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Republican Primary Potpourri

Newt Gingrich’s domination of the South Carolina primary has suddenly turned what most had assumed was a solemn Republican march to a Mitt Romney candidacy into at least for the moment, a serious two man showdown for the nomination. Here are a couple of our thoughts on the matter:

Ross Freiman-Mendel on Why Republicans Like Newt Gingrich:

He’s surprised everyone and proved the Republican establishment wrong on multiple occasions. After a stunning win in South Carolina, Newt Gingrich now leads in Florida and continues to undermine the Romney “inevitability” argument.

Romney exudes technocrat (plutocrat if you’re a liberal or Newt) – a statement on his affect, not policy. At his best, the Massachusetts Governor is uninspiring. Even if you’re inclined to agree with George Will, who finds the former speaker nauseating, Gingrich’s rhetoric makes you think he’s the next Ronald Reagan.

In terms of attracting the average voter, Rush Limbaugh explains Gingrich’s victory best:

I’ve been doing this show for 23 years, and one of my themes from the beginning — from 1988 — has been that the American conservative middle class are the ones playing by the rules, and they’re laughed at, and they’re made fun of, and they are impugned everywhere they look.

The base of the Republican Party, the voters, have been bottling up for 25 years a resentment — an anger, if you will — that their party won’t fight for them. When Newt gets teed up with these [debate] questions . . . and simply says what they’ve been thinking for 25 years, they say, ‘Finally!’

The effects of the debates are apparent, where Newt, “attacks his fellow candidates, the media, and President Obama with a gusto that’s almost joyous.” Ultimately, the reasons for the Newt’s surge are neither profound nor complicated. Romney is a flip-flopping milquetoast, and Newt’s the most palatable alternative.

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And That’s Why We Don’t Gamble

Yesterday’s Iowa Caucus results:
Mitt Romney: 24.6% – 30,015
Rick Santorum: 24.5% – 30,008
Ron Paul: 21.4% – 26,219

As you can see above, our Iowa Caucus predictions were not particularly good. My faith in the powers of same day registration and a passionate following proved unfounded as Ron Paul finished third.

Ross at least guessed a Rick Santorum second place finish, but failed to foresee a Mitt Romney victory in the caucuses, let alone one over Santorum.

Also of note, Michele Bachmann suspended her campaign today, and the status of Rick Perry candidacy is unknown after a recent tweet suggesting he was going to continue on in the race.

– Chip Lebovitz

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Dismayed at our failure? Then please feel free to send feedback to chross.talk@gmail.com. We’d love to hear from you.

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Iowa Caucus Predictions

Hey Everyone,
We’re back and just in time to bring in the New Year with our Iowa Caucus predictions, though sadly not in time for the most recent Des Moines Register Poll that would have made our lives a lot easier. C’est la vie, I guess. Our caucus predictions are below:

Ross Freiman-Mendel: Predicting the winner of Iowa caucuses is a fun exercise, but caucus goers will not deliver the eventual Republican nominee. Ron Paul will win in Iowa on January 3rd, with Rick Santorum and Mitt Romney finishing in second and third, respectively. It’s also noteworthy how these predictions show how irrelevant the Ames Straw Poll was in its predicative powers.

Ron Paul’s latest controversy spurred by his old newsletters underscores the fact that the conservative establishment considers him a real threat. The Texas Congressman will maintain his lead for three reasons: his idealistic, consistent message; the lucky, albeit fickle timing of the scandal during the dead news cycles of Christmas and New Years Eve; and because he’s defter than Rick Perry, Herman Cain and Newt Gingrich in his ability to maneuver his own political baggage. Defections from the Bachmann campaign are also telling, in addition to Paul benefiting from unique state rules dictating who can vote in the caucus.

Rick Santorum will surprise all, narrowly inching out Mr. Romney. His persistent yet shortsighted approach to Iowa has and will continue to pay dividends, as he begins to surge at just the right time. In the words of Paul Gigot of The Wall Street Journal, “Mr. Santorum is all moral values all the time.” Unfortunately for Mr. Santorum, Iowans hardly reflect the composition of the Republican electorate, and his deeply Christian campaign has little national appeal.

While Mitt Romney will place a close third, the loss will benefit him immensely. It’s well known that a loss in Iowa can do just as much for a candidate as a win, just look at George H.W. Bush’s third place finish in 1988. The pressure from other candidates has finally enlivened Mr. Romney, who up until now has been boring and uninspiring. Just recently he compared President Obama to Marie Antoinette and Newt Gingrich to Lucille Ball. This heated rhetoric is good omen that the candidate is finally willing to sling some punches. Continue reading

Predictions and Analysis of Bernanke’s Speech

Ben Bernanke, Chairman of the Federal Reserve, will deliver his annual address in Jackson Hole, Wyoming today. ChrossTalk breaks down the speech with our predictions of what Bernanke will discuss and our analysis of the Fed’s policy options moving forward.

Chip Lebovitz: The life of Ben Bernanke is unenviable. Rick Perry lobbed an allegation of treason at Bernanke last week, the economy has worsened over the last year, and the nation is looking to him to jumpstart the economy.

The problem is there is only so much that the Fed can do to boost the economy at the moment. Mohammed El-Erian CIO of Pimco is right to wonder about a quantitative easing three’s “questionable benefits.”  Inflation has been higher throughout the past year, a full 180 from the deflation threat facing the Fed at last year’s Jackson Hole conference. Because there was a threat of deflation, supporting an inflation-increasing move like quantitative easing two (QE2) was easily approved. With inflation beginning to return to normal over the past year, it’s hard to see the Fed undertaking another quantitative easing not only due to opposition by inflation hawks but also because of a stark reality: while stimulus is needed, the Fed is not necessarily the right provider at the moment.

The best thing that Bernanke could do today is not a single policy decision, but to emphasize the economy’s problems extend beyond what the Fed could do. Unless the Fed wants to enact a portfolio of completely unprecedented policies – Brent Budowsky of the Hill presents an interesting idea, rebooting the economy will require not only stimulus from the Federal Reserve, but also a broad sweeping compromise by Congress and the president.  Similar to what El-Erian suggests, Bernanke can reframe the debate; individual actors or organizations will not be able to solve our deficit and unemployment problem.  The nation requires both the Federal Reserve and government working in concert to target the weakest areas of the economy.

Working to reduce household debt would be a start. Mortgage refinancing akin to the trial balloon floated through the New York Times yesterday would be a good launching point. Unorthodox Fed policy, like Budowsky’s idea, combined with other government policy like Jared Bernstein’s FAST plan is the quickest way out of this economic downturn.

Ross Freiman-Mendel: Bernanke has a few options in his speech today; he can explain the rationale of the Zero Interest Rate Policy (ZIRP) through 2013, implement some contemporary form of the Kennedy era Operation Twist, or announce Quantitative Easing 3. He will make two announcements:

First: the Chairman will set the stage for Quantitative Easing 3 (QE3). He can’t formally make the announcement, because the effects of ZIRP and QE2 on inflation and growth have yet to materialize. Mired in an unprecedented amount of dissent, the Chairman doesn’t want to look reckless. However, some, including Goldman Sachs, see QE3 as an option to boost GDP. By suggesting that the Fed will either expand or alter their balance sheets, Bernanke sets the stage for more asset purchases without mentioning specific policy.

Even Bernanke will concede that monetary policy needs a breather.

Second: If engineered correctly, fiscal policy can provide short-term stimulus to the economy. The efficacy of tax and deregulatory policy coupled with long-term deficit reduction can alter economic conditions. From his bully pulpit flanked by the magnificent Grand Tetons, Bernanke will command the same attention from the financial world that the president does when he speaks. “Monetary policy is an important tool, it is a valuable tool, but it is not an exclusive tool. It does not solve all problems,” said President of the Federal Bank of Kansas City, Thomas Hoening, “Whether it has a long-term beneficial effect is of greater debate. I’m not sure more short-run fixes are necessarily good for the economy.” Hoening has hit the nail on the head. In a recent interview, Hoening explains that the bullets of conventional monetary policy have been exhausted, our currency has been debased too much, and the US ought to shift its focus to fiscal policy, whose dangers are more imminent and consequential. Bernanke has been inhibited by the government’s poor approach to fiscal policy; it would be wise to intimate that politicians have made the Chairman’s job significantly harder. Will the President and Congress heed his advice?

Jeremy Lerman: Investors and policy wonks around the world are salivating in anticipation of Bernanke’s speech in Jackson Hole today.  Anyone expecting a message that marks a shift in Fed Policy will be disappointed.  Anything revealed during this speech – barring any hints of QE3, which is unlikely – will be less important than the Fed’s promise on August 9th that it would continue to keep interest rates low through 2013.  In the free market, low rates signal high savings, but America has a negative savings rate and is the world’s largest debtor. So why are interest rates near zero percent?

What we need are higher rates. They are not politically attractive, but they are required for recovery. Rates have been too low for too long, fueling a misallocation of resources, labor, capital; and creating the biggest credit bubble this country has ever seen. Since the bubble burst with the financial collapse of 2008 coupled with the sharp downturn in the housing market, the Fed has aided the government in trying to re-inflate that bubble. Those policies have created a temporary floor for falling prices and even a short-term boom in stock prices, but in doing so have perpetuated our bad habits.

What the Fed ought to do is let us take our medicine, raise the rates to levels determined by the market rather than by arbitrary dictate, letting the market self-correct. This would mean less spending, less consumption and a significant contraction of the U.S. economy in the near term.  But this would also yield more savings, which is the key to long-term growth.  Keeping rates low only compounds and draws out the problem by encouraging us to spend more borrowed money and by punishing savings.

There is no indication that the Fed will do this even now that its policies have clearly made the problem worse. I suspect it will continue its easy money policy and continue to debase the dollar. What is at stake is nothing less than the dollar’s preservation as the world’s reserve currency.  The recent rush to gold is a signal that the rest of the public is starting to wise up regarding the dollar’s instability. Even central banks are beginning to buy up gold.   The next real threat will be when China and Japan decide not to finance our debt, which will lead to a major inflationary event, much worse than what we got in the 70’s.

Photo Credit: Forbes

All personal views expressed here are the writers own and are in no way representative of the institutions at which they work.

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Ames Straw Poll Predictions

The Republican presidential nomination fight heads into its first real event this weekend with the Ames Straw Poll. Although not an actual primary, Ames has a winnowing effect on the Republican field. The straw poll results ended the campaigns of now Kansas Governor Sam Brownback in 2007 and Tennessee Senator Lamar Alexander in 1999. Pictured above is supporters from the campaign of 2007 Straw Poll winner Mitt Romney.

ChrossTalk breaks down the straw poll with our predictions of the first and second place finishers. We’ll try to expand this list throughout the day to get more perspectives for you to peruse.

Jeremy Lerman: With respect to its ability to predict campaign success, the Ames Straw Poll shouldn’t be ignored. Of the five Ames polls that have been held, three of the five winners went on to win the Iowa Caucuses.  Two of those three later captured the Republican nomination. I can’t help but be both troubled and amused by the idea that Michele Bachmann could mispronounce “chutzpah” – an egregious offense to even the most casual employer of Yiddish diction – and still be considered a serious contender for the Republican nomination. Luckily for her, Boca Raton is not the bellwether for the Christian conservative base.

Bachmann is the frontrunner. Given Romney’s calculated decision not to pour money into Iowa, Bachmann’s formiddable contender is Ron Paul. Both Paul and Bachmann are associated with the Tea Party. Make no mistake, these are two very different candidates. When Paul advocates for small government, he walks the walk. We’re talking about a guy who refuses to participate in the lucrative congressional pension and healthcare plans because they are “immoral.” Bachmann espouses smaller government while simultaneously wearing her evangelical politics on her sleeve. While the contradiction is clear to many, it will play well for her in Iowa. The evangelical base likes lower taxes and fewer regulations – as long as they are promised that the administration will use the power of the federal government to ban abortions, prevent gay marriage and censor heterodoxical speech.  While Paul is well funded and incredibly well organized, Bachmann’s broader appeal and superior ability to garner media attention gives her the slight edge over Paul at this point.”

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The Price of Civility

To supplement our podcasts, ChrossTalk will be adding written content to the site. I’ll be adding my work for the Progressive Policy Institute and Ross will be adding an occasional piece as well. Starting next Friday, we’ll have a weekly point-counterpoint style article similar to the Talking Points section of the podcast.

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Announcements aside, here is my piece today for the Progressive Policy Institute on civility and the Huntsman campaign:

The Price of Civility
by Chip Lebovitz

Recently released polls have shown disappointing returns for Republican presidential candidate Jon Huntsman, whose percentage of the vote has hovered around 3 percent since early May, and received no noticeable bump from his June 21 campaign announcement. It gets worse: Only 42 percent of Republicans actually know of Huntsman, 20 percent less than the average candidate. Huntsman’s poll number plateau lends credence to Washington Post Columnist Dana Milbank’s view that Huntsman and his amicable approach were doomed on arrival.

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