Can The Democrats Retake The House? - Maybe
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In my February 7 E-Letter earlier this year, Spencer Wright and I analyzed the electoral landscape for the upcoming mid-term elections, using some very sophisticated polling data. We wanted to see if the electoral map indicated a big sweep by the Democrats, as the media was suggesting at the time.

As you may recall, what we found was that the GOP was actually in pretty good shape in early February, despite the various missteps of the Bush administration in 2005. Based on the state-by-state polling data, we concluded that the best-case scenario for the Democrats was that they might pick up a few seats in the House, but nowhere near a majority, and they would likely pick up no seats in the Senate -- despite President Bush's low approval ratings.

The problem for the Democrats -- in early February -- was that there were not that many "contested races" and of those that were, several were in states which seemed very unlikely to change parties.

Well, a LOT has changed in less than three months time! The continued gaffs by the Bush administration -- including the disastrous Dubai ports deal -- have radically changed voter sentiment, and the electoral map has swung significantly toward the Democrats. There is now the real chance that the Dems could take back the House and win a couple of seats in the Senate.

Given this sea change, I have once again asked Spencer Wright, my in-house politico, to go back and crunch the latest poll numbers, analyze the electoral map and give us a "damage report." Let me warn you in advance, what you're about to read is not good news for the GOP and conservatives in general. On the other hand, those of you who favor the Democrats will love this issue of Forecasts & Trends E-Letter.

With that bit of disclosure, take it away Spencer.

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The Mid-Term Elections: More Bad News For The GOP by Spencer Wright

When Gary asked me to crunch the polling numbers for our February 7 E-Letter, I expected the electoral map would look much worse for the Republicans than it actually did. After all, even back in February, many in the media were predicting a Democrat sweep in the November mid-term elections.

Yet as Gary points out above, the polling data back in early February was surprisingly favorable for the GOP. The state-by-state polling data back then suggested that the best-case scenario for the Democrats was they would pick up a few seats in the House, but nowhere near enough to regain the majority, and they would not gain any seats in the Senate.

Well that's all changed -- amazingly, in less than three short months -- and there is now the possibility that the Democrats could retake the House of Representatives, and maybe even pick up a couple of Senate seats as well.

There has been a gigantic shift in the electoral map, perhaps one of the greatest shifts in recent political history. I must tell you going in, that most of the blame for this massive shift lies with President Bush and his administration -- the same President Bush that Gary and I voted for in 2000 and again in 2004.

What Has Caused This RapidSea Change?

In my last analysis on February 7, I outlined a number of things that the GOP and the administration needed to do in order to maintain their slight advantage granted them by the favorable electoral arrangement. The GOP needed to reframe several current issues to have a Republican slant, such as immigration, and to push traditional issues that favor the GOP to the forefront, such as Homeland Security and the War On Terror. In short, an element of political "triangulation" was in order. This has not happened, in fact not even close. The Republicans have not changed or adapted to the new national political climate, which is rapidly moving against them.

The GOP has actually LOST ground on these national security issues where they have (or did have) the voters' confidence. And the issues they are articulating - flag burning, family values, etc. - are narrowly focused at the far right portion of their base. Has the GOP gone from a position of relative strength to being worried about their base? The answer is a resounding yes! They should have figured out a long time ago that many in the GOP base are frustrated with the failure of the Republican majority to advance the Party's agenda, and the blunders made by the Bush administration so far in this second term.

That's right. Bush II is in a stall and they can't seem to get the nose up. Almost every major issue that the administration is involved in has become an albatross. Iraq, the War on Terror, the Dubai ports deal, soaring energy costs, the immigration crisis, etc. are all weighing heavily against the president. How heavily you may ask?

Obviously, you know the president is struggling in the polls, to put it mildly. Yesterday, in fact, the latest poll showed Bush's approval rating at a new low of only 32%. When I did my last electoral analysis in early February, the president was enjoying a mild recovery from low approval ratings. Since then, that modest recovery has evaporated, and President Bush's approval ratings have sunk to new lows.

President Bush: The "Other Shoe" Has Dropped

You are probably wondering what started this freefall, and what started the national feeling that the Bush administration was on the wrong side of just about everything. The single biggest factor, quite simply, was the Dubai ports debacle. It cannot be overstated what an absolute disaster this deal was, nor the continuing negative effects it has on the GOP in this and likely future election cycles.

The GOP's trump card has long been national security. The Dubai ports deal single-handedly derailed national security as a solid GOP issue. Whether you were for, or against, the ports deal, you have to admit that it was very badly handled (bungled really) by the Bush administration. You have to wonder how Bush's political advisors would not have foreseen the public's outrage over a deal that appeared to give control of several key US ports to a company owned by the United Arab Emirates.

This deal, though it had broad support in the Congress and was vetted by all the necessary US agencies, was perceived by the public as a secretive backroom petro-dollar payola scheme concocted by the Bush administration, not to mention a threat to national security. The deal was received extremely negatively by a public that was previously unaware of its existence. A Rasmussen Poll taken at the time had only 17% supporting the deal. Virtually every politico under the sun ran away from this political disaster as quickly as they could. Well, everyone but President Bush, that is.

Bush and his administration revealed how politically tone-deaf they truly are when: 1) at first, the president said he didn't even know about the deal; 2) then fully supported it; and 3) then even threatened a veto (the first of his administration). And the result...

In a February 23 Rasmussen Poll, only 41% of respondents trusted the president to handle matters of national security while 43% trusted the Democrats in Congress. In a word, disaster!

As if this weren't more than enough to sink an election cycle, the Bush administration has thus far flubbed another very important issue, immigration. The administration has yet to articulate any coherent message or plan to solve the immigration crisis. So far, it has only floated a series of "trial balloons," most of which may have actually increased illegal immigration.

You can expect the issues of immigration and national security to be BIG in this election cycle. These are issues where the GOP is historically strong, but this time around, these issues could turn on them. This explains in large part why so many congressional races that were not in play in early February are clearly in play today. We will discuss the state races in much more detail below.

Has Bush Become The Proverbial "Boat Anchor"?

Mid-term elections have historically been referendums on the sitting president. If you are a candidate in a close mid-term election, it is always greatly helpful to have a popular president in the White House, who can show up in your district, drape his arm around you and get you more money and more votes. Clearly, popular presidents can help sway the political outcomes.

However, if you are a Republican in a close race in 2006, asking President Bush to come to your rescue is a dicey proposition at best. Some would argue at this point - what with Bush's approval ratings in the dumps and his disapproval ratings soaring -- that having a campaign rally with Bush at your side would be analogous to jumping off a pier clutching an anvil. When a sitting president's numbers get as bad, and for as long, as Bush's numbers have, it can have a resoundingly negative effect on mid-term elections.

This will actually be one of the most interesting things to watch as we head closer toward the election. Keep an eye on how many candidates choose to make public appearances with the president. We may not see many of these. It will likely depend on which states they are in, whether they appear with Bush or not. In that regard, prepare to be shocked by what follows!

How Many States Could Bush Win Today?

To give you an idea of just how dismal the president's standing is, lets take a look at some key state-by-state polling numbers in states that he won in the 2004 general election.

In 2004, Bush carried AL, AK, AZ, FL, IN, MO, MT, NC, TN, and TX -- 10 states by wide margins of 6% to 10% or even more. Based on the latest polling data, Bush would win NONE of these states. That's right, zero. Not even close.

According to the latest polls, if the presidential election were held today, Bush would reliably receive only around 23 electoral votes, versus the 286 electoral votes he received in 2004 when he defeated John Kerry. This is shocking! Today, for example, Bush's approval rating in Texas is only 45%, meaning he would probably not even carry his home state if the election were today. Unbelievable! This is a near unprecedented plunge in popularity in such a short time.

So, not only is the GOP robbed of its core issue of national security, thanks to the Dubai ports debacle, it is tied to a president who will likely be a negative force in the coming elections. Thus, is Bush now the proverbial "boat anchor" of the Republican Party? Sad to say, but the answer appears to be yes.

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The Latest State-By-State Polling Numbers

Given all that's happened since early February, the electoral map has changed dramatically in favor of the Democrats. Given that, let's go back through the polling data just as we did back in February. For conservatives, this will not be fun. For Democrat readers, what can I say, but enjoy.

First let's look at the Senate. In February, polling data indicated that, despite the leftward movement of the electorate, the GOP would retain its hold on the Senate and would most likely not lose a single seat. In less than three months, the polling data clearly shows that the GOP's tremendous advantage in electoral geography is eroding. The latest polling data suggests the GOP will hold their majority in the Senate, but the Democrats will gain two seats, one in Montana and one in Pennsylvania.

In Montana, Senator Conrad Burns, the four-term incumbent, is facing a serious primary challenge and may not even make it onto the state ballot. In Pennsylvania, Senator Rick Santorum's staunch support of the president is hurting him, and he is trailing his Democratic opponent by double digits. This is not good.

Should the erosion in GOP popularity continue over the next several months, and/or should the Bush administration make more critical mistakes, Senate seats in MO, NV, OH, and TN could also go into play. These four seats, previously considered relatively safe GOP holds, could soon be in play as contested races. Depending on the outcome of these races, it is now possible that the Democrats could regain a majority in the Senate. I would say it is very doubtful today, but we have over six months to go.

Understand, the Dems have to "run the table," but it is conceivable (although doubtful) that the mid-term elections could yield a Senate with 50 Democrat seats, 49 GOP seats, and one independent seat (VT). Should the one independent seat vote with the Democrats, that would give the Dems a 51-49 majority next year. As I say, it is doubtful, but it is conceivable.

Moving on to the House of Representatives, polling data in early February suggested that the best-case scenario for the GOP would be a gain of two seats; the best-case scenario for the Democrats would be a gain of a few seats. Fast-forward to today. With the GOP now in a freefall, the outcome looks much more rosy for the Democrats. Now, in the worst-case scenario for the Democrats, it looks as if the Dems will gain at least four seats in the House. So what, you may be wondering, is the best-case scenario for the Democrats now? I hate to even go there, but here goes (Democrat readers will love this!).

Let's again consider some of the states that President Bush won by large margins in 2004. Take the five states - AZ, FL, IN, NC and TX - which Bush won easily, and add to these the state of OH which Bush won, but narrowly. In each of these six states, there are House races (two in IN) that were previously thought to be safe for the GOP. Today, based on the latest polling data, these six states are all expected to be contested races, meaning that seven House seats could potentially go to the Democrats -- not good for the GOP.

Add to those the GOP-held House districts in the blue states of CT (two seats), MN (two seats), NY, PA, WA, and WI that were previously considered safe GOP districts, but are now expected to be contested races.

Considering these eight additional contested races, and suddenly the best-case scenario for the Democrats is a 15-seat pick-up. Should the Dems get lucky and pick up a 16th seat, that would give them control of the House, with 218 seats to the GOP's 216 seats. So, the Democrat's magic number of seats they need to gain control is 16.

I must emphasize, again, that the Democrats must run the table in all of these contested races, plus pick up one more seat, in order to retake the House. This seems highly unlikely today, but if the Republicans make any more mistakes. . .

Are Things Really THAT Bad for the GOP?

Sad to say, but YES. There are still a number of negatives weighing on the GOP - Iraq, Iran, the still developing Abramoff scandal, immigration, etc. But none of them are as destructive as the general perception that President Bush and his administration are incompetent or worse.

When a President becomes this unpopular, the outlook for his party in the mid-terms is universally grim. Does that mean that the GOP is sunk? Not necessarily. There is still time, although not much, and there are things that the president can do to salvage his majorities. Political strategist and former Clinton advisor, *** Morris, offered a few recent suggestions that be believes will work for the beleaguered GOP.

Morris recommends that Bush immediately announce major new initiatives on energy issues and provide sweeping alternatives to help break our ‘oil addiction' that he spoke of in the State of the Union message in January.

Morris also recommends that President Bush finally admit that there is an issue with "global warming" and launch major new initiatives to deal with its effects. Morris believes these environmental initiatives could dovetail with the energy issues.

On immigration, Morris believes Bush should advocate building a wall on our southern borders, and provide a process to let guest workers in. Morris believes this would appease the conservative GOP base, and would be accepted by Latinos if there is a chance for immigrants to work here legally and eventually become citizens.

Would championing these issues shore-up the GOP and lead to a rise in the polls? I don't really know. Time may have run out for the Bush administration, as suggested by recent polls. Even many conservatives have given up on the Bush administration. It will not be easy to win them back.

The recent shake-ups in the administration staff are a sign that the president is finally aware of the mid-term peril his party is facing. The single most important change in staff so far is Karl Rove stepping back from his policy duties and taking charge of the re-election efforts. This move alone is proof that a Democrat controlled Congress is not some liberal flight of fancy but is, as the above numbers suggest, now conceivable.

What About the Democrats?

You may be wondering where the Democrats are in all this. As usual, the Dems are doing nothing, except for enjoying the GOP slide. Don't forget one of the great political maxims: "Never interrupt your opponent when they are in the process of imploding." And the Republicans have done a brilliant job of that thus far.

In early February, we looked at the factors for and against a Democratic sweep in the mid-terms. All of those factors, pro and con, still exist but some of them, such as the steep disadvantage the Democrats suffered in campaign treasuries, are at least partially nullified by the dismal standing of the president and the GOP controlled Congress.

As we discussed in February, the main reason the DNC coffers were low is that Howard Dean invested heavily in building a national, 50-state ground organization. At the time, he was roundly criticized for it by the Democratic congressional leadership; now, however, it appears to be a stroke of political genius, as we predicted in our February 7 E-Letter. The fact that the Dems now have a ground game will doubtless play an important role in the 2006 mid-terms.

The Democrats are in an enviable position heading into the elections. Many Dems believe they now have the luxury of not having to articulate any specific positions or policies, and simply continue to criticize those taken by the president. It remains to be seen if the American people are so disgusted with Bush and Republicans in general that they will not insist on hearing what the Democrats plan to do if elected. This is sad.


Thank you, Spencer, for your detailed analysis and that sobering assessment of the mid-term elections.

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Conclusions - Close, Drawn-Out, Bloody Mess

Spencer paints a grim picture for the GOP, and there is little doubt that this mid-term election cycle is going to be a close, drawn-out, bloody mess. The GOP has to combat a negative national sentiment and the liberal media that is growing more negative by the day. That is a tall order to fill, especially given President Bush's woeful approval ratings. He will not be able to help many candidates, and could actually be shunned by most. This will be very interesting to watch.

I must admit that I am surprised at how far and how fast the Bush administration and the GOP have plummeted from a position of strength to the very uncertain ground they now find themselves on. If the GOP did not have such an advantage in electoral geography (ie -- which seats are up for election and which are not), this election could be a total rout, and both the House and Senate could revert to Democratic control.

The question is, are conservatives so disenchanted that they will break ranks and vote for Democrat candidates? In my opinion, the answer is, not many. Even as upset and angry as many conservatives are, myself included, I don't believe many will actually vote for Democrats on election day. I could be wrong, of course.

Along this same line, in my view, it is not a matter of conservatives abandoning the GOP; in fact, it's just the opposite -- the GOP has abandoned conservatives. Yet it remains to be seen if President Bush and Republicans in general really understand this.

The other question is, how many conservatives will simply stay home and not vote? This is almost as bad as voting for the Democrats. Certainly, many "swing voters" will shift to the Democrats, so it is critical that the Republicans get out the vote in November.

While it is true that anything can happen in politics, if the Democrats manage to recapture one or both houses of Congress, it will be one of the greatest political turnarounds in history. As a conservative, I hope this doesn't happen, even though I am thoroughly disappointed with President Bush and the Republicans in general.

One last point: While President Bush's approval ratings are in the low 30s, let US not forget that the public's approval rating of the Congress is even lower -- just 27% -- according to the latest Gallup poll.

Finally, I know this week's E-Letter will spark LOTS of responses! Many will criticize me for being critical of President Bush and the Republicans. Others complain anytime I write anything political at all. But when you see a massive shift in the poll numbers, as we've seen in the last few months, that's worth analyzing and writing about in my opinion. Keep in mind, I appreciate all of your responses, positive or negative.

Very best regards,

Gary D. Halbert

Gary Halbert is the president and CEO of the ProFutures companies, a diversified investment advisory firm located in Austin, Texas. ProFutures offers professional financial planning services to a nationwide base of clients. Mr. Halbert's firm specializes in tactical investing, and its recommended investment programs include mutual funds, managed accounts with professional Investment Advisors and alternative investments. For more information about the programs offered, call 800-348-3601 or visit the website at


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Forecasts & Trends is published by ProFutures, Inc., and Gary D. Halbert is the editor of this publication. Information contained herein is taken from sources believed to be reliable, but cannot be guaranteed as to its accuracy. Opinions and recommendations herein generally reflect the judgment of Gary D. Halbert and may change at any time without written notice, and ProFutures assumes no duty to update you regarding any changes. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. Any references to products offered by Halbert Wealth Management are not a solicitation for any investment. Such offer or solicitation can only be made by way of Halbert Wealth Management’s Form ADV Part II, complete disclosures regarding the product and otherwise in accordance with applicable securities laws. Readers are urged to check with their investment counselors and review all disclosures before making a decision to invest. This electronic newsletter does not constitute an offer of sales of any securities. Gary D. Halbert, ProFutures, Inc. and all affiliated companies, InvestorsInsight, their officers, directors and/or employees may or may not have investments in markets or programs mentioned herein. Securities trading is speculative and involves the potential loss of investment. Past results are not necessarily indicative of future results.

Posted 04-25-2006 5:33 PM by Gary D. Halbert