The State of the Presidential Race

With the election a little over eight months away and the Republican nomination as uncertain now as it was eight months ago, I figured it would be an interesting experiment to evaluate where the swing states line up now and see how it holds up leading up to the election. I'm still leaning towards Willard Romney being the GOP nominee simply because as gaffe-prone as he's proven to be, his opponents are more gaffe-prone. And while there's a core of Republican voters who would love to install another candidate than the current crop of losers running as the nominee in a brokered convention, such a scenario would require continued long-term relevance of both Gingrich and Santorum, which seems unlikely. It would also create an organizational headache that would produce a nominee without a campaign infrastructure less than three months before the election. As crazy as this process has been this cycle, and the persistence of fierce opposition to Willard, I won't rule out the prospect of a brokered convention, but for the sake of constructing this hypothetical, I will assume Romney is the nominee but make passing observations on the viability of Santorum in certain states.

But before I go to the state level, I have three overarching predictions. First, turnout will be very low...in the 50% range. There won't be much inspiration for a second act of Obama or either of the GOP clowns who make George W. Bush look like Julius Caesar in terms of political skills. Second, there won't be a historic blowout comparable to 1964 or 1972 either way. The nation is polarized in a way that such a historic wipeout is almost conceivable. The maximum either Obama could win is 30 states no matter how horrible the Republican challenger is and the maximum the Republican could win is 32-33 states (with disproportionately small electoral vote counts). Obama will not win Kentucky under any circumstance and Willard won't win California under any circumstance. Third, whoever the Americans Elect candidate is will get a significant protest vote....easily 5%. If it's somebody as charming and thoughtful as former Louisiana Congressman and Governor Buddy Roemer, currently throwing his name in the ring, a little media coverage will go a long way in helping him get even higher numbers of voters who find him preferable to either Obama or Willard/Santorum.

Now onto the horse race, starting with states that are effective locks for either Obama or the Republican....

Certain Obama--California, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, New Jersey, New York, Rhode Island, Vermont, Washington

Certain Romney/Santorum--Alabama, Alaska, Arkansas, Idaho, Kansas, Kentucky, Louisiana, Mississippi, Nebraska, North Dakota, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, West Virginia, Wyoming

Now, the "swing states", with varying degrees of swing....

Arizona--I decided to include every state that could conceivably be rated as a swing state, and in the case of Arizona it's a tremendous stretch no matter how optimistic the Obama campaign's spin. In a total blowout like 1996, Arizona is a conceivable blue state turnover. Beyond that, the demographics haven't changed fast enough to help Obama. Who knows about a generation from now, but in 2012 Arizona is a Republican state.

Colorado--There hasn't been a lot of polling in Colorado and it's easily to believe that since the Democrats came out unscathed in the state even during the 2010 GOP bloodbath that the bodes well for Obama. It well may, but the Republicans running in Colorado in 2010 were so awful (even worse than Romney and Santorum!) that it wouldn't be wise to consider their defeats as referendums in support of the President or a continuing Democratic tide in Colorado. With that said, the relative moderation of affluent suburban Denver, where elections are decided in Colorado, bodes well for Obama against what Romney and especially Santorum are selling. Furthermore, the most blistering growth in Colorado appears to be occurring in ski towns, which are overwhelmingly Democratic. I think it's pretty reasonable to assume that with current political conditions, Obama will win Colorado. If any number of things go wrong, it's winnable for Romney, but would probably not be the deciding state either way. If Obama's losing Colorado, Romney is winning nationwide with more than 300 electoral votes.

Florida--My feelings on Florida have not changed since last year. I can't see it determining the outcome of the 2012 election. It's likely to go red, and if it does go blue, Obama will have more than 300 electoral votes already. Obama had the perfect storm of maxed-out African American turnout and strong Puerto Rican turnout in 2008 and only won by two percentage points anyway. Since then, his approval ratings with older and Jewish voters have fallen, suggesting Obama would have to do even better with nonwhites and younger voters to win the state. Seems like an incredibly heavy lift. Furthermore, I continue to suspect Senator Marco Rubio is the frontrunner for the veepstakes, which will make it that much harder for Obama to win. Only in a landslide at least on par with 2008 will Obama win again in the Sunshine State.

Georgia--I only include Georgia because the black and Latino populations are growing so quickly that it's hard to know when the arithmetic will become untenable for Republicans. I don't think we're there yet but was impressed that Obama did as well as he did in 2008. At the current pace, it's easy to envision Georgia as a swing state in another decade, but it seems very unlikely to come soon enough for Obama.

Indiana--The consensus opinion even among Democrats is that Obama's Indiana win in 2008 was a fluke with almost zero chance of being repeated. I think they're right, but plan to hold out for some polling to support that notion before throwing in the towel. Indiana is still an auto-producing state and there could be some residual goodwill over the bailout. It would have to be a landslide nationally, but I'm not completely ready to write off the state of Indiana yet given the tremendous weakness of Romney and Santorum.

Iowa--I'm torn on the believability of the recent Des Moines Register poll showing Obama losing to every Republican except Newt Gingrich. It's inconsistent with most polls, but those polls were all taken quite some time ago before the Republicans monopolized the airwaves in the state with mostly favorable treatment, with only Gingrich (the one guy trailing Obama) leaving the state with a bloody nose. However, it's hard for me to abide the huge divisions between the Des Moines Register poll and the polls showing Obama with double-digit leads in Minnesota and Wisconsin given that the three states usually vote similarly. My guess is that Obama prevails in Iowa this year but it probably won't be as lopsided as four years ago even if Romney (or Santorum) was getting killed nationally.

Michigan--At least right now, most polls suggest Michigan isn't even a battleground state, with Obama vanquishing all Republican challengers by 15 points or more. Such an outcome would make sense given the success of the auto bailout and the contrast with the GOP diagnosis (particularly Romney's). Things would have to go dramatically wrong for Obama between now and November to lose Michigan, and if he did it would be a 1988-style Democratic thumping nationally.

Minnesota--Unlike the other Upper Midwestern states, virtually nobody has expected Minnesota will be competitive this fall and every available poll confirms that with comfortable Obama leads over all challengers. Barring a huge meltdown, Obama should have no problem winning Minnesota a second time, and his strength here makes the soft numbers in Iowa confusing.

Missouri--The only available polls showed a surprisingly competitive race. Until more come out, I'm assuming this is a red state in 2012 as has been the conventional wisdom when Obama couldn't even win it in 2008. It isn't unthinkable that the purple areas of Missouri could be swayed a couple thousands votes in Obama's direction since 2008 given how terrible Romney and Santorum look as candidates, but it's still a pretty tough nut to crack considering the 2008 turnout models will be a struggle to duplicate.

Montana--A poll last week showed Obama trailing by 7 in Montana, which was just small enough to consider the state conceivably winnable. Crazy to think Obama came within two points here in 2008, and a hard-fought Senate race should keep turnout high in the state. It's a 400-electoral vote blowout if Obama were to win Montana, and that seems unlikely even in the best-case scenario, but just like with Missouri, it's not unthinkable given recent trendlines.

Nevada--The only wild card here is popular Republican Governor Brian Sandoval who is being considered as a Vice-Presidential pick. A Sandoval veep selection is the only thing I can see that would make Nevada competitive given that Obama won it by 12 points in 2008. The Mormons will come out in full force for Willard, but it's the fast-growing Latino vote, and their well-organized service workers' union machine, that is driving Nevada bluer with every election cycle.

New Hampshire--Much like with Iowa, Willard got a head start in New Hampshire with the contested primary which he invested heavily in for months without a corresponding campaign message from Obama reaching into New Hampshire living rooms. For that reason and the state's general libertarian streak, New Hampshire is easier to envision turning red that most of Obama's 2008 states as long as the election is waged on taxes and the economy. But if continues to be about contraception, or certainly if Santorum is the nominee, New Hampshire will be overwhelmingly blue. Right now I venture to say it's a pretty pure toss-up but if Obama wins nationally by a decisive margin, New Hampshire will be part of his coalition.

New Mexico--Republican Governor Susana Martinez is another contender for veep selection which could conceivably put this state in play, but recent polls showing landslide double-digit margins for Obama suggest even Martinez being on the ballot wouldn't save Romney here. Obama will win this in all but the most humiliating of national climates.

North Carolina--Obama's numbers continue to hold up reasonably well here suggesting the demographic changes and Obama's long-standing investment in this state are paying off. I still think this will be a red state in 2012 but would be less surprised to see North Carolina stay blue than I would be with Florida. And if Republicans have to invest resources in North Carolina to win a national election every four years, they are really dealing to an inside straight to win the Presidency in any cycle.

Ohio--For a year now, I've been optimistic that Obama would win Ohio no matter how much doomsaying the would-be election experts parlay regarding Obama's struggles with the white working class. The bottom line is that the opposition has absolutely nothing to offer residents of a state like Ohio and the combined combination of a resurgent auto industry and the natural gas fracking industry's early successes in the region will make it hard for an opposition offering Ohioans nothing to hang the millstone of despair around Obama's neck. It'll be close as it was last time, but I expect Obama prevails here in a political environment that resembles the current one.

Oregon--I only include this one because it was competitive in 2000 and 2004, but it's hard to imagine any scenario, even a national unraveling of Obama's political standing, resulting in Oregon voting for Willard or Santorum this fall.

Pennsylvania--Every four years, Republicans think this is their year to pick off Pennsylvania but they always come up short. And true to form, it's looking like a tempting target again this year, with Willard never more than a couple of points behind Obama in any given poll. Willard's success in branding himself as a moderate northeastern Republican seems to be helping him in traditionally Republican but socially liberal suburban Philadelphia, where Pennsylvania elections are won or lost. If he can keep the charade up through election day, there's a chance of an upset here, but it's very much odds-against and the state will likely resume its tradition as a tease for Republicans as we move closer to election day. And if native son Santorum is the nominee, Pennsylvania will almost assuredly be even more out of reach for the Republicans.

Virginia--The demographic shift of Virginia sure seems to have made it Obama-friendly terrain. And particularly as Romney calls for slashing the pay and the size of the DC-based federal workforce, it seems poised to harden Democratic strength in kingmaking Northern Virginia where most of the state's growth is. If the national tide turns for any number of reasons, Virginia will be among the first states to slip out of the Obama coalition, but if current trends continue, Obama will win it again comfortably.

Wisconsin--For a state that was so remarkably consistent in its even-steven red-blue polarization for much of the previous decade, Wisconsin was been swinging wildly since, giving Obama a landslide in 2008 and Republicans up and down the ticket a landslide in 2010. All indications are that Obama is poised to recapture his 2008 mojo this time and recent polling suggests the state is barely in the battleground status today. It would take a huge national flameout for Willard to prevail here.

My current projections suggest a decisive Obama Electoral College victory of 303-235, a calculation which gives the GOP nominee Florida, North Carolina, and Indiana, among others. There's still not a lot of margin for error here though as a loss of a couple big states (think Virginia and Ohio) would make this a nailbiter. There's no indication right now that it will be a nailbiter, however, as Obama's numbers have improved dramatically with the fortunes of the economy and the weakness of his opposition. There's a real possibility the economy, international affairs, gas prices, and a center-left third party Presidential bid could reverse these fortunes, and if they do, I'm expecting a decisive victory the other direction.

The Complicated Relationship Between Spending and Deficits

To the average joe, the concept of higher government spending shrinking rather than enlarging deficits is counterintuitive. Nonetheless, particularly in a recession, there is a fairly strong consensus that the notion is true. Yes, when Obama signed the American Recovery and Reconstruction Act, otherwise known as the stimulus, in the spring of 2009, it immediately added over $800 billion to the deficit and in the next two fiscal years, deficits rose as high as $1.7 trillion for a single year. However, nonpartisan economists calculated what the deficit would have been without the infusion of stimulus dollars and concluded the number would have been nearly twice as large at $2.7 trillion.

How is this possible? Because government was the only entity capable of infusing capital into an economy that shrunk at a jaw-dropping rate of 9% in the fourth quarter of 2008. The loss of economic activity was significant even with that infusion of government dollars, but without it, the shrinkage of economic activity would have been even more severe and revenue would have come far beyond projections. Add on to that the layoffs of government employees and the trickle-down effect of that and you're looking at longer unemployment lines and less consumerism.....and the end result is massive debt.

Most economists who aren't cynical hacks gaming for the Republican Party's short-term political benefit would agree with the above comments. Indeed, the consensus opinion is that the biggest obstacle to our recovery now is that balanced budget requirements are forcing state and local governments to continue to cut services and lay off middle-class employees. Last quarter's economic growth of 2.8% was said to have been 3.7% if not for the continued extraction of public sector dollars from the economy. And if the economy grows by 3.7%, revenues come in at much higher dollar figures than they do when the economy grows by 2.8%. And that means smaller deficits.

While this is conventional wisdom among mainstream economists, it's not easy to explain to the public, who typically view government spending as a zero-sum game (every dollar spent is a dollar lost, adding to the deficit) and are thus easy prey for Republican demagogues trying to score political points in the cheapest possible way. Yet curiously, even those who get the upside of government spending's multiplier effect in inducing economic activity seem to be card-carrying members of the flat earth society when it comes to long-term entitlement spending and its effect on deficits.

Now I'm definitely not going to deny that Social Security and especially Medicare are unaffordable. Reform is necessary, but the most practical means of cutting long-term entitlements is also the most politically untenable...the rationing of Medicare services and the acknowledgment that people who could otherwise have lived marginally longer will not because of denied care. That's a tough sacrifice, but the alternative is the country going bankrupt.

But back to my main point, all of the economists and media smart guys seem to agree with proposals like Simpson-Bowles and even more draconian cuts to Social Security, failing to acknowledge that such cuts will be accompanied with loss of economic activity the same way that cutting government programs is slowing our recovery today. This would be true even in previous more bullish investment eras where most workers had defined-benefit pensions and their personal savings accrued interest rates above the current rate of 0%.

By contrast, Americans today are experiencing declining wages and are thus more likely to be living paycheck to paycheck and unable to save a penny. And even those who can afford to save see their savings wiped out and then some when educating their kids at colleges with tuition rising exponentially higher than the rate of inflation. They're also dealing with 401Ks (the worthless "unpensions") that have less value today than they did in 1999, interest rates so low that non-stock investments accrue virtually no return on investment year to year, and homes that have declined in value by half over the last few years. The overwhelming majority of Americans, despite feverish planning and preparation, are light years away from being prepared to finance a retirement, and when you consider that they are the fastest-growing group of Americans, this lack of preparation forecasts a serious loss of economic activity on the horizon.

That means Social Security is poised to be more important than ever in keeping the economy afloat and providing a base level of purchasing power for elderly consumers. Yet the politicians and the experts left, right, and center in American politics think it needs to be cut....in the interest of trimming the deficit. Has nobody really thought things through this far? Does a nation of old people living in poverty really seem like a scenario that would bring about deficit reduction?

The point is that there is no silver bullet to reduce our cycle of debt and the long-term financial turmoil that will come with it. If we don't cut entitlements, the simple arithmetic of more senior citizens extracting services from a smaller group of workers financing them breaks down. But if we do cut entitlements, seniors will be living in extreme financial duress and the rate of economic growth will plunge as their economic activity is erased along with their income....and deficits will still grow larger and larger. I guess this is why all societies seem to fall at some point as the time comes where there are no good options to proceed.