Caution: The Political Season Is Upon Us

FORECASTS & TRENDS E-LETTER
By Gary D. Halbert
September 19, 2006

IN THIS ISSUE:

1.  How The Mid-Term Election Polls Stack Up

2.  Politics Makes For Some Strange Bedfellows

3.  Armitage, Not Rove, Was The “Secret Leaker”

4.  ABC’s “The Path To 9/11” Docu-Drama

5.  Will It Be Hillary Versus Gore In 2008?

Introduction

With the mid-term elections now less than 50 days away, the political season is once again upon us in earnest, for better or worse.  This year’s mid-terms will be significant in that some political analysts believe the Democrats will win enough seats to gain majority control of the House of Representatives and possibly even the Senate.  While that remains to be seen, the mid-term elections merit our close attention.

This week, as we did in February and April, we will again review the latest polling data to see where things stand at this point.  Earlier this year, when President Bush’s approval ratings were at their lowest readings, the Democrats were confident of a sweep in November.  Yet in recent weeks, Bush’s ratings have gone up, and several of the seemingly lopsided races have tightened up.  As a result, the Democrats are getting nervous.  And they should be – the latest polls do not indicate that the Democrats will win majority control of either house of Congress in November.

There are some interesting House and Senate races going on and, as the old saying goes, politics makes for some strange bedfellows.  In one case, the Republicans are backing a liberal in their own party (Lincoln Chaffee of Rhode Island) and in another, the Democrats tried to oust a sitting Senator (Joe Lieberman of Connecticut) who they consider to be too conservative for their party.  As usual, both parties have demonstrated they’ll do almost anything to stay in power.

The House and Senate races have not been the only news on the political front recently.  In late August, a new book (Hubris… by Newsweek writer Michael Isikoff and David Corn) disclosed the name of the “secret leaker” in the Valerie Plame controversy.  You may recall that in 2003, columnist Robert Novak wrote that a high-level government official told him Valerie Plame (wife of Joe Wilson) was an undercover agent for the CIA.  Immediately, liberals and many in the media claimed it was Bush advisor Karl Rove who leaked Plame’s CIA connection.  They were wrong and now have egg on their faces!  I will discuss the details below.

The 5-year anniversary of the September 11, 2001 terror attacks sparked yet another political controversy in the form of ABC’s latest television ‘docu-drama’ entitled, “The Path To 9/11.”  The 5-hour TV special which aired on September 10 and 11 chronicled the events which led up to the 9/11 attacks.  Weeks before the special aired, many liberals and former Clinton administration officials blasted the film and demanded that ABC cancel it, since it was not flattering to the former president.  I say, congratulations to ABC!  I’ll tell you why later on.

Finally, a political E-Letter would not be complete without at least some discussion of the 2008 presidential race and, specifically, Hillary Clinton. Will she run, or won’t she?  Will she get the nomination?  Can she win if she gets the nomination?  Many people believe the answer to all these questions is yes.  However, Ms. Clinton’s popularity numbers have dropped recently, and it’s looking increasingly likely that Al Gore will get in the race.  Now that’s interesting!

We will look at all these political issues this week.  You may agree or disagree, and you’re welcome to let me know.

How The Polls Stack Up With 50 Days To Go

When I last wrote about the poll numbers in my April 25 E-Letter, things were looking grim for the Republicans in November.  President Bush was still reeling from the Dubai ports debacle, and his approval rating was at its low point of only 32%.  The so-called “generic ballot” – would you vote Republican or Democrat if the election were held today – was at +12 for the Democrats in late April.

Things have since improved at least marginally for the Republicans.  The latest generic ballot as of last week is at +9.5 for the Democrats.  President Bush’s approval ratings have climbed from the mid-to-low 30s to 40-45% in the latest polls.  While the Democrats still look to gain seats in the House and the Senate, it still looks like the Dems will not gain majority control of either house of Congress in November. 

For purposes of analysis, we will use the latest poll numbers from electionprojection.com. ElectionProjection aggregates a number of different polls to come up with their numbers.  As a result, there are individual polls that show the election closer than the numbers below.

The House of Representatives is currently 232 GOP, 202 DEM and 1 IND.  The polls now indicate on average that the Democrats will pick up 10-11 House seats in November.  That would put the House at 222 GOP, 213 DEM and 0 IND.  Unless there are some big surprises between now and the election, the Democrats will not regain control of the House.

In the Senate, the current count is 55 GOP, 44 DEM and 1 IND.  Based on the latest polls, the Democrats look to gain 3-4 seats in the Senate in November. That would put the Senate at 52 GOP, 46 DEM and 2 IND, still well short of a Democrat majority.  The three GOP Senate seats that are likely to fall to the Democrats are Conrad Burns (MT), Mike DeWine (OH) and Rick Santorum (PA).  It remains to be seen if Lincoln Chafee wins in Rhode Island.

While the Democrats are not likely to win majority control of either house of Congress, they are projected to make big gains in governorships around the country.  The current count of governors is 28 GOP and 22 DEM.  The latest polls indicate a huge shift to 21 GOP and 29 DEM in the November elections.  This is a very large shift in favor of the Democrats.

There are two big reasons why the Republicans will hold onto majority control in the House and Senate.  First, as I wrote in February and April, the Democrats are facing an unfavorable electoral arrangement. There are currently too many districts/states that will vote Republican no matter what the Democrats do, thanks in part to gerrymandering by the GOP.

Second, the GOP is on course to massively outspend the Democrats in the mid-term elections. According to the Federal Election Committee (as of June), the RNC has raised $152.9 million during the current election cycle, compared with $79.6 million for the DNC.  The FEC estimates that the RNC has $43.1 million in cash on hand, compared with $10.3 million for the Democrats. The Democrats, under the direction of DNC chairman  Howard Dean, have reportedly spent heavily on national organizations that can aide them in general elections for years to come, while the GOP has ‘kept their powder dry’ so to speak.  So, the GOP is on track to vastly outspend the Democrats in the next couple of months.

Given the poll numbers above and less than 50 days until the elections, the Democrats are starting to minimize expectations.  When I last covered these numbers in late April, the Democrats were boasting of a sweep in November, and House Minority Leader Nancy Pelosi was preparing to become the Speaker of the House.  That is not likely to happen.

There are those who are speculating that there will be a major housecleaning in the Democratic Party if they don’t win a majority in one house or the other in November.  The head most likely to roll is that of Howard Dean, especially if Hillary Clinton runs for president.  She reportedly doesn’t like Howard Dean and will want her own people running the DNC before 2008. 

In the last section of this E-Letter, I will discuss Hillary’s plans and how a poor showing by the Democrats in November could play right into her plans – unless Al Gore decides to get in the race, which some believe is going to happen.

Politics Makes For Strange Bedfellows

Two of this year’s Senate races demonstrate just how crazy (some would say ‘sick’) politics can be.  Lincoln Chafee, a sitting Senator from Rhode Island, is widely considered to be the most liberal Republican in the Senate.  He voted against the war in Iraq, against Bush’s tax cuts, against Samuel Alito for the Supreme Court and he is pro-abortion.  On ideological terms, the GOP would like nothing better than to get rid of Chafee this November.

Chafee was challenged in Rhode Island’s Republican primary by Stephen Laffey, who is a staunch conservative on most issues.  The problem was, GOP leaders calculated (probably correctly) that Laffey had almost no chance to beat the Democratic candidate, Sheldon Whitehouse, in the November election.  So, they decided to throw their support behind Chafee for no other reason than to hold on – hopefully – to his seat in the Senate.

And back him they did.  Republican strategists savaged Laffey.  The National Republican Senatorial Committee ran over $1 million in ads against Laffey, many of which were distasteful and misleading.  Laura Bush actually went to Rhode Island to campaign for Chafee, even though he admits he didn’t vote for President Bush in the 2004 election.

Chafee prevailed in the primary with 54% of the vote, thanks to GOP money and support and thanks to many Democrats and independents who voted for him, over Laffey.  It is estimated that over 14,000 Democrats switched their party affiliation just to vote for Chafee and against Laffey.  But it would be naïve to believe that all of those votes will go for Chafee in November when he faces Democrat challenger Sheldon Whitehouse.

Basically, the Republican party held its nose and supported Chafee, a liberal, only because they believe he has a better shot at holding onto his seat in the Senate in November than his conservative primary challenger.  It remains to be seen if this strategy proves to be successful on November 7.  Obviously, this is a race to watch closely.    

The Democrats, on the other hand, tried an altogether different strategy in the Connecticut primary for Senator Joe Lieberman’s seat which is also up this year.  Joe Lieberman, a three-term Senator, is one of the more conservative Democrats in Congress.  Lieberman voted for the war in Iraq (and made four trips there to visit our troops), is tough on crime and has voted with the Republicans on several other issues.  As a result, the Democrats wanted him out.

Democrat strategists threw their money and support behind Ned Lamont, the more liberal candidate in the Connecticut Democratic primary, and Lamont won on August 8.  Lieberman, who remains popular in CT, has decided to run for his Senate seat as an independent – an option the Democrats apparently hadn’t planned on.  As this is written, Lieberman leads Ned Lamont and Republican challenger Alan Schlesinger by a comfortable margin in the polls.  So at this point, it looks like the Democrats’ strategy in CT was an utter failure.

The point to be made regarding both of these races is that politicians in both parties will go to extreme measures to get their candidates elected and to hold onto power in Washington.  The GOP is backing Lincoln Chafee, a known liberal, in RI, and the Democrats tried their best to oust Joe Lieberman in CT, primarily because he voted for the war in Iraq and still supports it.  This is increasingly how politics works these days.

Armitage, Not Rove, Was The “Secret Leaker”

In late August, a new book (Hubris… by Newsweek writer Michael Isikoff and David Corn) disclosed the name of the “secret leaker” in the Valerie Plame controversy.  In July 2003, columnist Robert Novak wrote an article that identified Valerie Plame as an undercover agent for the CIA, but without including his source for the information.  A firestorm followed!

It is against the law for government employees to reveal the names of CIA (and other) undercover operatives, including current agents and those who have been undercover within the last five years.  Thus, the media went wild trying to find out who was Novak’s source.  Novak would reveal only that his source was a “senior administration official.”

Based on Novak’s vague description of his source, many in the media immediately assumed the leaker was none other than Karl Rove, the president’s top political advisor.  The story the media concocted went like this: Valerie Plame is married to Joe Wilson, the ex-diplomat that was sent to Niger to investigate whether Saddam Hussein had purchased enriched uranium; Wilson returned and claimed that Hussein had not made such purchases; then when President Bush decided to go to war in Iraq, Wilson was highly critical of the president. 

Since it is illegal to reveal the names of undercover agents, many in the media were convinced they finally had a scandal that could take down the president, if only they could confirm that the source of the Plame leak was someone high up in the Bush administration – such as Rove.  The story took on a life of its own, with the point being that it was Karl Rove who leaked Valerie Plame’s CIA identity to Novak for the express purpose of punishing Joe Wilson for his criticism of the Bush administration.  My, what a twisted web the liberals in the media spun!

The firestorm got so great that President Bush called for an investigation and appointed Special Prosecutor Patrick Fitzgerald at the end of 2003.  Fitzgerald’s investigation into the leaker has gone on for almost three years, and is still going on, at a reported cost of over $30 million to the taxpayers and still counting. 

Now fast-forward to the present.  Isikoff and Corn’s new book, Hubris…, comes out in late August and definitively names Richard Armitage as the secret leaker who identified Valerie Plame to Robert Novak.  Armitage is a career bureaucrat who in 2003 was the deputy Secretary of State working under Colin Powell.  Armitage now admits publicly to having a meeting with Robert Novak in early July 2003 in which he did, in fact, disclose to Novak that Valerie Plame was a CIA employee and former undercover agent.

Most interesting in all of this is the revelation that when Armitage read Novak’s column in which he identified Valerie Plame as a CIA employee, Armitage became very concerned that he could be identified as the leaker.  It has now been widely reported that Armitage phoned his boss, then Secretary of State Colin Powell, immediately after reading Novak’s column, and told Powell about his July conversation with Novak and the fact that he identified Valerie Plame as CIA. 

What we do not know to this day is why Richard Armitage and Colin Powell (and whoever else knew about this) kept quiet all this time, and why they let an expensive Justice Department criminal investigation go on for almost three years!  Colin Powell has been silent on the matter ever since the story broke wide open early this month.

Several troubling questions arise.  Here you had the Secretary of State and the deputy Secretary of State in the Bush administration who knowingly allowed a multi-million dollar investigation continue when they had information that could have stopped it in its tracks.  The first question is why would Powell want to see Rove take a dive?  Since Powell knew the truth, he also knew Rove could never be indicted for outing Valerie Plame.  So why did he let the expensive investigation go on?  Rove reportedly spent well over $5 million in legal fees defending himself.  Maybe there was bad blood between Powell and Rove.  Or maybe worse.  Maybe Colin Powell wanted the Bush administration to be mired in a scandal. 

The point is, we still don’t know, and we may never know what really happened.  We don’t know if it was only Richard Armitage who outed Valerie Plame, or if there was a larger effort to discredit her husband, Joe Wilson, by the Bush administration.  But what we do know is that Colin Powell and Armitage kept quiet for almost three years while an expensive criminal investigation was aimed at Karl Rove, Scooter Libby and others in the Bush administration.

Those in the media who vilified and falsely accused Karl Rove have no apologies, of course.  I have not seen a single story from those who accused Rove, and made charges against the Bush administration on the Valerie Plame issue, come out and admit they were wrong or set the story straight.  They’ve just dropped it like a hot potato!  What else is new?

ABC’s “The Path To 9/11” Docu-Drama

I was one of the relatively few people who watched ABC’s 5-hour TV special which aired on September 10 and 11 and chronicled the events which led up to the 9/11 attacks and was based largely on the 9/11 Commission report.  According to the Nielson ratings, “The Path To 9/11” drew only 13 million viewers on its opening night, whereas the NFL football game, which featured the Manning Brothers against each other, had 20.7 million viewers.  

Like many Americans, I probably would not have even known about the ABC special on 9/11 were it not for all the publicity it received before it even aired.  Former President Bill Clinton and his spokespersons, including former National Security Advisor Sandy Berger, were highly critical of the ABC special before it aired.  In fact, they and plenty of liberals in the media tried their best to get ABC to cancel the 5-hour movie!  They claimed the movie was full of lies.

To their credit, the bosses at ABC stuck to their guns and aired the $40 million TV special as planned on September 10-11.  As expected, the movie did not portray Bill Clinton and Sandy Berger in their finest light.  The movie did not depict Berger’s conviction and $50,000 fine for stealing highly classified documents from the National Archive.  But the movie did depict several opportunities when the Clinton administration had chances to kill or capture Osama bin Laden but chose not to.

The movie portrayed President Clinton as being preoccupied with the Monica Lewinski scandal and his possible impeachment, rather than hunting down bin Laden.  No wonder they wanted this movie canceled!  A Clinton spokesman called the movie “utterly and completely false.”

For the record, I thought the 5-hour 9/11 special was excellent.  I congratulate ABC for airing the program despite the firestorm of criticism from the Clinton crowd.  While the movie did contain some fictionalized scenes, I thought ABC got it mostly right.  Bill Clinton’s legacy is going to be what it is, movie or no movie.  FYI, the movie was also not kind to President Bush.

And speaking of Clinton’s legacy, let’s conclude with a look at Hillary’s plans and the likelihood of another Clinton in the White House after the 2008 election.

Will It Be Hillary Vs. Gore In 2008?

Speculation continues to run high on whether Hillary will seek the Democratic nomination for president in 2008.  I have some friends who still believe she will not.  They believe, in the end, she will not run for president, mainly because of all the negative baggage that is still associated with her by many.  They believe she will not take the chance.  I hope they are correct, but I believe they will be wrong.

As I will discuss below, Hillary’s poll numbers have been dropping over the last several months, but unless her numbers drop a lot more, I believe she will seek the nomination.  To those who believe she won’t, I ask this simple question: Why wouldn’t she?  She is the clear frontrunner, she has tons of money, and I can’t believe she doesn’t want to be the first female president of the United States.  So I fully expect her to run.  I just don’t know if she can win.

In polls conducted in March of this year, Hillary got 42% of the Democratic vote.  But in the latest Fox survey as of August 30, Hillary had fallen to only 33% of the vote.  Even worse, the “undecided” vote rose from 10% in March to 18% in late August.  This is very unusual without a new candidate entering the field or some kind of scandal.

33% is still a commanding lead.  In the same Fox poll, Al Gore rose to 15% (up from 12% in March), John Kerry came in at 13% and John Edwards at 11%.  But these numbers are somewhat misleading.  For starters, John Kerry and John Edwards are arguably unelectable, and Al Gore isn’t running for presidentOr is he?

Officially, Gore is not running for president in 2008.  But then neither is Hillary, officially.  I will tell you, however, that there is quite a buzz in the blogosphere that Al Gore is going to run in 2008 and that he will challenge Hillary for the nomination.  Dick Morris, the former political advisor to Bill Clinton, is one of those who believes that Gore is quietly gearing up to take on Hillary in 2008.  That would be fascinating!

A contest between Hillary and Gore would be most interesting.  Hillary has been purposely moving to the political center for the last several years in an effort to ward-off her image as a big government liberal.  Hillary voted for the war in Iraq and has been pro-military among other moves to convince voters she is a centrist and not a wild-eyed liberal.

Al Gore, on the other hand (and if he runs), would almost certainly run as the more liberal candidate.  He has been opposed to the war in Iraq from the beginning, and would no doubt play that card against Hillary.  I don’t think there’s any question that Gore could easily win over the left wing of the Democratic Party if he were to run, and in that case, his poll numbers would immediately go up.  Dick Morris opines, “…it is not too difficult to imagine Gore giving Clinton the fight of her life.”  I think Morris is right.  But the question remains, will Gore actually get in the race? 

I mentioned earlier that if the 2006 mid-term elections don’t go well for the Democrats, it could actually be a good thing for Hillary. Here’s how.  For the last two years (until just recently), the Democrats have boasted that the 2006 mid-term elections would be their best chance in years of winning back majority control of Congress.  But as the latest poll numbers indicate, the Republicans should comfortably retain majority control in both houses.

As noted above, a poor showing by the Democrats in November could pave the way for a major shakeup in the Party’s leadership, which is currently dominated by some of its most liberal members (Dean, Pelosi, Reed, etc.).  If Hillary is going to run in 2008, then I would expect that DNC chairman Howard Dean will get much of the blame for the mid-term elections, and that he will get the boot.  Hillary will want someone from within her camp to head the DNC.

The potential housecleaning at the DNC, and who ends up replacing the ultra-liberal Dean, could well be the tip-off to who is running for president in 2008.  It would seem to be a safe assumption that Hillary, the frontrunner, will insist on someone from her camp.  But that could also be the time when Al Gore decides to step in and demand some say in the selection of a new DNC head.  Of course, this is just so much speculation at this point.

Whatever happens, the 2008 presidential election is going to be very interesting to watch.  It will be especially interesting to see where liberal supporters like George Soros and the flotilla of 527 groups land if Al Gore gets in the race.  Keep a close eye on Hillary’s poll numbers; if she continues to drop, this makes a Gore entry all the more likely.

As long as I’m speculating, there is one other question I have had ever since the talk of Hillary running for president began.  My question is, Does Bill Clinton really want to go back under the microscope?  Does the former president want to move back into the White House only to be the “second banana” to Hillary?  And to have his every move watched by the media?  I wonder.

It is widely assumed by just about everyone in the media that Bill would throw his full and undivided support behind Hillary.  He has even stated on several occasions that he believes she would make a good president.  On the other hand, you have to figure that Bill Clinton likes his life as it is.  He’s making tons of money speaking around the world; he’s welcomed like royalty wherever he goes; and with Hillary in Washington, his social life is probably great too.  That’s why I have trouble seeing him move back into the White House as the “First Man.”

The GOP Has No Bench

To round out this week’s political discussion, I suppose we have to talk about the Republican candidates who may be running for president in 2008.  To put it bluntly, the conservative base of the Republican Party is not enamored with the current field of prospective candidates, which includes Senator John McCain, former NY Mayor Rudy Giuliani, Senator Bill Frist and possibly Mitt Romney, the governor of MA.

McCain and Giuliani are both considered too liberal on certain issues.  Bill Frist is … well, Bill Frist and is not likely to get the nomination.  Likewise, Romney is a longshot.  Conservatives tried to rally around Virginia Senator George Allen, but it appears he is not going to run.  So unless some other candidate arises, the 2008 presidential election season could be a non-starter for the Republican base.

If any one of the four Republican candidates noted above gets the nomination, I would say that increases the Democrats’ chances for a win in 2008.  There is the real chance that a lot of Republican voters will simply stay home on Election Day in 2008.  If that is the case, then the House and the Senate could well go back to Democratic control.  

On that note, I think it’s time to hit the “send” button for this week!

Very best regards,

Gary D. Halbert

SPECIAL ARTICLES:

Howard Dean’s spending strategy may give the edge to the GOP
http://news.yahoo.com/s/ap/20060919/ap_on_el_ge/political_parties_money

How Rove & Company delivered a win for Chafee.
http://www.projo.com/opinion/columnists/content/projo_20060919_clacho.31e760d.html

Why are John McCain & Company opposing terrorist interrogations?
http://www.opinionjournal.com/editorial/feature.html?id=110008959

Enough Apologies (from the Pope and the West)
http://www.washingtonpost.com/wp-dyn/content/article/2006/09/18/AR2006091800992.html


Read Gary’s blog and join the conversation at garydhalbert.com.


Forecasts & Trends E-Letter is published by ProFutures, Inc. Gary D. Halbert is the president and CEO of ProFutures, Inc. and is the editor of this publication. Information contained herein is taken from sources believed to be reliable but cannot be guaranteed as to its accuracy. Opinions and recommendations herein generally reflect the judgement of Gary D. Halbert (or another named author) and may change at any time without written notice. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. Readers are urged to check with their investment counselors before making any investment decisions. This electronic newsletter does not constitute an offer of sale of any securities. Gary D. Halbert, ProFutures, Inc., and its affiliated companies, its officers, directors and/or employees may or may not have investments in markets or programs mentioned herein. Past results are not necessarily indicative of future results. Reprinting for family or friends is allowed with proper credit. However, republishing (written or electronically) in its entirety or through the use of extensive quotes is prohibited without prior written consent.

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