The Wall Street Journal-20080116-The Morning Brief- Romney-s Michigan Win And Economic Optimism---- Online edition
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The Morning Brief: Romney's Michigan Win And Economic Optimism...; Online edition
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Mitt Romney's promise to bring jobs back to Michigan beat John McCain's purported economic realism in the state's primary. And if the political bottom line was the lack of a presidential frontrunner in either party, there were also clear implications for politicians already in Washington trying to find a way to stimulate the economy.
With Democrats all but ignoring Michigan thanks to an intra-party spat over the primary's timing, independents seemed mostly to flock to the Republican contest, where Mr. Romney won 39% primary votes, Mr. McCain 30% and Mike Huckabee 16%. No other candidate won more than fourth-place Ron Paul's 6%. As the Detroit News notes, Michigan's highest-in-the-nation unemployment rate and the loss of hundreds of thousands of factory jobs in recent years helped put the economy first among voters' priorities. According to an exit poll conducted for the Associated Press, when given four choices half of the Republican primary voters named the economy as the most important issue facing the U.S., and 42% of these voters said they backed Mr. Romney, many more than those who voted for Mr. McCain. (Less than one in five picked the war in Iraq, and fewer still were more concerned with immigration or terrorism. Mr. Romney also led among Republicans who like the performance of President Bush, while those who didn't generally voted for Mr. McCain.)
Nearly half of Republican primary voters said they prefer tax cuts over deficit reduction in terms of dealing with the economy -- and not surprisingly, a vast majority of this group backed Mr. Romney. The candidate himself tells the AP he viewed his first victory -- after losses in Iowa to Mr. Huckabee and in New Hampshire to Mr. McCain -- as "a victory of optimism over Washington-style pessimism," a theme that jibes with his strategy in Michigan. As the Washington Post notes, after Mr. McCain stressed job training and federal help for displaced workers whose jobs wouldn't magically reappear, Mr. Romney "pounced," portraying himself as the champion of a Detroit auto industry that can rise to its greatness of the past.
The economy was also a principal focus of the Democrats yesterday, though through their debate in Nevada, site of Saturday's caucus, rather than any actual voting. After more than a week of strained and sometimes bitter rhetoric over Hillary Clinton and Barack Obama's credentials and positions on civil rights, the debate came off as a "political Kumbaya," in the words of the Las Vegas Sun, with the candidates stressing civility and acknowledging their similarities on the issue. But if such dispute resolution dominated the headlines, the "reasoned, substantive conversation" described by the Sun showed the economy to be emerging as the dominant issue of the campaign. Mrs. Clinton, Mr. Obama and John Edwards got into the intricacies of sovereign-wealth funds' lack of transparency, the down-home and Wall Street ramifications of bundled and securitized subprime mortgage loans and proposed streamlining of the student-loan system.
But one topic that didn't get attention was how the economic plans being touted by the candidates ignore the U.S. budget deficit. As The Hill reports, Sens. Clinton and Obama have backed away from using tax increases or spending cuts to pay for any economic stimulus -- which could complicate their Democratic colleagues who are trying not to break budget rules as they work on the issue back on Capitol Hill.
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. . . And What It Means in Washington
The heart of those so-called pay-go rules in this context is the idea that as with any budget-making proposal, hard choices must be made. And politicians' affinity for avoiding hard choices can be seen in how both Democratic and Republican members of Congress are treating the economic-stimulus process. Senate Majority Leader Harry Reid and Speaker Nancy Pelosi wrote to President Bush on Friday "in what at first glance appeared to be a plea for pre-State of the Union negotiations on any stimulus package," as Roll Call notes. But a day later Democratic Senatorial Campaign Committee Chairman Charles Schumer seemed to exclude the notion of finding a willing partner in the White House.
Rep. Barney Frank, chairman of the House Financial Services Committee, tells The Wall Street Journal he thinks House Democrats and Mr. Bush can reach an agreement on the matter if Republicans don't insist on including a measure making Mr. Bush's tax cuts permanent -- but that could be a non-starter for the White House. And "looming over the talks is the question of whether Mr. Bush has enough political muscle to persuade Republicans to deal with Democrats," the Journal adds. "The president's approval ratings are low, and Republican lawmakers may see more benefit in drawing distinctions with Democrats in an election year, rather than going along with them." Mr. Bush himself today expressed "hope" that the U.S. economy could get some relief from high gas prices thanks to his plea for more oil production to Saudi Arabian King Abdullah. With the White House apparently keeping its power dry for the State of the Union, that plea has been the most concrete of the president's actions since economic stimulus became the issue du jour. And like the victory of Mr. Romney's rhetoric in Michigan, Mr. Bush's oil hopes suggest how much appeals based on public optimism will determine the policy outcome.
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A Red-Faced Boeing and Its 787
Airbus today acknowledged that Boeing delivered more planes last year than its European rival, but this isn't looking to be a triumphant day for the U.S. aerospace manufacturer. When Boeing announced in October that its 787 Dreamliner jet program was six months behind schedule, there seemed to be a tacit understanding with Wall Street that any further delays would damage the company's credibility, and the coming hours could bring just that. People familiar with the situation tell The Wall Street Journal Boeing continues to have problems on several 787 fronts and may not see the first of the next-generation planes take flight until June.
The Seattle Post-Intelligencer, which reports Boeing will announce the news today, notes that this delay means no 787s will be delivered in 2008 -- and, before October's bad news, customers had been scheduled to receive their first 787s this May. More significantly, the P-I adds, Boeing now believes its partners overseas can't accelerate production enough to reach the company's key target of delivering 109 787s by the end of 2009. And Boeing only gets paid most of its money when the jetliners are delivered, a factor that will add to Wall Street's doubts. Another problem for Boeing, the Journal says, is how further delays for the 787 give customers a chance to reconsider Airbus's new A350 jet, which had been running four years behind but is now catching up.
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Also of Note . . .
Los Angeles Times: In an unusual public criticism, Defense Secretary Robert Gates said he believes NATO forces currently deployed in southern Afghanistan don't know how to combat a guerrilla insurgency, a deficiency that could be contributing to the rising violence in the fight against the Taliban. His criticism comes as the Bush administration has decided to send 3,200 U.S. Marines to southern Afghanistan on a temporary mission to help quell the rising number of attacks. It also comes amid growing friction among allied commanders over the Afghan security situation.
Associated Press: A hawkish faction in Israeli Prime Minister Ehud Olmert's coalition pulled out of the government today, weakening him at a time when he needs broad support to reach a peace deal with the Palestinians by the end of the year. Separately, Israeli troops killed a son of Gaza's most powerful leader along with 18 other Palestinians in the bloodiest day of fighting in the coastal area since Hamas militants seized control last summer.
BBC: Opposition activists in Kenya are set to begin three days of banned mass rallies across the country against the disputed presidential election result, and received a boost yesterday when Raila Odinga's Orange Democratic Movement won the speaker's chair in the parliament that was also elected last month.
New York Times: Justice Department officials have told Congress that they face serious legal difficulties in pursuing criminal prosecutions of Blackwater security guards involved in a September shooting that left at least 17 Iraqis dead. Justice and State Department officials warned there were major legal obstacles that might prevent any prosecution but were careful not to say whether any decision had been made in the matter, according to two of the Congressional staff members who received the briefing.
Government Executive: The Defense Department is assembling a National Language Service Corps of at least 1,000 people fluent in critical foreign languages to serve the nation during times of emergency or international need.
Roll Call: Kansas Gov. Kathleen Sebelius, one of the Democrats' more popular and prominent female governors and one who leads a conservative-leaning Red state that favored President Bush in the 2004 election, has been tapped to deliver the Democrats' official response to President Bush's State of the Union address on Jan. 28.
Legal Times: The Supreme Court on Tuesday handed a solid win to third-party defendants in securities litigation -- including law firms, accountants, and bankers -- by shielding them from broad "scheme liability" for their tangential role in corporate fraud. The victory -- in a case where investor groups that sued the cable operator Charter Communications for fraud also pursued the companies that sold cable boxes -- the Court said that because investors victimized by Charter didn't rely on any statements or omissions made by the vendors Scientific-Atlanta and Motorola, the vendors could not be held liable.
Financial Times: Booz Allen, the $4 billion-a-year management consultancy, is in talks with several private equity groups that include Carlyle over the sale of its government-advisory business, one of the biggest defense contractors for the U.S. government. The move, which has been discussed by Booz Allen's senior management for months, would break up the 94-year-old firm, leaving its corporate consultancy as a stand-alone entity.
BusinessWeek: Apple Chief Executive Officer Steve Jobs unveiled an ultra-sleek laptop, the "Air" -- the world's thinnest notebook computer -- and made a host of upgrades to iTunes movie offerings and Apple TV, the set-top box that delivers video to a television. The announcements were greeted with enthusiasm by the throngs of conference attendees who scrambled for seats in San Francisco's Moscone Center, but initially failed to wow Wall Street.
San Jose Mercury News: Intel announced a 51% year-to-year jump in its quarterly profit, but the giant chip maker's weak outlook for the current quarter sent its stock plunging.
Wall Street Journal: Battered by winter storms, high fuel prices, and fears of a looming recession, U.S. airlines are expected to report a collective loss for the fourth quarter, starting with American Airlines' parent AMR today. But the industry is still on track to record 2007 as its second consecutive year of profitability, thanks to years of painful cost-cutting and restructuring that have made U.S. carriers' operations more efficient. Separately, while plunging aircraft-insurance premiums have been a rare bright spot for airlines buffeted by soaring fuel costs, last year was the first unprofitable year in a while for the companies that insure their airplanes, meaning they may now have to jack up their premiums.
Guardian: Mark Thompson, the BBC director general, warned the British government it would have to provide more money for public service broadcasting if it wanted the system to survive in the digital age.
Variety: Oprah Winfrey is adding a major piece of real estate to her media empire, teaming with Discovery Communications to create an Oprah-branded TV network called OWN.
Women's Wear Daily: Liz Claiborne has enlisted Isaac Mizrahi to rescue its struggling flagship brand. Mr. Mizrahi is leaving Target -- the venue that introduced him to the mainstream customer -- at the end of this year and will become creative director for all categories of the better-priced women's Liz Claiborne brand, beginning in spring 2009.
The Hill: Rep. Henry Waxman, chairman of a House investigative panel, offered a glimpse of how sternly he will deal with baseball's steroid abuse scandal, calling for a Justice Department investigation into whether a former American League Most Valuable Player, Miguel Tejada, lied to Congress.
Nature: A fossil found along the South American coast hints that a rodent weighing more than 2,200 pounds once roamed there.
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Quote of the Day
"No one can say this whole thing is over," Citigroup Chief Financial Officer Gary Crittenden tells the Financial Times, after the giant U.S. bank turned to foreign investors for an unprecedented bailout yesterday and revealed the major crisis its balance sheet is suffering from the subprime-mortgage mess and the pain it still expects. "These are not optimistic assumptions. But there are always circumstances under which things could get worse."
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