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Democrats’ Conundrum - Should Hillary Drop Out? |
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FORECASTS & TRENDS E-LETTER IN THIS ISSUE: 1. Hillary’s Big Win In Pennsylvania 2. A Look At Hillary’s Situation 3. A Look At Obama’s Situation 4. The Florida & Michigan Debacle 5. Dem’s Problem: The Apportionment System 6. DNC Fearful Of A Convention Nightmare 7. Strengthening A Weak Candidate 8. Conclusions, If There Are Any Introduction A friend recently asked me this question: “If I were Hillary, would I drop out of the presidential race at this point?” This friend, by the way, thinks I am one of the most principled people he knows. My answer was, “Yes, if I were Hillary at this point, I would gracefully bow out for the benefit of the party, because she can’t win, barring some bizarre blunder by Obama.” Never mind that Obama is the most liberal politician in the Congress. Never mind that he vows to hike taxes on the “rich.” Never mind that he promises to enact nationalized health care to replace the world’s greatest health care system. Never mind his other liberal policy agendas, and his questionable associations that continue to crop up. Still, the Clinton/Obama race goes on. Americans seem content to ignore the drip of Obama negatives that continue to leak out as we learn more about him. And why not ignore them since Hillary has plenty of negative baggage, as we all know, and as she herself has admitted recently. Oddly enough, there are some conservatives that are pulling for Hillary. Because the Dems are favored to win the White House this year, there are more than a few on the conservative side that hope Hillary can somehow pull off a win because Obama is so liberal. Their hope, rightly or wrongly, is that Hillary – like her husband before her – would abandon her own liberal agenda and move to the center should she become president. I’m not so sure. The Democratic race for the nomination was never expected to come to this. Hillary was supposed to win the nomination in a cakewalk. It is clear that she and her handlers never expected a challenge from the likes of Barack Obama. Now she’s hanging on for dear life. The question is, of course, whether Hillary still has a realistic chance of winning the nomination, given Obama’s commanding lead in the delegate count and the popular vote. And if she does not have a realistic shot, which many pollsters believe, should she just drop out? Given Hillary Clinton’s latest Democratic primary win in Pennsylvania, I’ll take another in-depth look at the state of the presidential nomination battle between Senators Clinton and Obama. Does it hurt the Democrats that they battle on? Does it help the Republicans? Or does it matter either way? The answers to these questions are far from clear and the media is spinning these issues big-time, mostly in favor of Obama to the surprise of many. There’s a lot to talk about, so here we go with a political analysis this week that will hopefully clear up some of the issues for you. As a reminder, I am not a member of any political party, never have been, although I am a conservative on most issues. Hillary’s Big Win In Pennsylvania A lot of attention fell on Pennsylvania as it was the largest prize among the remaining primary contests, and there was a full six weeks of non-stop campaigning leading up to the April 22 vote. It was yet another must-win state for Hillary (she did), and another chance for Obama to deliver a knockout blow (he didn’t). As it turned out, Senator Clinton won PA by a significant 10-point margin. In reality Hillary’s victory in Pennsylvania was never in doubt, despite all the hoopla in the media in the weeks leading up to it. Hillary was always well ahead in PA, so it was no surprise she won. However, the Clinton campaign, its allies and surrogates would have you believe that Hillary’s victory in PA somehow vaulted her into the lead in the race, and is the signal of her march to victory in November, and that the Obama campaign has run aground. Not so fast… The truth is that the Pennsylvania results changed almost nothing. And for that matter, the remaining contests will mean almost nothing and will have virtually no effect on the state of the race. Many of you are likely wondering how this can be the case. The fact is, the electoral math is not on Hillary’s side as we will see as we go along. Let’s dig in to find out why. A Look At Hillary’s Situation It is true that Hillary’s campaign got a boost from her Pennsylvania victory the past week. But as noted above, a Hillary victory in PA was never in doubt. You see, Pennsylvania has a very similar demographic composition to Ohio, including an aging population second only to Florida. That age demographic was clearly an advantage for Hillary, who also had the complete support of the PA state party apparatus from its Governor, Ed Rendell, on down. She had to win PA with those advantages, and she had to win big. As I see it, this long-expected victory did one significant thing for Hillary. It allowed her to step up her lackluster fundraising, which is great news for her campaign as it had a mere $8 million on hand on the night of the PA primary. It is worth noting that Hillary took in nearly $10 million in the 24 hours immediately following her PA win. Yet even with the win in PA, Hillary is still behind Obama in pledged delegates, and she still trails in the overall popular vote (excluding Michigan and Florida). For her “trouncing” of Obama in Pennsylvania, she received 84 delegates to his 74, a measly 10 delegate gain. Hillary does reportedly boast a slight lead in “Super Delegates,” those who can vote their minds at the Democrat National Convention, but this may or may not be the case, and it could change as I will discuss later on. One of the largest byproducts of any political victory (or loss) is spin. Well, the big spin coming out of PA for the Clinton campaign is that “she can still win this thing!” Well, anything is possible, but Hillary winning the nomination is highly improbable. Before you tune me out as just another conservative who wants to see Hillary fail, let’s look at the numbers. For Hillary to actually take a lead in pledged delegates, she would need to win ALL of the remaining contests by seemingly impossible margins, on the order of 20% per primary. Given Obama’s current popularity, this simply is not possible. And let’s not forget that the pledged delegates will not decide who ultimately gets the nomination. That’s because the Democrats elected many years ago to have their presidential primaries allocate delegates by an “apportionment” process, as opposed to a “winner-take-all” system that the Republicans use. So, in Democratic primaries, the winner gets only fractionally more delegates than the second-place finisher. So even though Hillary had a seemingly big win in PA, and Obama came in second, Hillary only picked up a very marginal number of delegates over Obama. This is how the Democrat primary system works. As I will discuss below, this largely explains why Hillary can’t overtake Obama, and also why he can’t knock her out. It is worth noting that if the Democrats used a winner-take-all system similar to the GOP’s, Hillary would now be leading Obama by upwards of 300 pledged delegates and would be well on her way to victory. You can bet that this is the last time the apportionment system will be used by the Dems. This is another reason why Obama will not drop out of the race. A Look At Obama’s Situation The Obama campaign was stunned by the surprise drubbing in Pennsylvania, where Obama out-spent Hillary nearly three to one. Some in the media speculated that Obama may have lost his spark. Others suggested that Hillary has bounced back into the lead. In fact nothing could be further from the truth. The Obama campaign knew that they could not win in PA, but they wanted to try and keep it close, so they spent lavishly in the state. Obama is awash in cash, so why not? This also forced Hillary to spend more than she wanted to, which took a toll on her already dwindling war chest. But at least she won another big state. Despite Hillary’s decisive win in PA, Obama still maintains a solid lead in the popular vote, in pledged delegates, in states won and most importantly, a massive war chest. As this is written, the Obama campaign has at least $43 million on hand. Also, don’t forget that Obama has proven to be a fundraising juggernaut, so you can expect his massive fundraising advantage to remain, despite Hillary’s best efforts to keep up. Why Can’t Obama Knock Hillary Out? A big question remains for Obama, especially given his lead in pledged delegates, the popular vote and fundraising. The question is, why has he failed to close the deal on several occasions, and why can’t he drive Hillary out of the race? The answer comes back to the Democrat’s apportionment system of awarding delegates. The bottom line is, realistically, Obama can’t knock out Hillary, and Hillary can’t overtake Obama. To begin with, who can tell Hillary to drop out? No one, not even the DNC. She is, after all, the wife of Bill Clinton, a Senator from New York, and she can stay in as long as she wants, no matter what (assuming she can continue to raise money). And it seems clear that Hillary plans to stay in to the bitter end, including a battle for Super Delegates at the convention, if necessary. Second, in order to rack up enough pledged delegates to clinch the nomination, Obama would have to win all the remaining contests by impossible margins. That is not likely to happen. As I noted above, the apportionment system used by the Democrats makes it all but impossible to win a “supermajority” of a state’s pledged delegates (more on apportionment later.) So if Hillary refuses to give up and drop out, which seems to be the case, then it would appear that the Dem’s presidential contest is headed for a convention resolution that could be explosive as has happened in the past. Just imagine what could happen at the Dem’s convention if the Super Delegates hand the nomination to Hillary, even though Obama leads in pledged delegates and the popular vote. That could be very ugly! The Florida And Michigan Debacle Of course, there is one more major lingering issue that could alter the outcome of the Democratic campaign and needs to be resolved soon. What will be done with the Florida and Michigan delegations? Here is the background on the Florida and Michigan debacle, in case you aren’t familiar with it. Both states defied the DNC primary date mandates, despite stern warnings as to the consequences, and moved their primaries up the calendar in order to supposedly have a greater say in the nominating process. In response, the DNC (on the orders of chairman Howard Dean) punished the states, as promised, by declaring that their delegations would not be seated, and their votes would not be counted, at the national convention. Furthermore, Dean instructed the Democratic candidates not to campaign in either state as a consequence of their supposed insubordination. Interestingly, Obama obeyed the DNC and did not campaign or place his name on the ballot in Michigan. But at the last minute, Hillary put her name on the ballot in MI, and not surprisingly, she won handily. She also won handily in Florida where neither candidate campaigned aggressively. No one seemed to care much at the time because it was assumed that the FL and MI votes would not count. Yet as the campaign ground along, and Obama pulled ahead, this issue of the FL and MI votes became much more critical – for Hillary, obviously. As noted earlier, it increasingly seems that the Democratic nominee will be decided, not by the pledged delegates, but by the so-called “Super Delegates” that can switch their votes at their own will, up to the last minute. DNC chairman Howard Dean has asked the Super Delegates on several occasions to make their choice known in advance of the convention, most recently by June 3. The Super Delegates have been slow to respond, with apprx. 300 of the 794 Supers remaining uncommitted, or about 40%. So, looking for some way to end this self-destructive campaign between Hillary and Obama, Dean and the DNC are once again contemplating their options regarding Florida and Michigan. Naturally the Clinton camp is lobbying hard to have the full FL and MI delegations seated (and voting) at the convention. The Obama camp is against this, obviously. There is a perception that if both delegations are seated and are allowed to vote at the convention, Hillary would likely win the nomination. This is also not true. Here’s why. Howard Dean and the DNC have four options on the FL and MI controversy. One: do not seat either the FL or MI delegations. Two: recognize the FL and MI election results - Hillary’s best scenario and the worst for Obama. Three: hold new elections in FL and MI (probably not going to happen). Four: a 50/50 split of Florida and Michigan’s delegates, the fairest but certainly the most opposed option by the Clinton camp. There is no way to know at this point how the DNC will finally resolve the issue of the Florida and Michigan votes. Personally, I would not count either of them, since they knowingly violated party rules and knew the penalties. But I don’t decide these things. Either way it goes, expect lawsuits – potentially from Hillary, Obama and/or the states of FL and MI. The key question is, does it matter how FL and MI are resolved? The answer is NO. In each of the FL and MI scenarios above, Obama still comes out the winner. It only matters by how much – a little or a lot. None of the FL and MI options put Hillary ahead. Of course, the fairest solution (assuming we want to be politically correct) would be to hold new elections in FL and MI, but that won’t happen due to time constraints and prohibitive costs. The next fairest solution is a 50/50 split, which the Clinton camp opposes and would likely fight in the courts. So it remains to be seen what will happen with the FL and MI votes. Whatever happens, it will be very ugly. If Hillary gets her way, the Obama supporters will go bonkers. If the FL and MI delegates don’t get to vote at the convention, Hillary will go ballistic. And the Republicans will make lots of noise, either way it goes. How entertaining! Dem’s Problem: The Apportionment System A significant portion of the turmoil the Democrats are experiencing in the nominating process can be directly linked to their apportionment system. The Democrat apportionment system is a direct result of the chaos surrounding the 1968 nominating process and the subsequent Chicago convention. The Democratic nominee, Hubert Humphrey, did not participate in any of the primaries or caucuses and was placed on the ticket by his influence with party bosses. This caused an already fractured party to crumble and they lost in the general election to Richard Nixon by a wide margin. In an effort to have a fairer and more open nominating process, the McGovern-Fraser Commission was organized and set about developing a system that awarded delegates in proportion to the populations of their respective states. The actual process is based both on Congressional Districts and an “at-large” allocation. Without going into mind-numbing detail, a candidate was to be awarded delegates in proportion to the level of the popular vote achieved. So in close contests like this one, where the candidates are only separated by a few points from one contest to the next, it is nearly impossible for a single candidate to capture an overwhelming majority of any particular state’s delegates. In recent days, former President Clinton has commented on a number of occasions that if it were not for the out-dated apportionment system, Hillary would be well ahead and on the brink of the nomination. Actually, he is correct. The Obama campaign has benefited enormously from the apportionment system as it has dramatically reduced the impact of Hillary winning the “big” states. Where would the numbers stand under a winner-take-all system such as the Republicans have? If the current allocation of Super Delegates is included for each candidate, Obama would have 1618 total delegates while Hillary would boast a whopping 1896. With eight primary contests left to go and 304 undecided Super Delegates, Hillary would be all but assured of the nomination. It would be over by now, and Obama would be history. McCain versus Hillary. So now it begins to make sense why Hillary keeps harping about her big state wins. However, as much as Hillary seems to have been disadvantaged by the current apportionment system, it did help her in her darkest hour. Remember when Obama wracked up 13 straight wins on Hillary? In a winner-take-all system, she would have been in dire straights at that point and under heavy, heavy pressure to bow out. But due to apportionment, she got some delegates in each of those states Obama won in that streak of victories. This reality again underscores the fact that Hillary can’t overtake Obama, and Obama can’t knock her out. What does all of this mean? Likely that this is the last time the Democrats will use an apportionment system, ever. DNC Fearful Of A Convention Nightmare As noted above, Howard Dean has asked the undeclared Super Delegates to commit to one candidate or the other by June 3. Dean and the DNC hope that this will result in a clear nominee before the convention. This assumes, of course, that the Super Delegates comply with Dean’s latest request. So far his capacity to incite them to action has been limited at best. If you assume that the remaining contests are basically a push (each candidate receiving apprx. 204 pledged delegates), which they will be thanks to the apportionment system, and that the Florida and Michigan delegations will not have a say in the nomination, then Obama only needs 95 of the remaining 304 Super Delegates to clinch the nomination. Hillary on the other hand would need 229 Super Delegates to clinch. Read that again: If Hillary and Obama essentially split the remaining primaries, then Obama needs only apprx. one-third of the remaining Super Delegates to clinch, while Hillary will need apprx. two-thirds to win, assuming FL and MI don’t get to vote at the convention. And so it is to these Super Delegates that both candidates are directly and indirectly making their cases. What the DNC is desperate to avoid is going into the convention without a clear nominee. The danger is that the convention would rapidly descend into chaos if neither candidate receives the 2025 delegate total needed to claim the nomination on the first ballot. [Speaking as an admitted political junkie and a conservative, I would love to see this happen! The sheer spectacle of it would be a once in a lifetime event.] This is why Hillary and her surrogates remind everyone within earshot at least 50 times a day that she won almost all the big states so far. Not only that, she claims that Obama would be unable to deliver those same big states that the Democrats need to win the November election. That is pure spin! Are we really to believe that the mega states of NY, CA, MI and even PA would vote for McCain in November, if Obama is the Dem’s nominee? I don’t think so. Strengthening A Weak Candidate A byproduct of the drawn out and bitter Democratic campaign is a seemingly stronger John McCain. The longer the Democrats fight it out, the stronger McCain seemingly becomes, which is a good thing because I think McCain is a weak candidate whose chances in November are not particularly good. Now before many of you go berserk, we need to face facts. John McCain does not match up especially well against either Hillary or Obama. To be fair, his negatives are not entirely of his own making. The country is in the midst of an economic slowdown, and George Bush’s approval numbers are in the tank. Add to that the fact that McCain has been a lackluster fundraiser and will likely take public financing for his fall campaign. If so, this will limit him to $84 million in total spending. You can bet that either Obama or Hillary will have three times that amount at their command and no limit on how much they can spend. That fact, all by itself, dims McCain’s chances dramatically. The general election is a long way off and anything can happen, but being at such a massive spending disadvantage starts McCain off in the hole. In addition, there is a significant block of Republicans that will not vote for McCain due to his negative baggage such as McCain-Feingold campaign finance reform, the “Gang of 14,” the “Keating Five,” his position on amnesty, etc. On the plus side, McCain has avoided making any major gaffes while Obama and Hillary are bickering away. And he has managed to keep his name in the news with various policy speeches and speculation as to his VP pick. This presents the GOP and McCain as organized and ready to lead. This perception will grow enormously if the Democrat convention descends into a pie fight for the nomination. The Democrats have obvious advantages this time around for the reasons noted above, but the lack of a nominee at this late date is a big plus for John McCain. Still, that is no guarantee that he can beat either Obama or Hillary. Conclusions So where does the Democratic campaign go from here? The next round of primaries is on May 6 in Indiana and North Carolina. Indiana is currently a toss-up with perhaps a slight edge toward Obama. North Carolina will be an Obama blowout victory, for as much as that matters. The remaining contests are West Virginia, Kentucky, Oregon, Puerto Rico, Montana and South Dakota. Who wins these remaining states makes almost no difference. As I noted above, you can just divide the remaining pledged delegates evenly between Hillary and Obama and likely come out very close to the final tallies. The remaining Super Delegates will decide the nomination. Hillary is hopeful that she can make a case solid enough to attract the 229 or so Super Delegates she will need to clinch. But, don’t count on it. Barring some major blunder, Obama will lead by every measurable factor by June 3 or shortly thereafter, and the Super Delegates are likely to make him the Democratic nominee for president. Why? Well, we may call it Clinton fatigue, or we may call it a real desire for change, but it is much simpler than that. For the Super Delegates to swing to Hillary, despite Obama’s lead on every front, would fly in the face of the apportionment system and the reasons behind it. You would have party elites overturning the will of the people. Not very Democratic is it? Imagine what will happen if the Super Delegates hand the nomination over to Hillary at the last moment, even if Barack has won the most pledged delegates and the popular vote and the most states. It will be most interesting to watch how this turns out. Can you say UGLY!? On the one hand, we may finally see the end of the Clintons, which will please many conservatives. On the other hand, should that happen, we will get one of the most liberal presidential nominees in our country’s history. And he will be running against a moderate Republican, John McCain, who will not be able to keep pace with Obama’s fundraising juggernaut. Of course, we also cannot rule out the possibility that Obama falls out of favor should he become the nominee. With friends like his former Pastor, Jeremiah Wright, he doesn’t need enemies! So maybe John McCain has a chance, even if he can’t raise money on par with Obama. We’ll see. Hopefully, the analysis above has cleared up some of the issues for you. Whatever happens, it will be one of the most interesting presidential seasons ever. If there is no clear nominee by the Democratic convention, look for it to be some of the best entertainment on television, at least for political junkies like myself. NEXT WEEK: Tomorrow (Wednesday), we get the much anticipated 1Q GDP report. Based on what we hear in the media about the economy, many are expecting a very negative GDP report tomorrow. However, the pre-report consensus is for a slightly positive number of +0.5% on average. But we’re in a recession, right? Well, maybe not. Next week, I will discuss the GDP report and the state of the economy. I will also have some interesting analysis on the directionless stock market – essentially sideways for the last nine years. And I will show you how some successful money managers I have money with have beaten the market over that same nine year time window, with a lot less risk. (Past results are no guarantee of future results.) Very best regards,
Gary D. Halbert SPECIAL ARTICLES
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