How to Protect Social Security and Medicare

Recently, the social security trustees offered yet another stark reminder that America is nearing an entitlement crisis. Within a decade, the Medicare hospital trust fund will be insolvent; within two decades, social security will be. When that happens, each program will be forced to automatically cut benefits—in the case of social security by over 20%. To fully fund the shortfall for the next 75 years, we would need to immediately inject about $17.5 trillion into the two programs, $3.5 trillion into Medicare and $14 trillion into Social Securitya financial impossibility. 

Over time, it is a financial necessity to make some changes to the programs, like a gradual increase in the retirement age, to improve their financial situation and ensure they will be there for future generations. Donald Trump promised to govern on behalf of the forgotten men and women of the working class who in particular rely on these programs in their sunset years, which is why it is critical he takes steps to sure up their finances. 

 

Now, not only is it financially impossible to fully fund these programs for perpetuity today, it is unnecessary. The $17.5 trillion shortfall is a best-efforts estimate that can shift materially if for instance economic growth is faster than forecast, which would result in higher tax revenue. Nonetheless, Social Security and Medicare clearly face shortfalls, and we should find ways to extend the trust funds’ lives. Fortunately, there actually is a way to materially extend these programs’ lives, reduce today’s budget deficit, make mortgage rates lower, and not reduce benefits by a dollar. 

 

The United States Treasury should sell $2 trillion in zero  couponputable, perpetual bonds (more on their structure below) to the Federal Reserve, America’s central bankIn turn, about $600 billion would be granted to the Medicare hospital trust fund and $1.4 trillion to Social Security’s trust fund. With these additional sums, Medicare would be able to meet current benefits into the mid-2030s, about a 10 year improvement, and Social Security into the mid-2040s, about a 5 year improvement. This step would provide more security and certainty to older Americans and give us more time to make gradual changes to the programs for future beneficiaries to further extend their solvency. 

 

Now as is the case with existing trust fund sums, this $2 trillion would be invested over time in US treasury debt. With the budget deficit likely to surpass $800 billion annually in coming years, the trust funds’ buying power would essentially cancel out 2-2.5 years of new budget deficits. By buying US debt, we would be selling fewer treasuries to private investors, this reduced supply would mean we can sell our debt at a higher price, all else equal. In other words, we would sell debt at a lower interest rate. Paying less in interest would bring down the US budget deficit somewhat. Additionally, US treasury interest rates are the benchmark off of which most banks determine their mortgage rates, business loan interest rates, and so forth. So, a lower treasury rate will translate to lower mortgage rates, making home buying more affordable. 

 

To some, this may sound too good to be true. If we are putting more money into entitlement programs, and bringing down the cost of debt in the process, there must be a catch, and they would point to the $2 trillion in bonds the government would sell to the Federal Reserve. Note though that the bonds sold to the Fed are “zero coupon,” which means they pay no interest, meanwhile the trust funds would be using the proceeds to buy US treasury debt that does pay interest. Additionally, these zero-coupon bonds are “perpetual,” meaning they never have to be paid back. In reality, these Fed-owned bonds hold no economic value. However, the Fed would “print” $2 trillion to send to Medicare and Social Security in exchange for them. At this point, some may say I am merely proposing printing money to pay for entitlements, which will cause inflation and weaken the dollar. As I will explain, that is actually not what I am proposing, but first, let me rebut the case that printing money in the first place would definitely be inflationary.

 

Over the past ten years, the Federal Reserve has printed about $3.4 trillion buying treasury and mortgage bonds, nearly quintupling its balance sheet to $4.3 trillion. During this time, the US dollar has actually strengthened by over 26% on a trade-weighted basis and core inflation has averaged less than 1.6%, below the Fed’s target of 2%. The many predictions that Fed policy would create runaway inflation simply have not come true. 

 

Moreover, it is worth noting that the fashion in which the Federal Reserve operates its monetary policy has exacerbated income inequality and the stagnation of median incomes for the past two decades. Targeting 2% inflation, the Fed tends to raise interest rates as we near full employment. Now, it is during periods of at or near full employment where workers are more in demand than in supply, meaning they enjoy the greatest wage increase. Immediately after a recession, even as business improves, there are many people eager for work, so businesses don’t have to increase wages even as the business grows, leading to higher profit margins. Periods of full employment reverse this with workers getting a bigger share of the pie. However in its fear of inflation, the Fed raises rates as the labor market improves, truncating the time spent in a tight labor market relative to the time in a loose labor market

 

As this continues over each economic cycle, business owners get a gradually increasing piece of the economic pie at the expense of workers, widening inequality and leaving our middle class behind. In fact, over the past twenty years, core inflation has averaged 1.7%, missing the Fed’s 2% target and showing its preference for low-inflation periods when businesses have the bargaining power to tight labor market periods when workers do. Using the Fed balance sheet to support entitlement programs that particularly benefit middle and working class Americans would help counteract this bias. 

 

Now to those still unsatisfied by my argument that using the Fed to create money is not problematic, I wish to explain why I am not proposing printing money. Rather than have the Fed print $2 trillion, I recommend selling $2 trillion in zero coupon, putable, perpetual bonds. True, zero coupon perpetual bonds have no economic value, but note the word “putable.” Putable means the Fed can “put back” (sell) the bonds at face value to the treasury if certain conditions are met. Namely, in any month when the core PCE index (the Fed’s preferred inflation measure) rises by 3-3.5% year over year, $50 billion of bonds are put back, 3.5-4% $75 billion, 4-4.5% $100 billion, 4.5-5% $125 billion, and over 5% $150 billion.

 

Essentially if I am wrong, and this program causes inflation to rise materially above the Fed’s 2% target, the Fed would be able to sell the bonds back, taking the US dollars back out of circulation, thereby tightening policy to bring inflation back down. Given that inflation hasn’t passed 3% on an annual basis in 26 years, it is likely that little if any of this $2 trillion bond is ever put back to the treasury. And if such a period comes sufficiently in the future, the amount saved on interest payments thanks to Social Security and Medicare buying treasury debt may well exceed the cost of buying back these putable bonds. I would venture a prediction that this $2 trillion bond issuance does not lead inflation to breach the putable levels over the forecastable horizon.

 

Given the structural undershoot of inflation, a middle class that has been left behind, and the pressing need to provide support to Medicare and Social Security, selling these bonds to the Federal Reserve is a gamble well worth taking. I would recommend beginning with this $2 trillion program, because the sum is large enough to postpone our entitlement crisis several years, but I wouldn’t attempt to fund all of the $17 trillion shortfall today as that would raise the risk of causing excess inflation, undermining the purpose of the program. Rather, it is best to take one step likely to succeed today, and then, 5-10 years down the road, the exercise can always be repeated if it proves as successful as I anticipate.

 

While virtually all Americans agree it is critical to preserve these programs as best as possible, some may question the wisdom of perpetuating them in their current form, and to them I would highlight some key points. First, we should ask honestly ourselves whether Congressional Democrats and Republicans, who both clearly like to spend money when in power, would actually permit Social Security and Medicare to cut benefits when their trust funds run dry? Or rather, would they either raise taxes or sell more debt to the public to fund the shortfall? It seems clear to me that it is better to try my strategy of issuing perpetual debt than issuing debt that has to be repaid to investors or raising taxes on hard-working Americans.

 

Some others may argue that it is unwise to take this course of action when there would remain a $15 trillion problem. To them, I would make two points. First, I think it better to solve part of the problem than none of it. Second, I don’t pretend this plan is a be-all, end-all solution. Rather, it is intended to add several years of viability to these programs to ensure they can meet the promises made to those at or near retirement who need certainty. It would be fantastic if this $2 billion Federal Reserve bond were paired with measures like gradually lifting the retirement age by 2 years starting in 2024 and moving future Social Security benefit cost of living adjustments to chained-CPI from headline CPI. These measures combined with the $2 trillion cash infusion would greatly extend the lives of Medicare and Social Security. Like President Reagan in 1986, I believe Republicans should take the lead in solving entitlement problems before the crisis is upon us. However, I would rather issue this zero-coupon bond then permanently raise taxes.

 

Last, it is critical to emphasize again that while America faces a public debt problem and a deficit problem, it does not face an inflation problem. That is largely because the Federal Reserve has run a structurally hawkish monetary policy that has led to below target inflation and lackluster median wage growth. While the Fed, through its quantitative easing program, has been happy to buy bonds to push up asset prices and make the rich richer, it has consistently acted to raise rates and slow the economy as it senses that upward wage pressures are increasing.As such, the one risk my policy increases, inflation (albeit as highlighted above, I emphasize my skepticism inflation would materially rise), is one the economy can afford, if only to counteract the years of overly hawkish Fed policy that have left the middle class behind. Moreover, given the putable nature of my bonds, any period of higher inflation would be short-lived as the Fed puts the bonds back to the Treasury and takes dollars out of circulation. All told, these risks stack up attractively versus the potential of putting $2 trillion into entitlements without issuing debt that has to be repaid or raising taxes.

 

Donald Trump was elected President because he promised to bring new thinking to our politics, and given the size of their problems, new and innovative thinking is needed to secure Social Security and Medicare. Issuing $2 trillion in zero coupon, putable, perpetual bonds to the Federal Reserve would greatly enhance these programs’ viability at no cost to taxpayers. In fact, by pushing down treasury bonds’ interest rates, taxpayers would save money in coming years.

 

Let’s act now to protect the retirements of America’s forgotten men and women.

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It’s Time to Back Trump

Within the political and chattering class, some conservatives, describing themselves as part of the “Never Trump” movement, have attacked Donald Trump as a threat to the republic and the conservative movement while attacking GOP leaders who support him, like Marco Rubio and Paul Ryan, as sell-outs or charlatans. These attacks couldn’t be further from the truth. Most recently, Ohio Governor John Kasich has been generating headlines by distancing himself further from Trump, in an attempt to lay the groundwork for another run for the Presidency in 2020. Conservatives need to recognize that much, though not all, of what Trump has run on represents the future, not the demise, of the conservative movement. While he is an imperfect messenger, Hillary Clinton would likely do irreversible harm to this country, which is why conservatives must back Trump.

In April 1998, there were 17.64 million Americans working in the manufacturing sector; today that number is 12.28 million. Put another way, we’ve lost 800 jobs every day for 18 years. During this time, real median incomes have fallen, and the African-American poverty rate languishes over 25%.

The typical working American is worse off today than at the turn of the century; for this, both parties share blame. While economists focus on the lost decades nations like Japan have suffered, the simple fact is outside of Silicon Valley and the DC and NYC suburbs, much of America has suffered two lost decades as well, a symptom of a nation in decline.

Trump has refocused the debate around the plight of ordinary Americans, something conservatives have failed to do in recent years. Conservatism is an inherently populist ideology; we prefer giving power to everyday individuals than concentrate it in the hands of supposed experts. Conservatives have faith in the genius of every man and woman. Since 1988, that has been forgotten as the GOP became the Chamber of Commerce Party. Trump is rightly realigning the GOP around the working men and women of this country.

While Trump is imperfect, the general election is about who is the better candidate, making it a simple choice. Given his lack of a political record, there is some uncertainty about what he would do, but we can be certain of what Clinton will do. She will nominate liberals to the Supreme Court while he may nominate conservatives. Take even an area where Trump supposedly disagrees with orthodoxy: trade. Does anyone really believe the same government that has run VA hospitals so terribly negotiated perfect trade deals, particularly when we know China has amassed $3 trillion in reserves?

True, Trump lacks a foreign policy record and is something of a wildcard, but no record is better than a record littered with failure, from ISIS taking territory across the Middle East to China building militarized islands throughout the South China Sea. As Secretary of State, Hillary Clinton left a world on fire; no wonder global warming appears to be such a problem…

It is said every election, but in 2016, the stakes really could not be higher. Implicit in the Never Trump argument is the belief the damage of a Clinton Presidency is containable, which underappreciates the power of a party’s 3rd term in power. Controlling the White House for 12 years cements policies and structurally shifts the political center. The Roosevelt-Truman terms shifted the country left for two generations, making support for more entitlements and welfare the new political center as evidenced by Republicans eventual acceptance of Social Security. Similar, the three Reagan-Bush terms shifted the political center rightward for a generation on most economic issues with even Bill Clinton declaring the era of big government over.

Clinton will cement the leftward shift begun by Obama for a generation with Obamacare, political correctness, and new regulatory regimes across the economy becoming entrenched political facts, unlikely to be rolled back for years, if ever. For eight years, Obama has pushed our economy, society, and foreign policy footing into one that looks more like Europe. A Clinton Presidency makes a reversal from that path all but impossible. We see the results of Europe’s experiment, and they’re devastating: slow growth, high debt, chronic youth unemployment, and atrophying military power.

The race is tightening, and in the polling averages, Trump has taken the lead in Ohio and Iowa while other states like Florida, North Carolina, and Nevada are too close to call. With momentum at his back, now is the time for reluctant Republicans to get behind Trump. Whether Trump wins 85% or 90% of republican voters on November 8 could very well determine who wins the Presidency. Leaders like John Kasich must really ask themselves if they are willing to sow division and make it easier for Hillary Clinton to continue Obama’s disastrous policies as President.

Donald Trump is our last chance to turn back from the current path of decline and decay. Conservatives need to get behind the republican nominee or risk losing the country we all have fought so hard to build.

Trump Will Reinvigorate NATO

In many precincts, there is this misleading suggestion that Donald Trump is backing off of America’s traditional support for NATO, a claim undermined by a reading of his actual position. Joint security pacts are only sustainable when all participants have security capabilities; Trump gets this. That is why NATO calls for each nation to spend 2% of GDP on defense to avoid free-riders. Otherwise, nations can rely on the defense capabilities of other nations. That isn’t collective security; it is one country providing a free, outsourced military for others.

Sadly, many nations are not spending the 2%, instead benefiting from the U.S. security umbrella without pulling their weight. That is unsustainable; even President Obama has called for more defense spending from NATO allies. Alliances, like personal friendships, are two-way streets. States like Estonia and Poland are meeting the minimum while those like Italy and Spain are in default. Italy, a wealthy country, spends less than 1% of GDP on defense. Germany, home to Europe’s top economy, is little better at a meager 1.2%. Relatively poor countries like Poland, Estonia, and Greece are meeting their NATO requirement while wealthy European states are gladly allowing their military to atrophy, enjoying a defense apparatus subsidized by the American taxpayer who is already carrying over $19 trillion in national debt.

Trump recognizes the 2% minimum is useless without enforcement mechanisms. Unless there are consequences for failing to spend 2% (either a fine or loss of membership), European nations will continue to ignore the requirement. Trump’s plan would simply put in penalties for falling short of 2% and would reinvigorate NATO. By forcing Europe to invest its military and thereby reconfirm its commitment to joint security, the alliance will be stronger and could more easily deter Russia. Putin sees a Europe with decaying powers and weak militaries; it is no wonder he is pursuing expansion. A weak Europe has given Putin room to expand, and by being lax on NATO enforcement, we have allowed Europe to weaken. Given NATO’s reliance on American power, we alone have the leverage to get the 23 members who inadequately invest in defense to meet their commitment. The result will be an energized NATO that makes Eastern Europe more not less safe.

Trump’s push for more NATO spending is the only way to stand up to Putin and protect our allies. Islamic terror, an Expansionist Russia, and a strengthening Iran are global problems. They require global responses. Europe should recognize this, especially after a string of terrorist attacks have hit Belgium, France, and now even Germany. Our current policy of blindly subsidizing many European powers has turned NATO from a collective defense pact into a bunch of nations free-riding on the US (and to a lesser extent the UK, Poland, Estonia, and Greece who are spending the 2%). Our European partners need to determine whether they want to help provide and enjoy collective security and meet their commitments.

Trump’s policy will return NATO to its original promise-a transatlantic alliance of democracies all providing for the security of each other. That will make NATO stronger and its collective defense mechanism more credible. Putin will no longer be able to devour the decaying carcass of Europe; instead, the Continent will be able to deter Putin and other aspiring powers like Russia and China. We can then deal with these nations from a position of strength, striking deals when possible and pushing back when necessary. America and the world will be better for it.

Time to Unite Behind Trump

While the media focuses exclusively on deepening divides within the Republican Party, we need to take a step back and remember the stakes of this election. A certain Senator this evening exhorted voters to “vote their conscience.” Yes, his non-endorsement of Donald Trump was clear, but let’s consider what our conscience actually demands of us.

Does your conscience consider the fact 3,400 Americans, many of them children, have been killed in the past 8 years in the city of Chicago acceptable? How about the fact the unemployment rate for African-American teenagers has risen in 2016 to 31%? Or that economic growth, the ultimate engine for lifting people out of poverty and into the middle class, is running at the slowest pace in a peace-time recovery since World War II? Are you comfortable with the fact that after years of decline, the violent crime rate has been rising since early 2015? Can your conscience tolerate the fact that Radical Islam is on the march, poisoning the minds of millions, seeping into Europe and even this country, while stripping millions of Muslim women and gays in the Middle East of basic human rights and dignity?

Are we willing to accept that this is the best that America can be? If your conscience says, “yes, the status quo is acceptable,” then perhaps you should vote for Hillary Clinton. After all, she is not an agent of change. Rather, she is beholden to an entrenched donor and political class that will continue the policies of President Barack Obama. Moreover, this status quo will persist beyond her 4 year term as she appoints judges, regulators, commissioners, and civil servants who could serve decades beyond her final day in office. A Hillary Clinton Presidency will cement our current trajectory for a generation. However, even if you are comfortable with the status quo, does your conscience permit you to vote for a woman of Hillary Clinton’s character? Obama’s own FBI Director noted Clinton’s “extreme carelessness” as she attempted to keep her emails secret from voters while exposing our nation’s secrets to our enemies. She even told the mother of an American killed in Benghazi that a video was the cause of the attack while telling her own daughter and a foreign diplomat otherwise. If Hillary Clinton can’t be trusted to tell a grieving mother the truth, can she be trusted in the event of a national crisis?

True to the American spirit of perpetually seeking national betterment, perhaps your conscience says the status quo isn’t good enough, that we can do better. That we can turn a safety net that merely makes poverty more palatable into a safety trampoline which makes poverty less prevalent. That we should give all parents choice where their children go to school to end the vicious circle of entrenched poverty. That we can accelerate growth by returning power and freedom to the most innovate citizenry the world has ever known. That we have a leader who is unafraid to call out evil in the world by its true name and work to eradicate it, instead of merely downplaying it.

Doing better requires doing something else. It requires voting not for an all-talk-no-action entrenched DC elite but for an outsider who is a doer not a talker. Doesn’t our conscience demand a vote for Donald Trump? We need a President who will cease to accept the decline into mediocrity that is our present course. Would we not rather have Paul Ryan as a governing partner with a Republican White House than as a leader of the opposition against yet another Democrat President who is simply presenting the same old ideas in new packaging?

If we believe conservative principles will make American lives better, we have a moral imperative to vote for the candidate most likely to institute them. Without a doubt, that candidate is Donald Trump, helped by his fantastic running mate, Mike Pence, and a partner in Congress in Speaker Ryan. I will vote my conscience, and it demands a vote for Donald Trump.

He offers change. She offer more of the same. He will return power to ordinary people and to the markets to free up the economy, boost working Americans, and improve social mobility. She will continue the same top-heavy policies that have seen weakened growth and ever-rising inequality. He will restore strength around the world after a President who has let American power recede by backing off red lines, downplaying Radical Islamic terror, and letting China expand in the South China Sea. Her foreign policy? Well, let’s put it this way: if global warming is such a major problem, perhaps the fact Secretary of State Hillary Clinton left a world on fire shares some of the blame.

Let’s unite and win in 2016.

Trump: Not Inevitable But Getting Closer

Well, Super Tuesday has come and gone, and the defining aspect of this race remains the same: Donald Trump is the overwhelming frontrunner to be the Republican nominee. That said, Senator Ted Cruz had a surprisingly strong night, carrying 3 states (TX as expected but OK and AK were a bit surprising). Senator Marco Rubio did manage a win in MN, but it otherwise was a dour night for him. Governor John Kasich nearly stole Vermont, had a 2nd in Massachusetts, and took critical votes in Virginia but was barely relevant in the South. As expected, Dr. Ben Carson barely took any delegates and is exiting the race. Here is how the delegates seemed to break (note things are not finalized and Trump could be anywhere between 240 and 260 with Cruz anywhere between 205 and 225) and updated probabilities.

st delegates

odds

As you can see, from a delegate perspective, Trump performed in-line even though I thought he would get 9 or 10 states rather than 7. His strong delegate performance was fueled by Rubio’s inability to meet thresholds in TX, VT, and AL as well as larger than expected wins in TN and GA. These factors buoyed his results despite losses in OK and AK. By missing those thresholds, Rubio fell significantly short in the delegate count, and much of his underperformance mirrors Cruz’s outperformance.

However, moving forward, Trump is clearly in the driver’s seat. I struggle mightily to see a scenario where a candidate other than Trump claims the 1,237 delegates needed to clinch the nomination, though I can still see the other candidates getting enough delegates together to block Trump from getting to 1,237 (though a finish below 900 would seem very unlikely). Yes, compared to what we were expecting 72 hours ago, Cruz had a good night. However, if we were told he won 3 states 1 month ago, that would have been disappointing because it is unclear what upcoming major states Cruz can beat Trump in 1 on 1. Super Tuesday is as good as it gets for Cruz. States like NY, NJ, PA, IN, and much of CA fit Trump better, even if the race narrowed. Cruz will continue to win a fair share of delegates, but to have a credible chance, he really needed to be the delegate leader. His path to the nomination is still hard to see, apart from some deal at the convention.

Similarly, Kasich is well positioned to compete in his state of Ohio and take the 66 delegates, but getting to a majority is hard to envision and is certainly dependent on Rubio losing Florida and dropping out on the 15th (note: I have donated to the Kasich campaign). Kasich must win Ohio, and if he does, he can accumulate more delegates in the North and Midwest to help block Trump. If Rubio loses FL, he could be the last, best hope against Trump and with enough wins, get enough delegates to take the nomination in a floor fight in Cleveland. The odds are long.

That leaves us with Rubio. He is so far back in the delegate count, he will basically need to win 2/3 of the remaining delegates, which is extremely unlikely. However, upcoming states are a far better fit for him than Cruz, and he is better funded than Kasich. In the event of a contested convention, there is a very good chance he is the nominee. However, his home state of Florida is a must-win for him, and polling shows him at least 10% behind. Early voting is also showing a substantial number of new voters, which is a positive for Trump. Losing those 99 delegates to Trump (it is winner take all) would give Trump an excellent shot at claiming 1,237 and be a devastating defeat to the Senator.

Expect Florida to be a war of attrition like 2012 with millions spent on TV ads (and the cavalry is coming with a heavily funded anti-Trump Super PAC hitting the airwaves), days of campaigning, and brutal attacks. Rumors continue to swirl Governor Rick Scott will endorse Trump, which would further lengthen Rubio’s odds. Florida is do or die for Rubio. If he wins (maybe a 25-33% shot at this point), he would suddenly be relatively well-positioned to take on Trump, but a loss is game-over. If Kasich were to lose alongside Rubio that night, the battle for the nomination would be effectively over with Trump able to run out the clock until he formally clinched it. Rubio is in a precarious position: the poor Super Tuesday showing makes getting an outright majority of delegates very difficult and forces him to come from behind in FL.

While Tuesday was in-line for Trump, he benefitted from the fact Cruz outperformed at Rubio’s expense, giving Cruz the rationale to stay in the race and continue splitting the vote. In future states, Rubio is more dangerous than Cruz, so Trump is happy to have Rubio further back in the delegate race. One cannot wonder if Rubio’s childish attacks on Trump backfired a bit. They may have succeeded in bringing down Trump but did some of those voters go to Cruz (who stayed above the fray to a degree) instead of Rubio? When you mud-wrestle, everyone gets dirty and the third person can benefit. Expect fireworks at the Thursday debate because the other candidates need to find a way to stop Trump by the 15th. If not, it will almost certainly be too late.

So that is how I see the race. Agree? Disagree? Let me know here or on Twitter!

Your Super Tuesday Primer

We are now just hours from the biggest day in the GOP Primary: Super Tuesday. 11 states will be holding binding primaries or caucuses, primarily centered in the South, and 595 delegates are up for grabs. At this point, the base case has to be a Donald Trump romp. He clearly has the momentum and has proven to be quite strong in the South and Northeast where most of the primaries are being held. I would expect Trump to carry 9 or 10 states (Texas likely goes to Cruz, and Minnesota is a bit of a wild card). Given this outcome, Trump is the runaway frontrunner in the race (I’d give him a 70% chance at the nomination) with Senator Marco Rubio the best positioned of the rest to beat him. Below are details on Super Tuesday and five things to watch.

odds

First, here is the list of states holding their primaries as well as minimum thresholds. These are important because while every state has a proportional allocation system, candidates must reach a certain share of the vote either statewide or in a congressional district to qualify for any delegates. For instance to win any of its statewide delegates in Texas, a candidate needs 20%. If he only gets 19%, he will fail to garner any delegates. If only one candidate meets the threshold, he would get all the delegates. In other words, proportional isn’t exactly proportional. With Cruz and Rubio polling around the minimum threshold in some states, their exact vote total could significantly sway the delegate count.

st states

Based on my expected winners and assuming Kasich and Carson fall short of viability thresholds throughout much of the South, below is my expected delegate haul for each candidate. Note, these are rough estimates because making or missing a viability threshold could swing these numbers meaningfully. Relative to my baseline, the risk is to the upside for Rubio and Trump and to the downside for Cruz. I am still expecting a reasonable victory for Cruz in Texas, which explains his haul exceeding Rubio. Cruz is clearly losing altitude, and a loss in Texas or distant third place finishes in the South would leave him behind Rubio. If Trump can expand from the low-30%’s to the low-40%’s in some states, he could come closer to 275 delegates. Basically, I would expect Trump to have a 100+ delegate lead, somewhere around 40-45% of total delegates, with Cruz and Rubio in a close battle for second.

st delegates

Now what to look for:

  1. It’s Trump’s Race to Lose

Trump is going to clean up on Tuesday with an outside chance at running the table. He will very likely carry at least 9 states, and 10 is my bet. After Tuesday, Trump will have a big delegate lead but will likely have only 25-30% on the delegates needed to be the nominee. That said, winning begets more winning as voters typically bandwagon to the winner. While he is divisive, Trump will enjoy some of this, and a romping will help Trump in future states. Winning Florida and Ohio would slam the door shut.  Additionally, a romping could lead to a wave of endorsements as members of the political class aim to team up with a winner (a la Chris Christie). Some endorsements (possibly Rudy Giuliani or Florida Governor Rick Scott) could give him more momentum, and each endorsement makes him seem more acceptable to anti-Trump voters. Barring a really stunning turn of events, Trump will win big on Tuesday and will be in excellent shape to claim the nomination.

  1. Can Rubio Win Somewhere?

Much of the establishment is moving behind his bid, and he is the candidate best positioned to take on Trump at this point, though he is a distant underdog. At some point, Rubio needs to start winning states rather than merely rack up 2nd and 3rd place finishes. His firewall is Florida, but recent polls show him down double digits there. Losing Florida and its 99 delegates to Trump leaves him with no path to 1,237 delegates. The question is whether Rubio can come back in Florida without winning somewhere else first, and given recent polling, skepticism is merited. Rubio will not win many states on Tuesday, and Minnesota appears to be his best shot (though no one really knows with caucus turnout hard to predict). Elsewhere, Rubio should have a strong showing in Northern Virginia, though that is unlikely to be enough to carry the state. If he can’t win any states, his path does get narrower, and he will have to expend significant resources to take back FL and get on track. If he can beat Cruz throughout the South and take more delegates, Rubio may be able to get more anti-Trump voters to jump on board. The Rubio-Cruz battle for 2nd is one to watch. Rubio is best positioned among the non-Trump candidates but still faces a steep uphill climb.

  1. Can Cruz Stay Viable?

March 1 should be good for Cruz; the South is evangelical heavy, which is the base of his support. His home state of Texas is also the biggest delegate prize. If he can’t win on March 1, it is unclear where he could. Frankly to have a clear shot at the nomination, Cruz needs to be the delegate leader on Tuesday as the map gets worse for him thereafter. However, that’s just not going to happen after disappointing finishes in South Carolina and Nevada. He absolutely must win Texas to justify staying in, and I think that is likelier than not. It would be helpful to win another state with Arkansas or maybe Oklahoma his best shot, but I wouldn’t bet on that. Cruz will likely win TX and be shut out elsewhere, which is enough to merit sticking around but leaves him without a clear path to 1,237 delegates. His strategy would be one of accumulating delegates and playing in a contested convention, though there could be pressure to drop out and swing behind Rubio in an anti-Trump coalition. If he has more delegates than Rubio after Tuesday, would Cruz step aside though? I doubt it.

  1. Can Kasich Surprise in the Northeast?

Kasich is betting his campaign on winning Ohio and its 66 delegates on the 15th. If he carries Ohio while Rubio loses Florida the same day, he’d be the last viable candidate to face Trump (full disclosure: I’ve donated to the Kasich campaign). He is also looking to do well in Michigan the 8th to be a springboard into Ohio. However, much of the establishment is starting to coalesce around Rubio, so Kasich needs to notch some 2nd place finishes on Tuesday to stay in picture. Vermont and Massachusetts seem like the most likely places for that to happen. His message could also resonate in Northern Virginia and parts of Tennessee where he may be able to beat polls. Kasich is probably better positioned to win OH than Rubio is Florida, but he needs to stay in the conversation until then, which could prove difficult.

  1. Does Carson Drop Out?

Carson will not be President; that much became clear a long time ago. After Tuesday, I expect Carson will drop out. The best explanation for why Carson continues to run is that he wants to take votes away from Cruz (as payback for dirty tricks in Iowa), blocking him from 1st or 2nd place finishes in the South. After Tuesday, that goal will be complete, and his campaign will be running on fumes. Recognizing the inevitable, I would expect Carson to step aside.

 

So, that’s how I see Tuesday. Trump the clear frontrunner, Rubio best positioned to take him on, and Cruz losing altitude fast. Agree? Disagree? Let me know here or on Twitter!

Conseratives: Don’t Pledge #NeverTrump

On Friday, New Jersey Governor Chris Christie endorsed Donald Trump, stepping on whatever debate momentum Senator Marco Rubio had and becoming the first major elected official to support the frontrunner for the Republican nomination for President. Conservatives lit up the Governor for his endorsement with some like Erick Erickson pledging never to support Trump. In fact, #NeverTrump was trending across the United States on Friday night as conservatives lined up against Trump, making the same pledge as Erickson. This is a mistake.

Let me be clear, I am not suggesting conservatives vote for Trump in the Republican primary as I am not a Trump supporter. I have supported Ohio Governor John Kasich since he announced last summer and continue to today (full disclosure: I have also donated to his campaign). I believe Kasich is the only candidate running today with any meaningful accomplishments in government, has an excellent record in Ohio, plays to our hopes rather than our fears, and is eminently electable. Across the board, Kasich is a better choice than Trump or Rubio or Senator Ted Cruz. I hope you vote for him in the primary.

That said, Trump is the clear frontrunner for the nomination (I would peg his odds at roughly 70%), and for the sake of argument, let’s assume he is the nominee. What should conservatives do in the General when he faces Clinton? Those saying #NeverTrump are pledging not to vote for him in that election, which is an error. Conservatives have five choices: stay home, vote 3rd party, don’t vote in the Presidential election but vote in down-ballot races, vote Hillary Clinton, or vote Trump. Hopefully, we agree staying home is the worst choice and a dereliction of civic duty. There are still important down-ballot races with qualified conservatives, and those candidates need our support. In the event of a credible 3rd party candidate (I would define credible as consistently polling in the 20’s), there may be a strong case to vote for that person over Trump or Hillary (I think this may happen with Mitt Romney possibly running as an independent conservative). Let’s set that scenario aside, as the question is whether it is wise to pledge never to support Trump, no if, ands, or buts. That leaves: Trump, Hillary, or blank ballot.

Ultimately, choosing a blank ballot or voting for Hillary makes it more likely she will be President by lowering the number of Democrat and Independent votes she must draw. I struggle to see how conservatives are better off with Clinton than Trump. Yes, Trump has changed positions on many issues over the years, but Clinton is a committed leftist who has moved further left to ward off the challenge from a socialist. On matters of policy, I am sympathetic to the notion Trump is a wildcard given his inconsistency, but is he going to be worse than Hillary? Yes, there is a risk Trump nominates a liberal to the Supreme Court, but is there any doubt Hillary would? Sometimes, you are better with the devil you don’t know than the devil you do, which would be the case in a Trump v. Clinton election even for conservatives more dubious of Trump than me.

In a vacuum, would Donald Trump be my choice for President? No, but general elections are choices. Not choosing one is a choice for the other; opposing Trump helps Hillary. Trump is a gamble, yes, but Clinton is a sure-fire losing hand. Relative to Hillary, the risk of a Trump Presidency is skewed to the upside. Trump is also not wrong on everything; he is right we need to be tougher on China. They hack our systems, steal our intellectual property, and are taking territory in the China Sea. He is right that the working class is being screwed; median wages are lower than when George W. Bush became President. Both parties are to blame. On foreign affairs, I would also note Clinton has not been a particular success. How’s the Russian reset? Or Libyan intervention? Or situation in Syria? I do think Trump is peddling some fiction to get elected (note: I am not excusing this behavior) and would govern more as a centrist technocrat, so I believe he would be a more competent President than Clinton. Even if you disagree with that assessment, which is admitted speculation, Clinton will be at least as damaging to the conservative cause as he would be given her platform. She will certainly push for leftist policies whereas he may not. His upside exceeds his downside relative to Clinton.

I would also note that much of what conservatives hate/fear (the Muslim ban, his insults, his comments on libel laws, his finger on the nuclear button etc.) are likely campaign bluster. Again, I am not excusing that behavior, but it suggests he could be a fine President. Even if I am wrong, our government has well-built structures that limit the power of the President, ensuring these positions could not become law. The strength of our institutions deserve more credit than some alarmists let on, further diminishing his downside. While Trump enjoys a Twitter tirade, he has a history of avoiding direct confrontation (with the exception of his personal punching bag, Jeb Bush) as illustrated by his handling of Megyn Kelly among others. I see no reason to feel less safe with Trump our Commander-in-Chief than Clinton.

#NeverTrump conservatives should also ask themselves whether his VP choice could sway them. Ultimatums made rashly can make one look foolish when one reverses or keep one anchored to bad positions out of an aversion to reversing. Does Cruz (or someone else) allay some concerns? If yes, perhaps, it is best to wait for him to make that choice. Assuming he is the nominee, who Trump picks as his VP will be fascinating and enlightening. If I were to make 5 guesses, I would go (in descending order of likelihood): David Petraeus, a business person (to emphasize the anti-politician theme—this un-named pick on my part is a clear cop-out), John Kasich, Bill O’Reilly, and Chris Christie. Who really knows though?

The General Election is a choice, and Trump is a better one than Clinton, especially as his worst ideas won’t become law with any reasonable congress if he even pursues them.

Conservatives could stand to benefit from some of Trump’s populism, and we do need toughness against China. He would also likely surround himself with smart people, providing wise council. A couple dozen people I know, whose judgment I respect and whose character is unimpeachable, are Trump supporters, and their support may have softened my opposition. The twittersphere showcases the worst of his support but is not representative of much of his base. Questions of moral fitness aside, I do think Trump, whom would likely govern as a centrist and pragmatist, would be a decent President, and the fact Clinton with her server and serial lying is equally unfit renders that concern moot in the General Election.

Conservatives have every right to oppose Trump in the primary. However should he be the nominee (very likely), we should be anti-Hillary in 2016, and this may mean voting for Donald Trump. Pledging #NeverTrump is a mistake.

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