Democrats outnumber Republicans by a two-to-one margin.

A few days after the Magellan poll, Public Policy Strategies reported that O'Malley had a slight lead - but confirmed that Ehrlich was winning nearly a quarter of all Democrats and enjoyed a wide lead among Independent voters.

Today, the latest Gonzales Research poll was released and it shows O'Malley with a small lead as well - 45% to 42%.

The bad news for Ehrlich:
  • The Gonzales poll shows O'Malley and Ehrlich tied among Independents and Ehrlich winning only 20% of Democrats - Ehrlich must win Independent voters by a clear margin and he needs to carry roughly 25% of Democrats.
The Bad news for O'Malley:
  • O'Malley's re-elect numbers have gone down 4 points since last year, he is stuck in the mid-40% range in this and every other poll.. What had been a 9 point lead in January is now a 3 point lead. O'Malley's approval rating is below 50%.
The take away from all of these polls?
  • This race could go either way. I think that it is likely to be decided by a matter of 20,000 votes - more or less.
  • O'Malley is in a bad spot for an incumbent, but two of the last four polls have Ehrlich still in the low 40s.

Monday, July 12, 2010

In Maryland, Poll Finds More Bad News for O'Malley

In a recent radio interview with John Domen I was asked whether all the polling on the Maryland race was telling us anything. The reporter wondered whether it was a forgone conclusion that Democrat Martin O'Malley would win given the Democrat's registration advantage in Maryland (roughly 58% D to 27% R).  I said that the race was anything but a safe bet for O'Malley - in fact I said O'Malley needed to be worried. O'Malley has not polled at 50% or above in any reelection poll and worse yet, every new poll shows former Republican governor Robert Ehrlich in a stronger position.

A new poll from Rasmussen finds Ehrlich edging Gov. O'Malley 47% to 46%. This may not seem like much, but the trend has been clear. In February, O’Malley led 49% to 43%, After Ehrlich announced the race narrowed in April to 47% to 44%. The two were tied last month with 45% apiece. So since February O'Malley has fallen from +6 to -1. Since announcing, Ehrlich has gone from -3 to +1. Simply stated, O'Malley is losing ground and Ehrlich is gaining.


In the Rasmussen survey, Ehrlich wins 87% of the state’s GOP vote and 22% of Maryland Democrats, while O’Malley earns just 71% support in his own party. These numbers essentially mirror the results in a recent poll by Magellan Strategies that I wrote about in a prior post. The Magellan poll showed the candidates tied among Independent voters, but Rasmussen reports that Ehrlich leads by 15 points.

If Ehrlich can win 87% of Republican, roughly a quarter of Democrats, and carry Independent voters by 15% he will be very happy on Election night 2010.


A new poll from Public Policy Polling is expected very soon and will either confirm or confound what other polls have shown. I've written much on the Maryland race and expect to write much more. Stay tuned!

Friday, July 2, 2010

In Blue Maryland, O'Malley Threatened by Growing GOP Wave

A new poll from Magellan Strategies shows Republican Bob Ehrlich holds a 3 point lead over incumbent Governor Martin O’Malley, 46% to 43%. Another 4% of voters prefer “another candidate”, and 7% are undecided. This poll comes on the heels of a Rasmussen poll that showed the race tied at 45%. Since announcing his candidacy, Ehrlich has steadily improved his position, while O'Malley has been losing ground.

In a prior post I showed that the key for Republican candidates in Maryland is not reduced turnout among Democratic voters, but rather a poor performance among them by the Democratic candidate and increased turnout by Republican voters. In 1994, Republicans came within 6,000 votes of winning the gubernatorial race because the Democratic candidate's vote total was only 80.5% of all Democrats voting. In contrast, the Republican's vote total equaled 155.6% of all Republicans voting - the Democratic candidate lost a lot of Democrats and the Republican candidate claimed them.  The scenario was nearly identical in 2002 when Ehrlich won the race.

The new poll shows O'Malley winning 64% of Democrats to Ehrlich's 25%. Among Republicans, Ehrlich wins 90% to O'Malley's 7%. The two essentially split the Independent vote with O'Malley at 38% and Ehrlich at 34%. 

What would those numbers mean when applied to actual voter registration data? In may 2010, there were 1,929,966 Democrats and 902,222 Republicans in the state, with another 574,979 essentially Independent. If Maryland had 100% turnout and the each man received the share of the vote reported by the new poll, O'Malley would win the race by a narrow 27,000 vote margin.

Of course, 100% turnout will not happen. The average turnout for registered Democrats in gubernatorial elections since 1994 has been 61.6%, turnout for Republicans has averaged 64.4%, and Independent voters have average 43%. Add those assumptions to my prior vote estimate and O'Malley's 27,000 vote victory margin becomes a 9,000 vote margin of loss.

But I'm not done... in the strong Republican years of 1994 and 2002, Democratic turnout was close to the 4 election average at 61.95%, but GOP turnout was higher - 66.15%. Independent turnout was unchanged. Apply those turnout assumptions to the Magellan poll and Ehrlich wins by 19,000 votes.

So O'Malley by 27,000 or Ehrlich by 19,000? It all depends on how many Democrats ultimately defect to Ehrlich and how many Republicans turnout. If the 2010 election in Maryland follows the pattern of 1994 or 2002 then Ehrlich will make a return trip to Annapolis. Unfortunately for Martin O'Malley, all indications are that 2010 will look very much like 1994 and 2002. As political guru Charlie Cook wrote today - "A GOP Wave is On the Way...."

This Keynesian Votes for Austerity

Battle lines are being drawn over whether America and indeed the world needs to increase government spending in order to stimulate economic growth or institute austerity measures to stem the tide of crippling government debt. 

I am a Keynesian - I believe in government stimulus - but I cannot endorse Keynesian policies at this time because we have failed to adhere to Keynesian theory for so long. Put into the simplest of terms Keynesian economic theory tells us that government should engage in deficit spending during economic downturns in order to compensate for lax private sector activity and to spur economic growth. This can be accomplished via spending, tax cuts, or both. This aspect of Keynesian policy has been standard practice since the 1930s.  Even the Reagan era policies - often derided as supply side or trickle down - were truly Keynesian. The tax cuts were financed via large federal deficits. These government financed tax cuts spurred tremendous economic growth during the 1980s.

But deficit spending only tells half the Keynesian tale. The rest of the theory holds that during times of economic growth, government must pay down the debt incurred to bring about that growth. So once an economy returns to healthy growth deficit spending must be reigned in, debt paid off. This is accomplished via spending cuts, tax increases, or a bit of both. This aspect of Keynesian economic policy has never been standard practice - rather our government (and in fact most western democracies) have instead maintained the "stimulus" policies of deficit spending even during strong economic times.

Look at the chart to the right -  it tracks total US debt as a percentage of the overall economy, or GDP. During our nation's first century you'll notice a rise and fall of our debt to GDP ratio. Our debt was high after the Revolutionary War, but we slowly retired it. It grew again during the War of 1812, but we retired it, it spikes during the Civil War only to fall again.

We see another spike following World War I and a steady decline just prior to the onset of the Great Depression -at which time Keynesian economic policy truly comes to America. Our prior periods of debt were caused by national crisis - War. The debt accrued during the Depression was related to an attempt to mitigate a financial crises. At the onset of the Great Depression our nations accrued debt was only 16.3% of GDP. Depression era deficit spending, or stimulus, doubled our debt ratio to post-World War I levels.

This spending did halt the dramatic economic declines on the early 1930s, but did not produce sustained growth. That would not occur until the build up for World War II when US debt ballooned to a rate more than twice that of GDP. Note in the next chart how economic growth peaked during the height of wartime spending. Though there was a decline in growth after the war, it was short lived and followed by a half century marked by economic expansion and brief episodes of contraction, or recession.

If you return to the first graph you'll see that initially we did begin to retire our debt. The US debt to GDP ratio fell dramatically during the post war economic boom. This halted during the latter part of the 1960s as economic crisis and the Vietnam War put pressure on our economy and the US budget. Our debt to GDP ratio fell to Depression-era levels, but has never since fallen below those level.

The economic expansion of the 1980s and 1990s should have been met with measures intended to retire our burgeoning debt - but those tough decisions were not made - with two exceptions. The Omnibus Budget Reconciliation Act of 1993 increased taxes. It created 36 percent and 39.6 income tax rates for individuals in the top 1.2% of the wage earners, it created a 35 percent income tax rate for corporations, the cap on Medicare taxes was repealed, and transportation fuels taxes were raised by 4.3 cents per gallon. The result was increased federal revenue and declining debt. Then in 1997, the Balanced Budget Act of 1997 trimmed hundreds of billions from the Medicare program - reducing government spending.

The net effect of these two acts was a brief period of surpluses during the late 1990s/early 2000s (see the third graph). But this era was short lived. Congress gave into special interest pressure in 1999 and restored many of the Medicare cuts in the Medicare Balanced Budget Refinement Act of 1999. Returning to the second graph we can see a period of recession in early 2000-2002.

That recession was met with an aggressive tax reduction/stimulus plan - The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). EGTRRA reduced tax rates across the board and reduced the top rate from 39.6% to 35%. In addition, taxpayers were sent rebate checks ranging from $300 a person to $600 a couple to stimulate the economy. Economic growth returned until the current downturn.

Those 2001 tax cuts and the Medicare increases came at a high price as US deficits soared and our debt to GDP ratio began to rise again.

So we find ourselves in 2010 in the midst of a dramatic economic slowdown. Unemployment is at 9.5% and the US economy has lost 8 million jobs in the last two years. In late 2008, Congress passed the Troubled Asset Relief Program or TARP to allow the United States Department of the Treasury to purchase or insure up to $700 Billion of "troubled assets". In January of 2009 Congress passed the American Recovery and Reinvestment Act which appropriated $787 billion in tax cuts and spending. TARP and the Recovery Act were financed via deficit spending and added greatly to our debt and deficit.

Total US debt has reached 80% of GDP and is expected to surpass GDP by 2015. We are already at levels not seen since the height of World War II.  The most recent economic outlook from the Congressional Budget Office looks at the share of debt held by the public, as opposed to what the government owes itself, finds that debt to GDP ratio is 62%, but "federal debt held by the public would rise... to 181 percent of GDP in 2035, and annual deficits would exceed 10 percent of GDP beginning in 2027." 

Why does this matter?
If the ratio of debt to GDP continues to rise, lenders may become concerned about the financial solvency of the government and demand higher interest rates to compensate for the increasing riskiness of holding government debt. Eventually, if the debt-to-GDP ratio keeps increasing and the budget outlook does not improve, both foreign and domestic lenders may not provide enough funds for the government to meet its obligations. By then, whether the government resolves the fiscal crisis by printing money, raising taxes, cutting spending, or going into default, economic growth will be seriously disrupted.
So how does all of this come back to my current opposition to additional stimulus and more Keynesian demand side policies? Simple, we have defied Keynesian policy for over 40 years. Since the late 1960s we have continually spent beyond our means in good times and lean years. Rather than pay down the debt accrued during periods of recession, we have continued to accrue debt at an alarming rate. At the onset of the Great Depression our debt to GDP ratio was but 16% and our budget balanced. Today, we entered the Great Recession with a debt to GDP ratio of 80% and a budget habitually out of balance. Rather than stimulus, America must embrace austerity. Such austerity will cause pain, but it will be a temporary pain as we pay for the excesses of the past 4 decades. The other option is continued deficit spending and crushing debt that we will never be able to grow out from under. The choice is between short term pain with long term health (austerity) and short term relief with long term ruin (stimulus).