Congress Talks, Markets Soar

On Monday, the Dow Jones index plunged 778 points but yesterday it soared 485 points even though nothing changed. One of the fundamental concepts of economic theory is that markets accurately reflect the actual value of the item being traded. But it is hard to believe that the true value of companies as solid as Boeing, Disney, Pfizer, and Wal-Mart can change by nearly 10% in a few hours.

The Senate is likely to vote on a revised bailout bill today. It will probably have sweeteners for various groups, such as an expanded FDIC limit to protect depositors and make them less likely to cause a run on a bank. Such a bill, however, may draw new opposition in the House. Didn't Abraham Lincoln say something like: "You can please some of the people all of the time and all of the people some of the time but you can't please all of the people all of the time"? This bill is definitely not going to please all of the people. It is being microscopically crafted to please 51 senators (or 50 senators plus Dick Cheney) and 218 representatives. But other plans are being circulated. For example, billionaire George Soros is floating a plan in which the treasury would recapitalize the failing banks by having them issue new stock that the government would buy at the market price. This scheme means that the stockholders of failing banks would have their stock watered down but the stockholders in banks that don't need assistance would be unaffected. Various alternative plans are also being suggested and opposition to it is still strong among conservatives.

Why Democrats Opposed the Bailout

The bailout bill was defeated in the House Monday primarily because 2/3 of the Republicans opposed it, despite John McCain's appearance on Capitol Hill to tell them to vote for it. Nevertheless, about 40% of the Democrats voted against it, too. Why? The leader of the antibailout Democrats is Rep. Brad Sherman (D-CA). Here is the memo he wrote describing why the bill should be killed. Memo or no memo, all it would take to pass it on the second try is to get 13 representatives who opposed it to sign on. The simplest way would be to simply give each one $1 billion in earmarks for his or her district. The cost of that is clear: $13 billion. Chances are the administration will be less direct however, and incorporate a few meaningless "improvements" to get the 13 votes. This time they will count better since a second defeat would be devastating.

Detailed Reactions to the Debate, Minute by Minute

Polls after the debate showed that Obama won. But what is it that he said that people liked? To get a better idea of what the high and low points were for each candidate, the Nielsen Company gave a group of 44 undecided Nevada voters a device with a knob that could be set to any number from 0 to 100. During the debate, these voters sat there furiously knobbing their reactions into a computer. Here are the minute-by-minute results. The best lines of the debate were Obama's discussion of oil independence and health care.

Veeps Prepping for Tomorrow's Debate

The two Vice-Presidential candidates, Joe Biden and Sarah Palin are busy practicing for tomorrow's debate at Washington University in St. Louis, MO, just like college students cramming for an exam. Biden has to make sure he is not condescending to Palin, but he already knows all the material very well. After Palin's interview with Katie Couric, it is clear she has a lot to learn. Conservative columnist George Will said Palin is not qualified to be President. The editors of Foreign Policy don't think cramming will help.

The Republicans have been bad-mouthing her for days now to lower expectations so that if she manages to put both a subject and verb in 50% of her sentences they can say she beat expectations. In truth, although she is not experienced in national affairs, she is not stupid. You can't be elected governor with an IQ of 90. She is unlikely to make many gaffes. The real fear is that she will make one humdinger of a gaffe--like if the moderator asks whether she thinks part of the bailout should involve the issuing of warrants and she interprets this to mean the bank CEOs should be arrested (as opposed to the issuing of warrants for the treasury to buy their stock later). One piece of bad luck for Palin is that the moderator is a woman, Gwen Ifill, so it will be difficult for spinners to say afterwards that the moderator was not fair to her and asked her hard questions. If they try that, Ifill will be insulted and say: "Women are just as capable of answering difficult questions as men. Did you want me to ask for her favorite cookie recipe?" On the other hand, Ifill is black, so the spinners will say she was pro-Obama from the start and tried to help Biden. Race, gender, identity, and experience are going to be mixed in strange ways tomorrow.

Election Day is Here

Voting has already started in a dozen states. It began in Ohio yesterday with students camped out the night before to be able to vote in the morning. Ohio has a 1-week window when you can register and vote the same day and both campaigns are targeting it. Democrats are trying to get students to register and vote all at once. Republicans are trying to get elderly rural voters to do the same. Democrats are also trying to get the homeless to vote. You don't have to have a home to vote. However, there are fights in some states to make sure people who have been foreclosed are still considered state residents and can vote.

National Polls Favor Obama

All the national polls favor Obama as follows: Diageo (Obama +6), Gallup (Obama +6), Rasmussen (Obama +6), Research 2000 (Obama +10), and Washington Post (Obama +4). The mean is an Obama lead of 6.4%. A win of 6% in the popular vote will translate into winning all the swing states and an electoral college landslide.

Intrade Predicts an Obama Landslide

Today's electoral map from www.intrade.com predicts a landslide for Obama. The bettors think he will sweep all the states Kerry won plus the swing states of Florida, Ohio, Virginia, Colorado, New Mexico, and Nevada. The only swing state bettors think McCain will take is Missouri, which ironically is the best bellwether since 1900. If this map ends up being the final one, Obama wins 339 electoral votes to McCain's 200. Here it is.

Today's Polls

We have 13 presidential polls today. What they are saying is that Nevada, Ohio, and Virginia will be close, as expected. However, Indiana and North Carolina might also be surprisingly close, although McCain is favored in both of them. Still, two consecutive polls in North Carolina have said it is a statistical tie. It bears watching.

We also have two Senate polls. One of them is noteworthy. Sen. Saxby Chambliss (R-GA) was expected to cruise to an easy reelection, but Jim Martin (D) is nipping at his heels.

We also have three House polls. Joe Courtney (D) won by only 87 votes last time but he is going to win by a lot more this time. Similarly, Chris Carney (D), a former political science professor barely won last time in an R+8 district, but the Republican brand is so toxic now that it looks like he will be reelected in a landslide.

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