Romney’s closing message in Michigan or a new campaign?

Dean Barnett offers a scathing assessment of the Romney campaign today. I don’t want to focus on that here, instead his closing:

I hope Mr. Romney does well enough in Michigan today that he gets the opportunity to introduce the public to the real Mitt Romney. He is a wonderful and gifted guy. It would be nice if he and his campaign allowed the voters in on that secret.

If Mitt Romney’s closing speech to the Detroit Economic Club is the real, Mitt Romney, then we have an even bigger problem then we thought. Byron York had this analysis of the speech:

Romney’s proposals might not be music to the ears of free-market conservatives who believe Detroit made its own problems and needs to fix itself. But it’s what a lot of people in Michigan want to hear.

In other words, Romney ran to the left telling "a lot of people [what they] want to hear." If this is the real Mitt Romney, still telling people what they want to hear, abandoning his new refound principles, then just wait until a general election.

McCain town hall in Reagan Democrat country

(Cross-post from Redstate)

Macomb County, Michigan, is one of the homes of the Reagan Democrat. Today, I saw John McCain give a town hall in the closing stretch of the Michigan primary. I don’t have pictures because my video camera was stolen, but I have impressions.

Michigan is in an a single-state recession. Unemployment is above 7%. Many of the current jobs are in manufacturing which, the Detroit News, the conservative paper in the state, has noted won’t come back. How to handle this is the fundamental debate. Mitt Romney is saying that he, personally, can turn the state around and that the future of Michigan is bright. McCain has argued that more realism and effort is needed, and has focused on retraining programs. My gut is that McCain wins this fight by recognizing the challenges. In New Hampshire exit polls McCain received substantially more support from people with economic anxiety, and Romney won only one economic subgroup, those making between $150k and $200k.

McCain’s answer is a retraining program. In March, I was in New Hampshire (before my camera was stolen), and asked him a similar question. This was his answer:

This is the backdrop of the town hall and the current debate in Michigan. Between 600-700 people attended (contrast with around 150 at Romney’s the previous day. In the Romney campaign’s defense, they have had some scheduling snafus that have forced them to cancel a number of events) The questions were primarily about national security, veterans, Iraq, etc., and economic issues like pharmaceuticals and healthcare, and the subprime crisis.

McCain was asked about the subprime crisis, and he passed the microphone to Carli Fiorina, the CEO of HP (formerly Hewlett Packard). She said that she had never campaigned before and was supporting McCain because he is "a unique and inspiring leader." She turned to answering the question and focused on the need for transparency and accountability. She said that there were many things "off balance sheet" so that risks couldn’t be properly accounted for. She then invoked Enron and said "if you can’t see it, you can’t understand it." One person in the audience liked the answer enough to say "Thank you Madame Vice President."

Off to an event at the Americans for Prosperity Forum.

Romney out of touch?

I have worried about the strange sense that I get that Mitt Romney is out of touch. He seems like a rich guy who doesn’t understand what normal people go through. The question is whether this impression gets down into the voters. MSNBC’s exit polls found that in New Hampshire the only income class that Romney beat John McCain was $150-200k, and they tied above $200k.

I was reminded of this when I saw an AP story today about Romney’s tax plan:

But the former Massachusetts governor goes beyond that to say "anyone" with adjusted gross income under $200,000 — that’s after certain deductions — should be relieved of all taxes on capital gains, interest and dividends, pushing his definition of the middle class well into six-figure incomes.

Now, I don’t have a problem with Romney’s position, but the polling above suggests that people might be getting an impression here. This could be bad news for him in Michigan, when Mike Huckabee is relating to the people who have "been laid off" and Romney is talking about "getting rid of people." Especially when there is 7%+ unemployment.

Turnaround artist didn’t turn around Mass. Job Growth

In March of this year the Boston Globe analyzed Mitt Romney’s economic record in Massachusetts:

On all key labor market measures, the state not only lagged behind the country as a whole, but often ranked at or near the bottom of the state distribution. Formal payroll employment in the state in 2006 was still 16,000 or 0.5 percent below its average level in 2002, the year immediately prior to the start of the Romney administration. Massachusetts ranked third lowest on this key job generation measure and would have ranked second lowest if Hurricane Katrina had not devastated the Louisiana economy. Manufacturing payroll employment throughout the nation declined by nearly 1.1 million or 7 percent between 2002 and 2006, but in Massachusetts it declined by more than 14 percent, the third worst record in the country.

They lost total jobs, ranking 3rd from the bottom:

While the number of employed people over age 16 in the United States rose by nearly 8 million, or close to 6 percent, between 2002 and 2006, the number of employed residents in the Commonwealth is estimated to have modestly declined by 8,500. Massachusetts was the only state to have failed to post any gain in its pool of employed residents. The aggregate number of people 16 and older either working or looking for work in Massachusetts fell over the Romney years.

They lost total population:

We were one of only two states to have experienced no growth in its resident labor force. Again, without the devastating effects of Hurricane Katrina on the dispersal of the Louisiana population, Massachusetts would have ranked last on this measure. The decline in the state’s labor force, which was influenced in large part by high levels of out-migration of working-age adults, helped hold down the official unemployment rate of the state. Between July 2002 and July 2006, the US Census Bureau estimated that 222,000 more residents left Massachusetts for other states than came here to live. This high level of net domestic out-migration was equivalent to 3.5 percent of the state’s population, the third highest rate of population loss in the country. Excluding the population displacement effects of Hurricane Katrina on Louisiana, Massachusetts would have ranked second highest on this measure. We were a national leader in exporting our population.

Does Romney want to take this nationwide?

Steve Forbes, Rudy, Romney, and the economy

(Cross-posted from Redstate)

Two days ago (technical problems delayed this) in Manchester, New Hampshire, I sat down with Steve Forbes, and we talked about his endorsement of Rudy Giuliani, and his thoughts on the economic records of the other candidates. As a supporter of Rudy Giuliani’s he has the most to say about what he likes about Rudy, but it was interesting to me that he ripped pretty hard into Mitt Romney’s record.

The next step of the Presidential race will turn to Michigan and South Carolina. Michigan is a big northern state in, perhaps, the worst economic state in the country, the old rust belt. Voters are going to want to know what can be done for the economy. This is different than taxes, which was an important issue in New Hampshire. In Michigan, the question on voters’ mind will be "who will create jobs?" Mitt Romney’s record is weaker than is generally assumed. The Club for Growth is already up with ads attacking Huckabee, although I suspect that this is more press release. John McCain, as a Senator, has his voting record and new policy proposals to defend and propose. Erick and Neil have more on that.

South Carolina is more complicated. I will be back with more about that.

Defining news story of the cycle?

We might have just found the issue and story that crystalizes the anxieties of all Americans around a protectionist message. The story is:

Citigroup Inc., the biggest U.S. bank by assets, will receive a $7.5 billion cash infusion from Abu Dhabi to replenish capital after record mortgage losses wiped out almost half its market value. … the state-owned Abu Dhabi Investment Authority

Let’s put the pieces together.

  1. We have a shadowy Middle Eastern monarch. A King. He is loaded up to the gills with oil money.
  2. We are worried about Middle Eastern terrorism.
  3. We have a domestic housing crises that risks being a larger economic crisis.
  4. We have an intangible crisis of confidence involving globalization.
  5. This is about our banks and our money. Now some king in the Middle East tied to oil — and inevitably terrorism, legitimately or not — makes money if I don’t pay off the whole balance on my Citibank credit card.

Remember the 80s when people were taking sledge hammers to Japanese cars? How do you take sledge hammers to banks? Owned by Arabs. Etc.

This a made for demogoguery moment. If you thought Dubai Ports was bad (and, btw, I think that the President got it right, but you knew I was a rabid internationalist) just you wait.

Economy most important issue?

Last week at Blog World Expo, a fascinating discussion broke out. Jerome Armstrong from MyDD and Markos from DailyKos, among other lefties, argued that Iraq was going to be a driving issue. They, furthermore, argued that success wouldn’t matter, because the failure was the initial decision, and Americans will stop paying attention The righties, Hugh Hewitt, Rob Bluey, John Hinderaker, and others argued that success would matter. Dean Barnett seemed to argue that it should but wouldn’t.

My sense is that the lefties are wrong. Iraq will come out of the headlines if we really start to succeed. The historical evidence provides the scenario. In 1952, Eisenhower ran on, more or less, pulling out of Korea. Eventually, after much wrangling, the troops stayed. Over 50 years later, 30k+ troops remain. It is clear that a similar scenario arises for the Dems. They know that it is irresponsible to completely pull out, in spite of their base. Dem presidential staffers admit to numbers in the range of 100k. They are even saying so in debates.

One wonders if, on a certain level, the Dems are going to mirror Eisenhower in this respect. He wanted to keep the GOP from embracing isolationism. There is little risk that Clinton would embrace the sort of irresponsible isolationism that so much of the Democratic base would seem to like, and that the 50s Taftians so dearly wanted.

That’s the good news for America. The bad news for the GOP is that once Iraq goes from being the top headline, the economy is the next issue. And, indeed, with casualties falling, Americans are focusing on the economy. As the Economist’s Democracy in America blog notes:

A MILESTONE of sorts was reached this month when a Newsweek poll showed that for the first time in years Iraq was not the top issue influencing prospective American voters. The economy had surfaced as the major issue on voters’ minds.

Fareed Zakaria quotes the poll:

In the new NEWSWEEK Poll, the economy now tops Iraq as the issue that voters say will most influence their choice for president, 22 percent to 19 percent. For two years, Iraq dominated these kinds of surveys. Only a month ago, in a CBS News poll, 28 percent of respondents wanted Iraq to be the campaign’s most-discussed issue, while the economy came in second at 16 percent.

Now, it is not clear to me that this is a huge win for Republicans, given the housing problems.  But Iraq is clearly coming out of the headlines. Which might mean that the Democrats have some space to make responsible decisions, if actually elected.

Handling economic instability…Immigration?

Joe Klein posits that the GOP may end up running on immigration in 2008:

It’s long been my belief that the GOP hole card in 2008 is going to be a rancid furriner-bashing anti-illegal-immigrant smear campaign. …  A few months ago, I asked Mitt Romney if he thought illegal immigration was a net economic plus or minus. He said…he wasn’t sure (but, of course, he knows that it’s a net plus).

As is typical for Klein, he only sees part of the problem. The Post made a similar point earlier in the week:

"This issue has real implications for the country. It captures all the American people’s anger and frustration not only with immigration, but with the economy," said Rep. Rahm Emanuel (Ill.), chairman of the House Democratic Caucus and an architect of the Democratic congressional victories of 2006. "It’s self-evident. This is a big problem."

Republicans, sensing a major vulnerability, have been hammering Democrats, forcing Congress to face the question of illegal immigration on every bill they can find, from agriculture spending and housing assistance to the State Children’s Health Insurance Program (SCHIP).

Rahm is on to something here. If I am right that the economy is going to be the real issue, how are the parties likely to deal with the issue of economic instability? The Dems are already running on irresponsible anti-globalization populism and silly (in substance, but smart in politics) housing proposals. Not to mention tax increases. And, of course, universal health care.

What do the Republicans have? Well, so far optimism, which could end up looking like thin gruel. After all, Republicans aren’t optimistic about the economy. One way of trying to handle this is immigration. But will that work?

What are the swing states? There’s the rust belt (WV, OH, PA, and, maybe, MI). There’s the upper midwest (WI, MN, and IA). There’s Florida. And there’s the inner west (CO, NV, AZ, and NM) Of these, OH, FL, and the western states are all deeply exposed to the housing crisis. (MI is too, but that’s just the state-specific recession) With the exception of OH, these are all states in which latinos are a hugely important swing vote.

So the states that are most vulnerable to housing-related economic populism are also states in which the GOP needs the immigrant vote. That’s a nasty synergy. Maybe we shouldn’t attack on immigration? Maybe that just makes it worse.

Housing crisis is hitting Republicans

A friend of mine is a lobbyist. He was on the Hill and asked a bunch of GOP members what they thought. Their position was basically:

  • This is a blue state problem and the people affected are going to vote Democrat anyway
  • Moral Hazard arguments and federal gov’t should not intervene
  • taxpayers should not bail out speculators

This is delusional. Pew did a new study on expectations of future housing prices. Most Americans are still optimistic. But Republicans are more pessimistic. People with over $75k are more pessimistic. People in more expensive metropolitan areas are more pessimistic. Rich people have also seen housing prices fall more. Etc.

Get it? The "blue state problem" is probably referring to places like the NYC suburbs, where we lost Sue Kelly’s seat and Nancy Johnson’s seat. Or Jerry Weller’s and Deb Pryce’s open seats.  Or places like (the crook) Pombo’s seat. Or the AZ seats we lost. Or the CO seats we lost. Etc.

The GOP economic message works when people are optimistic about the future. Core GOP voters — which we are losing anyways — are pessimistic. You think they are going to feel good about us?

Of course, the housing market is still collapsing. (but they said it was all over!) From today’s report by the realtors:

US existing home sales fell 8.0 percent in September as a persistent housing slump continued to weigh on the property market and the world’s biggest economy, an industry group said Wednesday.

The National Association of Realtors (NAR) said in a monthly snapshot that sales of existing homes and apartments tumbled to a seasonally adjusted rate of 5.04 million units in September from 5.48 million in August.

The drop was worse than expected. Most economists had only expected sales to decline to around 5.25 million.

Stripping out apartment sales, sales fell to their lowest level since January 1998. …

Economists are concerned the housing slowdown could put a brake on US economic growth.

Put slightly differently: when the realtors are telling you that people are pessimistic about the housing market, grab your parachute.

This is bad. The GOP is willfully not having an answer. Why don’t they get it?

It’s the economy stupid. Redux

James Pethokoukis, who used to work at IBD and whose writing seems to lean pretty much to the economic right, has a consistent critique of the GOP primary so far. His most recent post is entitled, "GOP Debate Strangely Ignores Financial Turmoil." To be clear, he’s talking about things like the near-doubling of the unemployment rate of the South Florida economy in the last 9 months. Read him. He knows what he is talking about. He has also argued repeatedly that 2008 could be a 1992 redux. Don’t believe him?

Check out some headlines from today and yesterday:

  • FT’s "US loan defaults widen." Meaning that people are defaulting on credit cards and car loans.
  • Dow Jones’ "Americans cashing in their 401(k)s." Meaning that people are struggling for money in the present, so they are giving up parts of their future. Often taking significant penalties.
  • Bloomberg’s "Countrywide to refinance up to $16b in loans." Meaning that Countrywide is being more lenient on defaults,  making it more likely that they are going to get their money back. As the article notes, "Lending has never been an altruistic business, but having lots of failed transactions on your books is never good".

Guys: The economy is going to be a serious issue. Hillary Clinton is, essentially, taking Iraq off the table as a general election issue. She is going to run on health care and the economy. And the field is being set. And the economy is tanking in important swing states.

And we are silent.