Obama’s Fiscal Cliff and Its Consequence

Last year Congress and Obama were unable to reach an agreement that suited Obama’s sense of “fairness” on the debt ceiling – i.e. getting the rich to pay more taxes in return for cutting spending. When, after agreeing to the amount of tax increase, Obama changed his mind, the can got kicked down the road.

Recall that Obama had agreed to hundreds of billions of dollars in cuts to Medicare and Medicaid entitlement spending in return for $800 billion in additional taxes – concessions ideologically painful to both parties. Then when Congressional Democrats had a hissy fit because they weren’t invited to the negotiations so they could stonewall them, Obama panicked and told Boehner he had to have $1.2 trillion in tax increases. Boehner accused Obama of “moving the goal posts” and walked out – rightfully so.

Each side postured for its base but the country’s bills had to be paid. The Grand Bargain of 2011 was the step-child born to the Republican and Democrat agreement to keep the country out of bankruptcy court by creating automatic tax increases and spending cuts designed to force Congress and the White House to negotiate a more sensible resolution before December 31, 2012 … or else. The child’s name was Sequestration, a strange appellation. Juries are sequestered to isolate them from news about their case, property is sequestered to settle a debt, sometimes people with a disease are sequestered in the interest of the public health. What got sequestered in last summer’s negotiations? Nerve apparently. Obama thinks that as President he has the last word in governing the US. Kings and emperors may have that power but not presidents of republics. Rather than make Obama drink from the well he poisoned, Boehner lost his nerve and agreed to postpone the problem rather than solving it. Cowardice would have been a better name for this step-child.

We have to go back to 1985 to understand how this strange word entered the legislative lexicon. That year the Gramm-Rudman-Hollings Deficit Reduction Act (yes, they were trying to reduce the deficit back then too) introduced the concept and term “sequestration” to deal with the fact that the sum of the spending bills passed by Congress would often exceed the aggregate budget approved by Congress. Theoretically, the excess would be sequestered by lopping off a percentage of each spending bill equal to the percentage by which their total exceeded the budget. What Messrs. Gramm, Rudman, and Hollings ignored, of course, was human nature. Or perhaps I should call it “congressional nature” so as not to give humans a bad name. Both houses of Congress have always been expected to bring home the bacon. After all, wasn’t that why they were elected? And if they failed in that appointed task, their high-minded derrieres would be sent packing home and replaced by a more effective bacon-bringer. So it shouldn’t shock you, dear reader, to learn that sequestration has never been used – until last November.

So, in the spirit of sequestration, Congress and the President must solve the problem they should have solved last year … except. Except now that His Majesty has been reelected, he is filled with renewed self-importance and has upped the ante to $1.6 trillion in tax increases – twice what he and Boehner originally agreed to. Except now a lame duck Congress has less than six weeks to deal with a problem that should be given six months to solve. Except now a Frankenstein monster will surely be created.

We’ve now come to the “or else” – a place some liken to a “fiscal cliff” to heighten the sense of high drama. Because Congress and Obama could not resolve their differences by selectively agreeing to spending cuts, the intelligent alternative was to take a meat-axe approach and lop off $1.2 trillion for the decade ending 2021. In 2013, that means a $55 billion cut in defense and a $55 billion cut in non-defense spending. The way the cuts are designed to work program spending will be reduced by $984 billion and the rest will come from reductions in debt service.

Of course the meat-axe approach assumes a sequestration spending solution will occur rather than a negotiated one.

On the revenue side, barring a negotiated solution, the tax increases of ObamaCare will become effective on January 1 and the Bush tax cuts expire. Those taxes will hit the wealthy and the middle class since the Bush tax cut favored both. Those with incomes of between $500,000 and $1 million will see their tax bills increase by about $40,000 – a fact that will affect their spending and investing, although not likely for the good of the economy.  The top two income tax rates will jump by nearly 20%, with the top rate going from 35% to almost 40%. Employer payroll tax increases from 37.4% to 52.2% – almost guaranteeing a recession. For investors, the capital gains tax rate will almost double from 15% to 28% and taxes on dividends will almost triple from 15% to almost 40%. That will negatively impact trading volumes and pricing, and people who live off of dividends will have to live on less. Then there’s the bad old estate tax that allows zillionaires to pass their ill-gotten gains to their worthless, leisure-class offspring. The $5.12 million exemption from estate tax will shrink to $1 million and the tax will go from zero (the 2010 rate) to 55%, and portability will vanish.

As long as we’re on the estate tax, wanna’ guess how much it raises annually? Until the recent Bush tax cuts, the historic estate annual estate tax receipts averaged about $20 billion – a pittance in receipts among the nearly $3 trillion the government receives in total.  In October, the Obama’s government spent $150 billion more than it brought in as tax receipts. That means the entire income from average estate taxes would have paid for four days of government profligacy during 2012.

But the estate tax serves as a highly symbolic reminder that the government boot is on the neck of free Americans, since estates consist of money that has already been taxed once. The government wants more than half of our already-taxed estate value anyway.  Thus, when we die and if our estate exceeds the now-reduced $1 million exemption, the government jack-boot is a reminder that everything belongs to the government.

Most middle class families don’t realize how little $1 million is relative to a lifetime accumulation of assets. I learned it when I sold the house of my blue-collar, depression-era parents and liquidated their savings and investments which I’d helped them manage, terrified as they were that they would run out of money before death. Anyone who thinks the truly rich, with their tax accountants and lawyers, pay estate taxes … well, I still have the Golden Gate Bridge I’m trying to sell.

Notwithstanding his protestations that he is after the “rich” people and that his tax increase will not be felt by “97% of all small businesses,” Obama is apparently ignorant that the top 3% of small businesses earn 91% of the total small business income and employ 54% of the private US workforce. The estate tax is the meanest of all taxes. It raises almost no tax receipts and unfairly impacts intergenerational transfers of farms and businesses rather than money assets. Everyone should hope someday to pass an estate to their children, and in a healthy economy home values and 401k savings would exceed the current exemption.

Pundits and debt-watchers have shown that the revenue side of last fall’s non-agreement could be achieved by limiting deductions on the wealthiest income earners, but Obama is committed to ideology more than common sense by insisting that taxes on the rich must increase even when it’s been shown historically that increasing tax rates do not increase tax revenue by the amount expected. Even a dumb animal will eventually learn by trying and failing. Politicians take longer.

To wit:

None of the increased taxes on personal income tax and capital gains have brought in the expected receipts to the US Treasury in the years following World War II.  For almost seven decades, tax revenue as a percentage of GDP has averaged just under 19% regardless of the tax rate, which has been as high as 92% and as low as 28%. This observed phenomenon, often referred to as Hauser’s Law, reflects the fact that people change their behavior when taxed. High taxes encourage them to shift, hide, under-report, and defer income to keep government out of their pockets. The more tax dollars that are at risk of taxes, the more expertise will be hired to conserve it. For all of his sanctimonious rants about not paying enough taxes, you can bet your bloomers that Warren Buffett pays a small army of accountants and tax lawyers to keep his IRS check low. Otherwise he would voluntarily contribute money to the US Treasury rather than be compelled by law to pay it.

Filled with his reelected righteousness, Obama has demanded $1.6 trillion in tax receipts over the next ten years from the so-called “rich” – i.e. those who make over $250,000 per couple annually. He’ll never see it happen. While he is able to seriously damage the economy in the coming decade, even if he could get the amount he wants from taxes, it would cover just 16% of the combined deficits that will really happen. ObamaCare will increase federal spending over $2 trillion and he wants to spend an additional $2.5 trillion in the decade. Unfortunately, there’s not enough gold in the goose to solve the deficit problem, but the breeders of class envy will be able to take solace that the so-called “rich” fat cats have less money even as America still has the deficit caused by the government fat cats.

Whether or not it happens before December 31, at some point Congress and Obama will have to choose between the meat-axe spending reductions of sequestration or negotiation, and at that time the negotiation will modify the tax increases of sequestration. When it comes to cuts in government spending, the smoke and mirrors display will be in full splendor as the Obama, Pelosi, Reid axis squabble with Republicans over the definition of a “cut.” Already the Democrats are jockeying to define a “cut” as a reduction in the spending baseline. In other words, something on which spending was planned but not appropriated is a “cut.” That’s like saying someone “saved” money by buying something for less than its sticker price. Whatever should have been spent is irrelevant to what is spent. Obama’s budget already includes a spending reduction due to the wind-down of the Iraq and Afghan wars, which happened for political reasons, not spending reductions. But Obama wants to count that as a spending cut.

Other smoke and mirror tricks are in his budget. Prior budgets that never got past Congress included $10 billion for a program, which will get cut 20% for a $2 billion saving. It doesn’t take a genius to figure out that spending cuts mean reductions in what has been spent and will continue to be spent unless cut. And that means entitlements, the sacred territory of the Left. There is no way to reduce spending without some constituency giving up something, which is what makes negotiations tough. And even if not one new program occurs this century, federal spending will eat up 46% of GDP by mid-century – twice its current bite which is 7% above historic levels – unless spending is C-U-T.

Can Congress be trusted to cut? Both Reagan and Bush 41 learned hard lessons by trusting that increased taxes would be followed by agreed upon spending cuts.

In 1982, Reagan agreed to a tax increase with a promised $3 in spending cuts for every $1 in tax hikes. When he left office, tax receipts had increased $290 billion and spending had increased $318 billion, producing a larger deficit than the one the “promise” was to correct. His memoirs recalled that the Democrats reneged on their spending cut promise.  Shocking!

In 1990, Bush 41 broke his famous “read my lips, no new taxes” pledge, agreeing to a $1 tax increase for $2 in spending cuts. Tax receipts grew by $60 billion and spending increased by $128 billion. Infuriated Republicans, miffed by his broken pledge and trust of Congress, sat out the 1992 election and Bush lost to Clinton.

One hopes Boehner will remember these experiences when the taxing and spending negotiations are underway and insist that spending cuts be enacted before tax increases become law.

Notwithstanding the sober reminders of failed historic negotiations and agreements, the Republicans will feel the pressure to make a deal, because they are convinced they’ll be blamed for “cliff diving.” Obama will therefore play them like a fiddle.

Recent surveys by Rasmussen and others have shown a majority of Americans believe the Bush tax cuts should expire for the wealthiest Americans, but a majority of those surveyed said that if the “fiscal cliff” is not avoided it will be the Republicans’ fault.  All Obama has to do is let the sequestration happen, cutting defense and domestic program spending and raising taxes on the middle class. If he holds fast to the inflexible position he has staked out in his tax increase demand, negotiations will likely collapse. Obama will blame the Republicans because they wouldn’t agree to his “reasonable” tax increases. With the middle class screaming about their taxes being increased, the Democrats will propose a bill to lower taxes on the middle class and dare the Republicans to vote against it. When they cave, Obama will have his increase on the wealthy without giving anything on spending and the Republicans will have lost their bargaining chips. Democrats will agree to some spending cuts as a political expedient, but the cuts will be a lot less than they would have been otherwise.

Democrats like Senator Patty Murray have already proposed letting negotiations go over the cliff. On a recent Sunday talk show she said, “We will reach a point at the end of this year where all the tax cuts expire, and we will start over next year and whatever we do will be a tax cut for whatever package we put together. That may be the way to get past this.” Howard Dean wants large tax increases and big defense spending cuts, and he has said he is willing to go over the cliff and even risk a recession to protect entitlement programs.

Republicans have rarely demonstrated political skill, but they could and should make the compelling argument that a lame duck Congress is not the right legislature to be negotiating a resolution to this badly-timed fiscal cliff. The 2012 election sent a new Congress to Washington to solve problems this far-reaching. Voters ought to see the wisdom in passing minimal legislation to keep the government running while a new Congress takes hold of the reins.

Boehner will be on solid Constitutional grounds by arguing against a lame duck solution because the 20^th Amendment shortened the original interval established by the Founders between the election of a new government and its installation. Its purpose was to prevent lame duck law-making. The new congressional term starts January 3, whereas the new executive term doesn’t start until January 20.

In fact, the new Congress will have something this Congress no longer has – two more years before any of them face the voters.  If Democrats block passing this issue to the incoming Congress, there is no reason why the sequestration tax increases and spending cuts should become permanent. Republicans should argue that no one wants the sequestration-imposed solution, and if the December 31 deadline passes without a permanent solution, a negotiated solution will be superior no matter how long it takes to get it.

A bad deal is worse than delaying the fiscal cliff and it’s worse than going over the fiscal cliff. Even weak-willed, wobbly-spined John Boehner ought to be able to make the case that a new Congress which has skin in the game and must face the voters in two years should be the choice of 2012 voters to negotiate with Obama.

If he can’t make that argument successfully, Boehner should resign as Speaker.

The Case of the Missing Voters

At the beginning of World War I, the Ottoman Empire, which contained today’s Middle East, had not allied itself with either side of the conflict. It was wooed by both the Germans and the British. When the British seized two Turkish battleships that were being built in British shipyards at the outbreak of the war to prevent military escalation, the Germans made a gift to the Ottoman navy of the German battleship Goeben and the cruiser Breslau. The trick was how to get them past the British Fleet guarding the Dardanelles and into the Black Sea for the awaiting Turks.

Winston Churchill was the First Lord of the Admiralty and therefore charged with responsibility for the fighting effectiveness of the British Fleet. As a consequence of a breakdown in British command and communication, the Goeben and Breslau were able to make it into Turkish hands which caused Turkey to join Germany and the Central Powers. Churchill sought to exonerate himself with an explanation for the British Fleet’s failure in his book The World Crisis:1911-1918;

In all this story of the escape of the Goeben one seems to see the influence of that sinister fatality which at a later stage and on a far larger scale was to dog the enterprise against the Dardanelles. The terrible ‘If’s’ accumulate.

He proceeds from there to catalog a list of “if onlys” – if only this or that had happened, the outcome would have been different.

But that’s true of almost every human activity. The terrible “ifs” accumulate to doom many an enterprise. If only the Persians had gotten to the Thermopylae pass before the Greeks in 480 BC and if only the King Xerxes’ Persian navy hadn’t been lured into the Straits of Salamis where big ships couldn’t maneuver, the West would be speaking Farsi today and Greek democracy would never have taken root elsewhere.

If only General Stonewall Jackson hadn’t been killed by friendly fire at Chancellorsville and if only General Lee had taken General Longstreet’s advice to put his army at Gettysburg between the Union Army and Washington, it’s likely that the outcome of the American Civil War would have been quite different.

As I predicted in last week’s blog, the punditocracy has now sifted through the post-election demographic data, and like the ghostly hand that wrote upon Belshazzar’s banquet wall in Daniel 5,  concluded that the Republican Party has been weighed in the balance by this election and found wanting. The pundits believe Obama’s win can be attributed to a modern list of terrible “ifs” which, they conclude, accumulated to defeat Romney and will continue to defeat every future Republican unless the party turns away from its social, fiscal, and small government conservatism.

I don’t agree. The pundits are looking at granular data and trying to augur meaning from the arrangement of bones as ancient seers did. Their problem isn’t an inability to see the forest for the trees; it’s an inability to see the forest for the bark. I think the answer can only be seen by getting far enough back that a picture and pattern can be seen.

In the 2012 election, after four years of Obama in office, his supporters turned out in fewer numbers – 9.5 million fewer, in fact, which represented an almost 12% decline in votes. Romney also saw fewer people turn out to vote for him compared to the 2008 turnout for McCain – 1.5 million fewer voters, representing a decline of almost 3%. Obama’s 2008 popular vote win over McCain was 9.5 million – a 7.4% spread. But Obama’s 2012 popular vote win over Romney was 3.1 million for a 2.6% spread.

Obama, therefore, cannot be said to have won a mandate in the 2012 election after having suffered a 12% decrease in turnout and a 5% smaller victory margin over his challenger. And the voter turnout and margin of winning in 2012 versus 2008 hardly make a compelling argument that the Republican Party should embrace different values as the punditocracy says it must.

The spreadsheet embedded in last week’s blog showed the election would come down to seven historically red states that, in my judgment, had fallen under the sway of Obama’s 2008 Hope and Change bandwagon. In that blog I said Romney could afford to lose Nevada or Colorado – but not both – and he would still win in 2012.. If he held on to Colorado and lost Nevada, he would win 275 electoral votes, and he needed 270 to win. If he lost Colorado and won Nevada, he would win 272 votes. I thought it was more likely that Romney would win Colorado than Nevada, which looks like it’s turning blue, especially after reelecting the political dinosaur Harry Reid in 2010.

As it turned out, Romney won two of the seven states – Indiana and North Carolina – but he lost the other five. I was stunned. But excluding Nevada, Obama won the combined 69 electoral votes of Colorado, Virginia, Florida, and Ohio by only 245,000 out of the 19.5 million votes collectively cast in those states. Romney therefore needed 245,000 plus one more vote in each of four states to have won. Alternately excluding Colorado, Obama won Nevada, Virginia, Florida, and Ohio by only 212,000 votes out of the 12.1 million votes cast in those states. One more vote in each of them and the election would have gone the other way.

Numbers this close make a poor argument for retooling the Republican Party in order to make it more competitive in future elections – especially since making it more attractive to the Democrat base would require forsaking core conservative values regarding abortion, gay marriage, small government, and fiscal restraint. If my product has a manual thingamajig and the competitor’s product has an automated thingamajig, automating mine will only achieve parity. The objective is to become the superior choice, not a look-alike choice.

The punditocracy reached its “change or die” assessment of the Republican 2012 election loss based on exit polls. Those aren’t the right people to talk to. The right people to talk to are the voters who stayed home. They could have made Obama’s reelection a rerun of 2008 or they could have elected Romney. They did neither. The question to ask is why. The question isn’t how Romney could have persuaded Obama voters to vote for him. That assumes this and all other elections are zero-sum encounters in which a fixed number of people are drawn one way or the other. It ignores those who aren’t voting for any number of reasons … reasons that remain unknown.

That is essentially what we do in business. Asking what can be done to products or business models to woo customers away from competitors focuses on expanding market share. Asking what can be done to woo non-consumers – the often much larger potential market that is sitting on the sidelines because none of the existing product offering or business models are currently attractive – focuses on expanding the market. The latter requires a different strategy than the former and is often a more productive use of resources.

From whom did 3M take customers with the introduction of Post-It Notes? Nobody. Post-It Note users were previously non-consumers. From whom did George de Mestral’s invention of Velcro take customers? Nobody. They weren’t customers of a competitive product. How about zippers and buttons, you ask? If you look at most uses of Velcro, it took very little market share from buttons and zippers; what it replaced was doing nothing. The customers for iPod, iTunes, iPhone, and iPad were not in the market before those products existed.

The Republican Party should not concern itself with attracting Democrat voters to its agenda. That’s a market share struggle. It should concern itself with attracting the non-voter – and there’s a bunch of them. Since the 1972 election of Richard Nixon, the voter turnout has averaged 55% of the age-eligible population. Almost half of the potential market is non-consumers! And until recently it had been getting worse.

Voter participation fell from 56% of age-eligible voters in the 1972 Nixon second term election to 52% in the 1996 Clinton second term election. These were huge voter dropouts over the 24-year, 7-election period because the voter-eligible population rose from 140 million in 1972 to 195 million in 1996. In these seven elections the only one to spark interest occurred in the first Clinton election for which voter participation rose to 58% – the year in which Bush 41 was fighting for a second term. But after one term in office, Clinton won his second term with a drop in voter participation of 6.5% relative to his first term – a turnout of only 51.7%.

Voter participation rose 2.5% for the infamous 2000 election when it was assumed Gore would inherit the Clinton mantle and ended up instead tied and in a court fight with Bush 43. But the second Bush 43 election in 2004 pitted the incumbent against John Kerry and was expected to be a referendum on the Iraq War. Participation rose almost 6% to 60% – i.e. the “market” expanded by 19.5 million voters. Bush 43 got 11.5 million of these voters and Kerry got 8 million, giving Bush the election by 3.5 million votes.

The “red hot” 2008 election saw only a slight increase in voter-eligible participation – from 60% to 61.5% – an increase of 8 million voters. Note: that’s less than half the election/election voter increase that had occurred for the 2004 second Bush election. Less enthusiasm or more enthusiasm? Obama won by 9.5 million votes. Now here’s what is interesting. Eight million of Obama’s votes came from expanding the “market” of voters and two million came from McCain, causing his vote total to fall two million less than Bush got in 2004. In other words 80% of Obama’s winning margin came from expanding the market and 20% came from switching voters from the Republican tally to the Democrat. All together class: where do most of the votes come from? From expanding the market, not from market share raids.

The 2012 election shows this lesson working in reverse. The voter-eligible participation fell and 9.5 million fewer voters showed up in 2012 than had shown up in 2008. A lot less enthusiasm because the voter market shrank. Who paid for that 9.5 million voter shrinkage? Mostly Obama II. He paid for 8 million of them by getting that many fewer votes than his Democrat predecessor, Obama I, had gotten in 2008. Romney paid for the rest of them – 1.5 million – by getting that many fewer votes than McCain in 2008. Obama still won, but only by a third of the margin that he had won in 2008 because most of the shrinkage was put on his tab. Once again we see the non-voter effect – except this time in reverse.

Enthusiasm almost always goes to the winner. A lack of enthusiasm is almost always paid by the incumbent. There was no market share shift in 2012 because Romney lost as well as Obama, albeit less. Had Romney increased his votes over McCain and voter participation had fallen, then Romney would have taken votes from Obama even if he didn’t take enough to swing the election to him.

So what’s the lesson here? It’s this. Elections are largely won by expanding the voter market and getting most of the increase, not by taking market share from the opponent. Of course elections can also be won when the voter market shrinks, as Obama showed, depending upon who pays for the shrinkage and how much they pay. Romney paid comparatively little for the 2012 shrinkage, but he would have had to overcome McCain’s 2008 deficit less Obama’s 2012 shrinkage to have won. Trying to win in shrinking voter markets is a lot riskier than winning in an expanding market.

The 2012 presidential contest took place in the context of a crummy economy, a healthcare law that has been consistently hated since its passage by at least 55% of the people, and a country in which two-thirds of its citizens believe their political leaders are headed in the wrong direction.  Voters were told that this was the most important election in modern times, if not the history of the Republic, given the radicalism of the incumbent President. Yet, notwithstanding the stakes, 45% of the voter-eligible population stayed home. Why?

Well, the answer won’t be found from exit polls. Those are the wrong people to talk to. It won’t be found by explicating the terrible “ifs” … election tactics only influence the voters in play, not the ones at home. If identity politics were the answer, the dropouts would have shown up to vote their convictions. They didn’t – a subtlety that Sarah Westwood, a sophomore at my alma mater, failed to grasp in her Wall Street Journal opinion this week. I thought Susan Lapin’s response to Sarah was thoughtfully well-argued in refuting Westwood’s poorly-reasoned opinion.

The pundits are looking in all the wrong places to understand the 2012 election. The Case of the Missing Voters is like Sherlock Holmes’ dog that didn’t bark – the clues are lost in plain sight.

The case that voters should show up was badly made.

How sad.

The issues were there. The voters weren’t. Apathy reelected Barack Obama.

Parsing the 2012 Presidential Election

As I said in a previous blog post, the polls leading up to the 2012 election were so pointedly partisan that it’s a wonder the Federal Elections Commission didn’t consider them in-kind political contributions to the Obama campaign. Their pollsters chose such ludicrous turnout models that they must have been living in a parallel universe. As we now know, the real turnout model was D+2.2 – not D+7 or more that the polling propagandists were promoting.

It became apparent to me in October that the polls – including the RealClearPolitics average of polls – had become so contaminated by politics you would have thought that a Republican could never again be elected President. Paul Krugman even went so far as to say that anyone who thought the 2012 election was close was stupid. Well, it was close, notwithstanding Krugman’s stupid remark. Obama won the popular vote nationally by a tad over 2% and nine million less votes (5%) less than 2008. The Florida vote was so close that it was Thursday afternoon before we knew Obama had won it by 61,000 – just seven-tenths of one percent. Of the seven red states that gave Obama the 2008 election, he lost two of them in 2012, and his winning margin for the combined seven states that swung the election to him on Tuesday was two-tenths of one percent – hardly a landslide. Still, in the Electoral College a win is a win and Obama got 332 votes to Romney’s 206.

Prior to the election I decided to ignore the polls and instead consulted the US Census Department data for the historic electoral vote by state (see spreadsheet 405 there), which goes back to the 1964 election of Lyndon Johnson. From this data I created my own spreadsheet so I could manipulate it in search of historic voting trends. Highlighting cells red for the states and years whose electoral votes were Republican and blue in the years for which the state’s electoral votes went to the Democrat candidate, I was able to construct a poll-agnostic view of each state’s political tilt by year.

A good deal of political shifting has occurred since Lyndon Johnson, Richard Nixon, and Jimmy Carter were president. As hard as it may be to believe today, California, New Hampshire, New Jersey, Illinois, and Vermont were solidly red states for the six elections following Lyndon Johnson – from Nixon through Bush 41 – before turning blue and remaining so.

There are two reasons I decided to ignore the elections of Johnson, Nixon, and Carter in deciding which states are truly red and which are truly blue regardless of what the polls say. First, in the 1968 election George Wallace was a serious contender and won the electoral votes of five Deep South states. Second, it’s hard to know how much the Nixon second term scandals helped elect Jimmy Carter, whose hapless opponent, Gerald Ford, inherited the White House after Nixon resigned. Ford was suspected of being a carryover of the hated Nixon in the 1976 election.

For these reasons, I narrowed my attention to the states and their colors since 1980 – the first Reagan election. That focused in on the last eight elections – enough elections to see if a state is a long-term red or blue state or changed colors during the more than three decades covered by those elections.

Once I had highlighted each state red or blue based on the electoral vote winner in each year, I rearranged the states by their “redness” and “blueness” so that I (and you) could see trends over the eight elections. The states that had been red for each of the eight elections – 13 of them – became the top rows of the spreadsheet and those that had been blue for every election – only Minnesota and the District of Columbia – were the bottom rows.

Logically, states that voted red or blue in each of the last eight elections are “hard core” states that should continue voting the same way in the 2012 election. The 13 states that have voted red for the past eight elections including 2008 should therefore vote red in 2012, giving Romney 102 electoral votes.

The middle rows of my spreadsheet are occupied by states that have changed colors during the last eight elections. This was the tricky part because most states have changed colors in various ways. To decide if a state would likely vote red or blue in the 2012 election probably depends on how long it has been its latest color. States that have been red for several previous elections and remained red in the 2008 Obama election should vote red in 2012. Georgia, Montana, and Arizona have been red states for all of the last eight elections except one of the two Clinton elections. They remained red in the 2008 election and should vote red in 2012, giving Romney an additional 30 electoral votes for a total of 132.

Six states voted red in all eight elections except both of Clinton’s elections. The fact that they remained red votes in 2008 while all of the remaining states were going gah-gah over Obama makes them safe red votes in 2012, in my opinion, adding 48 electoral votes to the Romney tally and bringing his total to 180.

There can be little doubt that some red states fell under the sway of Obamamania following the two Bush 43 terms, two wars, and a choice between a hip black dude and an old guy with the personality of Bob Dole. Indiana, North Carolina, and Virginia had been red since Reagan but in 2008 they went over to the dark side and voted blue. Colorado and Florida had also been red since Reagan, except for one of the two Clinton elections. After voting for Bush 43 twice, they went over to the dark side and voted blue in 2008. Finally, Ohio and Nevada have been red since Reagan. They voted red in both Reagan elections, red for Bush 41 but then dumped him for Clinton, voted again for Clinton, whose challenger was Bob Dole, and then voted for Bush 43 twice. Based on their past voting, I believe that Nevada and Ohio are red states that fell for the Hope and Change spin in 2008.

In my opinion, these seven states, which had voted for Obama in 2008, will repent of their folly and vote red in 2012. That will give Romney 101 additional electoral votes, giving him a total of 281 votes and the presidency.

Two states – Iowa and New Mexico – voted for Obama in 2008 but have had curious prior election voting histories. New Mexico voted for Reagan twice, Bush 41, and then voted for Bush 43 in his second term election. Iowa voted similarly but did not go for Bush 41. These don’t look like red states. But then they don’t look like blue states either. I think they are the only true toss-up states in the 2012 election. Romney doesn’t need them to win if I’m right on the other states. Iowa has six electoral votes and New Mexico has five, for a total of 11 votes – nice to have but not essential.

I contend that there are 29 red states – some of them hard core red – that will reliably vote red when given a viable candidate for the presidency. This has nothing to do with polls, which are flawed by turnout models and the fact that only 9% of the adult population will talk to a pollster. Their redness has more to do with the political composition of the state as revealed in historic election voting.

The remaining 19 states and the District of Columbia are truly blue states. They have voted blue in the last five elections, with the exception of New Hampshire, which went for Bush 43 in 2000 and returned to the blue fold after voting for him. 

The bad news for the Democrats is that they can’t win with these 19 states and DC because they represent 246 electoral votes. Even with both of the toss-up states, Democrats can’t get to 270 votes, the number needed to win the presidency. The only way to win is to take red state votes as Obama did in 2008 – 101 of them.

Moreover, changes have been occurring between the states that I believe are true red and true blue which will make winning with these 19 states even harder in the future. Why? Because blue states are losing population and therefore losing electors – 24 of them since Reagan’s first term. They’re going over to the red states, which have gained 25 electors since Reagan’s first term including one from the toss-up states.

So, that’s what I thought would happen when I wrote the preceding paragraphs of this blog and created the red/blue table of states on Monday evening before Tuesday's election. Now that the election is over, I can see that both I and the polls were wrong about the outcome.

If my model was correct, Florida, North Carolina, and Virginia should have been called within an hour or two of poll closing. When they weren’t, I knew Romney was in trouble.

Here’s where my model was right.

The hard core red states and the “almost hard core” reds that didn’t swoon in Obama’s 2008 election voted red in the 2012 balloting as I predicted. Those states gave Romney 180 electoral votes. Two additional states – Indiana and North Carolina – recovered from their blue state swoon in their 2012 votes, adding another 26 electors for a total of 206 for Romney.

I didn’t think Romney needed the two states that appeared to be toss-ups based on past voting – Iowa and New Mexico – which represented 11 votes combined. Tuesday night they went to Obama.

Here’s where I was wrong.

I expected the other blue swoon states to recover their senses in the 2012 balloting. They didn’t. The states of Virginia, Colorado, Florida, Nevada, and Ohio remained with Obama along with their 75 electoral votes which Romney needed to put him in the White House. The loss of either Colorado or Nevada, but not both, would have still put him over the top. Romney lost both.

Florida was close. Obama won it by only seven-tenths of one percent, but an inch is as good as a mile in politics. He had won it by almost 3% in 2008. Florida is politically three blocs – the north and panhandle is heavily Republican, the south is Democrat, so elections are usually decided by the turnout in central Florida. Romney lost three critical counties in central Florida. While I expect Florida will be red more often than blue in future elections, downsizing the military, especially the Navy, will make the north Florida vote weaker in the state's balloting. Don’t think Obama doesn’t know this.

Obama won Ohio by 1.9% – close but good enough in elections. He had spent $100 million in the state pulverizing Romney for wanting the auto industry to go through bankruptcy proceedings instead of the government bailout that preserved the oppressive weight of the union contracts. Obama, on the other hand, was determined to protect the auto workers’ union. All of Ohio’s unions showed their gratitude in contributions of millions of dollars and free labor to get out the vote. Ohio is mostly a red state except around its major cities. It may remain red in the future unless the Democrats field another candidate glib of tongue who can play the unions like a fiddle.

Virginia has historically been red. Other than its 2008 soirée to the dark side, it had been red since Reagan. I lived in the Arlington area of northern Virginia across the Potomac from Washington while I was in college. It was conservative due to the large number of military living in the area and it was part of a southern state. But during the Obama regime government greatly expanded its workforce even as the rest of the country wallowed in recession. Arlington, Alexandria, and McLean homes now combine to form one long enclave for those who slop in the government trough. If a person doesn’t work for the government, he works for a company living off of the government. All of these trough-feeders know which side of the bacon slab the fat is found and voted heavily for Obama in 2008. In the 2012 election their vote overcame the downstate red votes and once again gave Virginia to Obama. Since the number of government workers and contractors is growing, Virginia may be turning blue. The 2016 election should tell. An incumbent president will not be running then, so if Virginia votes blue again, it’s a blue state.

Colorado has historically been red. In 40 years it had turned blue in one election – Clinton’s first – before going for Obama big in 2008 when he beat McCain by nine points. While he won by 99,000 votes in 2012, that margin was 4.3% more votes than Romney – a country mile in politics. Colorado’s Hispanic population is the 7^th largest in the nation, and they pushed Obama to victory. Even though Obama won in 2012 by half the vote margin of 2008, Colorado voted in a ballot initiative to allow recreational use of marijuana. This could be a blue state in the making.

After winning Nevada by 55.1% in 2008, Obama won in 2012 by the smaller margin of 52.3% -- helped by the casino union workers. Despite its historic redness and unemployment above the national average, Nevada reelected Harry Reid in 2008. But in this election Nevada elected a Republican as the state’s second Senator, and elected a Republican for Governor. We’ll have to wait until 2016 to see if Nevada is blue or red.

Of the lessons learned from the 2012 election one of them is how divided – in fact, polarized – the country has become. Romney’s comment that he didn’t expect to get votes from the 47% of the country that pay no taxes may have been politically inept, but it was an accurate observation that an increasing number of the country’s citizens depends on government entitlements that they don’t pay for. As I’ve said in previous blogs, we are becoming a nation of makers and takers. Many of the takers are like hogs under an oak tree that never look up to see where the acorns are coming from. Someone has to pay for their entitlements because the government has no money except what it seizes from citizens. We are approaching a tipping point that could turn America into a European social democracy because looking at the swing state votes that made it possible for Obama to hold on to office, dependency on government was certainly a factor in how they voted. Furthermore, identity politics – race, ethnic origin, sexual preference, and reproductive rights – are more determinative than candidate quality in how a growing percentage of the country votes. Black unemployment is 14% and among black teens it's 50%. Yet, Obama got over 90% of the black vote. America is becoming two countries. The last time that happened on the scale we are approaching was in the 1850s, which was the prelude to the American Civil War.

Another lesson learned is how smash-mouth presidential politics has become. Instead of presenting and arguing for their respective visions for the country, the candidates try to destroy each other in their campaigning. Hundreds of millions of dollars are spent spinning lies, half-truths, and gotchas from which voters learn little. So their votes couldn’t be informed choices of one candidate's position over the other’s. State and national elections are becoming more like gladiatorial spectacles than the process by which we select the best qualified person to take care of the people’s business at the least cost. What kind of future candidates will we attract to elective office if they and their families must be subjected to a brutalizing primary election and then run the gauntlet in the national election? Voters say smash-mouth is a turnoff, but I don’t believe them. I believe Romney didn’t run a personal attack campaign, and I believe it contributed to his loss.

A third lesson learned from the 2012 election is the enormous power the media has gained in political influence. It is the Fourth Estate in politics whose left-leaning bias is patently undisguised. Media-sponsored polling in this election was disgracefully unscientific and unabashedly intended to mislead and demoralize Romney supporters and get them to stay home. When Hurricane Sandy hit the east coast, the media gave Obama millions of dollars in free advertising. And yet it gave Obama cover in the election day run-up by keeping the Benghazi scandal under wraps. The media has become a force multiplier for the Democrat party.

Once again, voters chose gridlock by putting the Democrat party in charge of the White House and one chamber of Congress. Insanity is doing the same thing and expecting a different result. As the darkness of ObamaCare descends on the country in two years, its back-loaded political chicanery will cause Americans to groan like the Jews under Pharaoh. To avert a fiscal crisis, more money will have to be diverted out of the productive private sector and into the black hole of the public sector. Job creation will suffer. Money will become less valuable. We can moderate our government bondage by putting both houses of Congress under the Republican party at the mid-term elections in 2014, after which time Obama’s presidency will slip into its lame duck years. New Democrat contenders for his throne enter the 2016 fray, telling Americans how different they are from Obama and his disastrous legacy.

Expect to read in the aftermath of 2012 a hue and cry that the Republican party must retool to look more like the Democrat party. Don’t believe it. This was a close election. Republicans had the better vision for the country but communicated it with restrained passion. But for three million Republican voters who cast ballots in 2008 and stayed at home in 2012, we would be looking at a different resident in the White House.