Here's the same guy's call for the election in 2004.......was pretty close.
MONDAY, OCTOBER 11, 2004
Kings of the Hill
Why the GOP will strengthen its grip on Congress
By JIM MCTAGUE
THE STATE OF THE UNION is cause for anxiety. Our military is stretched thin in Afghanistan and Iraq; the profligate Congress has turned a surplus into a record deficit; and the economy is threatened by trade imbalances, job losses, high oil prices and a health-care affordability crisis.
In light of this doleful litany, you'd expect voters to "Throw the bums out!" The bums in this case are the Republicans, who control not only the White House but both branches of the legislature. But the throwing-out will not materialize, in our view. While it's too soon to predict the presidential race, the GOP looks poised to strengthen its grip on Capitol Hill once all the votes are tallied after Nov. 2 and all the legal challenges are adjudicated.
Barron's predicts that the Republicans will pick up seven additional seats in the House and three more in the Senate, adding to the gains of the 2002 midterm election.
In the House, we foresee the Republicans with 234 members to the Democrats' 201, for a 53.8% majority, up from the current 227-205, or 52.5% majority. In the Senate, we believe the Republicans will end up with 54 members to the Democrats' 46, up from the current 51-49 advantage.
The predictions -- pointing to greater GOP gains than most observers expect -- reflect our view that the Republicans in key races generally have better grass-roots organizations than their rivals. The evidence: greater contributions from local residents as opposed to out-of-state interest groups. The Republicans are also helped by an economy that, while perceived less robust than before 2001, nonetheless is growing.
In sizing up the races, we looked at key polls, campaign-financing disclosures, economic indicators and insights from top political analysts -- a broad approach that served us well in forecasting the outcome of the 2000 and 2002 elections. In 2002, for instance, we were among the first and the few to correctly call a GOP win in the Senate. We predicted a 52-48 GOP advantage, when most other prognosticators saw Democrats winning control. We also correctly called a GOP surge in the House. We predicted a 225-seat majority, which was only two seats short of the actual result.
The GOP gains we forecast this time bode well for the stock market. For one thing, stocks have generally fared better when Republicans have held majorities in both the House and Senate. Such Republican rule historically has been accompanied by average gains of 16.9% a year in the Standard & Poor's 500 index, compared with 8.2% gains when Democrats have held sway, says Anthony Chan, senior economist with J.P. Morgan Fleming Asset Management. That reflects Republicans' historical role as fiscal conservatives, favoring lower taxes and less spending.
Furthermore, even with the predicted Republican gains, Washington will remain sufficiently gridlocked that neither party will be able to spend freely. And that's good news for deficit reduction, a key concern on Wall Street.
Lawrence Lindsey, President Bush's former economic adviser, says the GOP needs at least 55 seats in the Senate to accomplish much. Republican lobbyist and political guru Rick Hohlt argues that Bush, if re-elected, would need 60 Republicans in the Senate to assure passage of his second-term agenda. Hohlt points out that the GOP for all intents and purposes will have three-to-four fewer seats than advertised. That's because Republicans Olympia Snowe and Susan Collins of Maine, Lincoln Chaffee of Rhode Island and Arlen Specter of Pennsylvania often oppose their party's most sweeping proposals.
John Kerry, if elected, clearly would be even more stymied. But that might not be so bad for investors: A gridlocked Washington can't do much harm to the economy.
On our score card, a candidate's fund-raising prowess is given considerable weight, especially on the House side, where there is considerable historical evidence linking a big war chest with an Election Day victory. In fact, in most upsets of incumbents, the challenger usually is better financed. On the other hand, an incumbent with a cash advantage is rarely defeated on Election Day.
The correspondence between lucre and electability is not as pronounced in Senate races because both candidates typically are awash with cash. In part, there is more money because people from outside a state are making donations to advance their party's Senate candidate. To compensate for outside interference, we give an additional edge to the candidate who raises the most money from local zip codes. Local donations, we find, measure the strength of a candidate's grass-roots support and campaign organization.
IN 2002, 413 HOUSE SEATS out of 435 were won by candidates with the most money, according to a study by the Center for Responsive Politics. That's 95%. In the Senate, cash triumphed in 26 of the 34 races, or 76%.
To supplement our own work, we drew on insights from a trio of top political observers: Hohlt, legendary GOP election analyst John Morgan and Democratic guru Dave Beattie, a partner in Hamilton, Beattie & Staff, a polling and strategy firm. All three helped us handicap the closest races across the country. This is art, not science, so we also relied on our instincts.
Some of the hottest action is in Senate races. Democrats believe that they have a chance this year to take control of the 100-seat Senate by 51 to 49. There are 19 Senate seats currently occupied by Democrats that are in contention, and we predict that Republicans will win five of them: Louisiana. South Dakota, Florida, South Carolina and Georgia. There are 15 seats up for grabs held by Republicans. We predict that the Democrats will win two of them: Illinois and Oklahoma. Here's a rundown on nine of the most interesting races in the Senate.
CLIFF-HANGERS
Here's a sampling of some of the most hotly contested races around the country, along with Barron's projections of the winners.
Senate
WINNER: Lisa Murkowski
Tony Knowles
ALASKA -- Murkowski, a Republican named to the seat by her father when he became governor, is dogged by nepotism charges. But Democrat Knowles has it worse: He has angered oil and fishing interests.
WINNER: Peter Coors
Ken Salazar
COLORADO -- Republican beer man Coors has the edge, because there are many more GOP voters in the state than Democrats. But Salazar, a popular Democratic state attorney general, can't be dismissed.
WINNER: Mel Martinez
Betty Castor
FLORIDA -- Martinez, a Republican and former U.S. housing secretary, has raised more money in-state than Democrat Castor, a former university president. A strong turnout of Hispanic voters should help him.
Tom Daschle
WINNER: John Thune
SOUTH DAKOTA -- Pundits are split on this race, but we think incumbent Daschle, a high-profile Democrat, will lose. Thune, a former GOP congressman, appears to have stronger grass-roots support.
House
WINNER: Geoff Davis
Nick Clooney
KENTUCKY (District 4) -- Davis, a Republican, is likely to beat local TV personality Clooney, a Democrat and father of Hollywood heart-throb George. Clooney depends too heavily on Hollywood contributions.
WINNER: David Wu
Goli Ameri
OREGON (1) -- Democratic incumbent Wu faces a tough challenge from Republican Ameri, an Iranian immigrant. Ameri has been hammering at Wu's record, but Wu holds the crucial lead in in-state funding.
WINNER: Allyson Schwartz
Melissa Brown
PENNSYLVANIA (13) -- Schwartz, a Democratic state senator, should trounce Republican Brown, even though Brown nearly won the seat in 2002. Schwartz benefits from a superior organization.
WINNER: Randy Neugebauer
Charlie Stenholm
TEXAS (19) -- In this post-reredistricting battle of incumbents, Republican Neugebauer is likely to knock off Democrat Stenholm, whose old district was folded into the new 19th. Texas has other similarly tight races.Alaska: When he became governor of Alaska in 2002, Frank Murkowski appointed his daughter Lisa, a fellow Republican, to fill out the rest of his term in the U.S. Senate. The nepotism hasn't sat well with a lot of Alaskans. Beattie says Alaskans also are upset with the governor because he reduced the citizens' annual share of state oil revenues (every Alaskan gets an annual check just for living there). The found money is fond money. "They are taking their anger out on Lisa," he says.
Even so, former Democrat Gov. Tony Knowles, who is challenging Lisa Murkowski for the Senate seat, has a statistically insignificant lead in the polls. Morgan and Hohlt say it's because Alaska's senior senator, Ted Stevens, a popular Republican, is calling in a lot of chits on behalf of Lisa Murkowski. We predict that Knowles will narrowly lose to Murkowski because he has angered Alaska's oil men by backing Kerry's opposition to drilling in wilderness areas. Knowles also has managed to aggravate the state's fishermen for his handling of the settlement with Exxon Mobil for the Exxon Valdez oil spill of 1989.
Colorado: A Senate seat is up for grabs here because Republican Ben Nighthorse Campbell is retiring. Democrat Ken Salazar, a popular state attorney general who campaigns in a white cowboy hat, is battling beer brewer Pete Coors, who says the Senate needs a businessman, not another lawyer. Salazar is a smoother politician and is more popular among the state's farmers and ranchers than is Coors. Beattie thinks the voters are leaning toward Salazar in this very close race. Hohlt and Morgan say Coors has the advantage of a popular Republican governor in Colorado. The GOP also has about 180,000 more registered voters and more contributions county-by-county. For us, that seals the case for the beer king.
Illinois: Democrat Barack Obama, who has a $10 million campaign war chest, doesn't need it to beat carpetbagger Alan Keyes, a desperation candidate from Maryland thrown up by the GOP after a sex scandal scuttled the campaign of rising star Jack Ryan. Keyes ran for president in the 2000 GOP primary. This race is hot because it marks the birth of a potential Democratic star, "The Obamanator!"
Oklahoma: Former Republican U.S. Rep. Tom Coburn seemed likely to snap up the seat that opened after the retirement of Republican Sen. Don Nickles, a perennial favorite of the voters. But Coburn, a doctor, is getting smeared with accusations that he once committed Medicaid fraud. Attacks on his House voting record also are hurting. Hohlt and Morgan believe Coburn is too polarizing. Beattie points out that he called state legislators "crap heads." Coburn also remarked, while discussing Medicare reform, that many oldsters go the doctor because they are lonely. His bedside manner will hurt him.
Democratic Rep. Brad Carson, his opponent, is an attractive young candidate who has amassed close to $3 million, versus $823,000 for Coburn. And over half of Carson's money is from Oklahoma contributors. We see Oklahomans, who are largely conservative Republicans, splitting their tickets, voting for Bush for president and Carson for the Senate.
Florida: Republican Mel Martinez, the former U.S. housing secretary, is battling Democrat Betty Castor, a former university president, for the seat that was held by Bob Graham, an unsuccessful presidential candidate. Both candidates have equivalent war chests of over $4 million, but more of the Martinez hoard is from in-state, which gives him the edge when our formula is applied. Morgan and Hohlt predict a strong turnout of Cubans and other Hispanics for Martinez.
Georgia: Democratic turncoat Zell Miller's seat is open as the firebrand retires. Republican Rep. Johnny Isakson has a $4.4 million war chest and his challenger, Democratic Rep. Denise Majette, has about $900,000. Money talks: Veteran Isakson walks over freshman Majette, in our estimation.
Louisiana: Retiring Democrat John Breaux's seat will be won by Republican John Vitter, who has attracted more in-state donations than Democrat Chris John. This race may not be decided until a December runoff if Vitter gets less than 50% of the vote. Though both have over $3 million war chests, Vitter has raised over $1 million more than John from locals.
South Carolina: Republican Rep. Jim DeMint should have no problem besting Democrat Inez Tenenbaum, a former state education superintendent, for the seat vacated by Democrat Ernest Hollings. But Beattie says the race is closer than generally believed because Tenenbaum has exploited DeMint's support for a national sales tax by claiming it would raise the cost of food for families. But polls show that the state, a mecca for retirees and new business, is trending heavily Republican. It will go for DeMint, who has the cash advantage.
South Dakota: Democratic Sen. Tom Daschle is a better campaigner than former Republican Rep. John Thune, his challenger. But our three experts are split: Morgan believes Thune will win, Hohlt isn't so sure and Beattie says Daschle has the incumbent's advantage. Daschle did outshine Thune in a debate on NBC's Meet the Press. Even so, Daschle, in our opinion, will lose. Though Daschle has over $13 million in his war chest compared with Thune's $6 million, Thune has raised over $1 million more than Daschle in-state.
In the House races, Republicans have even stronger advantages. In part this is because more and more voters in states that traditionally end up in the Democratic column are going for Bush. Social issues like gay marriage are a primary cause of the vote switching, says Morgan. Catholics in states like Pennsylvania and New Jersey especially are troubled by Kerry's support for civil unions for gays as well as his toleration of abortion. Here are the House districts to watch:
Arkansas 2: Democratic incumbent Rep. Vic Snyder, one of the most liberal members of Congress, will go down in a race rife with outrageous charges. Republican Marvin Parks, a state representative, is trying to paint Snyder as anti-God and anti-business. Snyder, for his part, accuses Parks of corruption for not taking the shortest, albeit not the fastest, route to work, resulting in large mileage reimbursements from the state. Parks will win, in our view, simply because he has raised more in-state money. But few races are more cartoonish than this one.
Kentucky 4: Businessman Geoff Davis, the Republican candidate, is originally from Pittsburgh, and he's running in a district that is strongly Democratic. Nevertheless, he will defeat native son Nick Clooney, a popular local TV personality and father of Hollywood heart-throb George Clooney. Davis has raised far more money from in-state. Clooney is overly dependent on handouts from Hollywood, which suggests that he's the real carpetbagger in this contest.
Missouri 3: This is the seat that has been occupied by Rep. Richard Gephardt, an old-time liberal who is retiring. Democrat Russ Carnahan, son of the late Missouri Gov. Mel Carnahan, will defeat perennial GOP candidate Bill Federer, who has run so often that he risks becoming a Pat Paulsen parody.
Missouri 5: Emanuel Cleaver, a Democrat who has been a popular mayor of Kansas City, will win the seat formerly occupied by Democrat Rep. Karen McCarthy. Republican millionaire challenger Jeanne Patterson wouldn't be a contender were it not for her private piggy bank. She can't compete with Cleaver's charisma.
Pennsylvania 13: Democrat Allyson Schwartz, a state senator, will trounce Republican Melissa Brown, who nearly won the seat from Democratic Rep. Joe Hoeffel in 2002. Hoeffel is waging a likely unsuccessful Senate race against Republican incumbent Arlen Specter, who often votes with Democrats. Schwartz has more money and a superior organization.
Oregon 1: Incumbent David Wu, a Democrat, should beat back a very tough challenge from Republican Goli Ameri. Wu has raised more cash in-state. Morgan and Hohlt differ with us on this one. They see an upset by Ameri, an Iranian immigrant who has effectively attacked Wu's voting record.
South Dakota 1: Democratic incumbent Stephanie Herseth, who won a special election to her seat last summer, should hang on to defeat a tough challenge from Larry Diedrich. We don't think that South Dakota voters are so fickle that they would toss out Herseth after just a few months. She has the cash advantage, too.
Texas (various districts): This state has some of the tightest races because of a hard-fought redistricting that favors the GOP. Democrat Max Sandlin looks as though he will retain his seat despite boundary changes in his First District that added GOP voters. He faces a strong challenge by Republican Louis Gohmert Jr. Likewise, incumbent Democrat Nick Lampson, running in a redistricted Second District, will beat Republican challenger Ted Poe.
But Democratic incumbent Chet Edwards in District 17 will be bumped off by Republican challenger A. Arlene Wohlgemuth, in our opinion. And in Texas 19, Republican Rep. Randy Neugebauer looks like he will knock off incumbent Democrat Charlie Stenholm, whose old district was folded into this new one. We expect incumbent Democratic Rep. Martin Frost to survive a hard contest against Republican incumbent Pete Sessions in a new 32 district, which encompasses Dallas. Frost has a dollar advantage.
While we aren't ready to predict the presidential race, it's safe to say that George Bush and John Kerry would each face difficulty with the next Congress. Greg Valliere, chief strategist for Schwab Washington Research, agrees with Hohlt that you need 60 votes in the Senate to get anything done. "There will be gridlock if Kerry is elected president, and Bush won't be able to get anything done. There will be no Social Security reform, no energy bill and no tort reform."
With budget money tight, most of the action will be on taxes rather than spending, says L. Douglas Lee of Economics From Washington, a consulting firm. The additional GOP Senate seats could help Bush make his tax cuts permanent. As for Kerry, his plan to raise taxes on the rich would be a non-starter. His costly prescription drug and health-care proposals also would be doomed from Day One.
With the next president limited largely to speechifying, however, investors troubled by the thought of runaway government spending should profit no matter who is elected.
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