2008 Elections

For the past couple of weeks, I’ve noticed that Obama and McCain have started to beat upon one another on various dimensions of the issues of taxation and Social Security.

Annoyingly, real life has prevented me from offering my €0.02 worth until now.

Oversimplifying, the discussion seems to be focused around Obama’s various plans to increase taxes on individuals earning more than $250,000 year, both through income/capital gains taxes, as well as Social Security payroll taxes.   McCain is publicly calling for making the Bush tax cuts permanent, reining in spending, and promising to work across the aisle on Social Security reform.

A few thoughts come to my mind:

• A hat tip goes in Obama’s general direction for daring to broach the subject of Social Security.  It takes political chutzpah to touch such a sensitive subject on the campaign trail and daring to make a specific proposal, and I respect Obama for having done so.  It’d be nice if McCain would offer some specific ideas, rather than just railing against the hit to the $250k+ income crowd.
   
• Having said that, I can’t help but wonder if anyone’s thought through the potential implications to the economy of imposing such a potentially large shock to the super-affluent crowd.  Granted, such folks are already making plans for the lapsing of the Bush tax cuts at the end of 2011, but I do wonder about unintended consequences of major, short-notice changes to tax law.
   
• I am disappointed that so much of the public debate seems solely focused on the tax side of the equation.  Surely I’m not the only person concerned about the unsustainability of our current spending spree.  Yet I don’t think I’ve heard much discussion on just what the two candidates are thinking of doing about that problem, other than bickering over tax policy.

This afternoon, Hillary was overheard to say that she’d be willing to accept a nomination for Vice-President.

That statement got me to thinking:  What if McCain tapped Hillary for the number two slot?

Even though they differ in politics, McCain and Hillary are good buddies.  I’d bet that Hillary could draw enough support to deny Obama the win.  

Would McCain and Hillary want to win badly enough to set aside their political differences, and share a ticket to maximize their odds of winning, I wonder.

I doubt it…but it’s an interesting thought, isn’t it?

Seen on the AP wire:

Sen. Barack Obama of Illinois sealed the Democratic presidential nomination Tuesday, a historic step toward his once-improbable goal of becoming the nation’s first black president.[...]

Obama sealed his nomination based on primary elections, state Democratic caucuses and delegates’ public declarations as well as support from 22 delegates and "superdelegates" who privately confirmed their intentions to The Associated Press. It takes 2,118 delegates to clinch the nomination at the convention in Denver this summer.

From what I understand, reaction from the Clinton campaign was:

"I’m melting!"

(Yes, I know that’s horribly unfair of me.  But, while I respect the Clintons’ skill as politicians, that doesn’t mean I like Hillary.)

So, this is it.  South Dakota and Montana have their primaries today, bringing primary season to a close.

In a normal year, this wouldn’t be a noteworthy landmark.  But this year… pundits, professional and amateur, have been waiting to be able to breathe a sigh of relief.

It’s a shame I’m going to be in meetings all day.   There’s an expectation that a steady trickle of superdelegate endorsements will be made today and tomorrow.  I’ve got to believe that someone (probably the Obama campaign) will have a running tally going, so that the blogosphere can melt down when he clinches the nomination, this evening or tomorrow.

An article in the Wall Street Journal over the weekend reminds us of the rumblings about the federalization of catastrophe insurance possibly playing a role in this year’s election cycle:

The proposal — backed by giant insurers Allstate Corp. and State Farm Mutual Automobile Insurance Co., as well as Florida lawmakers — focuses on "reinsurance," the policies bought by insurers themselves to protect against catastrophic losses. The proposal envisions a taxpayer-financed reinsurance program covering all 50 states, which would essentially backstop the giant insurers in case of disaster.

The program could save homeowners roughly $500 apiece in annual premiums in Florida, according to an advocacy group backed by Allstate and State Farm, the largest writers of property insurance in the U.S.

But environmentalists and other critics — including the American Insurance Association, a major trade group — say lower premiums would more likely spur irresponsible coastal development, already a big factor in insurance costs. The program could also shift costs to taxpayers in states with fewer natural-disaster risks.

"This bill makes it a little bit too easy for the state to go to the federal government for a bailout," said Eric Goldberg, associate general counsel at the American Insurance Association, an insurers’ trade group.

The legislation passed the House with bipartisan support, 258-155, late last year, despite a presidential veto threat. Although a Senate vote is unlikely this year, proponents are trying to make it a litmus-test issue in the presidential race. The two Democratic contenders, Sen. Hillary Clinton of New York and Sen. Barack Obama of Illinois, in their recent visits to Florida — a key swing state — have both voiced support for the plan.[...]

The proposal envisions the creation of funds like Florida’s in all 50 states. These reinsurance funds would collect premiums from companies like Allstate, who would benefit because they would be paying less than in the private reinsurance market. That savings would get passed on to homeowners. Then, if a state got hit with a particularly severe disaster, whether hurricane, earthquake, tornadoes or other crisis, federal loans and state-backed reinsurance could step in to cover big losses.

In order to draw congressional support from states with somewhat less disaster risk, the federal program is designed to kick in for events that don’t necessarily approach the catastrophic level of, say, a Hurricane Katrina. In tiny Delaware, for example, federal payouts could begin after yearly losses of less than $300 million. Katrina-related losses in Louisiana, by comparison, topped $20 billion.

On general principle, I’m not a fan of the government stepping in to provide a service that is already mostly-adequately addressed in the open market. 

However, I also have to admit that yes, a chunk of reinsurance cost is a hefty profit/risk load, required to attract the capital necessary to support the business.  If cover were provided with the feds underwriting the risk, then in theory, the profit motive should be eliminated, and arguably less capital would be required to maintain solvency…assuming that the federal government can continue to be thought of as infinitely solvent.

Aside from my small-ell libertarian objection to federalization of cat cover, I also have a couple of practical concerns of the idea:

First, our government seems allergic to fiscal responsibility — it likes to spend money without adequate thought being given to exactly how or when the revenue will be raised.   A catastrophe program like this should accumulate assumed premiums into a reserve fund which can be tapped to pay when disaster strikes, if the program is to be financially viable over the long term. 

I don’t think I’m being too cynical to think that an accumulation of a large warchest of cash will be too tempting for bureaucrats to resist repurposing, as part of accounting magic to hide the national addiction to credit, much as is being done with the Social Security trust fund (and as was done with the Medicare trust fund, before it was depleted).

Such manipulations of the national financial records will eventually net themselves out, but I am extremely uncomfortable with providing the feds another means by which they can deceive the public about our debt problems.

Second, I have reservations about any federal bureaucracy attempting to operate as efficiently as a private business.  I’m not sure that the personal insurance behemoths of Allstate and State Farm would be doing themselves any favors by relying on federal reinsurance to eventually pay out, rather than private reinsurers.

And finally…even though a federally-supported entity might be able to avoid some of the price drag created by a need to provide investors profit, there is still the reality that the underlying loss costs are very high in certain parts of the country.   Do we actually think that a federal agency will have the chutzpah to demand adequate cessions in support of (say) Florida wind exposure, when the head of the executive branch of the government (and therefore the federal reinsurance entity) has to appeal to Florida voters every four years?

With Obama supporting the idea, and Florida still considered a swing state (albeit not as much of one as it would be with Hillary at the head of the Democratic ticket)… I could actually see this mattering somewhat as an issue this summer and fall.

I have CSPAN on as I type, after having sweet-talked the remote away from my wife.

Looking at the "every vote counts" protest, I’m still left to wonder — whatever happened to belief in the fairness of playing by the same set of rules?

Seen in the New York Times:

Democratic Party lawyers have determined that no more than half the delegates from Florida and Michigan can be seated at the party’s August convention, dealing a blow to Senator Hillary Rodham Clinton’s efforts to seat the full delegations from those states.[...]

In asking that the full delegations from these states be seated, Mrs. Clinton hopes to narrow Senator Barack Obama’s delegate edge and make the case that by including the votes from these states, she will have more of the popular vote in the nominating contests, an assertion that has come under some dispute. But the legal analysis, based on party rules and contained in a 38-page memo to the committee, says the committee can either seat only 50 percent of the delegates or seat them all but give them only half a vote, which amounts to the same thing.

Letting Michigan and Florida delegates cast half-votes, the same sort of penalty that’s being imposed by the GOP for the states’ decision to have their primaries so ridiculously early, is actually the most sensible compromise in my mind, if only because it’s half way between “the rules are the rules” and the strategic folly of not seating the delegations from two potentially large swing states.

The rules committee is meeting Saturday, and the pundits think a decision will be made that day.  Personally, I think it would be more strategically appropriate to withhold a ruling until late next week — after the final primaries have been held, and undeclared superdelegates have an opportunity to chime in.

The way Obama’s been collecting superdelegates recently, if the rules committee postponed their decision, it’s entirely possible that the outcome of the primary season could be cleanly settled, without having to touch the question of Florida and Michigan.   If that were the case, any decision could be rendered moot, allowing for easier compromise.

With the potential of a 31 May ruling…well, the Dems have a shot at looking more like their nominee is being determined by party bigwigs in the (admittedly semi-transparent) back room….an image the D’s should be shying away from, unless they really are trying to snatch defeat from the jaws of victory.

Seen at CNN’s Political Ticker:

The former Georgia congressman — who left the Republican Party two years ago, citing differences over fiscal policy and concerns over civil liberties — was nominated on the sixth ballot at the party’s convention in Denver.

So, am I the only person to wonder, for all that Ron Paul’s supporters are accused of having tried to take over the GOP, conservatives seem to be gaining influence, if not taking over, the Libertarian Party?

Last week, I posted my back-of-the-envelope arithmetic to double-check the sanity of Hillary’s delegate math.

In case anyone’s interested, here is an update to that reckoning:

Last week, the “% unpledged Hillary needs to win” figures were 80%, 56%, and 64%.

If Hillary could pull off an bigger rout of Obama than is expected — say by getting a margin of victory beyond 225,000 — she would have a better claim to winning the popular vote.

However, it looks like she hasn’t gained much traction with that argument among the superdelegates, so far.  That bodes ill for her candidacy, since in the end, it’s the delegate count that matters.

Well, another primary night has come and gone.  Hillary gets congratulations for winning Kentucky, Obama gets congratulations for winning Oregon, and Hillary gets congratulations again for her creative arithmetic and her tenacity for vowing to stay in the race until the final primary.

One happy thought — in two weeks the primary season will be over….and perhaps sometime in the next 3½ months we might reach a definitive answer on who the Dems’ nominee might be.