Portrait of Defeat.


This is what it feels like when you lose an election.

How Did Sarah Do?


First things first!

Q. How did the Sarah Palin for President campaign do last night?

A. Not bad!!

There's the messy little problem on the home front, of course, where the Wicked Witch returned from her primary defeat to defeat Ms. Palin's favored one in the general election. And there are the losses in the West Virginia, Delaware and Nevada Senate races. Any number of so-called "establishment Republicans" are lining up to blame those defeats on Ms. Palin.

But the fact is, Sue Lowden wasn't going to beat Harry Reid in Nevada. No one was going to beat Harry Reid in Nevada. He ran a nearly perfect campaign.

In West Virginia, Ms. Palin at least had the right message, which was: "don't send your good governor to Washington, keep him here in West Virginia. Send a Republican to Washington and it's a two-fer." It didn't work (obviously), but neither did it leave behind any ill will or bad karma.

And Delaware wasn't so much Ms. Palin's fault as it was a complete failure of the vaunted "GOP Establishment" to scare up 33,000 votes for Rep. Mike Castle in the Republican primary. You have to be really, really bad at your work to not produce 33,000 votes in a primary for a candidate who had served as governor and as an at-large Congressman for the better part of two decades. That Ms. Palin defeated them with Tweets and Facebook says a lot more about them than it does about her.

So the only real blemish is the Alaska thing and, truth be told, no one really cares about Alaska, because no one really knows anything about Alaska. It's like a foreign country to the political world.

What the political world does care about is early caucus and primary states. Iowa, New Hampshire and South Carolina are the "big three" in that category and it was in the "big three" that Ms. Palin played her hand best.

When it was politically difficult to do so, she endorsed Iowa's once and future governor Terry Branstad in the primary. She did so against the wishes of many prominent Iowa conservative activists, who thought Branstad was insufficiently devoted to the cause. At the end of the general election campaign, every wannabe 2012 presidential candidate was fulsome in his praise of the great wisdom and magnificence of Mr. Branstad. Branstad owes them nothing. He owes Sarah Palin big-time. She flattened his conservative opposition.

Ditto New Hampshire, where Palin interceded on behalf of state Attorney General Kelly Ayotte and squashed her Tea Party primary challenger. Ayotte went on to win (by a wide margin) the US Senate seat now held by Judd Gregg.

Ditto South Carolina, where Palin catapulted Nikki Haley from single digit primary obscurity into the governor's mansion in South Carolina. In all three of the key early states, Ms. Palin now commands the allegiance of the most important GOP political figure in those states.

Not bad indeed.

In the meantime, a few more Republicans woke up this morning to the dulcet tones (in their minds's ear) of "Hail to the Chief." Among them, Rick Perry of Texas! And Haley Barbour of Mississippi (who, as head of the RGA, helped a lot of his new-best-friend governors-elect win their elections). And don't forget Mitch Daniels and Tim Pawlenty, who look at the field and say: "Haley Barbour? Why not me?"

They're all men. Ms. Palin is the only woman. And the "Republican Establishment" in Washington is openly saying they want her dead. If you wanted to script the movie for Sarah Palin, it doesn't start much better than that.

State Spending.


Beyond debt subsidies, general federal government transfers to states now stand at the highest levels on record. Traditionally, state revenues were primarily comprised of sales, personal and corporate income taxes. Over the years, however, federal government transfers have subsidized business-as-usual state spending not covered by state tax collections. Today, more than 28% of state funding comes from federal government transfers, the highest contribution on record.

These transfers have made states dependent on federal assistance. New York, for example, spent in excess of 250% of its tax receipts over the last decade. The largest 15 states by GDP spent on average over 220% of their tax receipts. Clearly, states have been spending at unsustainable levels without facing immediate consequences due to federal transfer payments and other temporary factors.

At the same time, local governments now rely on state government transfers for 33% of their funding. Thus, when a state finds itself in a financial bind, it has the option of saving itself before saving one of its local municipalities. Pennsylvania recently assisted the state capital, Harrisburg, in the form of a one-time "advance" payment—but there are hundreds of towns like Harrisburg that will also need assistance. These one-time fixes fail to address the real structural problems facing so many states and municipalities.

State budgets are likely to experience their second consecutive year with deficits of close to $200 billion. The root of the problem is simple: State governments have spent recklessly and unsustainably. Rainy-day funds are depleted, pension-fund contributions are already at record lows, and almost all of the major federal government subsidy programs will run out in June 2011.

Until now, the states have been able to evade the need to rein in spending largely because the federal government enabled them to do so through record high federal allocations, and by creative accounting that put off funding well over a trillion dollars of state-employee pension and other retirement obligations.

The level of complacency around this issue is alarming. Most assume, as last week's Buttonwood panel did, that the federal government will simply come to the rescue of the states without appreciating the immensity of the cumulative state-budget gaps. I expect multiple municipal defaults to trigger indiscriminate selling, which will prompt a federal response. Solutions attempted in piecemeal fashion, as we've seen thus far, would amount to constantly putting out recurring fires.

Rather than waiting for more federal intervention, states need to make their own hard decisions and not kick the can down the road. How will taxpayers from fiscally conservative states like Texas or Nebraska feel about bailing out threadbare Illinois or California? Let's hope we never have to find out.

-- Meredith Whitney, in the WSJ

Conservatives, Reformers and Upstarts.

Joseph Esposito surveys the world of publishing and breaks it down into three categories of people. He thinks the "conservatives" are finished. He thinks that somewhere out there is an Upstart who will change the business altogether.

He Was Hoping No One Would Ask..


This interview with Defense Secretary Robert Gates is worth reading in full.

Good Pitching and Three Run Homers

A wonderful baseball game last night came down to one inning and, eventually, one pitch to one guy.
The pitch was a cut fastball up in the strike zone. The hitter was the veteran San Francisco Giants shortstop Edgar Renteria. By game's end, he would be the World Series MVP.

Down in Juarez.

A total of 350 people were killed in the Ciudad Juarez metro area during October, according to the Chihuahua State Attorney General’s Office, making it the deadliest month of 2010 to date. According to the Attorney General’s Office, Juarez has seen some 2,387 drug trafficking-related deaths in 2010 against 2,666 for the entire state of Chihuahua — and those are only the ones reported. To give some perspective, 2009 was believed to have been the deadliest year on record for the state of Chihuahua, with 2,754 drug trafficking-related deaths. Now, 2010 — which has yet to have a month with fewer than 100 deaths — is on pace to break that record.

No part of the Juarez metro area has been left untouched by the seemingly endless violence despite hosting the largest deployments of Mexican federal security forces, including both Federal Police and members of the military. The violence stems from a three-front war involving the Vicente Carrillo Fuentes organization (VCF), aka the Juarez cartel, and the Sinaloa Federation headed by Joaquin “El Chapo” Guzman Loera. U.S. and Mexican law enforcement have both indicated that the Sinaloa Federation appears to have gained a tactical advantage in the Juarez region and is now the region’s primary trafficker. This appears to have provoked the VCF to employ more extreme tactics, such as deploying vehicle-borne improvised explosive devices against Mexican security forces.

Nothing suggests the violence in Juarez will slow soon, as the three-way war dynamic is not likely to change in the near term. With the Sinaloa Federation appearing to be the dominant cartel in the region, however, the VCF simply cannot maintain the pace at which it is currently operating indefinitely given its current resources. It may take several months or even years for the Sinaloa federation to either co-opt or eliminate the VCF, but it appears that one of those outcomes will be inevitable.


-- Stratfor.

GOP Win Bigger Than Expected?


Nate Silver lays out the case for why it might be. Reason #5 is particularly compelling.

Lumbering Elephants


Having failed to garner 33,000 votes for Rep. Mike Castle in the Delaware Republican Senate Republican primary, the GOP political establishment in Washington is now rested and ready to tackle its next assignment: stopping Sarah Palin. Ms. Palin was unavailable for comment, but one imagines her saying "blessed are my enemies, because everything they do makes my job easier."

Harry Reid a Winner?


It's interesting that the best political correspondent in Nevada -- Jon Ralston -- thinks that Harry Reid will prevail on Tuesday.