10:47 PM: Wonder when Steele will comment. One way or another with the outcome, he probably will claim that his chairmanship = increased competitiveness in these kind of districts.
10:41 PM: So, what is the Big Broad Conclusion now, regardless of who actually takes the seat? When we set the stage tonight, we framed the race as a chance for one side or another to extrapolate from the results. But what do you extrapolate from essentially a dead heat?
From purely a standpoint of ease-on-the-ears from talking-point yakkers, the lack of certain conclusion is somewhat relieving. Eventually, one of Murphy or Tedisco will take this seat, and perhaps the absentees will push this into a more conclusive territory. But certainly nobody will be crowing about "what this says about Obama" on one side or the other because we probably won't know for a few days, by which time it'll be an afterthought, and what will be remembered is how razor-close it was. There won't be any electorate "referendum."
10:39 PM: Final precinct reports, Tedisco closes from 81 to 65 votes. Scott Murphy leads 77,344 to 77,279, or by 0.04%.
10:29 PM: While we wait, the average precinct size in Saratoga is 298 votes.
10:27 PM: Now we get to the part of the evening where subtle shifts in previously "100% reported" counties start to change. In Washington County, which was previously fully reported, added 252 Murphy votes and 220 Tedisco votes, so the overall numbers jumped. Two of the three outstanding Saratoga precincts came in, and Murphy holds an 81-vote lead with one Saratoga precinct outstanding "officially," and possibly some slight toggling of numbers in other counties that are officially in.
10:20 PM: Murphy closes strongly. With only 3 precincts in Saratoga unreported, Scott Murphy now leads Jim Tedisco by 252 votes, or 0.16%. There are roughly 6,000 uncounted absentee ballots.
10:15 PM: Getting ridiculous. Now 30 votes separate the candidates (Tedisco still leads) after 3 more Saratoga precincts report. Those had favored Tedisco strongly, but Murphy just made up 72 votes. Nobody's going to have anything definitive tonight.
10:11 PM: Big move for Murphy after 30 of the 38 outstanding Columbia precincts and all the remaining Delaware precincts report, almost certainly not going to be called tonight with absentees outstanding. With just under 147,000 votes counted, Tedisco leads by 102. Still 8 precincts in Columbia (Murphy edge) and 14 precincts in Saratoga (Tedisco edge) outstanding, and of course results are unofficial. The total lead is 50.03% to 49.97%.
10:07 PM: A few more Saratoga precincts report, and the extrapolation tightens a bit, to an 840-vote lead (pending absentees) for Tedisco. 534 of 610 in, or about 87.5% reporting.
10:04 PM: With 505 of 610 precincts in, there are three counties the AP says haven't fully reported all their precincts: 38 of 58 outstanding Columbia (favors Murphy by 12 points), 24 of 49 outstanding in Delaware county (favors Tedisco by 6 points) and 43 of 188 precincts left in Saratoga (favors Tedisco by 10 points). Updated extrapolation if the county percentages hold: Tedisco would win by 1445 votes.
9:56 PM: With 77% in, Tedisco still has a 809-vote lead. Extrapolating the counties that are out, were the county-wide percentages to hold with the outstanding precincts in each county, Tedisco would win by 1599 votes.
9:43 PM: Another 103 precincts come in; Tedisco has 856-vote lead out of around 102,000 counted, with 68% reporting.
9:36 PM: Murphy briefly pulled ahead, but now Tedisco has pushed it back out to an 803-vote lead, with 312 of 610 precincts reporting.
9:32 PM: Tedisco apparently took a page from Michael Steele's textbook and bused a bunch of minority volunteers to make phone calls today. With a third of the precincts reporting, Tedisco holds a stable 52%-48% lead, with no results from Columbia, Delaware or Washington counties.
9:23 PM: Early trends favoring Tedisco. With 15% overall in, the Republican leads by 720 votes, 52%-48%. Warren County, one of 10 counties wholly or partly in NY-20, is good for Murphy, but 37 of its 70 counties are counted (Murphy has 56%-44% lead there), whereas Saratoga has only 23 of 188 precincts counted and Tedisco holding his 59%-41% edge there.
9:19 PM: Tedisco has early 51%-49% lead, 6,093 to 5,757, with Saratoga County giving a big edge so far to Tedisco, 59%-41%.
At 9:00 eastern, the polls close in upstate New York's 20th Congressional District, where the special election between Democrat Scott Murphy and Republican Jim Tedisco is being held today. We'll update as results come in.
Lots of opinions on this one about its significance; undoubtedly there will be crowing from one side or the other about what the results say about Democrats and Republicans writ large nationally, and about what the country thinks of Obama and the stimulus package. Extrapolation is the name of tonight's game. Who will get to extrapolate?
If Tedisco pulls it out, the story is different now than it was a few weeks ago. Tedisco was better known in the district and Republican registration is well ahead of Democratic registration, the story would have been: "Favorite Wins." Now, after the only independent pollster showed dramatic movement over a series of polls toward the younger Murphy, including a final poll that had Murphy ahead by four, the story if Tedisco wins will be "referendum on Obama," even if those same voters give the president mid-60s approval ratings.
If Murphy wins, the focus will shift to more speculation about Steele, Democrats will do more Republican grave-dancing, and the larger conclusion will be: Republicans are unwise to block Obama.
Who wins a low-turnout special (compared to regular elections) really shouldn't be taken too seriously. But in a political world where perception is often reality and where the inside baseball implications are real, tonight is good theater.
By Renard Sexton, Geneva, Switzerland
I spent January of 2008 in northern India, looking at environment and energy issues, and writing about various roles that Indian NGOs have taken on in rural areas to fill in the power vacuum left by poor national governance. Wherever I visited, however, it was not climate change, alternative energy, or water pollution that the various professors, government officials and NGOs wanted to talk about.
It was Obama. It was Hillary. It was McCain and Romney. It was the incredible influence that US foreign and domestic policy has on the rest of the world.
I had just arrived in Delhi on the eve of the Iowa caucuses. When my colleagues and I awoke the following morning, because of the time difference, the final results were just streaming onto CNN – one of only two channels that were clear enough to watch on the hotel television.
On one channel was a live telecast of an India national team test cricket match – as close to a national religion as there is in India – and on the other was Obama’s victory speech in Des Moines. And no one – including the morning porter, whose understanding of English was frighteningly awful – was watching the test cricket match.
My colleague Jerry, a Californian by birth, Virginian by transplant, turned to me and said, “This is history, my friend.”
[Below: The morning commute in New Delhi, India -- an hour per kilometer is quite typical. Photo by R. Sexton, Jan 2008]
This experience launched a journey of watching US Presidential politics from afar, seeing the intricate, the hilarious, and the unexplainable. I occasionally took it in locally, when spending time in the Washington D.C. area, where I was born, raised, and educated. The rest of the time, I explored from abroad the tale of two fascinating narratives: the ways US politics impact the world, and the way the world impacts US politics.
A word of introduction – I am a young professional, living in Geneva, Switzerland, working for the United Nations Environment Programme, specifically on conflict and peacebuilding issues. I am also a fan, critic, and all around enthusiast of the US political world. My work and wanderlust allow me to travel often, to various parts of the world, and I take with me a critical eye.
This column aims to connect the US political universe to the billions that don’t live in North America. As it turns out, seeing the lives, dreams and prejudices of others teaches you a lot about what those things mean in your home context. I hope to share anecdotes, analysis, news, and ruminations to make FiveThirtyEight’s political coverage even better-rounded then it is already. I plan to do this in a conversational style, in keeping with the accessibility of FiveThirtyEight’s work.
The idea is to cover areas of interest to readers in North America, but also to bring narratives that are often not well known or understood stateside. As we get the ball rolling, I would encourage critical questions and suggestions.
Continuing our narrative of 2008 elections, an important thought to keep in mind is the incredible level of ownership that was felt by many members of the international community in the discourse and outcomes of the US race. It was not simply that there was an interest by decision-makers, who would be directly impacted by a new administration, but instead a palpable recognition that political events in the US make very powerful, international, waves. Indeed, even many regular citizens felt quite a stake in this election. I would be willing to bet that there were as many Obama-Biden stickers and t-shirts in Freetown, Sierra Leone as in Freeport, Maine.
[Below: Obama-Biden bumper sticker in Freetown, Sierra Leone, near the Wilberforce Barracks. Photo by R. Sexton, Feb 2009]
Back in India, there was a keen sense of excitement that a Democratic president would be very positive for the Indian economy, and status in the world. Historically, Republican administrations, as seen in the recent past, have tended to favor Pakistan vis-à-vis India, while Democratic presidencies have often been to India’s advantage. This has no small impact on regional relations, and the strength of each country’s global bargaining positions.
One well-respected university dean in north India put it this way: “I wish that we could vote for President. In fact, really, the world should all vote for US president. It’s really not fair."
A common misconception, however, perpetuated by the images of then Sen. Obama’s summer international tour and its grand reception in several European cities, is that the international community was universally and fanatically supportive of his candidacy. The truth is actually quite different.
Most moderates and liberals (using the American ideology terms) in Europe strongly favored Mdm. Clinton in the Democratic primary, and were sometimes quite slow to warm to Obama. A number of conservatives across Europe, and even some moderates in various countries were actually quite hostile to Obama’s candidacy. They preferred Sen. McCain’s harder stance on Russia, continued trade liberalization, and continued expansion of US/NATO military operations to counter so-called rogue regimes.
As well, many recipients of USAID funding for HIV/AIDS, transparency, and education in Africa and Asia were sad to see Pres. Bush leave office. He was responsible for the robust funding increases in HIV/AIDS work, and on this issue many NGOs, underfunded governments and local people were pleased with Bush’s emphasis. Some people have worried that a Democratic approach might spread funds too thinly in order to finance a larger portfolio of projects. The Bush administration’s more narrowly focused aid approach dealt more vigorously with a fewer number of core issues, which was successful in some areas.
The bottom line is that people in any country, in any region, have a vested interest in the politics of the US. And contrary to what some might think, events, opinions and realities around the world play a key role in the way US politics play out. Whether linked to economics in a globalized world, culture in the internet age, or geopolitical crises that test US military and diplomatic strength, these linkages are intimate and influential. Exploring these outside the sometimes bubble-like American context is quite productive for anyone who wants to better understand the issues at play, and their consequences.
Fast forward ten months to the middle of November - two weeks after the election. I am in Germany on business, working on various UN planning documents with partners in Berlin. Curious about the local reaction to the election that gripped the city just a few months earlier, I asked a few people what they thought about the results. Several people told me – in embarrassingly well-spoken English – that they were indeed pleased with the change in leadership, and impressed with the rapid change in direction that had taken place in the US. Some mentioned critiques on various platform pieces of the two candidates, often citing Iraq or climate change. Many said they had attended the summer rally that had pushed Germany to the edge of “Obamamania”, and said they strongly supported his candidacy.
However, particularly among the young, a certain realism had already set in, the honeymoon quickly over in the midst of a badly struggling German economy.
“I don’t care much about Obama anymore,” one university student told me, “I just want to have a job when I finish studying.” He paused to think, and then solemnly asked, “Are there jobs in America?”
I haven't provided the dates on the chart because they aren't important. The auto business is highly cyclical because consumers are buying expensive assets that last for years at a time. Nobody ever really has to buy a new car (they can buy a used one if their car breaks down), and therefore consumers are willing to hold on to their existing vehicles and wait out economic slumps. You can't do that with, say, a loaf of bread, or even something like a cellphone, which has a much shorter lifespan.
But you knew all of that already. The remarkable thing is that, once you account for the economic cycles, the trend for GM is exceptionally steady -- an exceptionally steady trend downward. There were still bad times thirty years ago -- but they weren't bad enough to threaten GM's survival, and conversely, the good times were much better. These are General Motors' operating margins by decade:
Average Annual Operating Margin, General MotorsIf I were an alien beaming down from Rigel-3 looking at this pattern -- an alien with an MBA degree -- my first guess is that it would reflect some sort of systemic problem, some chronic imbalance that magnified over time. Something, in other words, like the costs of GM's retiree pension and health care programs. It's difficult to get a precise figure on these so-called legacy costs, but they averaged about $7 billion per year between 1993 and 2007 and are probably at least $10 billion per year now. Considering that GM has never made as much as $10 billion in profit in a year and that its entire operating lossses in 2008 were $13.8 billion, you can see why this is a significant problem.
* Excludes one-time $20 billion accounting charge for retiree health benefits in 1992.
Of course, GM benefited by promising its employees access to lucrative retirement programs -- it benefited by being able to pay less to those employees in the form of salary. But whereas the benefits to GM came long ago, the costs come now. This, indeed, is the entire crux of the problem, as is cogently explained by this Washington Post article from 2005:
GM was willing to cut its employees some very attractive deals in the 1950s through the 1980s -- provided that they took them in the form of retirement benefits rather than salary, which wouldn't hit GM's books until much later and which until 1992 weren't even required to be carried on its balance sheets all, making its financial statements (superficially) more appealing to its shareholders. That health care costs have risen so substantially in the United States have made a bad matter worse.
GM began its slide down the slippery slope in 1950, when it began picking up costs for medical insurance, pensions and retiree benefits. There was huge risk to GM in taking on these obligations -- but that didn't show up as a cost or balance-sheet liability. By 1973, the UAW says, GM was paying the entire health insurance bill for its employees, survivors and retirees, and had agreed to "30 and out" early retirement that granted workers full pensions after 30 years on the job, regardless of age.
These problems began to surface about 15 years ago because regulators changed the accounting rules. In 1992, GM says, it took a $20 billion non-cash charge to recognize pension obligations. Evolving rules then put OPEB on the balance sheet. Now, these obligations -- call it a combined $170 billion for U.S. operations -- are fully visible. And out-of-pocket costs for health care are eating GM alive.
This issue is wrongly portrayed by both the liberal and the conservative media as one of management versus labor, when really it is a battle between General Motors past and General Motors present. In the 50s, 60s and 70s, everyone benefited: GM and its shareholders got the benefit of higher profit margins, and meanwhile, its employees benefited from GM's willingness to cut a bad deal -- for every dollar they were giving up in salary, those employees were getting a dollar and change back in retirement benefits. But now, everyone is hurting.
Nor does this provide for much in the way of solutions. The retirees might have benefited from GM's short-sightedness -- but they also worked hard Monday through Friday every week of in expectation of receiving the benefits that GM had promised them. From the standpoint of fairness, it would be much better to require GM to take the hit -- but there isn't much of GM left to punish, as its outstanding retiree obligations exceed its market capitalization many times over, and as the decision-makers who led GM into this position left the company decades ago. Today's employees at GM, and the unions that organize them, likewise don't have anything much to do with the problem -- most of the excess costs it requires to produce a Buick versus a Toyota come in the form of legacy costs, not what those employees are receiving in salary and benefits today. And the taxpayer is bound to to get screwed either way, either picking up the tab to bail out GM, or bearing the costs of the pension programs, which are guaranteed by the government (although the legacy health benefits aren't guaranteed).
Policy-makers, finally, share in the blame too. General Motors might be the latest casualty of the distorted incentives created by our employer-based health care system. Meanwhile, the government would probably improve incentives by providing a more generous Social Security guarantee in lieu of guaranteeing private pension programs. The whole idea of Social Security is that people do an inadequate job of saving when left to their own devices. But companies, even companies as big and proud as General Motors, are overly concerned with the present as well.
The initiative has been passed by four states totaling 50 electoral votes. In five other states totaling 36 electoral votes, there is "live" legislation that has been passed by one of the two state houses but not yet by the other. Finally, there is another tier of seven states, consisting of 112 electoral votes, that have had at least one chamber of their state houses pass the Compact at some point in the past, but not in the current legislative session:
Tier 1: Signed into law (50 electoral votes)
New Jersey (15)
Tier 2: Passed by one house, currently pending before other house (36 electoral votes)
Tier 3: Passed by at least one house in past (112 electoral votes)
California (55, vetoed by governor)
Michigan (17, not voted on by senate)
North Carolina (15, not voted on by house)
Massachusetts (12, not sent to governor)
New Mexico (5, not voted on by senate)
Maine (4, not voted on by house)
Rhode Island (4, vetoed by governor)
What's interesting about the list of states is that have taken some action on the Compact is how blue they are. Red states have been very reluctant to move on the bill; concomitantly, the bill has been vetoed by Republican governors in certain blue states like California and Rhode Island. People, obviously, are going to remember 2000 for a very long time, in which Al Gore was screwed by the Electoral College. But throughout most of 2008, our simulations showed that the Democrats, not the Republicans, had a structural advantage in the Electoral College, something which was also apparent in 2004 when John Kerry nearly won the Electoral College in spite of trailing in the national popular vote by 2.5 points.
There are presently a couple of particularly interesting tests for the Compact, including purple Colorado, where the state house has passed the bill and the state senate is deciding whether to do the same, and red Arkansas, which is in a parallel situation.
For reasons that should be apparent, I'm going to take the fifth on whether I think the Compact is a good idea. But its chances of success, at least in the near-term, appear to me to be relatively slim. The idea of the Compact has been around since 2001, but the states that have had even one of their houses approve the bill at any point in time total 198 electoral votes, a fair bit shy of the 270 threshold. In addition, the Compact, if it gained a toehold, would almost certainly become the subject of a Constitutional challenge (.pdf).
What would it take for there to be a real chance of abolishing (or end-arounding, as the Compact seeks to do) the Electoral College? I think it would take two elections in relatively rapid succession in which there's a popular:electoral split, particularly if these two elections are won by candidates of opposite parties. The memories of 2000 should linger for a few more cycles, and so if there's another such occurrence before, say, 2020 or 2024, things could get very interesting.
Until and unless that occurs, however, my guess is that at least one of the two parties will see the Electoral College as being advantageous to them at any given time, as will most or all of the swing states. This will make it difficult for the Compact to garner a majority.
I have a great deal of love for Chicago, where I've been for the past 13 years, and the Midwest, where I've been essentially my entire life. In the Internet era, one can cover American politics from almost anywhere: some extremely talented writers do it from places like Brazil and Mexico. Nevertheless, as I've watched the number of 212 and 646 area codes proliferate in my Blackberry (see incredibly dorky chart below), and become intimately familiar with the concession stands at LaGuardia Airport (avoid the Wendy's by Terminal D), I've realized that there's an if-you-can't-beat-'em, join-'em quality to New York City -- and I've decided to join 'em.
All right, truth be told, the decision isn't nearly as scientific as all of that. I love cities -- their intrinsic vitality, their polyphony of cultures, their food (!) -- and as a lover of cities, I'd feel stupid if I were lying on my deathbed and hadn't lived in New York for at least a couple of years.
As a result of this, posting volumes are going to be a little bit light over the next few days, although Sean (who sold out and moved to Washington D.C. in January) and Andrew (who already lives in New York) should keep things moving relatively smoothly. In the meantime, Go Green!, and things should be more or less back to normal by the end of the week.
But Senator Dianne Feinstein of California, who has declined to co-sponsor EFCA and may not support it at all? This is much harder to explain. Feinstein is not nearly as liberal as the lay public assumes. Nevertheless, she has an 87 percent lifetime score (.pdf) from the AFL-CIO, and hails from progressive California, which has one of the highest unionization rates in the country. This is not the profile of someone whom you'd think might vote against the bill that labor considers its most important priority in decades. So, what gives?
Here's my theory. California is holding a gubernatorial race of 2010, in which Feinstein is a prospective candidate. In fact, according to the Field Poll (.pdf), Feinstein is probably the favorite in the Democratic primary if she chooses to enter.
But as is always the case in California, the field is going to be very crowded. Lieutenant Governor John Garamendi has already entered, and a number of higher-profile candidates may be on their way, including Los Angeles Mayor Antonio Villariagosa, San Francisco Mayer Gavin Newsom, and Attorney General (and former Governor) Jerry Brown.
Villariagoa, Newsom, and Brown are all likely to get plenty of support from unions. Feinstein, even before this vote on EFCA, probably was not going to. So there's not that much for her to lose by pissing off labor: even if they're angry with her, that leaves open the question of which of the several alternatives they'd urge their constituents to vote for instead. Odds are that the various unions will split their endorsements. Protest votes don't work very well in multi-candidate races.
And what is there for Feinstein to gain by this? Well, money. Winning a race in a state as large and diverse as California is exceptionally expensive. Moreover, campaign finance laws are much laxer in California. Individuals and PACs can contribute up to $24,100 (.pdf) in California in both the primary and the general election, much higher than the $2,300 federal limit. By hedging her bets on EFCA, Feinstein stands to make herself more attractive to corporate contributors. She might also differentiate herself as the moderate candidate in a field of liberals, which is not a bad strategy since California's primaries are open to independent and Republican voters.
So the upshot of her lukewarmness on EFCA is this, I think: Dianne Feinstein is running for governor.
____ 3/27 3/12 2/26Siena is the only non-partisan pollster to have surveyed this race. (The Tedisco camp disputes the result, citing internal polling that still shows them with a lead). Siena's record as a pollster is, to be frank, fairly average, although this particular race is almost literally in their back yard, as NY-20 wraps around the town of Loudonville, where Siena College is located. The usual caveats about polling special elections, which feature very low turnout and are notoriously hard to predict, also apply.
Tedisco (R) 43% 45% 46%
Murphy (D) 47% 41% 34%
Nevertheless, we shouldn't be horribly surprised if the Democrat has turned this race into a toss-up. In the past three Presidential elections, NY-20 been slightly more Republican than the country as a whole -- but only slightly so, and it is arguably becoming less so. And of course, the country as a whole has been Democratic. Note that Barack Obama received the majority of NY-20's vote in November:
VOTE SHARE RECEIVED BY DEMOCRATIC CANDIDATEDemocrats have generally been winning about 60% of the elections for the Congress in districts with PVI's of +2 or +3 over the past couple of electoral cycles; this is how they have earned their majority. So while, on the one hand, the blue team may sneak away with a victory here, they are probably also somewhat guilty of having downplayed expectations.
Year NY-20 USA PVI
2008 (Obama) 51% 53% R+2
2004 (Kerry) 46% 48% R+2
2000 (Gore) 44% 48% R+4
UPDATE: Jeff, in the comments section, asks:
Are we really supposed to believe that only 64% of republicans are Tedisco voters, as this poll claims? Come on.Well, I don't know. But note that the poll also implies that Republicans have a fairly substantial registration advantage in the district. According to the poll, Murphy has a much larger lead among Democratic voters (84-11) than Tedisco has among Republicans (64-27), while the two candidates are essentially tied among independents (Tedisco leads 45-44). If you assumed that the district was composed of, say, 40% Republicans, 40% Democrats and 20% independents, then Murphy would have a 53-39 lead according to the poll's internals. But in fact, the poll only shows Murphy with a 4-point lead. To arrive at those numbers, there have to be quite a bit more registered Republicans than Democrats in Siena's sample.
So suppose that Siena is right -- and I have no reason to doubt them -- that Republicans have a substantial registration advantage in NY-20? What do we know about those Republicans? Well, we know that a fair number of them probably voted for Barack Obama, because Barack Obama won this district, and we know that a fair number of them probably voted for Kirsten Gillibrand, because Kirsten Gillibrand won this district. So crossing over to vote for a Democratic candidate in elections for national office is nothing new for these Republicans; some of them have been doing it routinely.
Personally, I suspect that the relatively high incidence of Republican registration in NY-20 has more to do with politics at the state level. If you're a voter in NY-20, your vote frankly isn't going to matter much for the Presidency and it isn't going to matter much for the U.S. Senate -- the Democrat is going to win those elections. It will matter some of course, for the U.S. Congress. But the most important vote you cast may be for the New York State Senate, which has been almost evenly divided between the two parties, largely along upstate versus NYC lines. That is, the Republicanness of the district may partly reflect its conservatism relative to New York City and will not necessarily translate into elections for national office.
Think there might be a few rich grannies pulled off a few respirators on December 31, 2010?
A pair of Australian economists, who studied the repeal of that country's inheritance tax in 1979, seem to think there very well could be. They found (.pdf) evidence of so-called "death elasticity": statistically significant aberrations in reported death rates in Australia on and around June 30, 1979, when the repeal of the estate tax took effect. A relatively high number of Australians who would have been subject to the tax found a way to postpone their deaths until after the 30th. (Or, just as plausibly, their relatives found ways to conceal the moment of passing on their death certificates).
Postponement of one's death, of course, isn't such a problem. But because of this one-year glitch in the tax code, it will actually incentivize dying in 2010 instead of 2011. And it's undoubtedly much easier to speed up one's date of death than to slow it down. Talk about perverse incentives.
Quick summary: No, I don't think exit polls are necessarily better and, in any case, I don't yet have the raw exit poll data. But I did have the raw data from the Pew polls, so that what I used. Pew polls are good. But Kos did get me on New Hampshire. As we continue to analyze further data, I don't think our maps will change by much but they will certainly change in some details (notably, whites in N.H.). Also, now I'm convinced that it's better to use some range of shading to indicate the close calls, so that people don't think I'm expressing 100% confidence in the color of each state.
Between 1992 and 2007, pay in the securities industry roughly doubled in real dollar terms, from an already-high $119,064 per employee to an extraordinarily high $234,594 per person. That 97 percent increase was by far the highest of any of the 61 industry sub-classifications tracked by the Bureau of Labor Statistics (the average American worker's pay increased by about 20 percent over this period).
Why did Wall Street pay increase so substantially during this period? There are a lot of interesting hypotheses, but the chart below, taken from a new paper (.pdf) written by Thomas Philippon of New York University and Ariell Reshef of the University of Virginia, provides perhaps the most compelling case. There has historically been a very strong relationship, they find, between the amount of deregulation in the financial services sector and the pay that its employees receive:
Wall Street pay has been very high before -- in the Pre-Depression Era that was characterized, like the era we find ourselves in now, by extremely lax regulation. Philippon and Reshef hypothesize that "regulation inhibits the ability to exploit the creativity and innovation of educated and skilled workers [while] deregulation unleashes creativity and innovation and increases demand". In other words, the laxer the regulatory environment, the more ways there are to try and beat the system -- and the more Wall Street is willing to pay for people who can figure out ways to do so. Products like credit default swaps, for instance, are extremely complex and require much skill to arbitrage, far more so than the trading of ordinary stocks and bonds.
Even accounting for the fact that laxer regulatory environments increase the premium on highly-skilled workers, however, Philippon and Reshef find that professionals in the securities industry are overpaid. Specifically, they are overpaid by roughly 40% relative to their educational backgrounds and risk of job loss. This can be inferred, for example, by comparing the pay of Wall Street employees to that of engineers, two jobs that require broadly similar skill sets -- the gap between engineer and financier pay has been increasing:
One thing that Philippon and Reshef don't address is why and how this discrepancy has managed to sustain itself. Say that you have a set of identical twins, Marvin and Melvin; Marvin works on Wall Street and makes $140,000 per year, and Melvin works as an engineer and makes $100,000 per year. What should happen, in an efficient market, is that Melvin will undercut Marvin; he'd be willing to do Marvin's job for, say, $110,000 per year. This would save the firm $30K per year and so they should hire Melvin. But this has largely not been what's happening.
I have a pet theory about why this has occurred. My hunch is that the financial services sector has been artificially limiting its labor supply by confining its hiring to an extremely small number of elite undergraduate and business schools, such as the Ivy League, the U. of Chicago, Stanford and M.I.T. Maybe the reason that Marvin is an investment banker and Melvin an engineer is because Marvin went to Yale and Melvin went to Purdue, and the bank only recruits at Yale and not at Purdue. Indeed, while the participation of Ivy League graduates in leadership positions in non-financial companies has been decreasing, the same has not been true at investment banks. One can easily imagine, moreover, how this trend could be self-perpetuating. You get a bunch of Harvard, Yale and Stanford grads in management positions at investment banks, and they're probably going to be predisposed to hire other Harvard, Yale and Stanford grads.
Over time, there would theoretically be incentives for this pattern to correct itself: one firm would hire a bunch of really smart state school kids, realize it was getting better work for less pay, and provide more value to its shareholders. However, firms in extremely profitable industries -- and until about 18 months ago, investment banking was extremely profitable -- may not feel the same imperatives to optimize their labor costs. In the real world, managers are more sensitive to the difference between a $10 million profit and a $10 million loss than they are to the difference between a $40 million profit and a $20 million profit, even though economically speaking the savings ($20 million) are the same.
This is something I have observed, for example, in the baseball industry: throughout most of the 1990s and the 2000s, baseball teams were almost certainly paying too much for free agent talent. But they were also making money hand over fist, and so the excesses were easy to ignore. Now that the recession has placed more profitability pressure on major league clubs, they have become much more efficient about optimizing their pay structures, and free agent salaries have declined.
But back to the point at hand: it may not only be that laxer regulation triggers greater compensation, but also that greater compensation triggers laxer regulation. As Philippon and Reshef speculate:
In retrospect, it is clear that regulators did not have the human capital to keep up with the financial industry, and to understand it well enough to be able to exert effective regulation. Given the wage premia that we document, it was impossible for regulators to attract and retain highly-skilled financial workers, because they could not compete with private sector wages. Our approach therefore provides an explanation for regulatory failures.That is, the excessive wages paid by Wall Street not only lure talent away from other parts of the private sector, but also from the public sector, where employees are subject to government wage controls. The very people who might be the most capable of enforcing regulations on the banks instead wind up working for them.
This is a very real problem. Some of the work that I did in my first job after college at KPMG involved valuing intellectual property in conjunction with international tax disputes. We had our economists, and the IRS had theirs. The thing was, however, that our economists were better than the IRS's, because if someone at the IRS was any good, we'd hire them away and treble their salary. Part of a good regulatory reform plan, then, would be to increase the salaries paid to employees at institutions like the Fed, the Treasury, the IRS, and the FDIC.
The more general point, however, is that if the Obama administration is serious about regulating the banks, they might also find that this places downward pressure on pay within the industry. What seems like two fights -- on executive pay and regulation -- may really be just one.
I’m in a fantasy baseball league, in fact, that’s chock full of Wall Street Bankers. And once, several years ago, I was interviewed by some Wall Street Bankers for a Wall Street hedge fund job. They didn’t end up offering me this position (and actually, the job was in Connecticut), but they did take me to a Yankees game and a nice Italian meal.
More alarmingly, my best friend from college is a former Wall Street Banker. This friend, whom I’ll identify only by the pseudonym Vijay, worked as an analyst for Salomon Smith Barney for several years in New York City, although he’s since moved on to private equity and then gone back to business school.
From looking at him, you wouldn’t know that Vijay was a Wall Street Banker. He’s an unassuming guy, into indie rock and cheap beer. He doesn’t eat meat and his politics are fairly liberal, although slightly to the right of mine.
While employed on Wall Street, Vijay routinely worked in excess of 100 hours a week. His apartment in the Financial District, a few blocks away from Ground Zero, consisted of three video gaming consoles, four alarm clocks, and a mattress; he was virtually never home, and so he had little need for anything else. I remember one occasion, when I was visiting my sister in New York City and we were attempting to drink cheap beer with Vijay, when he received a message on his Blackberry and abruptly had to dart off to Kinko’s at 11:30 on Sunday evening to fax a document to a client. I thought this was Extremely Uncool –- my sister and I still talk about the “Kinko’s Incident” -- but Vijay is nothing if not hard-working.
Vijay is a rather inconspicuous consumer, however, still driving the same beat-up Honda Civic that we used to take on midnight runs to Taco & Burrito Palace while in college. Although he was once something of a cheapskate, he has since become generous to a fault: the cheap beer is usually on him. While working in private equity, Vijay took time out of his day to teach inner-city high schoolers about finance and economics, and took a year off in between jobs to see his family and volunteer for the Red Cross in India.
Vijay has his vices -- if he didn't, he wouldn't be my friend -- and his prejudices -- an irrational disdain for the borough of Brooklyn, for instance. But it is hard for me, when I read blanket assertions that Wall Street businesspeople are “greedy, selfish and utterly immoral”, not to think of Vijay, who is not really any of those things. True, Vijay is perhaps slightly more motivated by financial considerations than I am (but only slightly so). He attributes this to his Indian-American upbringing, which emphasizes the idea that money is hard to make, and so you do so when you can, and then use it to provide generously for your family and friends. This is his version of the American Dream, which is slightly different from mine, and is probably slightly different from yours, but not something I can find great fault with.
It is quite possible to believe each of the following things -- that the tax code is not as progressive as it ought to be; that high-level executives at major companies make, on average, more than they ultimately generate in profits for their shareholders; that the working class have too little influence over American politics and the upper class too much, and that banks and other financial institutions are inadequately regulated -– without having to demonize the people who work on Wall Street, the vast majority of whom are like Vijay: hard-working and ethical folks, maybe a little money-obsessed, but most of whom voted in November for a President who vowed to raise their taxes.
In our private lives, we all have the right to determine whom we do and do not choose to associate with; personally, I’ve found that there’s relatively little correlation between someone’s occupation and their character. But these sorts of judgments do not, in my view, have a place in infringing upon public policy, any more than judgments about race, religion, gender or sexual orientation do. The Supreme Court has sometimes interpreted the phrase “pursuit of happiness” in the Declaration of Independence to refer to the right to pursue the vocation of one’s choosing without undue interference. If we want to tax the rich more, let’s tax the rich more, but let’s not single out individuals in particular occupations or who work for particular companies: let’s tax millionaire bankers and millionaire baseball players, millionaire hedge fund managers and millionaire dentists. If we want to be more vigilant about white-collar crime, let’s be so –- in fact, let’s throw away the lock and key, and treat white-collar criminals every bit as harshly as do blue-collar criminals. But let’s not presume that anyone who works in a particular occupation is engaged in criminal conduct.
And as for the notion that Wall Street Bankers are greedy -- your damned right they're greedy, if by greed you mean wanting to maximize profits for themselves and/or their firms. Most of us are greedy, within reasonable limits, when it comes to our professional lives; less so, hopefully, in our personal ones. I'm borrowing someone else's punchline, but we should be no more surprised by the presence of greed than we are by the presence of gravity. Where that greed has pernicious effects, we should regulate around it, building stronger structures to withstand its impact. But the financial crisis reflects, as I have written, a market failure rather than a moral one.
Unsurprisingly, McCain did better among whites than among all voters. In a refrain already familiar to regular readers, I decline to offer explanation or interpretation. There's been enough discussion of the white vote that I think it's a useful contribution to present these (slightly processed) data and give you more information to help you make your own conclusions.
See here for more details on what we did.
There are at least six reasons why a bill that passed with more than 75 pecent of the House's vote now has only the faintest of chances of passing in the Senate:
1. The White House doesn't like it. The Administration has gone from damning the House bill with faint praise to more explicit disavowals of its logic, and from what I've heard from people in consultation with the White House, their private reluctance on the matter is probably even greater. Ten of the 12 cosponsors of the Senate version of the bill are from states that Obama won in November. If the White House wants to bury the bill, logic would dictate that it probably can.
2. Obama largely avoided political fallout from the AIG bonus scandal. The hypothesis that we reached over the weekend -- that voters are largely not blaming Barack Obama for the AIG bonuses -- now has some polling evidence to back it up. According to Gallup, just 7 percent of voters principally blame Obama for the bonuses, while 46 percent blame AIG management and 19 percent blame the Congress. Thus, there would no longer appear to be an imperative to pass a bill as a "least-bad" alternative to defend against a precipitous decline in Obama's approval rating.
3. The bill isn't actually all that popular. A CBS poll released on Monday reveals that, while 77 percent of the public thinks that the government should try and recover AIG's bonus money in the abstract, support drops to 51 percent (versus 44 percent opposed) when voters are asked about the more specific proposal of "tax[ing] bonuses paid to executives at the rate of 90% if their company is receiving federal bailout money" -- essentially what the House passed last week. Because the House was afraid of constitutional trouble if it drafted a bill which was too narrow, it instead wound up drafting a bill that is broader but materially less popular.
4. Just two senators can kill it. In recent legislative years, the House has voted to approve about twice as many bills per legislative session as the Senate. This is by no means a surprise in consideration of the more aggressive use of the filibuster and the more languid pace of life in the Upper Chamber. Nevertheless, it should serve as a reminder that the Senate has lots of lots of ways to kill a bill if it so desires. The easiest way for the Senate to accomplish this is through the practice of the hold, by which any one Senator can quash a bill unless the Majority Leader is willing to take a cloture (filibuster-breaking) vote to advance it. Which two senators, then, could effectively kill the bill? Harry Reid, by refusing to take a cloture vote, plus any of the other 98 senators, by placing a hold on it. (Paging Dr. Coburn. Dr. Coburn to the Senate Cloakroom...)
5. The Obama-Geithner plan is probably a "go". For better or for worse, the enthusiastic response of equities markets to the Public-Private Investment Program crafted by Treasury Secterary Tim Geithner has probably entrenched it: it may or may not succeed, but it will very likely be attempted in something resembling its present form. As potential private participants in the PPIP (say that five times fast) have expressed skepticism about participating in the plan if they are subject to what they perceive to be capricious or punitive actions coming from the Congress, the Senate may be disinclined to rock the boat just as the plan is being rolled out.
6. Cooler heads may be prevailing. Lastly, as the AIG controversy recedes somewhat from the public consciousness and as some of the bonus money has been given back by its recipients, the Senate may tend to consider the bill more on its economic merits and less on its political ones. But it is hard to identify any serious economist who thinks the bill makes economic sense. Meanwhile, the decision to levy 90 percent taxes (or 70 percent, as the Senate version proposes) on particular individuals may have been one of those had-to-be-there, gravity-defying moments that is unlikely to be replicated except under intense and somewhat unusual political pressures.
With these six factors working against it, I would guess that the bill has not more than a 5-10 percent chance of passing in something resembling its present form, though the prospects forthe bill passing in any form (i.e. a slap-on-the-wrist, severely watered-down version) are probably a little higher.
This does not mean, however, that the bailout skeptics won't have gotten something for their trouble. As Chris Bowers points out, the bonus controversy has probably shifted the needle from "difficult" to "near-impossible" when it comes to Congress' willingness to approve additional bailout monies, a fact which the White House seems to be keenly aware of and which may have informed their decision to proceed as they have (the PPIP plan will not require Congressional approval.) Chris, in fact, goes so far as to declare the bailout window is entirely closed. I think that is a little overclaimed -- I can imagine the Senate approving a "token" sum of $100 billion or so if the Obama-Geithner plan is deemed to be a success (the existing plan is almost certainly too small to cover for all of the troubled assets.) I can also imagine the Senate being willing to agree to additional bailout funds given extremely stringent limits on compensation -- limits which Wall Street would probably be unwilling to accept.
But Chris's contention is basically correct. While the bonus tax bill is probably dead, its legacy may continue to resonate for some time.
Personally, I was hoping that Obama would be probed in a bit more depth about the specifics of the Geithner plan. But -- and this is not meant in a bad way -- that's not the real area of expertise of the people in the room, and some of the folks who plausibly might have been exceptions (the reporters from the Wall Street Journal and Bloomberg, for instance) weren't offered the opportunity to ask questions.
8:00 PM. I thought Obama closed relatively strongly there. He certainly seems highly engaged by the challenges of the moment (as one hopes that any President would be), even if he's a bit worn by them. But there's a seed of something else too: he's motivated to prove his doubters wrong. One needs to remember that Obama was always more of a counter-puncher than a brawler during the campaign.
7:51 PM. Although, on second thought, he sounded like he was about ready to fall asleep when that Washington Times guy asked his follow-up on stem cells.
7:47 PM. I don't know what this means, but Obama is clearly more comfortable taking questions from some of he less-heralded members of the media than from the Big 4 (Tapper, Reid, Todd, Garrett).
7:37 PM. That was Ed Henry's most embarrassing moment since the gum-throwing incident, although also not one of the President's better moments.
7:27 PM. The MSM takeaway on this, among other things, is likely to be that Obama seems tired and weary, although I don't think that should be mistaken for a lack of self-assurance.
7:20 PM. Granted, they're not nearly as important as Jake Tapper, but what would this press conference look like if Obama were taking questions from a room full of 100 economists?
As of this writing, the Pollster.com average has Barack Obama's numbers at 59.3 percent approve and 33.8 percent disapprove; the Real Clear Politics average is slightly more favorable to Obama, at 61.2 percent approve and 30.5 percent disapprove.
So a Zogby poll that put Obama's numbers at roughly 50-50 would be a significant outlier. Outliers are nothing new, however, when it comes to Zogby polls. They are, in fact, the rule and not the exception.
Let me qualify this a bit: Zogby International conducts two types of polls. One type are conventional telephone polls. Zogby's telephone polls, while prone to somewhat wild fluctuations and subject to their share of erratic results (such as predicting a 13-point win for Barack Obama in the California primary; Obama lost by 9 points), are actually not terrible, and did fairly well on November 4th.
Zogby, however, also conducts Internet-based polls. These polls are conducted among users who volunteer to participate in them, first by signing up at the Zogby website (you can do so yourself here) and then by responding to an e-mail solicitation. These Internet polls, to the extent they rely on voluntary participation, violate the most basic precept of survey research, which is that of the random sample. And as you might infer, they obtain absolutely terrible results.
Because I'm writing this post ahead of time, I'm not 100% certain that the particular poll in question is an Internet poll. Zogby, which is probably aware of the poor reputation of its Internet polls, has begun to go to some length to conceal their origin, usually reserving notification that the poll was conducted online for the fine print. However, I'm about 99.8% certain that this is an Internet poll, as all of the polling that Zogby has recently conducted on Presidential approval have been of the Internet variety. And that polling, by the way, has produced some very strange results: in an Internet poll conducted from January 22-26, for example, in the immediate aftermath of Barack Obama's inauguration, Zogby had Obama's job approval at 52/29, while the average of polls from five other agencies (Gallup, Hotline, Rasmussen, FOX and Democracy Corps) conducted at the same time put the numbers at avergae of 62/19.
Let's take a look at the track record of Zogby's Internet polling. Zogby conducted his last series of Internet polls for last year's Presidential election in mid-October. He missed 3 of 11 states, and was off on the final margin by an average of 5.4 points.
These are not good results -- the average miss on election day among all presidential polls in these states was around 2,5 points; Zogby Interactive's average error was twice that. And Zogby is probably fortunate that he confined his polling to these 11 states only. When he had conducted a broader series of Internet polling back in June, it had produced some truly head-scratching results:
Note that Zogby had Barack Obama winning states such as Arkansas, Arizona and South Carolina, results which no other pollster saw at any point during the election cycle. He also had Obama polling within 5 points of John McCain in Oklahoma, which Obama would go on to lose by 31 points, and Tennessee, which he'd lose by 15.
Did the Zogby Internet polls just have a bad year? No. If anything, their performance was much improved from 2006, when Zogby had surveyed a wider number of contests. Below are the Internet polls that Zogby put out on October 27, 2006 in advance of that year's senatorial elections. His average miss was 8.7 points, including six misses of 10 points or more, and one miss of almost 30 points:
Zogby's gubernatorial polling that year was similarly error-prone. His Internet polls missed the margin in 19 gubernatorial contests by an average of 7.7 points, and he called 5 of the 19 election wrong, including a couple of states (like Arkansas, Colorado and Wisconsin) where the outcome was never in much doubt.
All told, between 48 contests that he's surveyed over the past two election cycles, Zogby's Internet polls have been off by an average of 7.6 points. This is an extreme outlier with respect to absolutely anyone else in the polling community.
These Internet polls, simply put, are not scientific and should not be published by any legitimate news organization, at least not without an asterisk the size of an Alex Rodriguez steroidal syringe. But I'll bet you that Matt Drudge already has the siren cued up by now.
This is the amount of debt per US family, in inflation-adjusted 2007 dollars, as according to the Federal Reserve's triennial Survey of Consumer Finances.
Per-family household debt increased by about 130% in real dollars between 1989 and 2007, from roughly $42,000 per family in 1989 to $97,000 eighteen years later. Most of that increase has come during the past six or seven years -- household debt increased by 52% between 2001 and 2007 alone.
Almost all of the debt (about 85%) falls into the category that the Fed calls "secured by residential property" -- which means mortgages and home-equity loans. Credit card debt, while having increased roughly threefold since 1989, is overall a very minor part of the problem, averaging about $3,400 per family. (We could have paid off every credit card bill in America for the cost of the TARP program.) "Other" types of debt, which I gather are mostly things like automotive loans and student financing, have also increased somewhat, but not nearly at the rate of mortgages.
All of his wasn't that much of a problem so long as the value of the housing stock was appreciating at 10 or 15% per year, keeping pace with the additional debt that households were assuming. But of course, it stopped doing so about 2-3 years ago. Translation: look out below. When people talk about the destruction of the household balance sheet, this is what they're referring to (or at least what they ought to be referring to).
The collapse of the housing bubble was obviously a very important event in precipitating the current economic crisis. There is some debate among economists about just how important it was; I tend to side with folks like Dean Baker in thinking it was a very large problem indeed.
If so, however, it makes the matter of attributing blame for the economic crisis a little bit more complicated. Clearly, for instance, credit default swaps, which bankrupted AIG, were poorly conceived of and improperly regulated instruments. But their collapse was triggered by the correction in housing prices. AIG bought into the fiction that the housing bubble wasn't really a bubble, but save for a few prescient economists like Baker, Paul Krugman and Bob Schiller, so did most everyone else.
I know it isn't in vogue to say this, but I think the manifest excesses of Wall Street have made them perhaps too easy a target in assigning blame for the economic collapse. A more appropriate focal point is probably the Federal Reserve, which many economists believe kept interest rates far lower than they ought to have been, contributing to the climate of cheap credit that triggered the housing boom (and bust). The mortgage companies themselves, of course, also exercised exceptionally poor judgment -- as did the media, with its Flip-This-House fetishism, which perpetuated the fiction that one of the biggest asset price bubbles in American history was in fact business as usual. Whether to assign any blame to the homebuyer himself is probably not important. It's tempting to say: if Joe the Homeowner had only read Schiller, none of this would have happened! But it's difficult to expect the consumer to behave rationally when they were getting such bad information from their televisions and their elected (and appointed) officials.
Is there reason for Democrats to worry? Well: yes, to a degree, although the fears are probably also exaggerated.
For one thing, we should keep in mind that the party maintaining control of the Presidency almost always loses seats at the midterm elections. Since World War II, the incumbent party has lost an average of 23 House seats at the midterms, although the pattern has tended to be somewhat hit-and-miss in recent cycles (with the incumbent party taking a big hit in 1982, 1994 and 2006, but faring relatively well in 1986, 1990, 1998 and 2002). So the baseline expectation is that the Democrats will lose ground.
Of course, since the House re-elects all of its members every two years, a tie on the generic ballot would imply not merely that Democrats will lose seats, but also that they'll potentially lose their majority, give or take a few seats depending on how that vote was distributed across different races all over the country. Such an outcome is hard to reconcile with the fact that Democrats continue to maintain a sizable advantage over Republicans in party identification, and that Congressional Democrats are viewed quite a bit more favorably than Congressional Republicans.
The problem, however, is that while Congressional Democrats are more highly regarded than Congressional Republicans, they are still not very popular in the abstract. And party identification is only one of the axes upon which midterm elections turn; the other is the incumbent versus non-incumbent axis. In 1998, for example, while the Democrats bucked the trend by gaining seats while Bill Clinton was still in office, really 1998 was just a good year for incumbents, with 98.3 percent of incumbents who ran for re-election holding onto their jobs. By contrast, in 1978, "only" 93.7 percent of incumbents running for re-election secured it, and there was also a relatively high rate of retirements. Although Democrats suffered the preponderance of the damage in 1978, losing a net of 15 seats, incumbents from both parties were fairly vulnerable.
That 1978 election, for what it's worth, provides for something of an interesting parallel to what we might see in 2010: a first-term Democratic president amidst a sluggish economy and some simmering (but not net boiling) anti-Washington sentiment, but paired against an opposition party that had plenty of its own problems (in 1978, this was the shadow of Watergate for Republicans; now it's the shadow of George W. Bush).
If there is a "bipartisan" anti-incumbent wave, in other words, something like what happened in 1978, Democrats will lose some ground simply because they hold more seats now. Suppose, for instance, that between retirements and outright defeats, 20 percent of incumbents from both parties lose their seats to the opposition (this would be a very high figure). That alone would result in a transfer of 15 seats to the Republicans, even if voters were equally disposed to dispatch incumbents from either party.
Still, this is a far cry from the possibility that Democrats could lose their majority, especially in conjunction with the extreme unpopularity of the Republicans in Congress and the failure of the party to articulate compelling policy alternatives. It would be risky to make a judgment based on just two polls, one of which (Rasmussen) has tended to have something of a Republican-leaning house effect since the November elections. Diageo/Hotline, which surveyed the generic ballot three weeks ago, gave the Democrats a 6-point edge. That would imply a net loss of seats for the Democrats, who had about a 9-point generic ballot advantage to support their performance in November 2008, but nothing catastrophic.
The other noteworthy feature is that Republicans have not gained ground so much as Democrats have lost it. The Real Clear Politics average of generic ballot polls -- which includes the Rasmussen, NPR and Hotline surveys, puts the Democrats at 40 percent and the Republicans at 39 percent. By contrast, heading into November 4, the averages were 48 percent for Democrats and 39 percent for Republicans. So the Republicans have held steady, while the Dems have dropped from 48 to 40.
So voters may be willing to listen to Republicans -- something which they largely weren't willing to do, frankly, in 2006 or 2008. Where they will end up will depend on how persuasively they can make the case to these voters. I certainly would not rule out the possibility of the House changing hands (Intrade puts the probability at 20 percent, which I think is slightly cheap), although the Senate, where the Democrats will benefit from an abnormally high number of GOP retirements, is another matter. But, the GOP still has plenty of work ahead in nominating compelling candidates and in giving them a compelling message.
Here's the information in the second map of my earlier post, now expressed as scatterplots:
Each dot on the graphs is a county; the lines are lowess regressions. As you can see, my calculations were not perfect; in particular the formula says that Obama got less than 0% of the nonblack vote in some counties, which can't be right. Rather than correcting those points and putting them at zero, I've left them where they are as an indication of imperfection in the model.
Outside the South, Obama did best among nonblacks in counties with more blacks. Inside the South, he did best among nonblacks in counties with fewer blacks. This has got to be an urban-rural thing as much as anything else.
P.S. I like these scatterplots, but I think the maps are useful too, in particular for shooting down the story that whites in Appalachia were particularly anti-Obama.
Wall Street could be responding this way for any of essentially three reasons. The first would be if they think the Geithner plan is good for the economy. The second would be if they think the Geithner plan is good for the shareholders of the major corporations traded on Wall Street. And the third would be if they aren't really thinking at all, but the certainty represented by a plan is an excuse for shedding some of their "irrational" fear and loathing toward the present state of affairs.
A couple of weeks ago I introduced something called the Cyclical Expectations Index, which is the ratio of the share prices of consumer discretionary products (which are thought to be more cyclical) to consumer staples. My hypothesis is that the CEI is a better gauge than broader stock indices for what the market really thinks about the economic variables that are important to most of us -- like GDP growth and unemployment.
Here's how the CEI has performed since September 15th, with the S&P 500 represented on the same scale:
In general, the CEI has been much more stable than the S&P 500. Since roughly mid-November, when credit markets stabilized somewhat, investors have neither gotten particularly more optimistic nor particularly more pessimistic about the near-to-medium term state of the economy, somewhat belying the relatively large fluctuations within the S&P. Just as the S&P had declined much more sharply than the CEI in February, the slight run-up in the CEI in March is not a match for the much steeper gains achieved by the S&P 500.
Likewise, while the CEI is up today -- to 91.2 as of this writing, it's highest value since January 9 -- that isn't a match for the 4%+ gains made by the S&P. Today's rally, then, probably falls more into the Wall-Street-thinks-this-is-good-for-Wall-Street category.
On the other hand, the market may be shedding some of its risk-averseness. This is a nontrivial consideration, because essentially the whole debate over whether the Geithner plan is a good one or not boils down to whether the "toxic" assets that the government is trying to extricate from bank balance sheets are being undervalued by the markets in a sort of negative bubble.
I'll put it like this: the fact that Wall Street has reacted well to the Geithner plan today is by no means a sufficient condition for its success. But it is probably a necessary one. If the markets did not believe that the plan had a chance of success, there's little chance that it would.
From a quick look at this graph, it appears there's something special going on with these white people in Appalachia who didn't want to vote for Obama.
The actual picture for white people, as I estimate it, is slightly different. The complicating factor is that, at the same time that whites in some areas were moving toward McCain, blacks everywhere were moving toward Obama. Maps of the total vote show the sum of the two patterns.
If there's a question about what whites in particular are doing, we can try to separate out their votes. To estimate Obama’s vote share among nonblacks within each county, we used the following calculation:
Obama got 96% of the black vote. If he got 96% in every county, which cannot be far from the truth, simple algebra will show his share of the non-black vote in every county. If B is the proportion black in the county and X is the (unknown) Obama vote share among non-blacks, then, for each county:
Obama’s vote share = 0.96*B + X*(1-B).
And so, under these assumptions,
X = (Obama’s vote share - 0.96*B) / (1 - B).
Here's the map of Obama's estimated vote share among non-blacks, by county:
The Appalachian counties don't stand out in this map. McCain did extremely well among whites in a much broader area in the southeast, with the Applachian counties standing out in the earlier map only because they had very few black votes to cancel out the swing among the whites. Actually it looks like McCain did even better in some of the counties just south of that Appalachian belt.
P.S. Thanks to Ben Lauderdale and Yu-Sung Su for the maps.
P.P.S. It wouldn't be so easy to estimate Kerry's vote share among nonblacks in 2004. Kerry got only 88% of the black vote and so it's less reasonable to approximate his vote share as being constant across counties.
But so far, and in spite of numerous assertions to the contrary inside both the blogosphere and the mainstream media, there's little evidence that the bonus controversy is hurting Barack Obama.
Compare Barack Obama's approval ratings today to those eight days earlier, before the AIG controversy blew up a week ago Saturday. Among the two organizations that track approval on a daily basis, Rasmussen has Obama's approval rating down by just one point, while Gallup actually has it moving up by four points:
In addition, Research 2000, which does not track presidential approval but does track the related concept of presidential favorability, sees little change in Barack Obama's standing with the public. This week, 67 percent of the public has a favorable impression of Obama and 28 an unfavorable one, not materially changed from last week, when those numbers were 68 percent and 27 percent, respectively.
This apparent steadiness in Obama's numbers comes in spite of the fact that the public has been following the AIG story very, very closely. The Occam's Razor answer to this dilemma may simply be that, in spite of the outrage the public feels about the bonuses, they do not particularly blame Obama for them. Instead, they blame AIG itself, and may see Obama as being as much of a victim as a co-conspirator. We should keep in mind that, among the 95 percent of the population that does not follow politics especially closely, what they've seen is Obama expressing some (tempered) outrage about the bonuses and saying he'll do whatever he can to recoup them, in between stints on Leno and filling out his March Madness bracket. The notion that the Administration should be blamed for failing to build in better checks on executive compensation in its bailout and/or stimulus legislation, while persuasive to policy wonks, is perhaps a bit esoteric for the average American. The perception is that AIG broke the rules, not (as is actually closer to the mark) that the rules were inadequately written.
Several other factors may also be helping Obama. Firstly, the Republicans, who have historically been laxer on executive compensation, are in no position to claim the moral highground. Secondly, the rally in the stock market, which seems to be boosting consumer sentiments, may be providing something of a wind behind Obama's back. And thirdly, the Administration has a keen survival instinct, and hasn't hesitated to throw its allies, particularly Chris Dodd, under the proverbial bus.
This is not to suggest that there aren't longer-term risks for the White House. Any further actions that are perceived as a "bailout" will now require more political capital, and may in fact be entirely impossible. This may come to a head this week, as further details emerge about Treasury's bank rescue plan, which is so far receiving almost uniformly terrible reviews.
If you believe as I do, moreover, that some of the actions taken by the Congress are actively counterproductive to the recovery of the economy, that could obviously come back to harm Obama.
As Ron Brownstein points out, however, the unexpected ferocity of the AIG backlash could also prove to be helpful to other aspects of the Democratic agenda. Consider that about half of the Republican conference in the House just voted for a 90 percent tax rate on certain individuals; is it now going to be easier or harder for the Administration to roll back the Bush tax cuts? Other major aspects of the Obama agenda, moreover, such as health care and EFCA, can credibly be framed as common interests against corporate ones; such frames may now have greater resonance.
Then again, it may be that outrage over AIG, while intense, may be rather narrowly directed at AIG itself, and may not translate to outrage at the wealthy or at corporate America in general. My sense is that the anger at the banks does in fact reflect at least a mild paradigmatic shift in the American consciousness on these issues, but I can offer no proof of it.
Populist sentiment, ultimately, may prove to be both the greatest asset and the greatest risk to the Administration as it tries to enact its agenda. Can the Administration rely on the populist vanguard to shift the Overton Window on matters of class? Or will the broad-based left-of-center coalition that elected Obama cleave itself into halves, making it harder for the Administration to achieve political consensus?
One thing's for certain: populist sentiment, whatever the Administration chooses to make of it, is no longer something it can afford to ignore.