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Palin Stirs the Pot, and Things Get Ugly

Outlook

  1. Sen. John McCain‘s post-convention bump is not an ephemeral one, but a permanent gain from his selection of Alaska Gov. Sarah Palin as his running mate. That’s not to say McCain won’t sag in the polls, but the bump is the result of his bringing on board and revving up elements of the conservative base.
  2. The Treasury Department’s takeover of Fannie Mae and Freddie Mac buoyed stock markets, but reflected deep panic about the economy among the mandarins on Wall Street and Pennsylvania Avenue.
  3. The media’s and the Left’s tone-deaf criticism of Palin continues, only slightly abated from last week’s ferocious pace. Senators Barack Obama and Joe Biden took the high road for a few days, but this week got personal.
  4. Congress returns from recess with a mess on its plate.

Presidential

Palin: McCain’s bounce is less a "convention bounce" and more of a Palin bounce.

  1. For the first time this campaign, John McCain is receiving more media attention than is Barack Obama–and Sarah Palin is the reason. Is it beneficial for the top of the ticket to play second fiddle to the bottom half?
  2. Palin, for her part, is benefiting from what you might call the Obama effect. Smears and personal attacks have drowned out more recent charges. Because the media led with attacks on Palin’s family and experience (sprinkled with occasional falsehoods and open consideration of bizarre smears), more recent criticism of Palin–stemming from a spirited dig into her record as mayor and governor–has been drowned out.
  3. Just as her speech was the most important speech of either convention, her interviews with ABC late this week will be the most important interviews of the election. If she comes across as well-versed and confident, she will set aside doubts from conservatives and moderates–while probably causing the liberal attacks to multiply. It’s hard to imagine her not revealing serious holes in her understanding of policy, though.
  4. Obama and Biden at first stayed above the fray as their ideological allies unloaded on Palin. Obama’s comments about "lipstick on a pig" and Biden’s attack on Palin’s opposition to federal funding of embryonic stem-cell research both came across as personal assaults on Palin thinly veiled as policy critiques. It’s getting ugly.
  5. One part of the Palin bump is the surge among white woman voters. While the Washington Post poll’s 20-point surge is likely overblown, McCain has probably at least pulled even with Obama among that demographic. If this "lipstick on a pig" comment gets wide play, regardless of its intention, a large McCain lead among women is possible.

Financial

Fannie and Freddie: The Bush Administration could go down in history as the most economically interventionist administration since Richard Nixon‘s, with the bailout-takeover of mortgage giants Fannie Mae and Freddie Mac as the icing on the cake.

  1. Inaction was not an option politically, and putting Fannie Mae into conservatorship was the prudent move once a massive bailout was inevitable.
  2. But what will be the eventual disposition of Fannie and Freddie? The Bush Administration is punting that question to the next administration. Many conservatives on Capitol Hill are pushing for complete privatization, with no shadow of an implicit subsidy, and breaking up the two companies into many pieces.
  3. The alternative–and the desired course for some Capitol Hill Democrats–is preserving them as more or less government agencies. Washington’s controlling the mortgage market would be quite a step towards European-style central management of the economy.
  4. Industry insiders discern a more deliberate and detailed mortgage-market game plan in the actions of Treasury Secretary Henry Paulson that suggest he sees a Fannie-free future–or at least a diminished role for the institutions that buy mortgages from banks. Paulson has advanced international agreements to liberalize the covered bond markets–Europe’s answer to Fannie and Freddie, in which banks securitize mortgages as bonds. Looser regulations on covered bonds might remove current incentives towards sub-prime lending, and could mitigate the absence of Fannie and Freddie.
  5. McCain, actively working these days burnish the reformer image he had when he was President Bush’s scourge, decided not to question the bail out when Congress approved it last month. He had words of praise for Treasury’s handling of it this week.
  6. How will the bailout play in the election? It probably won’t. Voters know bailouts are bad, but both sides here are pro-bailout. Beyond that, it’s far too complex.

Senate 2008

Alaska: Times are interesting in Alaska, and the spectacle of GOP Sen. Ted Stevens standing trial in Washington, D.C., while running for reelection is among the highlights. Even more amazing, Stevens could win.

Stevens is charged with failing to disclose $250,000 in gifts from an oil company, and his trial begins September 22. The Department of Justice and Stevens’ lawyers both expect the trial to last four weeks, ending about two weeks before Election Day. If Stevens is acquitted, the vindication could catapult him to a landslide win. If he is convicted, will the Alaska GOP have time to replace him on the ballot? Would it make a difference?

Anchorage Mayor Mark Begich (D) enjoyed massive leads in the polls after Stevens’ indictment, but a recent survey brought Stevens nearly back to even. An incumbent below 50 percent is generally very worrisome, but so much will come out over the next month that current polls are not very meaningful.

The presiding judge late last week refused to move the trial to Alaska, which means Stevens will be mostly unavailable for campaigning. This could cause Begich to pull well ahead. Still, this election looks like it will come down to an election of twelve men and women in D.C. Leaning Democratic Takeover

New Mexico: Republicans are all but writing off the Senate seat left open by retiring Sen. Pete Domenici (R). Top RNC officials express no confidence that Rep. Steve Pearce (R) can defeat Rep. Tom Udall (D) in November, and the party has stopped spending money on that race, according to the Associated Press.

Udall holds prohibitive leads over Pearce in polls and in fundraising. Extremely popular in his own district, Udall also benefits from the Democratic tilt of Albuquerque and the liberal portions of Pearce’s district.

As Udall pulls away this fall, he will be freed up to help other Democrats in this politically-dense state. Most importantly, he can help Obama in this state where polls show the presidential contest is well within the margin of error. Also, Udall could lend a hand in the Albuquerque district being left open by Rep. Heather Wilson (R) and in Pearce’s southern New Mexico district. Likely Democratic Takeover.

House 2008

Alaska-At Large: With the absentee ballots counted, Rep. Don Young (R) was declared the winner in his three-way primary—edging out Palin-endorsed Lt. Gov. Sean Parnell (R) by 239 votes.

Young–opposed by a majority of GOP primary voters, under federal investigation, and now the poster boy for the Alaska corruption that Sarah Palin has been fighting–is in worse shape than his colleague Ted Stevens. Former State House Minority Leader Ethan Berkowitz (D) is the favorite here.

Young, like Stevens, could resuscitate himself, but his seniority in the House is worth much less now that Republicans are in a permanent majority. By January, the house-cleaning of corrupt Republicans in Alaska could be complete. Leaning Democratic Takeover.

Recent Results

Arizona: Anti-tax activist Sydney Hay (R) won the GOP primary while State Rep. Ann Kirkpatrick (D) grabbed the Democratic nod last Tuesday. The race to replace retiring Rep. Rick Renzi (R) should be one of the most competitive in the country. The 1st District takes up most of the state, geographically, and President Bush carried 54 percent of the vote here. Kirkpatrick, as of August 13, had a four-to-one cash-on-hand advantage, though.

With McCain atop the ticket some coattails could help Hay, who lost a crowded primary here in 2002. Leaning Democratic Takeover.

Delaware: State Treasurer Jack Markell (D) pulled off an upset in yesterday’s gubernatorial primary, defeating Lt. Gov. John Carney (D) by 1,700 votes. On the Republican side, former judge Bill Lee trounced frequent candidate Mike Protack.

Carney was the heir apparent, tapped by retiring Gov. Ruth Ann Minner (D) as her successor. While Carney was gracious in defeat, Markell has reason to worry about full support from the Democratic Party establishment, whom he harshly critiqued in his run as a maverick Democrat. Even with some Democratic disunity, Markell is the favorite here. Leaning Democratic Retention.

New Hampshire-1: Former Rep. Jeb Bradley (R) will get his rematch against Rep. Carol Shea-Porter (D), now that Bradley has edged out former Health Secretary John Stephen (R) in the four-way primary. In that race, Stephen attacked Bradley’s penchant for wasteful spending. The general election will be close. Leaning Democratic Retention.

New York-13: State Assemblyman Bob Straniere (R) and City Councilman Mike McMahon (D) easily won their respective primaries in the Staten Island seat left open by the retirement of disgraced Rep. Vito Fossella (R).

This is another recruiting failure for the GOP, in a district with a deep Republican bench and a Republican tilt. McMahon is the favorite in November. Leaning Democratic Takeover.

NewYork-21: Former state Assemblyman Paul Tonko (D) came out on top in a five-way primary, and will face Schenectady County legislator Jim Burhmaster (R) in November. Phil Steck, the Albaany County legislator who finished third in the Democratic primary, will appear on the November ballot on the Independence Party and Working Families Party lines. Steck, however has said he will not actively campaign and has backed Tonko in this Albany-area district being left open by the retirement of Rep. Michael McNulty (D). Likely Democratic Retention.

New York-26: Iraq veteran Jon Powers (D) and wealthy 2006 nominee Jack Davis (D) were so engaged in their one-on-one scrum that environmental activist Alice Kryzan (D) was able to grab the loose ball and race into the end zone yesterday, pulling off an upset in the Democratic primary in this Western New York district. Kryzan faces businessman Chris Lee (R) in the race to succeed retiring Rep. Tom Reynolds (R).

Powers will be on the ballot on the Working Families line, and as of Wednesday afternoon, he had not indicated whether he would campaign. Leaning Democratic Takeover.

Written By

Mr. Carney served as a reporter for Bob Novak from 2001 to 2004, and from 2007 to 2008 as the senior reporter and, upon Novak‚??s retirement, editor of the Evans-Novak Political Report.

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