DiscussionDIVAS

On pins and needles

The campaign frenzy hit a high point his week—there they were, the candidates in the rain, in the cold, in balmy Florida weather. Hugging, shaking hands, pointing, smiling, yelling, while some 20 million people cast votes their early, ahead of Tuesday.
 
As of Friday morning, polling puts Barack Obama ahead of John McCain by an average of 6 points, according to Real Clear Politics. While Obama has polled ahead of McCain for the majority of the last 14 months, for 10 days in September, during the height of the Sarah Palin love fest, McCain was ahead.
 
And then the market collapsed, and Obama surged. This graph shows the scenario well—check out what happens in mid-September when Lehman Brothers failed and Merrill Lynch was sold to Bank of America (scroll down to see interactive graph once you link out).
 
Don't forget the Electoral College
Remember 2000? Al Gore won the popular vote but came up just short of what's constitutionally required to win—a majority of Electoral College votes. Let’s review:
 
The winner needs to collect 270 of 538 Electoral College votes. The Electoral College is made up of people selected by the parties ahead of Election Day to ultimately cast the official vote in December. This is confusing, we know, but this “indirect” and controversial method was created by the founding fathers as a compromise—some didn’t want a popular vote to decide the election.

The 538 number is equal to the number of U.S. senators and representatives, plus three for the District of Columbia. Bigger states like California (55) have more votes than say, Montana (3). If a candidate wins the majority of the popular vote in a state, in almost all cases, he wins all the electoral votes in that state. See how many Electoral College votes your state has.
 
At this point CNN estimates Obama has 291 Electoral College vote—more than enough to win (some estimates put it higher)—and McCain has 163, leaving 84 up for grabs.
 
The swing states
Record voter turnout is expected and there are still some undecideds out there. Each campaign is focusing intensely on tossup voters in those notorious swing states: Pennsylvania (21), Ohio (20) and Florida (27). In 2000, the election was decided in Florida. In 2004, it was Ohio. 
 
The Democrats are banking on a big win in the Senate
Half of the 50 states are electing Senators on November 4. The current Senate makeup is 51-49 Democrats to Republicans, and they’re hoping to make that spread more like 56-44, and it could easily be even bigger. The big Senate races are in North Carolina, Alaska (where the GOP incumbent just got convicted of a felony!), Minnesota and New Hampshire, to name just a few.  Democrats could take seats from Republicans in all these states.

The big picture
If you’re like us—regardless of which way your political winds blow, you’re probably on pins and needles. On Wednesday I crashed my car (the beloved Volvo)—my first ever car accident in almost 20 years of driving, and I blame the election. My mind is preoccupied. So are the markets. So is the world. Comedian Larry David says he's "at the end of his rope," and taking it out on his ex-wife. We’re all ready for a little resolution.

In need of a little TLC

You use them every day but probably don’t think much about them, except maybe if they are crumbling beneath you. Now, repairing them and building new ones, or new versions of them, may help save the economy. At least according to Democrats.

We’re talking about roads, such as the Interstate Highway System, created by President Dwight D. Eisenhower in 1956, which was about the last time any major funding went toward the system.

But we’re also talking about U.S. infrastructure in general—roads, bridges, the electrical grid, the water system—all the things that support what we do or need every day, many of which are deteriorating or could benefit from new technology.

The idea that we as a nation need to invest in infrastructure is getting a lot of buzz lately, especially as Democrats and Barack Obama tout the need for another stimulus package to kick-start our sputtering economy. 

The infrastructure is crumbling... and dated
Remember the bridge in Minneapolis that collapsed last year, killing 13 people? That bridge was built in 1967 and there were warnings in 1990 that its stability was compromised. The Federal Highway Administration recently told The News Hour there are about 70,000 bridges across the country in need of repair while another article says one in four are "structurally deficient or functionally obsolete."

Indeed many of the roads, bridges and buildings in the United States date back even farther to the 1930s and the New Deal, when Franklin D. Roosevelt created programs like the Work Progress Administration to help lift the nation out of the Great Depression.

The WPA built 600,000 miles of roads, over 100,000 bridges and buildings and thousands of parks. LaGuardia Airport in New York and the U.S. presidential retreat, Camp David, are both WPA projects still standing. Interestingly—a side note here—Fannie Mae, social security and the Securities and Exchange Commission (SEC), all hot topics on the campaign trail this year, all began under the New Deal. (Read our explanation of Fannie Mae.)
 
Why is infrastructure a big deal right now?
In part this is a hot topic because the economy is in dire straits and some say investment in infrastructure that creates jobs and provides a needed service could be just the boost the economy needs. Two weeks ago Democrats called for a new stimulus plan that could cost $150 billion, with an emphasis on putting money to work in infrastructure projects. And Obama has called for creating new jobs (and green jobs) in this arena as part of his overall economic stimulus program. 

The big picture
A second stimulus plan has some hurdles, namely Republicans who don’t want to spend more money. But Fed Chairman Ben Bernanke backed the idea this week, saying a stimulus package would be good for the economy but thought a works program might be slow to kick off.

Estimates say it could take $1.6 trillion to shore up infrastructure. And a good plan won’t just fix what we have, it will catapult us forward toward a system that respects our natural resources and moves us away from traditional, fossil fuel-burning forms of transportation. Let’s hear it for high-speed trains!

The two e's

Election, economy. Election, economy. The two "e's" are dominating the headlines these days. And rightfully so--the election is two and half weeks away and the economy is bleeding. It's really pretty serious. 

And while both candidates are now touting new rescue plans on top of their longer-term economic strategies, it seems like market and economic conditions are changing so quickly that it's hard to know whether these ideas would be actionable and when. In the end, it all feels like a sale to us. It was difficult enough to keep track of their plans before the economy tanked. Sigh.

So, in an effort to help us all, we've been trying to cut through the jargon of these plans and to bring you just the facts, ma'am. Since there are so many nuances, we're going to just focus on their tax plans for individuals only, and keep it plain and simple--not muddle them with corporate tax plans, which they also talk a lot about.

- President Bush cut taxes in 2001 and 2003, creating new (lower) tax brackets. For instance, if you were taxed 28%, that dropped to 25%. He also cut capital gains taxes (income you make on investments) in half, to 15%. These cuts are good only until January 1, 2011, and McCain wants to make them permanent. 

- You've probably heard this mentioned over and over: Obama wants to cut taxes for 95% of Americans. This is everyone who makes less than $250,000 a year (a lot of people!). What does this mean? Folks in this category would see at least a $500 cut for individuals or $1,000 cut for families. If you make more than $250,000, your taxes will likely go up but he says you will not pay more than what you paid before the Bush tax cuts. It looks like people in the top 35% tax bracked would pay closer to 39%. 

- Both candidates talk about estate taxes. What are these? Well, they're taxes that apply when you die. Basically, everything you're worth is taxable when you die. If everything you're worth (as an individual) is equal to $2 million or less today, you're exempt from paying taxes on that money. But everything over that amount is taxed at 45%. So, if you're worth $10 million, $8 million is taxed at 45%.

In 2009, the amount your exempt from jumps to $3.5 million. In 2011, it reverts back to $1 million per person. McCain wants to raise that figure to $5 million, and tax the rest at 15%. Obama wants keep the cap at $3.5 million and tax the rest at 45%.

  

The big picture

Taxes of course are just a piece of McCain and Obama's overall economic plans. Job creation, social security, health care, retirement savings and plans for handling the large number of home foreclosures across the country make up their comprehensive plans. (See a comparison of their plans here.) Regardless of their plans, it's clear whomever wins is going to be saddled with a monumental task of healing a sick economy.

What's happening in the financial markets?

Sitting at dinner Wednesday night we noticed fewer people at our favorite go-to restaurant in San Francisco. Was it just a dead Wednesday? Were people at home enjoying the new fall TV season? Or, is the economy getting to people? Tough to say.

 

Last Friday we splurged at a more upscale restaurant and it was packed. Of course that was before Monday's wild ride on Wall Street, before Iceland announced it may go bankrupt, and before the Dow plunged 700 points on Thursday and kept falling on Friday. What a difference a few days can make.

 

Feeling overwhelmed?

The headlines keep flying and they are ugly. If you're like us, you're probably feeling a little overwhelmed by all of it—that it's tough to grasp the gravity of the situation. So, focus on the basics to help keep it in perspective: 

• The stock market is down around 40% from last October. In one year the Dow Jones Industrial Average has lost about $8 trillion. In the last six years it's gone from 7,500 points to 14,164 back to about 8,500 points. If the Dow drops another 1,000 points, it will have wiped out six years of gains in the stock market.
  
• Since July of last year, retirement plans—such as 401(k)s—have lost $2 trillion. Some estimates show individual accounts are down about 20% on average. Unfortunately, 401(k)s are the main source of retirement savings for Americans, whose personal savings usually amount to 1% of income or less. (The median U.S. household income is $50,000.)
  
• Consumers are already spending less and likely to keep reining it in, even as we head into the holiday season, which is typically a big boom time for retailers. This doesn’t bode well for the economy.
  
• As we've been explaining, the credit markets are still stuck, meaning businesses can't get loans, which means some companies won't be able to make payroll. Many companies take out small loans to pay their employees. If they can't get the loan and can't make payroll AND consumers aren't buying their products, people will lose jobs. When people lose jobs, they can’t buy things, meaning the economy doesn't grow. If it doesn't grow for two consecutive quarters, technically it's a recession. It's a vicious cycle.

The big picture

The million dollar question is when will this scary time end? Most economists say the U.S. is already in a recession. The moves the Federal government has made (cutting interest rates, buying up those bad mortgages), are meant to stop the economy from slipping into full-blown depression. Some economists now think we’ll need another stimulus plan (we already got a check from the government this year) to get the economy moving again.

 

The presidential candidates are offering up their ideas, as we saw in the last debate. In fact we wanted to get into the various economic policies being proposed by John McCain and Barack Obama, but we need more space than we allow ourselves in these weekly posts! We’ll break that down next week.

 

We’re going to live blog the debate on Wednesday and hope you’ll chime in with your thoughts on www.discussiondivas.com.

Sarah Palin Survives the VP Debate

As Sarah Palin—who participated in her first and only vice-presidential debate on Thursday—might say, “you betcha” we’re talkin’ politics this week.

The reviews
After a rough go with Katie Couric, the Sarah Palin-Joe Biden debate was perhaps the most anticipated television moment of the year. Apparently 3,100 media credentials were issued, the most ever by the Commission on Presidential Debates. (Watch highlights of the debate here.)

We watched with a room full of several-hundred women in San Francisco, many of whom laughed at Palin’s colloquialisms and her eagerness to stick to her talking points on energy. But by all accounts she survived the evening and as the New York Times puts it, didn’t do “any obvious damage to the Republican ticket.”

And while it will take a little while to get the poll results, it’s not likely the performance did much to help John McCain’s presidential campaign. Over the last week Barack Obama has pulled ahead in national polls and also in several key battleground states: Pennsylvania, Ohio and Florida.

A review of the campaign positions
The VP debate centered on energy policy, the wars in Iraq and Afghanistan, and the economy, all hot topics in the presidential race.

Energy: Both candidates support off-shore drilling in the United States, although McCain (“drill, baby, drill!”) is far more enthusiastic. Obama favors limited drilling.

The economy: Sen. Obama wants to raise taxes only on individuals who make more than $250,000 a year, McCain wants to cut taxes on both individuals and corporations.

Healthcare: The Obama camp is pushing for universal health care. McCain wants to give people $5,000 to go buy their own health insurance, but where that money would come from has been the source of some controversy. 

The Wars: McCain wants to stay in Iraq until there’s “success,” Obama wants to set a timeline for troop withdrawal. In Afghanistan, both camps seem to want to prop up the efforts there.

We’ll do a full breakdown of the major issues and where each candidate stands in the coming weeks so that everyone will be fully prepared for November 4.

The big picture
With just 31 days to go until “the most important election you’ll ever vote in,” according to Joe Biden, the campaigning has reached a crescendo. When they aren’t in Washington bailing out the financial crisis, the candidates have been focusing on those undecideds. Barack Obama parked himself in Michigan for much of the week, working on getting the blue-collar vote, and news came Thursday that McCain was abandoning his campaign efforts there. McCain was in Iowa earlier in the week and had a testy exchange with the editorial board of the Des Moines Register (see clips).

The candidates will meet in Nashville on Tuesday for a town-hall debate, and one more time on October 15. Still, early voting has started in many states, but of course we won’t get these results until the day that really counts: Nov. 4.