2010 - %3, September

Norwegian Curse Words, Hoodies, and the Alaska Senate Race

| Wed Sep. 29, 2010 10:47 AM EDT

Alaska's Democratic Senate candidate Scott McAdams, who we profiled here last month, is up with his first ad, which touts his deep ties to the state. It's probably the first political ad to brag about being cursed at in Norwegian. I'd also venture that it's the first to feature a candidate dressed in a hoodie.

"This is a long way from DC," he says in the ad. He continues: "I'm not your usual Senate candidate."

McAdams' candidacy got a whole lot more exciting a few weeks ago, as tea-party candidate Joe Miller defeated incumbent Republican Lisa Murkowski in the primary. Then Murkowski decided to launch a write-in campaign, spicing things up further. The latest poll shows McAdams behind both his opponents; Miller at 42 percent, Murkowski at 27, and McAdams at 25. But Murkowski's bid relies largely on making sure people know how to spell her last name—which is apparently more difficult than it seems.

But McAdams might have more of a shot than the top line poll numbers show right now. The same poll found that 18 percent of likely voters in the state said they were "nor sure" yet what they think of McAdams. (Only 4 percent said the same of Miller and 2 percent said that about Murkowski.) This is his first ad in the state, which means more Alaskans could be getting to know McAdams in the coming weeks.

Here's the spot:

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Is Ted Strickland Recovering?

| Wed Sep. 29, 2010 10:36 AM EDT

Four weeks ago, Ohio Governor Ted Strickland looked cooked. The incumbent Dem was trailing his challenger, former GOP congressman (and Lehman Bros. banker) John Kasich, by double digits in some polls. But this week, things suddenly started looking brighter for Strickland. Several polls put him a few points back, within the margin of error, while a partisan Dem poll showed him in the lead. Polling guru Nate Silver upgraded Strickland's chances—but only to 13 percent, up from 8 percent last week. 

What's causing the shift in the polling? It's hard to know for sure, but maybe Strickland's relentless campaign to paint Kasich as a Wall Street banker who is out of touch with Ohioans is finally having an effect. If Strickland starts pulling into the lead in the next round of polls, it could be a great sign for Dems nationwide—and a data point to support the argument that moving left and getting angry could actually help some candidates. Strickland sure is railing away at Kasich, the GOP, and the banks. Here's CNN's Peter Hamby, who's in Ohio covering the campaign:

At a union hall in Cleveland Tuesday, at a student center at the University of Akron and at a rally on the state house steps in Columbus, the usually mild-mannered former minister unleashed a torrent of attacks against his Republican challenger, John Kasich, and the Bush administration, pointedly blaming them for bringing the country to the brink of a great depression.

"I am angry because the Republicans under George Bush brought this economy to the brink of total collapse, and the people who carried out those shenanigans on Wall Street, people like John Kasich absolutely just about caused us to go to the depths of economic destruction," he roared in Cleveland, bringing nearly 200 union members to their feet.

Strickland repeatedly mentioned Kasich's ties to Lehman Brothers - where he worked as a managing director for nine years - at one point making the claim that his opponent will bring "Wall Street thinking and Wall Street behavior" to the governor's office.

"And we're going to say hell no!," Strickland thundered, banging his fist against the podium. "No we're not going bring that into the governor's mansion. Hell no you won't! We're going to fight this guy."

As Hamby notes, while other vulnerable Dems have broken with the White House, Strickland has done little to distance himself from President Obama. Instead, he's attacked the GOP and its ties to the economic collapse. He's also looking past the midterms to a potential Dem resurgence two years hence. "We are coming after you, Newt Gingrich and Sarah Palin and Tim Pawlenty and all of the right-wing extremists," he told an audience in Akron earlier this week. "We are coming after you in 2012, and we will re-elect Barack Obama to be a second-term president of the United States of America." 

Quote of the Day: Rand Paul on Medicare

| Wed Sep. 29, 2010 10:06 AM EDT

From Rand Paul, talking 15 months ago about problems with Medicare:

Medicare is socialized medicine! People are afraid of that because they'll say "Ohhh, you're against Medicare." No, I'll say, "We have to do something different. We can't just eliminate Medicare, but we have to get more to a market-based system." It's counter-intuitive to a lot of people, but you have to pay for things if you want prices to come down. So you really need higher deductibles. And the real answer to Medicare would be a $2,000 deductible, but try selling that one in an election. But that's the real answer.

That's via Steve Benen, who reports that Paul is outraged that his Democratic opponent has highlighted his support for a $2000 deductible, which as you can imagine, is not going down well with Kentucky's seniors. But the video is here, and it sure doesn't look like anything is taken out of context. Paul supports the deductible idea but admits that it's a terrible campaign idea. And of course, now he's in a campaign. So he no longer wants anyone to know that he said this. And who can blame him?

Want to know more? Check out "Tea and Crackers," Matt Taibbi's latest in Rolling Stone. It's ostensibly about the tea party movement, but about half the piece is actually about Rand Paul. Enjoy.

Tax Cut Followup

| Wed Sep. 29, 2010 9:50 AM EDT

This is arcane, but I guess I need to follow up on my post last night about the CBO's report on extending tax cuts. I think I've figured out what's going on.

The CBO chart is below, and it doesn't seem to match the data in Table 4. But it does, sort of. Take the bar for full extension of tax cuts with a weak labor response. According to Table 4, its effect in 2020 is to reduce real GNP by 1.6%. That's if everyone assumes there's no response. But if we assume that government spending will be reduced after 2020, a lifecycle model predicts that the net effect of extension is only -1.4%. If we assume a tax increase after 2020, the lifecycle model predicts that the net effect is -0.8%.

Now average all those together and you get -1.26%. That rounds to -1.3%, and that's what's shown in the chart. If you average all the other options they also match the chart.

Is this simple arithmetic averaging legit? Beats me. And I'm not even sure who to ask. But apparently that's what they did.

One more thing, though. The CBO model suggests that in all cases, a policy response to full extension of the tax cuts reduces the long-term damage. However, a policy response to extension of just the middle-class cuts increases the long-term damage or has only a tiny effect. This seems like a very strange result. Why does a policy response (either lower spending or higher taxes) have a strongly positive effect in one case and a bad or negligible effect in the other? Again, I'm not even sure who to ask. But it seems odd even if you're a supply side die hard.

Why the Brown/Whitman Debate (Almost) Doesn't Matter

| Wed Sep. 29, 2010 9:00 AM EDT

California gubernatorial candidates Jerry Brown and Meg Whitman held their first televised debate yesterday evening. Although it was covered by 130 journalists serving media outlets as far away as Germany and China, it didn't really matter much. Not, at least, in terms of the state's economic meltdown and budget crisis. California's real problems run deeper than either candidate wants to admit.

It's no secret that Proposition 13, which slashed property taxes 30 years ago, has put the state and its leaders in an ever-tightening fiscal straightjacket. This didn't make much difference in the '90s and '00s when the tech and housing booms fueled growth. But now that the party's over, lawmakers have found that their hands are tied. For one thing, polls show that most voters staunchly oppose tax increases. And regardless, state laws that mandate a two-thirds majority to pass both a budget and tax increases make it essentially impossible to raise new revenue.

One response to the predicament would be to cut services, as a set of budget reform initiatives on the ballot in May, 2009, would have done. But they were trounced at the polls. Surveys showed that the same voters who didn't want tax increases also didn't want cuts to parks, education, health care, or just about everything else that the state provides. The problem, as former Republican Finance Director Cliff Allenby put it, is that "Californians want high levels of services for their middle levels of taxes."

So what should Republican Whitman and Democrat Brown do? A start would be to chide voters for their unreasonable expectations. (Of course, I know that's not the best way to win a political campaign). To his credit, Brown, who served as California's governor from 1975 to 1983, at least showed a flash of courage when he refused to tell the debate audience, students at UC Davis, that he would roll back the funding cuts to higher education. "Not my first year, not with a $19 billion deficit," he said. "We have to get real here." (Whitman, a former CEO of eBay, talked up a lame plan to cut $1 billion from welfare and put it in higher ed instead of towards the shortfall).

But Brown also made it seem like raising new revenue would be almost as simple as forcing the rich pay their fair share. A more progressive income tax would certainly help matters more than Whitman's billions in proposed tax cuts, but even if two-thirds of voters approved it, California would still be a mess. The state's revenue system has already evolved "from one with several legs to utter dependence on personal income taxes, nearly all of which were paid by those in upper income brackets," writes Sacramento Bee columnist Dan Walters in Remaking California: Reclaiming the Public Good. This "has left the state vulnerable to even mild economic swings because those high-income taxpayers largely derived their taxable incomes from volatile stocks and other capital markets." Lenny Goldberg, director of the California Tax Reform Association, suggests instead that California reform its commercial property tax code, which favors entrenched interests and stifles innovation.

The best solution to California's woes might be the most drastic: Scrapping the entire state constitution and writing a new one from scratch, as a bipartisan coalition of reformers, Repair California, tried to do earlier this year before the effort fizzled. "Political analysts say the proponents have had a tough time keeping voters focussed on their complicated prescriptions for California's ills," the LA Times explained. Maybe that's where Brown and Whitman should speak up. It would have been nice, at least, to hear them weigh in on Proposition 25, which would eliminate the two-thirds requirement to pass a budget. Sure, it's by far California's most boring ballot measure this year. But it's also its most important. And there, also, is the problem. 

Your Bad Economic News for the Morning

| Wed Sep. 29, 2010 7:38 AM EDT

Earlier this year, government bond spreads in several European countries ballooned dangerously in response to the Greek debt crisis. In May the EU came to the rescue, Greece agreed to a combined loan/austerity package, and spreads settled down. The crisis was over.

But for how long? As the chart on the right shows, spreads have been steadily rising since May in Greece, Ireland, and Portugal, and now stand as high or higher than they were at the height of the crisis. And Spain may be next. Edward Hugh explains in a long post that ends with an analogy:

According to one popular analogy currently circulating , the EuroArea countries could be likened to a group of 16 Alpine climbers scaling the Matterhorn who find themselves tightly roped together in appalling weather conditions. One of the climbers — Greece — has lost his footing and slipped over the edge of a dangerous precipice. As things stand, the other 15 can easily take the strain of holding him dangling there, however uncomfortable it may be for them, but they cannot quite manage to pull their colleague back up again. So, as the day advances, others, wearied by all the effort required, start themselves to slide. First it is Ireland who moves closest to the edge, getting nearer and nearer to the abysss with each passing moment. And just behind Ireland comes Portugal, while some way further back Spain lies Spain, busily consoling itself that it is in no way as badly off as the others who have already lost there footing. But if Spain cannot hold out, and all four finally go over, each dragged down by the weight of those who preceded them, then this will leave some 12 countries supporting four, something that the May bailout package only anticipated as a worst-case scenario.

This is especially bad news since widening spreads can easily become self-fulfilling prophecies. Greece, Ireland, and Portugal were in big enough trouble already, but high interest rates on their debt could turn a difficult situation into an impossible one, requiring yet another massive bailout that might have catastrophic knock-on effects. And remember: we're all one big happy global economy these days. If Europe catches a cold, we're going to catch it too.

And that's not all. Closer to home, housing bubble Cassandra Meredith Whitney is back with a report on municipal debt. She believes that cities and states — but mostly cities — are on the verge of a massive wave of defaults that are going to reprise the systemic bank defaults of 2008. "The similarities between the states and the banks," she told Maria Bartiromo on Tuesday, "are extreme to the extent that the states have been spending dramatically, growing leverage dramatically. Muni debt has doubled since 2000." Felix Salmon adds:

The more lasting effect of widespread defaults will be in the real economy, where public employees and public services will start feeling the pinch of forced austerity. Once you approach default, no one will roll over your debt any more and no one will insure your bonds. So you have to slash your budget: you have no choice. That process has barely begun, in the U.S., and depending on the timing, it could contribute markedly to a bout of deflation or even a double-dip recession. If the first recession had its causes in the nexus of finance and real estate, its follow-up could well be based in local government.

As a resident of California — #1 on Whitney's list of disaster areas — I find this all terrifyingly plausible. Buckle your seatbelts.

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Can Women Voters Save the Democrats?

| Wed Sep. 29, 2010 5:48 AM EDT

The yawning enthusiasm gap between the Democrats and Republicans this election cycle also reflects a big gender gap, as men have led the conservative surge that's revived the GOP. Though women are still more likely to vote Democratic, they're also more likely to stay home. Ben Smith explains:

Men are not only more loyal to the GOP than two years ago but also more motivated to vote, recent polls suggest. This year’s central issues are ones that politicians traditionally use to appeal to men, especially worries about budget deficits….

A Marist poll this month found 48 percent of Republican men called themselves "very enthusiastic" about voting, the most of any group; just 28 percent of Democratic women said the same, with Republican women and Democratic men falling in the middle.

Big Democratic groups like EMILY's List realize that they'll have trouble holding back the GOP wave if they don't turn out Dem women. But it's late in the game, so the groups are doing triage on Dem incumbents, backing targeted political ads in key Congressional races where Democratic women voters could make a difference. One such contest is in Colorado, where GOPer Cory Cardner is challenging freshman Rep. Betsy Markey. 

Health care is an issue that the Democratic Party has certainly been avoiding this election cycle, and Markey's vote in favor of health care reform is sometimes described as a liability in this Republican-leaning district. But to appeal to Democratic women, EMILY's List has embraced the topic. As Politico's Alex Burns notes, an EMILY's List attack ad that's running against Gardner criticizes the Republican for voting "to allow insurance companies to deny coverage to children with autism." (Sharron Angle was also under fire in Nevada last week for making similar remarks about autism coverage.)

There's a good reason for this. Although the health reform law law has remained unpopular with the public as a whole, it is significantly more popular with the female voters who proved key to Obama's 2008 victory. Though prominent GOP female candidates like Sarah Palin's "Mama Grizzlies" may have grabbed the spotlight, their conservative rabble-rousing hasn't convinced female voters to flock to the Republican Party. According to Hart Research Associates, a Democratic firm, 81 percent of Democratic women voters who were newly registered in 2008 said they were "very or fairly concerned that Republicans want to overturn the health care law that provides mammogram coverage and pregnancy care to women."

Democrats decided that it was too risky to run on the party's big legislative accomplishments in light of the conservative, tea party-driven revolt. But in doing so, the party has failed to excite key constituencies—like Democratic women—and failed to convince them that there's enough at stake this year. So while groups like EMILY's List are making last-ditch appeals, it's uncertain whether such efforts will be enough to make a difference outside of a small handful of races.

Secrets of the Census

| Wed Sep. 29, 2010 5:19 AM EDT

Right now, the politerati are focused on the House of Representatives. Will the GOP win enough seats (39) to take control and boot Nancy Pelosi from the Speaker's chair, or will they fall short? Here's what you may not know: the results of the November elections can be undermined—or set in stone—by the US Census.

The results of America's nationwide head count determine the number of congressional districts in each state—and, consequently, those states' electoral votes in presidential elections. It's fairly simple: To calculate how many electoral votes a state is worth, simply count the number of congressional districts in the state and add two—one for each senator. House seats and electoral votes are transferred from slow-growing states to faster-growing ones after each census. 

The latest estimates of which states will gain and lose seats (and electoral votes) came out this week. The bottom line is that the results aren't good for Barack Obama and the Democrats. Solid blue states New York, Illinois, Pennsylvania, Massachusetts, Michigan, and New Jersey—states that have gone for the Democrat in every presidential election since 1992—are set to lose seven electoral votes. Washington is the only reliably Democratic state that is poised to gain a seat. Meanwhile, solid red states Georgia, South Carolina, Texas, and Utah are set to gain a net seven electoral votes. Louisiana, which Bill Clinton won twice but has been a solid red state since Katrina, will lose a seat. There are changes going on in key swing states, too. Arizona and Nevada are both set to gain a seat, and Florida will gain two. Iowa and Missouri, meanwhile, will lose a seat each—and Ohio, long a national bellwether, will lose two. 

Blue states losing six electoral votes and red states gaining six isn't exactly a disaster for Democrats. The big fight, however, will be over congressional redistricting. That process—which will force some incumbents out of their jobs and protect many others—is controlled by the states. Governors play a role, but most of the work is usually done by state legislators. Whichever party controls the legislature generally gets to draw the maps.

To avoid getting totally shafted in the redistricting process, the key is to control at least one of the three main pivot points of redistricting—the governor's office or one of the two legislative chambers. A party with full control of a state's legislative and executive branches will have the ability to run wild with redistricting. Right now, the GOP is threatening to do just that in a number of key midwestern states. 

Republicans have a real shot of controlling the entire redistricting process in Indiana, Ohio, Pennsylvania, Michigan, and Wisconsin. If the GOP can sweep those contests, Republicans can cut the heart out of any potential Democratic House majority going forward. Republicans either hold the governorship or lead in the polls in the gubernatorial races in all five states. And while Democrats hold at least one legislative chamber in each of the five states, the party's hold on these majorities is tenuous.

Insider Dishes on For-Profit Colleges

| Wed Sep. 29, 2010 5:00 AM EDT

According to a whistleblower inside one of the for-profit college industry's biggest players, a graduate trained to design video games is considered "placed" in a relevant career by working at Toys "R" Us in the video game department earning $8.90 an hour. And a Residential Planning graduate working in a gas station convenience store was deemed to be "using her skills" by arranging the candy bar displays.

These are just a few revelations in a pretty juicy letter, first obtained by Stephen Burd at the New America Foundation's Higher Ed Watch blog, that was written by a career counselor at the Art Institute of Pittsburgh. The for-profit college is owned by Education Management Corporation, an industry powerhouse that's facing heavy criticism from lawmakers and education reform advocates. (Read my story, "Astroturf U," on EDMC's use of a controversial lobbying outfit to fight new industry regulations.) The counselor, Kathleen Bittel, sent her letter earlier this month to Sen. Tom Harkin (D-Iowa.), chair of Senate Health, Education, Labor, and Pensions (HELP) Committee. On Thursday, the committee is holding another hearing on for-profit colleges titled "The Federal Investment in For-Profit Education: Are Students Succeeding?"

The Art Institute's Bittel is one of six witnesses slated to testify at the hearing. In her letter, she wrote, "I am currently employed by EDMC and it was a tough decision to put my livelihood on the line in this current economic situation. But my conscience will not allow me to remain quiet about what I know." She later added, "What I found in Career Services was even more deceptive than the recruiting practices."

Here are some excerpts, per Higher Ed Watch, from Bittel's letter:

  • "A graduate only needs to be working at their job for it to ‘count’ as an employment in their field."

  • "Early in my tenure with the department, I was instructed on how to manufacture an email from a graduate to say whatever it needed to say, to justify placement."

  • "I was also shown how to eliminate a document received from a graduate stating she was working in her field, but only earning 8K, and to subsequently create a document using Salary.com to validate that an employee in that position would be typically earning 25K, which would meet the salary threshold of $10,500 to ‘justify’ placement in their field."

  • "I was repeatedly pressured to call graduates working in unrelated fields and review the courses they learned and somehow convince them that obscure details of their current jobs were using the ‘skills’ they were taught, and that they were using those skills at least 25 percent of their time there. One needed to convince them to sign a form stating so."

Bittel also went into detail about the Art Institute's practices in dealing with graduates and employment. Her claims are especially relevant as the Obama administration seeks to impose a "gainful employment" rule on for-profit colleges. Such a rule would limit the amount of federal funding these colleges receive—and many rely heavily on these funds—if those colleges weren't placing students in decent-paying jobs related to their degree after graduation. In addition to the Toy R Us and gas station examples, Bittel wrote that Graphic Design students "working in places like Starbucks whom were expected to agree they were using their 'skills learned' within their employment by making signs for daily specials and menus."

The Senate's hearing on for-profit colleges is scheduled for 10 am on Thursday, where lawmakers will hear from Bittel, Lauren Asher, president of the Institute for College Access and Success, Dr. Arnold Mitchem, president of the Council for Opportunity in Education, and several others yet to be named. On Wednesday, the for-profit college industry has planned a major lobbying push on Capitol Hill to convince lawmakers to oppose the Education Department's gainful employment rule. An email obtained by Mother Jones touting the fly-in lobbying event reads, "We need to give our members of Congress the truth and, to do it, we need to hit the ground running. So to borrow a saying from college football, here's the play: mark your calendar and plan to fly in to Washington, DC, on September 28."

We're Still at War: Photo of the Day for September 29, 2010

Wed Sep. 29, 2010 4:30 AM EDT

U.S. Army Sgt. John Rogers, of the 1st Battalion, 4th Infantry Regiment, shows a fellow Soldier his sector of fire during a presence patrol in the Zabul province of Afghanistan Sept. 18, 2010. DoD photo by Spc. Joshua Grenier, U.S. Army.