Gleanings on the Midterms

The Tradesports House GOP 2006 contract has dropped several points to a new low at 32 percent. Bettors are now right at the point where they are giving up on the contract.

On the Senate side however, the contract is still a 70 percent bet on a Republican hold. So the online betting market is predicting a Congressional split. This is basically my own view that the GOP will barely hang on in the Senate, but will lose roughly 25 seats in the House.

However it’s gone down to the wire. This morning, Scott Rasmussen moved Montana Republican incumbent Conrad Burns into “toss-up” status from “leans Democrat” in his race against Tester.

A split Congress means that Washington will do no harm on pro-growth measures, especially tax policy.

However, it is still possible that a phony Pay-Go revenue deal could surface with a coalition of House Democrats, as well as liberal Republican Senators and Senate Democrats.

Presumably President Bush would then put on his Grover Cleveland hat and veto it.

More troubling is a big move toward protectionist trade activity. Dems are against free trade almost uniformly nowadays. And 30-40 percent of Republicans are unreliable on free trade.

A big WSJ story yesterday shows a strong push for textile protectionism with China, Vietnam, Africa, Haiti and South America. This would be totally anti-growth and lose-lose for the U.S. and the other nations.

Remember: the supply side growth model stresses low tax rates and free trade to promote growth, along with a steady dollar to contain inflation.

There’s no election correction in the stock market yet which is a great thing. The market will not worry about a split Congress. In fact, the stock market favors a split Congress. Think of it: Republican polls are going down, and stocks are going up. Is this the Pelosi bull market? Omygosh!

But if the Senate goes Democrat, the market will change its mind. Taxes, trade, spending, will all go the wrong way. Check out today’s Robert Pear story in the New York Times on Democratic plans to control drug prices, attack health insurers and pharmaceutical companies -- all rolling towards a Hillary-Care takeover of fifteen percent of our economy.

On the brighter side, The Wall Street Journal/NBC News poll shows a rise in President Bush’s handling of the economy where his approval has gone up 5 points to 44 percent. Republicans should be flogging away on the economy, the benefits of lower tax rates, as well as the drop in gasoline prices. And, they should be loudly trumpeting the splendid stock market rally.

This is the GOP’s very best bet in the next 18 days to rev up a big, enthusiastic turnout from the investor class.

Rasmussen shows that the two most favorable groups on President Bush’s job approval are entrepreneurs (49%) and investors (46%). Message to GOP: talk up the low tax, Goldilocks stock market and get these folks to the polls. It’s your last chance boys and girls.