The Independent Market Observer

9/19/12 – You Have to Get 96 Percent of 53 Percent to Win, Mitt

Posted by Brad McMillan, CFA, CAIA, MAI

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This entry was posted on Sep 19, 2012 9:13:31 AM

and tagged Politics and the Economy, Yesterday's News

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I am going to change the format of the Yesterday’s News posts. Rather than hitting every item in one long post, I am going to have individual posts for each major story, then a clean-up post if necessary for things that are worth mentioning but don’t warrant an individual post. Please let me know whether you like this format or prefer the previous one.

The major front-page story remains the Romney video I mentioned yesterday, the one in which he basically throws 47 percent of the U.S. population under the bus. As it turns out, he also calls Mideast peace impossible, among other comments, but let’s stay with the comment about the 47 percent, as that was the focus of most of today’s articles. The Financial Times (FT) had “Romney gaffe draws fire from all sides” on the front page, quoting several Republicans denouncing the comments, as well as “Romney video stirs media debate” on page 2; the Wall Street Journal (WSJ) front page had “Video Flap Jolts Campaign,” which talks about the Romney campaign’s attempt to turn the flap into a debate on the role of government; and the front page of the New York Times (NYT) had “Romney Stands Behind Message Caught on Video,” which is pretty self-explanatory.

Looking at the actual facts behind the numbers, the FT has a good analysis and chart on page 2, with “Income tax data mask complex realities,” and the WSJ follows up its front-page article with some good data and analysis on page A6. Both conclude that, although Romney’s numbers are basically correct in aggregate, most of the people who paid no income taxes did pay payroll taxes and would generally be classed as the working poor. People who did not pay either income or payroll taxes are elderly poor.

Romney seems to be doing his best to turn this into a debate on the role of government, but whether that will succeed remains to be seen. At the simplest level, per my headline above, it simply does not make sense to abandon 47 percent of the electorate, as you then have to win 96 percent of the remainder—which appears to be doubtful at best. I know Romney is not running his campaign that way, which makes me—and others—wonder why, in candid remarks, he says that he is. The tone of contempt, not the content, is what may end up having the most effect. That said, the issue is real, although I suspect that many of the 47 percent would be happy to pay income taxes if they had more income.

The net effect of all of this appears to be negative for the Romney campaign. The WSJ had “Obama Extends Lead in New Poll” on page A6, which is pretty self-explanatory. As I write this, has Obama’s reelection chances at 67.9 percent, as opposed to Romney’s election chances at 32.5 percent. The race certainly is not over, but the clock is ticking.

Have a great day!

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