Democrats Now Have A Real Shot To Win It All

FORECASTS & TRENDS E-LETTER
By Gary D. Halbert
October 10, 2006

IN THIS ISSUE:

1.  Polls Shifting In Favor Of The Democrats

2.  The Democrats Could Possibly Win It All

3.  What Changed To Give Democrats The Edge

4.  How The Democrats Would Rule If They Win

5.  The 109th Congress Was Pretty Much A Bust  

6.  Gallup Poll – Bush Controls Gasoline Prices

Polls Shifting In Favor Of The Democrats

In just the last 2-3 weeks, the midterm election polls have shifted significantly, and there is the real chance now that the Democrats will actually sweep on November 8 and retake control of both the Senate and the House of Representatives.  News has been very bad for the Republicans over the last few weeks, and apparently that has shifted voter sentiment more than expected.

I have focused on the midterm elections in three previous issues of this weekly E-Letter this year (February 7, April 25 and September 19), and each time the polling data clearly suggested that the Republicans would hold onto a majority in both the House and Senate in November.  This was true only three weeks ago as I discussed in these pages on September 19.

Yet the two polling groups I follow most closely have seen their results shift in just the last two weeks to the point that the Democrats now have a real chance to regain control of both houses of Congress in the midterm elections on November 8.  Several key elections appear to have swung toward the Democrats, especially in the Senate races, in just the last 2-3 weeks.

Considering that I wrote about the midterm elections three previous times when it looked like the Republicans would hold on, I figure it’s only fair to write about how things have changed in favor of the Democrats.  For the first time in over a year, it now looks like the Dems have a real chance of retaking control of both houses of Congress in the midterm elections.

While I’m not a member of either political party, and never have been, I am a conservative on most issues, which means I usually favor the Republicans.  But as I have written in these pages in the last couple of years, the Republicans have been a huge disappointment.  Many in the Republican “base” agree, and now with the latest run of bad news, the GOP looks to be in real trouble.

In today’s issue, we will once again break down the latest poll numbers which seem clearly to be shifting to the Democrats, take a look at what is apparently going wrong for the Republicans, and think about the political implications if in fact Congress goes back into the control of the Democrats next year.

The Democrats Could Possibly Win It All

All year the media has been hyping us about the likelihood of a Democrat takeover of the House and possibly the Senate.  But the fact is, until now, the state-by-state polling data did not support a Democrat takeover of either house of Congress this year. 

The two polling data sources I respect the most are ElectionProjection.com and RealClearPolitics.com.  Both of these sources track a large number of independent polls, including the major media polls, and report these data individually, plus they provide an average of all the polls they track.  As of the end of last week, both polls have shifted to give the Democrats a real shot at winning back the Senate and possibly the House in November.

The current makeup of the Senate is 55 Republicans/44 Democtrats/1 Independent.  The Democrats need to have a net gain of six seats to win majority control of the Senate.  In the House of Representatives, the current makeup is 232 Republicans/202 Democrats/1 Independent.  The Democrats need a net gain of 15 seats to win majority control of the House.

On September 19 when I last handicapped the election polling data, it looked like the Democrats would fall short of retaking either house of Congress.  As I wrote in that issue three weeks ago:

“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.”

But things have changed, in just the last 2-3 weeks.  As of this writing, both ElectionProjections and RealClearPolitics show that the overall election results have tightened significantly to the point that both the Senate and the House are in play for the Democrats.  Both ElectionProjections and RealClearPolitics now show that the Democrats are on track to gain at least 5-6 Senate seats and 12-15 House seats.  Wow, what a switch!

As I reported on September 19, the so-called “generic ballot” (Would you vote Republican or Democrat today?) stood at +9.5 for the Democrats, down from +12 in April.  But in just the last few weeks, the generic ballot has improved to +16 for the Democrats according to RealClearPolitics. But some of the state-by-state races have shifted even more.

The Senate has been thought to be safe for Republicans, at least until now.  In the last few weeks, several races have not only tightened but now appear to favor the Democrats.  In particular, Maryland, Montana and Rhode Island look to have flipped in favor of the Dems, in addition to Minnesota, Michigan, Pennsylvania and Washington that were already leaning in favor of the Democrats a month ago.

In addition to these Senate races that appear to have tipped toward the Democrats in the last 2-3 weeks, there are also four other Senate races that are now too close to call – Missouri, New Jersey, Ohio and Tennessee.  Virginia was on this list, but it looks like Senator George Allen will win re-election in VA at this point, as well as Senator Jon Kyl in Arizona.

So it now looks like there are enough seats in play, as this is written, for the Democrats to have a real chance of regaining majority control of the Senate in the midterm election.  Of course, the Democrats still have to win a net six seats to regain control of the Senate, which remains to be seen, but the latest polls suggest that is possible, if not likely, with just a month to go.  My how things have changed in just 2-3 weeks!

In the House of Representatives, RealClearPolitics lists 20 seats that are now in the balance or leaning toward the Democrats.  ElectionProjections now shows 13 House races likely to switch to the Democrats, with several other states too close to call.  Just a few weeks ago, the polls suggested that, at most, only 10-11 House seats were really in play. 

A major political shift has happened, and now it is entirely possible that the Democrats could regain majority control of both houses of Congress in the midterm elections on November 8.  I cannot remember a shift of this magnitude in such a short time.

What Changed To Give Democrats The Edge

It would be easy to assume that the recent Republican fall from grace has been the result of the latest sex scandal involving former congressman Mark Foley (R-FL) and his abrupt resignation from the House of Representatives.  No doubt, this story has dominated the news over the last week.  But that is only part of the Republicans’ problems of late.

The scandal over Rep. Foley is still unfolding, in particular the ‘who knew what and when,’ especially for House Speaker Dennis Hastert, so I will not comment other than to say that this entire issue has been portrayed as another black mark against all Republicans, rightly or wrongly.  The media has played it up, as you would expect, and Democrats have used it to their advantage.

The Republicans were looking good just a month ago.  President Bush’s approval rating was going up in the wake of the 9/11 anniversary.  The president won a legislative victory on the issue of interrogating terrorist detainees, which reminded conservatives what they like about Bush.  As I last reported on September 19, the polls showed that the Republicans would hold onto their majorities in both houses of Congress. 

But over the last 2-3 weeks, the wheels appear to be falling off the GOP.  The Foley scandal, and the media’s quest to convince us there was a cover-up, is of course the most serious blow to the Republicans.  Bob Woodward’s new book, State of Denial, is very negative for the Bush administration.  In addition, there was the leak of the National Intelligence Estimate which suggested that we are less safe as a result of the war in Iraq.  And speaking of the war in Iraq, the death toll of American soldiers has accelerated in the last month as well, which is particularly bad news for the Republicans with an election just around the corner.

For all these reasons, the polls have shifted significantly in recent weeks, and it is now quite possible that the Democrats will retake control of one or both houses of Congress.  Of course, there is still time for a shift back toward the GOP.  The Democrats are equally capable of shooting themselves in the foot or over-playing their hand.

Finally, by far the biggest risk to Republicans on November 8 is the growing likelihood that conservative voters are now so fed up that they simply stay home and do not vote in the midterm election.  The Foley scandal may have convinced some conservative voters that there’s really no difference between the Democrats and the Republicans, so why even bother to vote.  If this is the case, Republican voter apathy alone could swing the election, and Congress, to the Democrats.

What A Democratic House & Senate Would Look Like

If the Democrats win majority control of the Senate and/or the House, then congressional leadership will also switch accordingly.  If the Democrats sweep, the Senate Majority Leader would likely be Harry Reed, and the House Speaker would likely be Nancy Pelosi.  Both are among the most liberal Democrats in the Congress.

Likewise, if the Democrats sweep, the leadership of the powerful House and Senate committees will also switch to the Democrats.  Here are a few notable examples of likely committee chairmen if the Democrats win control. In the Senate, the Appropriations Committee would go to Robert Byrd (D-WV), Armed Services would go to Carl Levin (D-MI), Commerce would go to Daniel Inouye (D-HI), Foreign Relations would go to Joseph Biden (D-DE) and Health, Education & Labor would go to Ted Kennedy (D-MA).

Notables in the House of Representatives include the Appropriations Committee which would likely go to David Obey (D-WI), Armed Services would go to Ike Skelton (D-MO), Energy & Commerce would go to John Dingell (D-MI), Ways & Means would go to Charles Rangell (D-NY) and Judiciary would go to John Conyers (D-MI).

It is fair to say that the names above include some of the most liberal members of the Democratic Party.

Lieberman Likely To Get The Last Laugh

Connecticut Senator Joe Lieberman, running as an Independent, has opened up a big lead on his Democratic opponent Ned Lamont.  You will recall that the Democratic National Committee and top party leaders threw their support behind Lamont who actually defeated Lieberman in the primary.  The Democratic leadership opposed Lieberman primarily because of his support for the war in Iraq, but also because he has voted with the Republicans on other issues as well.

Yet even with all his multi-millions in cash and support from top Democrats, Lamont’s anti-war message isn’t playing well.  Lieberman now leads Lamont by 10-20 points depending on which poll you look at.  RealClearPolitics has Lieberman ahead by 13 points.  It looks almost certain that Lieberman will win a fourth term in the Senate in November.  He has gone from being shunned by his own party to very likely becoming the most powerful member of the Senate.  The Democrats blew this one big-time!

Consider this scenario. Let’s say the Senate ends up 49 Republican/49 Democrat/2 Independent, or even a one-seat advantage to either side.  In that case, Lieberman’s votes could become the “spoiler” for whichever side he chooses to oppose.  It will be interesting to see if Lieberman aligns himself with one side or the other, or if he will try to remain a true Independent.  Whatever the case, his vote will be highly sought after.

How The Democrats Would Rule If They Win

With the latest shift in the polls in favor of the Democrats, there is increasing discussion about how the Dems would govern if in fact they do take control of both houses of Congress next year.  Presumably, if the Democrats win the House and the Senate, they will have only narrow majorities.  This has led some political commentators to suggest that the Democrats won’t make sweeping changes if they are in the majority.

For the record, I am not one who believes this theory.  In fact, I expect the Democrats to exploit every opportunity to advance their liberal agenda if they gain control of Congress. If you disagree (or have no opinion), read the following excerpts from a New York Times editorial by staff writer Robin Toner on Sunday:

“A Democratic Congress would have sweeping new powers to set the agenda and focus the political debate — through the hearings it calls, the witnesses it summons and the kind of legislation it brings to the floor. ‘More oversight’ could be more revolutionary than it sounds, with the rise of lawmakers like Representative Henry A. Waxman, the hard-charging California Democrat who would take over the House Government Reform Committee; in an interview, he promised a review into ‘waste, fraud and abuse of taxpayers’ money’ related to Iraq, Hurricane Katrina and homeland security.

A Democratic majority in the Senate could also stymie, or at least slow, the conservative reconstruction of the Supreme Court, assuming another vacancy occurs in the next two years, and force President Bush to seek more bipartisanship on all judicial nominees. ‘You’re not going to have a polarizing figure,’ said Senator Patrick J. Leahy, the Vermont Democrat who would take over the Judiciary Committee. ‘It would require more of an effort at consensus for lifetime appointments.’

Moreover, a Democratic Congress could force Mr. Bush and a Republican minority to take a stand — again and again, if it chooses — on popular Democratic causes like raising the minimum wage or encouraging embryonic stem cell research. ‘If you have true openness in the debate, you have the chance to make some of these issues too hot for the president and too hard for many Republicans to vote against,’ said Representative Nancy Pelosi of California, the minority leader who would most likely be speaker if the Democrats prevail.”

In fairness, Mr. Toner points out that if the Democrats win control of both houses of Congress, their margins may be too slim to carry out sweeping liberal changes.  But that doesn’t mean they won’t try or that they won’t succeed on some important issues such as pulling out of the war in Iraq, repealing Bush’s tax cuts, or even the threatened impeachment of President Bush.  Plus, we can count on the Democrats to impose new regulations across the economy on everything from energy to the Internet, punishing industries they don’t like and subsidizing those they do. 

Hopefully, apathetic Republican voters will bear all this in mind and see fit to make the effort to vote on November 8. 

The 109th Congress Was Pretty Much A Bust

 There are many Americans, both liberal and conservative, that now believe it makes little difference which party controls the Congress.  Certainly there are many conservatives who feel that way after almost a decade of GOP control.  Clearly, the 109th Congress which recently adjourned demonstrated just how little can be accomplished.

As one commentator aptly put it, “The House session opened with an attempt to change the rule that would have required an indicted Tom DeLay to step down as majority leader. It finished with Mark Foley hustling off to rehab before he answered questions about his electronic messages to underage male House pages. And in between, what was accomplished? Nothing of significance on any of the major problems confronting the nation.”

The 109th Congress was indeed one of the most ineffectual in recent history.  Whether the need was immigration reform, a rational energy policy, an effort to expand health insurance coverage or greater security for retirement, Congress failed to deliver.  The 109th Congress worked fewer days, and accomplished less, than any Congress in recent history, and postponed much of its routine work and legislation until after the election, including a formal budget resolution.

Even the liberal Center on Budget and Policy Priorities concluded: “The 109th Congress took our already large projected budget deficits and passed legislation that will make them larger. The legislation increased projected deficits from 2005 (the year the Congress convened) through 2011 (when the current five-year budget window ends) by a total of $452 billion. Moreover, the budget deterioration over the past six fiscal years -- 2000 to 2006 -- is the largest deterioration for any six-year period in the past half-century.”

To its credit, the 109th Congress did preside over the confirmation of two relatively conservative Supreme Court justices – John Roberts (Chief Justice) and Samuel Alito.  However, that’s as far as the credit goes.  The 109th Congress had the poorest record on confirmations of judges of any Congress during the Bush presidency. And they achieved that poor record despite having more Republicans in the Senate than at any other time during Bush’s tenure.

Despite the numerical advantages and majority control of both houses, the 109th Congress confirmed fewer Circuit Court judges and fewer District Court judges than either the 107th or 108th Congresses.  According to judicial watchdog group ConfirmThem.com, the 109th Congress confirmed only 50 District and Circuit court judges, plus the two Supreme Court justices for a total of 52, as compared to the 107th and 108th Congresses which confirmed 100 and 103 judges, respectively.

The main reason the 109th Congress confirmed so few judicial appointments was Democratic opposition and foot-dragging.  Imagine what will happen if the Democrats gain control of one or both houses of Congress, and especially the Senate, in the midterm election.  President Bush can kiss goodbye many of his current judicial nominees!  This is another big reason why supposedly apathetic Republican voters should turn out on November 8. 

Gallup Poll – Bush Controls Gasoline Prices

According to a Gallup poll released in late September, 42% of respondents said they believe the Bush administration controls the price of gasoline.  Specifically, 42% of those surveyed said they believe the Bush administration “deliberately manipulated the price of gasoline” so that prices would fall significantly going into the November midterm elections.  While 53% of respondents did not believe the Bush administration controls the price of oil, I was shocked to see that 42% believe President Bush can manipulate the price of gas.  That is ridiculous!

Interestingly, almost two-thirds of those who said they believe President Bush manipulated gas prices lower were registered Democrats, according to Gallup.  Somehow, that doesn’t surprise me!

For the record, the prices of crude oil and gasoline in the US are set daily at the New York Mercantile Exchange where oil and gasoline futures are traded.  This is the ultimate open-outcry free market where prices are set by global supply and demand and buyers and sellers of all types.  President Bush does not control or manipulate the futures markets.

Among the main reasons oil and gasoline prices went so high earlier this year were the predictions by many climatologists and meteorologists that the 2006 hurricane season would be one of the worst ever.  As you know, hurricanes in the Gulf of Mexico almost always send oil, and therefore gasoline, soaring higher.  So hedge funds and speculators (large and small) loaded up on oil and gas futures, and this was a big contributing factor that sent prices to new record highs by the middle of the year.

But guess what - we’ve had no major hurricanes hit the US or cause any supply disruptions in the Gulf this year, and hurricane season is drawing to a close.  Plus, with gasoline prices above $3 per gallon earlier in the year, people figured out ways to cut back, including curtailing summer travel plans in many cases.  As a result, inventories of oil and gasoline have risen significantly. 

Hedge funds and speculators (large and small) have recently been liquidating their long positions with abandon, and this has been one of the main factors that have driven prices much lower than just about anyone had expected.  Thus, it has been unprecedented speculation in the energy futures markets that contributed to oil and gasoline prices soaring higher than they otherwise should have in the first half of the year, and now sharply lower as these speculators have been liquidating their long positions.  It remains to be seen how low oil and gas futures will go. 

The point is, the Bush administration had nothing to do with it, but the media is all too happy to convince people otherwise.

By the way, you may not have noticed but the stock prices of the large insurers have gone through the roof recently.  After being hammered in the first half of the year largely due to the ominous hurricane warnings, insurers like Allstate and Chubb are now seeing their share prices at new highs.  With no hurricanes, there were no multi-billion dollar damage claims as had been anticipated.  In fact, Allstate’s shares recently hit the highest price in the company’s history.  But then, President Bush must be manipulating that market as well!  Yeah, right!!

It is sad to know that a large segment of the US population believes that the Bush administration manipulated oil and gasoline prices to new record highs to benefit Big Oil, and now is manipulating prices lower for political gain in the November elections.  According to the Gallup poll, 42% apparently believe this hogwash, 5% didn’t know, and only 53% said they did not believe it.  Of course the media is all too happy to foster such ignorance.

Political Conclusions – Anything’s Possible

As detailed above, the Republicans have gone from a comfortable margin in holding onto their majorities in the House and Senate to the point where it now looks possible, perhaps even likely, that the Democrats will regain control of both houses.  All this has happened in a span of 2-3 weeks.  It remains to be seen if the Democrats continue to gain ground, or if the fickle political tide will turn back to the GOP over the remaining four weeks. 

The Democrats are milking the Mark Foley fiasco for all it’s worth, while the Republicans are hoping that North Korea’s nuclear test on Sunday will convince voters to keep the GOP in the majority.  The Democrats are hoping that many in the Republican base have become so apathetic or angry that they won’t vote.  The Republicans are hoping the Democrats are wrong.

With the polls changing so rapidly, I won’t venture a guess as to how it all comes out on November 8, or whether the Democrats regain majority control of the House and/or Senate.  What is clear is that the polls have shifted significantly in favor of the Democrats over the last few weeks.  As a conservative, I would prefer that the Republicans remain in the majority.  On the other hand, getting knocked out of control might be a much-needed wake up call for the GOP.

Whatever happens, the next four weeks will be interesting to watch!  Be sure to vote.

 

Very best regards,

Gary D. Halbert

SPECIAL ARTICLES:

GOP Officials Brace for Loss Of Seven to 30 House Seats.
http://www.washingtonpost.com/wp-dyn/content/article/2006/10/09/AR2006100901218.html

Foley scandal pushes voters to the Democrats (warning: this is grim).
http://www.usatoday.com/printedition/news/20061010/1a_lede10.art.htm

Charles Krauthammer analyses the Mark Foley sex scandal.
http://www.weeklystandard.com/Content/Public/Articles/000/000/012/798fojwv.asp

Cal Thomas makes the Republicans’ case they couldn’t make for themselves.
http://www.realclearpolitics.com/articles/2006/10/the_case_for_continuing_the_go.html

 

 

 

 


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, Mike Posey (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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