U.S. Government Will Nationalize the Banks

Just a week after announcing that it was absolutely essential for the government to buy up all the toxic mortgages and that no other solution was possible, treasury secretary Henry Paulson has now ditched his plan and is going to (partially) buy the banks. This move effectively nationalizes them. The British government did this over the weekend and it led to a huge stock market rally in Europe. Paulson II caused the Dow Jones index to jump 936 points yesterday, its biggest one-day gain in history. While Paulson will never admit it, the plan to buy the banks was originally proposed by the liberal Democrats. However, he steamrollered them into submission and they voted for his plan because without it. he said, the sky would fall. Government ownership of the banks is a hallmark of socialism, of course. Who would have thought that the October surprise was for the Bush administration to come out of the closet and become overt socialists three weeks before a hotly contested election? The reaction of the Republican rank and file is yet to come. No doubt this subject will get a lot of play in tomorrow's third and final presidential debate.

Paul Krugman Wins the Nobel Prize for Economics

Princeton professor of economics and New York Times op-ed columnist has won the Nobel Prize for economics. Krugman has been a vociferous and unrelenting critic of George Bush and John McCain, especially their economic policies. While Krugman got the prize for his work on the impact of global trade, this award will only enhance his prestige and increase the size of his megaphone.

Palin Whips the Base into a Frenzy

The decision to pick an unknown evangelical governor as John McCain's running mate has succeeded beyond Steve Schmidt's wildest dreams. Way beyond. Sarah Palin has perfect aim when throwing red meat to partisan crowds and whipping them into a frenzy to the point when people at rallies yell: "terrorist" and "kill him" about Obama. Then Palin can conveniently say she did not say that but the point is made anyway. Of course when this happens she could say: "Somebody grab that guy and drag him out of here. I don't want people like that at my rallies" but she never does. She winks and basks. The trouble for Palin and now McCain is that this frenzy has been widely reported and condemned and it is turning off crucial independent voters in droves. The featured commentary at intrade.com is about Palin, saying: "Rove's creation has turned into a mob baying for blood." Even leading conservative columnists don't like this. Kathleen Parker has called for her to drop off the ticket. The bettors agree that Rove III is not working. Ten shares of McCain stock cost $23 this morning. This means that if you are absolutely convinced McCain will win, you can invest, say, $23,000 now and collect $100,000 in 3 weeks if McCain wins.

The consequence of this whole campaign could be far reaching. If Obama wins and the exit polls show independents voted overwhelmingly for him, the pundits are going to lay the blame at Palin's high heels and advise the GOP to forget the evangelicals and run candidates with financial expertise (like Mitt Romney) in the future. Needless to say, the evangelicals, who finally got one of their own on the ticket, won't take this well and the ensuing battle will tear the Republican Party to bits.

More on the Bradley Effect

The Bradley Effect gets its name from the 1982 gubernatorial race in which the late Los Angeles mayor Tom Bradley (who was black) lost despite being ahead in the polls. Only it is not true according to the pollster working for the winner, George Deukmejian. In an article on Real Clear Politics, Deukmejian's pollster, Lance Tarrance, says that his polls showed Bradley's once-impressive lead had dwindled to 1 point by election day. In other words, he says that the polls did not predict a Bradley win, they predicted a too-close-to-call race. Tarrance was there at polling ground zero and doesn't believe in any such effect at all. Another interesting fact to toss into the hopper.

Balance of Power in Congress

CQ Politics has a good article on the state of the races for Congress. Their projection is that the Democrats are going to pick up 6-12 seats in the Senate. The upper end of this range was absolutely inconceivable six months ago, but 61 merely requires winning all the ties. A gain of 11 seats is not unprecedented; the Republicans picked up 12 Senate seats in 1980 in the Reagan landslide. Half a year ago the Democrats were worried about losing Louisiana. Now Louisiana is in the bag and they are drooling at the possibility of winning Senate races in Georgia, Mississippi, and Kentucky, none of which seemed remotely possible then. The odds of getting 60 seats in the Senate (needed to invoke cloture) probably aren't 50-50 yet, but are getting closer.

Our Senate map (Click on "Senate map and races" to the right of the map) now shows the projected Senate with 59 Democrats (including independents Joe Lieberman and Bernie Sanders) with Georgia, Kentucky, Mississippi-B up for grabs. Clearly CQ Politics is looking at the same polling data we are and coming to the same conclusion: a 60-seat Democratic caucus is within the realm of possibility. Of course, a lot depends on what the Democrats do to/with Joe Lieberman, but if they need him to get 60 seats, they are not likely to boot him out. On the other hand, if they get 61 seats, he is suddenly dispensable.

These developments, especially in the Senate, have not gone unnoticed at the Republican National Committee, which raised $66 million in August. The RNC is now considering borrowing $5 million to try to salvage some Senate campaigns that are heading south. While the RNC denies that it is abandoning McCain and in order to keep enough Senate seats to give it leverage with a possible President Obama, actions speak louder than words. Normally, three weeks before the election the national committees do everything they possibly can to boost their presidential candidate. This year the onus is definitely on the RNC since McCain is counting on it to make up for the fact that Obama opted out of the public financing system and has raised money by the boatload. Obama's haul for September hasn't been announced yet, but an aide described it as big (English translation: more than the $66 million we raised in August). If Obama did raise something in the $70-100 million range, he will be all over TV in marginal states like West Virginia and Indiana, forcing McCain to make terrible choices about which states to abandon, much as Bush did to Kerry in 2004.

Today's Polls

We have 13 presidential polls today. Rasmussen has polls in Florida, Missouri, North Carolina, Ohio, and Virginia, with Obama leading in all but North Carolina, where the two are tied. A SurveyUSA poll of Missouri confirms that Obama's lead there is outside the margin of error on both polls. If you follow Intrade, you will have noticed that as soon as these polls came out, the state flipped. The bettors follow the polls, not the other way around. Marist College has a pair polls out now that give Obama an 12-point lead in Pennsylvania and a 4-point lead in Ohio.

We also have three Senate polls from SurveyUSA. In Georgia, which is suddenly a real horse race, Jim Martin (D) is within 3 points of Sen. Saxby Chambliss (R-GA) and in Oregon, Jeff Merkley (D) is leading Sen. Gordon Smith (R-OR) by 5 points.

We also have one House poll. in PA-03, we may be looking at an upset here as challenger Kathleen Dahlkemper (D) is leading Rep. Phil English (R-PA) by 7 points. This is English's toughest race ever and Dahlkemper is undoubtedly benefiting from the huge voter registration drive that Obama has conducted in Pennsylvania and his large margin in the polls.

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