When Bernancke says it’s bad, you know you are in trouble

FT has a story about some of the problems:

Ben Bernanke, Federal Reserve chairman, said last week that the central bank now thinks the economy will not return to close to its trend rate of growth until some time into next year. Earlier on, policymakers had talked about a return to close to trend by the final quarters of this year.

An analyst is quoted in a front-page WaPo story a little bit more clearly:

"When people get scared, they tighten up all over," said A. Gary Shilling, president of the investment firm that bears his name. He said he expects housing prices to fall significantly further. "This kills consumer spending," he said of the credit crunch. "We think we’ll be in a recession as a result by the end of the year. And that will spread globally because U.S. consumers still are the buyers of first and last resort for the excess goods and services produced around the world."

Oy. And awareness of these is a lagging indicator.

Rudy versus Thompson: Two options for the party

I have been meaning to write about this for a while, but I hadn’t gotten my act together. Here’s my thesis: Rudy Giuliani and Fred Thompson represent two different models (perhaps even polarities) for where the party goes from here.

Rudy Giuliani appeals to certain kinds of swing voters, for example many kinds of Reagan Democrats with toughness, soccer/security moms with security and social moderation/tolerance/liberalism, etc. In some ways, in a Republican Party whose base is increasingly focused on security, Rudy Giuliani is a natural candidate of that new part of the coalition. And he is seen as "electable." And, as one Member of Congress who is leaning towards Giuliani put it the other day, "They guy was #3 in the Reagan Justice Department. How much of a squish could be really be?" In some sense, one could argue that Rudy is a transformational candidate for the party.

At the same time, Fred Thompson is increasingly appearing to be the candidate of social conservatives. (if that proposition had been offered in 2000, it would have been laughable) Perhaps more precisely, he is becoming a part of the candidate of the existing coalition, which is "with but not of" the social conservative movement. This is especially important. To see why, let’s talk a little bit more about what a Rudy Giuliani nominee would mean.

The first point to make is that the GOP, out of necessity would need to recruit a whole new set of volunteers. As I pointed out last week, pro-lifers form a significant portion of the GOP activist base. Those people will not volunteer for Rudy. Many of those activists won’t even vote for him. Let’s assume, for a second, that the GOP and the Giuliani campaign would be able to recruit a new activist base. This would shatter the grip that social conservative activists have on the grassroots of the party. As I said, transformative. This would be a repeat of the Goldwater revival of the grassroots or the Reagan/New Right revival of the GOP grassroots. Now, I am not sure that they can do that. The Giuliani campaign has very little ground game.

Second, and continuing to assume his success, the transition could be very, very bloody. We would find the volunteers for the swing states at the Presidential level. But could we produce them for Congressional races in places like KS-2, CA-4, CA-11, TX-22, NC-10, etc. In other words, places that won’t be in play at the Presidential level, but will be at the congressional level. The fact is, the nominee will determine the tone of the campaign. The groups can try to turnout volunteers, but I have trouble seeing literally thousands of home schoolers mobilizing for down-ballot races when Giuliani is at the top of the ticket. So I could easily imagine a scenario in which Giuliani succeeds at the top of the ticket , but we suffer down ballot because we can’t crank out of the phone calls in swing districts. But, over time, Giuliani should be able to attract, as President, a new set of volunteers to revert to a more normal situation. (note that Mitt Romney offers another problem. I predict that with him as the nominee we lose lots of close rust belt congressional seats)

The conclusion that I come to from this is that a Thompson candidacy is getting its support from conservative groups partly to maintain some level of control over the party apparatus. Thompson is not perfect. (who would think that the social conservative groups would rally behind a pro-campaign finance reform, anti-marriage amendment, anti-life amendment candidate?) But he does not flood the party with new activists. And, if you were to believe that the party will not keep the White House in 2008 — a safe bet –, then … he’s a safe bet to keep people in their positions of power.

Now, according to this analysis, I think that John McCain might be a happy medium (war hero, emphasizing security, and the most pro-life 1st tier candidate), but the distrust that the base has for him, especially on things like immigration, may be insurmountable.

Just a thought.

More bad housing data strike higher incomes

UPDATE: The Big Picture has details on the conference call announcing these results.

Countrywide Financial Corp. had very bad Q2 profit numbers:

The rise in credit-related costs were primarily related to the company’s investments in prime home equity loans, Mozilo said.

Unlike subprime loans, which target borrowers with spotty credit histories, prime loans are typically available only to those with solid credit profiles who are considered less risky.

The rise in delinquencies and projections of more defaults led Countrywide to write down the value of securities backed by prime home-equity loans by $388 million in the quarter, reducing earnings by 40 cents per share.

That lowered their Q2 profit by 50%. Now why would this be happening? Dumb people? Not exactly:

The company said the delinquencies were not due to borrowers struggling with mortgage interest rate resets, as many had expected.

Instead, the delinquencies have been largely due to people losing their jobs or similar factors, the company said. Those homeowners have been unable to refinance because the value on their home has fallen and the credit crunch has cut off other borrowing options.

"I do think it’s important to observe what happens going forward," Mozilo said. "We are experiencing home price depreciation almost like never before, with the exception of the Great Depression."

The story is that well-off or financially-reliable people are having a bad, bad time. Check out this story from the Chicago Tribune:

The Kaneville-based public-records tracker looked at foreclosures involving mortgages of $350,000 and higher and found 584 in those two counties in the first five months of 2007, more than double the 265 recorded in the same period last year and 117 in 2005. For comparison’s sake, the median home price in the Chicago area is $252,000.

In many cases, the owners had the mortgage for less than a year, said Patty Maier, Record Information’s data management director. "Are these cases of biting off more than they could chew or faced an unexpected personal crisis? Maybe a little of both," she said.

Those Republican voters aren’t voting this time. When people start saying things like "never before with the exception of the Great Depression" something is really, really serious.

Rudy on the air in IA and NH linked to falling polls?

So, Rudy Giuiliani is up on the air. The AP links these to Ames, but I wonder… Could these be linked to his falling poll numbers?

Stay with me for a second. I have long thought that MItt Romney’s numbers in the early states are somewhat inflated because he is on the air. Whenever you come off the air, your numbers fall again. Now, this is a theoretical statement. Perhaps Romney will simply stay on the air in the first 3-5 states through their primaries. In any case, when Romney went on the air, it was widely analyzed as being necessary to move the numbers.

So, in contrast, Rudy’s numbers may be falling, and he needs to move or stabilize his. Just a thought. Maybe not a good one. But what other theories are there for why they decided to go on the air now?

McCain blogger conference call

I missed the opening comments.

Rob Bluey asks about last night’s Democratic debate. Barack Obama said he would meet with leaders of bad countries. McCain called that perspective "naive". When we sit down with the Iranians, what’s the first topic? Israel? Nuclear weapons? Or IEDs that they export to Iraq?

Jennifer Rubin asked about the other GOP candidates "softening" on Iraq. He mentioned Romney’s "secret plan" for withdrawal.
Phil Klein asked Newt’s statement that McCain is on the verge of dropping out. McCain responds with "perhaps he has some clairvoyance that I am not aware of." "We are going to be fine. I am going to win this nomination." Phil asks a follow up about matching funds, and McCain responds that the question about taking matching funds has everything to do with winning strategy.

Ed Morrissey asks about AMT. McCain explains why the AMT is important. Would do it very quickly.

Skip Murphy asks about corporate taxes. McCain said he would not support the current Democratic proposals. McCain points out that a corporate tax increase would result in companies leaving the US. He would like there to be a BRAC-like commission to reduce

Jim Geraghty mentioned Barack Obama’s position on Iraq. Obama said that genocide would occur after we leave Iraq. McCain says that the Democratic position makes no sense. "It is curious logic to say that we must stop genocide in one part of the world, but it is ok in another part of the world." "It seems to me not a very sophisticated approach."

Betsy Newman asked about Kelo and property. McCain said that he would give a speech on Kelo and property rights.

Christopher Potter Stewart asks about energy policy. McCain responds that "climate change is a huge issue." "I think that we are coming around … the Republican Party is coming around on this issue." "Doesn’t get a lot of coverage. The nature of media is that it is all about Iraq…"

Pat Hynes says two more calls. Senator McCain corrects him to 5.

Ryan Sager asks about the early state strategy. McCain responds that Michigan and other states may matter quite a bit.  "The person who wins 2 out of 3 of the early states is inevitably the nominee."

Ed Morrissey asks about a Fair Tax. McCain responds about the system in general. "Fair or flat or whatever. It’s an abomination." McCain mentions the 22% Estonian Flat Tax. 99% income tax compliance.

Paul someone asks about wasted productivity and Sarbanes-Oxley and Senator DeMints proposal. McCain says that it is a good proposal. He also says that the problem is "a little harder than DeMint’s proposal." "Clearly Sarbox has had tremendous negative impact on Small and Medium sized enterprises."

Brownback’s autocalls against Tancredo and Romney

Sam Brownback’s campaign has been making phone calls in Iowa with solid facts. He has been attacking Tom Tancredo:

Brownback’s campaign has been making phone calls in Iowa that criticize Tancredo for taking campaign money from a Planned Parenthood backer.

Tancredo says Brownback is a longtime friend who “is well aware of my lifelong commitment to the unborn.”

Tancredo’s campaign has accused Brownback of trying to divert attention away from illegal immigration.

This is something that Brownback had mentioned previously. The point of this is pretty clearly to make Tancredo unpalatable to Iowa caucus-goers and Ames-goers. Brownback is playing a dangerous game. On the one hand, all of his facts are totally solid. On the other hand, that may not be enough for politics.

He also hits at Mitt Romney:

Mitt Romney is telling Iowans he is firmly pro-life. Nothing could be further from the truth,” said the Brownback campaign’s phone message.

The message goes on to attack the former Massachusetts governor’s wife, warning, “His wife, Ann, has contributed money to Planned Parenthood.”

Romney spokesman Tim Albrecht expressed outrage at what he called “despicable, negative phone calls.”

“They should apologize to Ann Romney and Governor Romney for this personal attack,” Albrecht said.

These seem to me to be aggressive but not wrong on the facts.  In the past, Brownback has repeatedly beat up Romney on this issue. And I have been struck that in previous years Romney’s position(s) would be prima facia not pro-life. But these are funny times for the GOP.

Also, the real goal here is probably the earned media from Romney. I wonder if Tancredo voters are basically anti-immigration voters, and they aren’t moving…

McCain’s general election numbers … improving

  Zogby Fox
Giuliani Hillary +5 Hillary +5
McCain Hillary +3 Hillary +2

Now, normally, I don’t blog about day to do day polls. But …

Is John McCain going up in general election polls against Hillary, compared to Giuliani? In both of these, McCain is within the margin of error with Hillary.

This could illustrate the problem with the favorability numbers that I just used. Sounds like it is likely that McCain’s support is being maintained among moderates while he is struggling somewhat among GOPers.

Romney vs. Thompson polling

The other day, I mentioned that Fred Thompson’s name ID was lower than Mitt Romney’s. I got some push back. Rasmussen has some numbers that confirm my assertion. This has been the case for a long, long time.

  GOP Overall
  Fav Unfav Image Unknown Fav Unfav
Giuliani 71 23 3.1 6 53 40
Thompson 61 17 3.6 23 44 31
Romney 56 31 1.8 13 37 43
McCain 54 39 1.4 7 44 46

Looking at these numbers, we see several things:

  1. Mitt Romney doesn’t have that much more room to grow. Very soon, more forward progress for him is going to depend on changing people’s minds about him, which is much, much harder than introducing him. And Romney’s continued negative press will make this hard. Now, his numbers will go up some when he advertises, so he has some hope. I want crosstabs to tell me who doesn’t like Romney.
  2. Fred Thompson is still not known by almost 1/4 GOPers. This is both an opportunity and a danger. If more stories like the abortion lobbyist story emerge, he might get introduced like Romney has been. But it seems that he can count on positive press.Romney
  3. Giuliani is cruising.
  4. McCain is struggling. Will probably take a significant change in context for him to come back.

These results, and the idea that Romney and Thompson are fighting for similar voters, suggests that Romney will continue to attack Thompson.

We also see that Thompson’s unfavorable among Democrats and/or independents offers him some hope in a general election.

The conclusions are the same that they’ve been in a while. Romney has been painted by something and someone. His general election candidacy is almost certainly not viable.  And to win the general, he probably has to go through Thompson.

It is just too early to tell for Thompson.

Now there’s another important issue: electoral votes. I am not sure that I see how either one of these guys really add electoral votes.

What happened to abortion and the GOP?

Once you take John McCain off the table, as many do, the top-tier of the GOP is left with three candidates. Two of them gave money to Planned Parenthood and one lobbied for an abortion group. And none of them support the Human Life Amendment, which, in many states, is the test for a Right to Life endorsement in state races. That’s an indictment about something in the GOP, although, to be frank, I am not sure exactly what. I think that the main phenomenon is a disconnect between pro-life voters and groups and candidates.

Either our pool of candidates is not particularly pro-life and they simply wear it as a costume, or they do not believe that you can get elected with a strong pro-life position. In any case, that is something that GOP candidates and GOP activists need to think deeply about. In many ways, I agree William Saletan’s argument that the right has won the abortion wars in an incremental fashion. Slowly the ball has moved to the right. And this is not just legally, but also in people’s minds. But the question for the pro-life movement is: where next? If they can’t keep their candidates in line, what can they do? This move has depended on a public debate on their terms. (meaning debating partial birth abortion and parental notification versus criminalization)

Last week, after a bunch of people left the McCain campaign, I got several calls from friends working for candidates in the 2nd tier. And they were despondent. They are strong, strong, strong pro-lifers, as are their candidates. They know that it would take a near miracle for their candidates to win the nomination, much less the White House. But they are in the fight for what they believe. And they always assumed that the GOP wouldn’t abandon them on this issue. What has sunk in with my friends is that, with the exit of John McCain, the GOP has lost their only first-tier unambiguous, if unenthusiastic, pro-lifer.

Now they aren’t so sure. And they aren’t so sure where this takes the party. For pro-lifers, there is no deeper issue than this one. But there is another perspective worth considering.

Pro-lifers form, in many cases, the core of the GOP volunteer base. It is not an accident that social moderates have fewer volunteers. And when the RNC ships people around prior to elections, social moderates are sent staffers, and social conservatives are sent pro-lifers, often in the form of home schoolers. Are pro-lifers going to turn out in the same way? Who will be the new volunteer base for the GOP? After all, the GOP turnout operation is, basically, a mechanical process that turns volunteer hours into votes. But without the volunteer hours, it is basically impossible to drive out those unreliable conservative voters.

In other words, the loss of strong pro-life voices could lead to a short-term losses for the GOP due to difficulties in turning out the unreliable parts of the base. I say short term because there would be some corrective over time and we would either find new volunteers or revert. But ….

And this is saying nothing of the swing voters. There are plenty of swing voters for whom abortion is what brings them into the GOP. (there are also swing voters for whom abortion drives people out)

Now one could argue that someone with strong appeal to moderates could change this dynamic by increasing moderate turnout. And, in many cases that is a real possibility. Arnold Schwarzenegger in California is a successful case-in-point. But that wasn’t even a close election. And 2008 is going to be a close election, no question about it. One might argue that Hillary Clinton will drive up GOP volunteer activity. I think there is something to that, but there are plenty of people in the GOP base who will not vote for a thrice-married, basically lapsed Catholic or a Mormon. I meet more every day.

Where do we go? Parties are coalitions. And an essential part of our coalition has been social conservatives and pro-lifers in the phone banks. Where do we go if these are our candidates?