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Republicans & Hillary On Track To Lose Election

FORECASTS & TRENDS E-LETTER
by Gary D. Halbert
February 12, 2008

IN THIS ISSUE:

1.   Will GOP Voters Just Sit This One Out?

2.   Other Electoral Obstacles For John McCain

3.   Another Poll Shows McCain Beats Hillary

4.   Obama Surging – Hillary Could Be Out Soon 

5.   So What Happens Next In This Election Year?

6.   Finally, Be Careful What You Wish For!

Introduction

In my January 22 E-Letter, I talked at some length about the importance of getting the Republican vote out on Election Day on November 4.  Now that Super Tuesday has come and gone, we have some startling voting data showing that the Democrats are voting in the primaries in far greater numbers than the Republicans.  In fact, Republicans are voting in the primaries this year in far smaller numbers than in 2000, the last time there was no incumbent running for president.  I will show you the numbers in the pages that follow.

If this trend continues, it will almost certainly spell defeat for the GOP nominee in November, which now appears to be John McCain.  There are some in the Republican Party that believe McCain will cause GOP voter apathy to swell even more, thus sealing a GOP defeat to either Hillary or Obama.  Hopefully, this will not happen as the numbers are bad enough already.

GOP voter apathy is not John McCain’s only problem, fortunately or unfortunately, depending on your view of McCain as the Republican presidential nominee.  McCain, who virtually wrapped up the GOP nomination on Super Tuesday, will have serious problems in winning the same states in the general election on November 4.  I will tell you why as we go along.

Next, if you noticed the title of this week’s E-Letter above, your first thought might well have been: Say what? How can the Republicans and Hillary lose the election in November?  Here’s how – Senator Barack Obama is now on track to run the table by: 1) beating Hillary for the nomination; and 2) beating the GOP in the November presidential election.  Thus, both the Republicans and Hillary could lose this year.  Details to follow as this E-Letter unfolds.

Finally and most importantly, we will take a closer look at some of the beliefs and policy intentions of Barack Obama.  Many conservatives would like nothing more than to see Hillary eliminated from the presidential race, and to finally be rid of the Clintons for good.  But as I will point out below, conservatives should be careful what they wish for.  Barack Obama is a liberal ideologue, seemingly well to the left of Bill and Hillary.

But I’m getting ahead of myself, as usual, so let’s just get started and move along with this week’s political discussion topics.  Here goes.

Will GOP Voters Just Sit This One Out?

On Thursday of last week, former Massachusetts’s governor Mitt Romney announced that he had suspended his campaign.  This announcement came as a surprise to many Republican voters, but it was clear after the Super Tuesday results that Romney had little chance to catch McCain.  So, for better or worse, Senator McCain will be the GOP nominee for president, barring some unimaginable surprise.  But more importantly, we first need to look at some sobering numbers on the GOP voter turnout so far this year.   The numbers below are from the Federal Election Commission.

Super Tuesday 2008
GOP     9,000,000 est.
DEM   14,600,000 est.

All 2008 Primaries So Far
GOP   12,500,000 est.
DEM   25,000,000 est.

Before I comment on what should be obvious to anyone reading this, let’s compare the voter turnout data above to what happened in the 2000 presidential primary season, the last time there was no incumbent president running.

2000 - All Primaries
GOP    20,717,198
DEM   14,665,119

As you can see, there has been a massive shift in voter turnout in 2008 in favor of the Democrats.  So far in 2008, Democratic voters have doubled the Republican turnout in the primaries, with an estimated 25 million voters versus only apprx. 12.5 million for the GOP.  Obviously, the Democratic Party is energized, what with the chance to reclaim the White House after eight years of George W. Bush.  Republicans, on the other hand, may be suffering from “Bush Fatigue.”

For those of you that keep up with such data and voting trends, you may recall that the Democrats dominated the primary voting in 2004, and yet Republicans managed to garner just over 62 million votes to re-elect President Bush in the general election.  In that case, however, most Republicans saw no reason to vote in the primaries because Bush was unopposed.

So the question is, will Republicans sit this one out?  If primary participation is any indicator, it looks like many Republicans will simply stay at home, especially conservatives that are very frustrated with McCain. 

I happened to be out of the office last Thursday afternoon and caught the tail-end of Rush Limbaugh’s program.  That was the day that Romney dropped out in the morning and McCain gave what was in essence his acceptance speech in the afternoon.  Rush said that he received the second highest number of e-mails in the program’s history for a single three-hour show, with the vast majority indicating there is no way they would vote for McCain.

Other Electoral Obstacles For John McCain

It is clear that John McCain will have to make great strides in unifying the Republican Party in the weeks and months ahead, if he is to have any chance at winning in November.  I don’t know what he can do to reach out to conservatives who vow never to vote for him.  I did listen to McCain’s acceptance speech last Thursday afternoon, and I thought it was an excellent speech, even though I’m no big McCain fan.  In fact, it sounded more like a Ronald Reagan speech than a John McCain speech.  He’s going to need more of them!

Click on the following link if you would like to read McCain’s acceptance speech last Thursday:

http://www.realclearpolitics.com/articles/2008/02/john_mccains_cpac_speech.html

Even if McCain can win over some of the conservatives between now and November 4, he has other serious electoral problems to surmount. 

While McCain has racked up some big primary and caucus victories, he will have a hard time duplicating that success in November.  Why?  Well, McCain’s victories have come mainly in states that Democrats win in the general election.  Let’s look at the states McCain has won so far: NH, SC, FL, MO, NY, NJ, CT, DE, IL, CA, OK, AZ and WA (maybe – they’re still counting).

Of these states, only SC and OK have voted for the GOP candidate in all of the last four general elections; FL and AZ have voted GOP in three of the last four; MO in two of the last four; and NH in only one of the last four presidential contests. That leaves NY, NJ, CT, DE and WA, none of which voted for the GOP candidate in the past four general elections.  In fact, WA and NY have not voted for the GOP candidate since the Ronald Reagan mega-landslide in 1984.  That’s 24 years folks!

For McCain to win in November, he needs to carry the more traditional GOP states, mainly in the South and West.  The trouble for McCain is he hasn’t been able to do that, and those states have mostly gone for Huckabee and Romney.  These states include both KS and LA that voted for Huckabee after McCain’s mea-culpa on several issues in his CPAC acceptance speech last Thursday.

It does appear that McCain will be the GOP nominee, but he has by no means closed the sale with conservatives as the most recent Huckabee victories illustrate.  One thing McCain must now be considering seriously is to take Huckabee as his running mate.  Huckabee has real appeal in the South that McCain needs badly.  Huckabee could also serve to strengthen McCain’s standing with conservatives and the so-called evangelicals.

However, on Meet the Press last Sunday, Huckabee said he was not interested in being VP. “I'm not going to be asked. It's pretty evident that there would be a whole lot of people on the list long before me and one of them would say yes”.  I understand that Huckabee is not ready to fold his tent just yet, but to think he wouldn’t be asked?  Well, you wonder if he knows something we don’t.  Huckabee, with his strength in the South, must be high on McCain’s VP list. 

That leaves two other obvious choices and a slew of darkhorses as possible running mates.  Let’s look at the obvious choices.  The two obvious VP choices for McCain after Huckabee are Mitt Romney and Texas Governor Rick Perry.  Romney brings appeal in the West and may be able to deliver MA in the general election.  He would also go a long way to adding credibility to the ticket with conservatives.  Gov. Perry would likely have some appeal in the South and would very likely be able to deliver TX in the general election, as it is in play for the first time in eight years.

In any case McCain has a long, long way to go to consolidate the GOP conservative rank and file. The wrong VP choice could cost him dearly. While McCain polls reasonably well against both potential Democrat candidates, he cannot win against either of them without a string of wins in the South and in the West.

Another Poll Shows McCain Beats Hillary

For months now, most of the major polls have shown that the Democrats will win the White House in November, regardless whether it’s Hillary or Obama.  However, as I reported to you on January 22, the latest GALLUP poll of head-to-head contests had McCain defeating either Hillary or Obama.  None of the other GOP candidates win against either of the Democrats in this same national poll.

The numbers have shifted in early February.  The latest RealClearPolitics head-to-head poll averages now stand as follows: 

McCain  46.6 / Hillary  45.0
McCain  43.9 / Obama  47.4

While it is troubling to see McCain slipping below Obama, it is still encouraging to see that he continues to lead Hillary, although by only a slim margin.  For those who were sad to see Mitt Romney bow out, he was nowhere near this close to Hillary or Obama.  While McCain was certainly not my first choice for the Republican nomination, he may just be the GOP’s only chance to defeat either Hillary or Obama in the national election. 

Because McCain is a moderate on numerous issues, he draws a significant number of independents and even some conservative Democrats.  Yet there are those who claim that if McCain is the Republican nominee, conservatives will simply stay home on Election Day.  I hope that is not the case.  Staying home is the equivalent of a vote for Hillary or Obama.

Obama Surging – Hillary Could Be Out Soon

Junior Senator Barack Obama has leaped from virtual obscurity just a year ago to a statistical tie with Hillary Clinton in the 2008 presidential race.  After winning big on Super Tuesday, Obama has closed to a neck-and-neck race.  In the latest RealClearPolitics.com poll average this morning, we find a statistical dead-heat with Hillary at 45.3 and Obama at 43.7, and he is gaining each time there is a new poll.  The latest USA Today/Gallup poll has Hillary at 44, while Obama has surged to 47.  So what happened?

Hillary’s campaign has been foundering over the last couple of months.  Her husband, former president Bill Clinton, made some racially-charged comments about Obama last month, which were roundly criticized in the mainstream media, and actually gave Obama a boost – oops!  But of late, a toned-down Bill Clinton is still on the stump.  Just yesterday, Hillary replaced her campaign manager.  She is obviously struggling.

Obama has proven to be a fundraising juggernaut, attracting millions of younger voters to the race.  Obama raised a record $32 million in January alone, as compared to Hillary’s $13.5 million.  In early February, Hillary had to loan her campaign $5 million of her own personal money, and put her staff on unpaid status, at least for a few days or weeks.  What is happening to the Clinton campaign?  Maybe the better question is, what happening with Obama’s campaign?

Obama has swept the recent Democratic primaries, including the past weekend of votes in Washington State, Louisiana, Maine, Nebraska and the US Virgin Islands.  Obama now has a very slim lead in Democratic election delegates, and will get even more in today’s primaries.  He clearly has the momentum.

Obama is heavily favored to win today’s primaries in Maryland, Virginia and the District of Columbia.  According to the latest polling, he is ahead by double digits in all three.  By around 9:00 this evening, Barack Obama should be the clear front-runner for the Democratic nomination.

No wonder that Hillary has challenged Obama to five debates over the coming weeks.  Thus far, Obama has reportedly only agreed to one debate.  This is a clear sign that Obama has the momentum and could very likely defeat Hillary for the Democrat nomination.

Most Republican pundits maintain that they would prefer for McCain to run against Hillary.  After all, she has much more negative baggage than Obama.  In fact, the greatest fear among Republican pundits has been a Hillary/Obama ticket, which would likely be an unstoppable landslide.  But now, as Obama seems to be gaining the upper hand, Republican fears are mounting. 

It seems clear that an Obama/Hillary ticket is not going to happen.  While Hillary might surely accept Obama as her running mate (she will do anything to win), I would bet that Obama will not reciprocate.  I don’t believe Hillary would accept second billing if Obama wins the nomination.   It’s all or nothing for the Clintons, in my opinion - no second banana for Hillary.

So What Happens Next In This Election Year?

Here’s the way the next few months play out, in my opinion.  On the Republican side, John McCain has two problems. One, he has to reach out to the conservative base, as he did last week, and try to make the case that he is a real conservative.  But two, he has to somehow move to the center to keep his independent voters onboard at some point.  I don’t know how he does both.  And he has to accumulate a huge war chest of money to match either Hillary or Obama in the summer and fall.

Hillary and Obama will likely continue their fight until one of them wins enough delegates to lock-up the nomination.  As noted earlier, if Obama wins the Maryland, Virginia and DC primaries tonight as is widely expected, he clearly becomes the front-runner.  He is widely expected to win the Hawaii primary next Tuesday, at which time he might also win Wisconsin.

If this is the case, Obama will have won the last 10 Democrat primaries or caucuses in a row, to Hillary’s 0.  If Hillary happens to win Wisconsin, then it will have been 9-1.  Either way, it then really comes down to Ohio and Texas on March 4 for Hillary to have any reasonable chance to stay viable in the race.  Pundits are calling Texas and Ohio Hillary’s “firewall.”   She desperately needs to win them both.  As a result, I expect we’ll see the Clintons camped out in downtown Austin at the Driskill Hotel later on this month.

Side Note:  It has been eight years since we have seen a national political contest in Texas.  With Texas clearly in George W. Bush’s back pocket in the last two national elections, presidential candidates have not campaigned here.  As a result, we here in Texas haven’t been annoyed by political ads every time we turned on our TVs or radios.  How nice!  But those days are about to be over. 

And by the way, virtually every major newspaper in Texas has endorsed Obama over the last week.  Only the Houston Chronicle is holding out.  That is an indication of how the large urban centers in Texas are leaning.  If Hillary wins Texas, it will have to be by a large turnout of Latino voters.  No wonder that Hillary has campaign stops scheduled this week in San Antonio, El Paso and McCallen (south Texas).

If Hillary continues to fall behind Obama, look for this campaign to turn viciously UGLY.  Texans and Ohioans are about to witness the Democratic race turn very nasty, I predict.  The Clintons will pull out every stop, call in every favor and do everything they possibly can to dig up dirt on Obama. 

We can certainly expect to see the Clintons find a way to get those Florida and Michigan delegates seated for Hillary at the convention.  And I would not be surprised if Bill and Hillary find some way, legal or otherwise, to influence those nearly 800 “SuperDelegates” that can vote however they want.  The next month or two may be the ugliest campaign we’ve seen in recent memory!

That all assumes, of course, that Hillary can raise tons more money to keep up with the Obama fundraising juggernaut, which remains to be seen.  If she loses all three primaries tonight, as is widely expected, it will become increasingly difficult for Hillary to keep raising large sums of money from her relatively narrow base of wealthy donors, as they may be asking themselves tomorrow (Wednesday) and beyond: Does she still have a chance to win this thing? If not, maybe we should get on the Obama bandwagon. 

Finally, Be Careful What You Wish For!

No doubt, many conservatives, and indeed a growing number of Democrats, would like nothing more than to see Obama take out Hillary, with no return of the Clintons to the White House.  But those who are cheering Obama on had better realize just what they’re in for if he becomes our next president.

On the foreign policy front, he has no experience.  What we do know is that he intends to talk directly to foreign despots such as Kim Jong Il, Fidel Castro, Hugo Chavez and others.  He also wants to talk directly with Iran’s Mahmoud Ahmadinejad, perhaps in the US at Obama’s invitation.  On the war in Iraq, Obama has made it clear he will withdraw our forces as soon as possible, no matter what the inevitable results will be for Iraq. 

When Obama was asked if he thought an immediate withdrawal from Iraq would lead to chaos and genocide, the Associated Press reported he said: “The United States cannot use its military to solve humanitarian problems and that preventing a potential genocide in Iraq isn’t a good enough reason to keep U.S. forces there.”  

Maybe Obama thinks he can sit down with Iran’s madman Ahmadinejad, perhaps on Oprah’s show, and convince him to stay out of Iraq after he pulls US forces out and leaves Iraq to the takers.  Can he really be that naïve?  We just do not know.

On domestic policy, Obama has made it clear that he will raise taxes on upper income Americans in the first year of his presidency, in addition to eliminating the Bush tax cuts.  Obama says he would cut taxes for middle class Americans, but he has offered no specific plan for doing so that I can find.  Sounds like “get elected” rhetoric to me.

Obama has proposed eliminating the earnings cap on Social Security taxes – read raise taxes - now set at the first $102,000 of income.  Those earning $102,000 or more would get an immediate tax increase, so the “wealthy” would become those earning just over $100,000 a year.  Think about that.  According to the Heritage Foundation and other watchdog groups, Obama’s tax proposals would also raise taxes for millions of Americans that are considered to be in the middle class, despite his rhetoric to the contrary.

Also don't forget that employers are going to be required to pay half of the increased Social Security tax burden.  Faced with an additional 6.2% of all payroll in excess of the $102,000 per worker, corporate profits will suffer and employers will likely look for ways to reduce costs.  That could mean the loss of hundreds of thousands of jobs in the economy.  Hmmm...suddenly, soaking the rich doesn’t sound like such a good idea, does it?

Obama has made it clear that he will institute his version of nationalized health care.  While his socialized health plan differs somewhat from Hillary’s, the results would be largely the same.  He would put the world’s greatest health care system in history on track to become on par with those of Europe and Canada over the next decade.  Do we really want that?  And more importantly, how do we pay for it?  Can you say much higher taxes?  

Next, Obama’s higher income taxes will come at a time when the US economy is very possibly in a recession.  Have we not learned the lesson that you don’t raise taxes in a time of recession; just the opposite, that the best medicine for a recession is tax cuts?  I guess not if you are Barack Obama (or Hillary).  Unfortunately, most American voters don’t think these issues through, and Obama knows it.  Just vote for the candidate that promises the most.

And finally, what about the military and national security?  Other than ending the war in Iraq as quickly as possible, little else is clear in regard to Obama’s positions on these two issues based on what he has said publicly.  Many left-wing ideologues tend (privately) to despise the military and want it reduced.  Yet day after day, we hear that the US armed forces are already stretched too thin, and we need to strengthen the military.  This is a key national security issue, and we need to know where Obama stands.

I could go on with the list of things we should be concerned about with regard to Barack Obama.  But what concerns me even more is that Obama has said virtually nothing with regard to his specific policy positions.  For the most part, all Obama talks about is “hope” and “dreams” for his presidential reign, and very little of substance.  Maybe that is because of his inexperience.

Whatever the reason, Obama is clearly the most charismatic political candidate in a long time; yet he is the best at saying virtually nothing of substance.  Nevertheless, it seems to be working.

Obama has been successful in bringing millions of younger Americans into the political process.  This is the primary reason why the Democrats voting in this year’s primaries have dwarfed the number of GOP voters. 

Say what you will, but Barack Obama is a “paradigm shift” in American politics, for better or worse.  Barring some big surprise, he is on track to knock out the Clintons for good in the next month or two.  And if so, he has the potential to steamroll John McCain in November as well.  I hope not.

Republicans have some important decisions to make just ahead: Will they get behind McCain or stay at home?  The stakes are now very high.

Be careful what you wish for…..

Next week, we return to investment and retirement themes.

Very best regards,

Gary D. Halbert

SPECIAL ARTICLES:

Obama’s Camelot (read this!)
http://www.ibdeditorials.com/IBDArticles.aspx?id=286415262198440

Obama’s Path To Victory (by Bill Kristol)
http://www.nytimes.com/2008/02/11/opinion/11kristol.html?ref=opinion

Several states poised to swing Democrats’ way.
http://www.chicagotribune.com/news/opinion/chi-redblue_thinkfeb10,0,360188.story

Hillary is down but not out (from a liberal).
http://www.slate.com/id/2184207/


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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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