Important Political News

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ccrawford@cq.com. This column is scheduled to run in the Nov. 20 edition of CQ Weekly. For more information about CQ Weekly, please visit CQ.com.

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Shaken and Stirred

Last week's election didn't just change the lineup in Congress; it also winnowed the Republican presidential field. The big casualties were Sens. Rick Santorum of Pennsylvania and George Allen of Virginia, two conservatives who lost their bids for re-election-and probably any hope for the White House.

That still leaves plenty of presidential wannabes for '08, led by Arizona Sen. John McCain (news, bio, voting record). But two other men are generating buzz as they jockey for position as the main alternative to the front-runner. First on the list is former New York Mayor Rudolph Giuliani, who leads some public-opinion polls. In a recent Gallup survey, 29 percent of Republicans supported him, compared with 24 percent for McCain (everyone else was in single digits). But Giuliani's position is based largely on name recognition and his reputation as a dynamic leader in the aftermath of 9/11. "He is the gold standard for leadership in the war on terrorism," says a key GOP strategist. As such, Giuliani has been a big draw as a fundraiser for GOP candidates.


The former mayor says he is considering a run, but political pros say his popularity could melt away once GOP voters understand his liberal views on issues like gay unions, abortion, and gun control. His abrasive manner can also be a turnoff. "Rudy plays well in the boroughs of New York but not in the Republican heartland," says a GOP critic.


Perhaps the most aggressive behind-the-scenes campaign is being waged by outgoing Massachusetts Gov. Mitt Romney, a strong conservative with movie-star looks and big-time charisma. Romney is modeling his approach on George W. Bush's pattern from 1999, when Bush, then governor of Texas, invited party leaders to Austin for persuasive get-acquainted sessions. Romney is doing the same thing in Boston and is apparently making a good impression as a fresh-faced Washington outsider who radiates competence and optimism while advocating smaller government. He is also a good listener, which impresses many of his guests, and in the past has appealed to independent voters and some Democrats in Massachusetts.


Drawbacks. Romney's Mormon faith, however, is greeted with suspicion by many evangelical Christians, while his lack of national-security experience could drag him down if the war on terrorism and the conflict in Iraq remain top concerns. Just as important, his popularity back home in Massachusetts has declined, which isn't a good sign.


Among the others who have expressed an interest in running are Senate Majority Leader Bill Frist of Tennessee and Gov. George Pataki of New York (both of whom are leaving office), Sens. Chuck Hagel of Nebraska and Sam Brownback of Kansas, and Gov. Mike Huckabee of Arkansas.


One of the longest of long shots is Rep. Duncan Hunter (news, bio, voting record) of California, the gruff chairman of the House Armed Services Committee. Hunter has little national following; in fact, few have heard of him outside Washington and his home district in San Diego. That hasn't stopped him from declaring his candidacy as he attempts to find a niche as a hard-liner on national security and illegal immigration.


In a blast from the past, former House Speaker Newt Gingrich is impressing the GOP faithful as he talks of a need to return to Republican ideals of smaller government, a strong national defense, and tough-minded realism in foreign policy.


But Gingrich was a polarizing figure in Congress, and voters may be more interested in a less divisive style of leadership for 2008. "People are fed up with politics as usual," says a prominent Republican who advises the White House. "They want to see politicians work together. That's one lesson we learned from last week's election."

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Immigration No Election Elixir, But It Likely Did Not Hurt GOP

The ballots were barely in before pundits declared immigration the winner. A tough stand against it failed to save Republicans in several key states, and control of Congress shifted to the pro-immigration Democratic Party.


But a closer look at the winners and losers tells a different story, in which Republican hawks on immigration fared better than GOP moderates.

The success of anti-immigration referendums also suggests hawkish stances might have helped Republicans as much as or more than it hurt them.

"Clearly what didn't happen is the people didn't endorse the amnesty-guest-worker approach of the president," said Mark Krikorian, executive director of the Center for Immigration Studies, which favors tough immigration controls.

"When people were voting on the specific issue of immigration control, they overwhelmingly supported it," he said. "What happened to particular candidates is a much muddier picture."

Immigration may be the one issue that the White House and the new Democratic Congress agree on. It's not on the Democrats' list for immediate action, but it could come up later next year.

Immigration advocates cite the defeat of Rep. J.D. Hayworth (news, bio, voting record) and Minuteman organizer Randy Graf (to replace Jim Kolbe) in Arizona, Sen. Rick Santorum (news, bio, voting record) in Pennsylvania and Senate hopeful Thomas Kean Jr. in New Jersey to argue that tough stands on immigration cost Republicans votes.

"Now that the people have spoken, maybe the Congress will finally listen and pass comprehensive immigration reform," wrote Linda Chavez in her first post-election syndicated column.

A week later, reform fans had a more nuanced argument: Republicans might not have lost because of immigration, but it wasn't a winning issue either.

"A segment of the Republican Party seemed to believe that this very aggressive anti-immigrant stance was going to be the wedge issue which would keep the control of Congress in Republicans hands, and it was a big flop as that," Chavez told IBD.

House Republicans bet wrongly that a hard line on immigration would make up for their other ills, said Frank Sharry, president of the National Immigration Forum.

"That's a different point than they lost because of it," Sharry said. "They thought that it would bring out the base, win over some Democrats, and that Latinos wouldn't show up. It did turn out some base voters. It didn't sway independents and swing voters... and Latinos turned out in record numbers."

Krikorian doubts that anyone expected so much from one issue.

"Of course immigration's not a silver bullet. I'm not sure who thought it would be," he said. "Obviously Iraq and corruption were at the top of people's minds, not the immigration issue."

Voters Had Other Priorities

Exit polls showed immigration as voters' No. 4 concern after Iraq, terrorism and the economy.

"It wasn't a defining issue of this race," said John Gay of the National Restaurant Association.

Republicans won just 30% of Latino votes, down 14 points from 2004. As the GOP's take of white voters dropped 6%, about half of the shift in Latino voters may have been because of immigration.

Even so, close-the-border incumbents fared better on average than their open-border colleagues.

The GOP lost 11.5% of its seats in Congress, but the hawkish House Immigration Reform Caucus, headed by Rep. Tom Tancredo, R-Colo., lost just 6.7% of its members.

NumbersUSA lobbies for less immigration and grades lawmakers on that issue. It says 25% of those who got F's lost on Nov. 7 vs. just 9.6% of those with A's.

While Arizona voters opposed Hayworth and Graf, they overwhelmingly backed four initiatives that rolled up the state's welcome mat. The ballot measures declared English the state's official language, barred illegal aliens from some state benefits, barred illegals from collecting punitive damages in civil suits, and denied bail to illegals arrested for serious crimes.

Voters in Arizona also re-elected GOP Sen. Jon Kyl (news, bio, voting record), who voted against the comprehensive Senate immigration bill, turning back a challenge from Democrat Jim Pederson, who supported it.

The Kyl camp made much of Pederson's comment that the 1986 amnesty was the "the last effective measure that passed Congress."

Reformers Downplayed Issue

Immigration helped make the difference in Illinois' 6th District, where Republican Peter Roskam edged out Democrat Tammy Duckworth to claim the seat being vacated by GOP Rep. Henry Hyde (news, bio, voting record).

Duckworth, an Army veteran who lost both legs in Iraq, backed the Senate bill but lost to Roskam, who campaigned hard against it.

NumbersUSA's Caroline Espinosa noted while some candidates ran boldly against immigration, none ran boldly for it. "None of the candidates -- no Republican, Democrat, anybody -- ran on an open-borders platform," she said. "Nobody came out and said, 'Oh, we need an amnesty, we need to legalize 12 million illegal aliens.'"

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The ballots were barely in before pundits declared immigration the winner. A tough st

The election of a Democratic Congress was enough to cause executives of the big drug makers to reach for a headache pill.


Why worry? Democrats have talked about allowing the government to negotiate Medicare drug prices and letting consumers import cheap drugs from Canada. There also have been murmurs of barring the ubiquitous and highly effective direct-to-consumer drug advertising.

The post-election drop among drug and medical stocks illustrated the fears.

Merck (NYSE:MRK - News) fell 6.1% through the remainder of the election week. Pfizer (NYSE:PFE - News) surrendered 5.8%. Wyeth (NYSE:WYE - News) dropped 5.7%.

Those three companies represent more than 40% of the assets held by Merrill Lynch, Pierce, Fenner & Smith's Pharmaceutical Holdrs fund (AMEX:PPH - News).

The fund, which tracks 20 top pharma stocks, had just begun eking out gains in early November after a dip to its 50-day line. In the three days following the election, the fund fell 5.3%, to 74.95.

Round Two

Medical stocks in general staged a rousing comeback last week as cooler heads prevailed. The Pharma Holdrs fund gained back 3.2% to end the week at 77.35. Launched in February 2000, the Pharma Holdrs fund, like the industry it reflects, has suffered travails.

Its shares fell steadily, from above 103 in January 2001 to below 70 last December. Prior to the election, it had gained ground, however. Year to date, it is up 11%.

That puts it even with the Powershares Dynamic Pharmaceuticals fund (AMEX:PJP - News), also up 11% for the year. The iShares Dow Jones U.S. Pharmaceuticals Fund (NYSE:IHE - News) is up 6% from its May launch. The Streettracks SPDR Pharmaceutical Fund (AMEX:XPH - News) rose 9% since its start of trading in June.

Post-Election

Beyond Democrats, drug makers as a group face a complex maze of challenges.

Years of underinvestment in research and development has left the industry pipeline sucking the bottom of the cup. In addition, many branded drugs, the backbone of big pharma's sales, are nearing the end of their patent protection.

Analysts say the pipeline may be recovering.

But consensus estimates forecast essentially flat earnings for Merck through 2007. Pfizer is looking at a 1% EPS increase this year, 6% in 2007.

Wyeth shows more promise, sporting a consensus forecast gain of 145% this year, another 10% in 2007.

The Pharma Holdrs fund's largest single chunk of assets, 22%, is in Johnson & Johnson (NYSE:JNJ - News). The health care products maker has averaged 15% annual EPS growth over the past three years.

Analyst consensus looks toward a 10% gain this year, and about the same in 2007.

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Huckabee says campaign laws aid McCain

LITTLE ROCK, Ark. - Arkansas Gov. Mike Huckabee on Friday said potential 2008 presidential rival John McCain's campaign finance reforms gives the Republican senator an advantage over other candidates by allowing him to transfer money easily.

"If you're a senator, you can take the money you raise in a Senate campaign and transfer it to a presidential, but you can't take money you raise in a state campaign and transfer that to a federal campaign," Huckabee, a Republican, told The Associated Press in an interview Friday.

"McCain was very smart in creating a system where he could take all of this Senate money that he had and turn it over to his presidential campaign to give him a distinct advantage over anyone else who ran," he said.

Huckabee, who leaves office in January due to term limits, is considering a run for the 2008 Republican presidential nomination. McCain, from Arizona, announced this week that he was forming a presidential exploratory committee.

A spokesman for McCain's committee said transferring the $1 million remaining from his 2004 re-election bid to a presidential campaign is an option, but denied that was a motivation for McCain's campaign finance legislation.

"That wasn't the intent of the law in any way, shape or form," said spokesman Craig Goldman.

Huckabee's comments came after a discussion he participated in at the Clinton presidential library in downtown Little Rock that focused on the 2006 election.

He has said he won't announce any decision to run until after his term ends in January.

During the forum, Huckabee criticized some campaign finance measures as encouraging independent groups, or so-called 527 groups, which are not subject to conventional campaign finance restrictions and can spend unlimited amounts on election advocacy.

"When you have a system that says you can't give to candidates except this much, but you can give to this independent group in unlimited amounts, guess where the money goes? It goes to the independent entity," he said.

When asked about the strongest ticket the Democrats could offer in 2008, Huckabee mentioned Sen. Hillary Clinton, D-N.Y., praising her as smart and focused and calling her "a rock star in her own party."

"I think people will underestimate Hillary Clinton at their own peril," Huckabee said.

When asked about the best Republican ticket, Democratic National Committee Vice President Lottie Shackelford mentioned McCain, and then motioned to Huckabee.

"Arkansas has always been so underestimated by so much of the country, so I'd have to say Gov. Huckabee," she said.

The governor responded, "I think McCain would be a wonderful vice president."

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Howard Dean defends 50-state strategy

TETON VILLAGE, Wyo. - Democratic chairman Howard Dean on Friday took a swipe at Washington critics who questioned his strategy of spending money in all 50 states, dismissing them as the "old Democratic Party."



Basking in the afterglow of last week's election victories, Dean told the state party chairmen who were among the biggest beneficiaries of his strategy that it was an approach marked by Democratic wins at all levels of government.

"It was a great win for what I call the new Democratic Party," Dean said in a speech to the Association of State Democratic Chairs. "This is the new Democratic Party. The old Democratic Party is back there in Washington, sometimes they still complain a little bit."

In recent days, political strategist James Carville, best known for his work on Bill Clinton's campaign in 1992, has assailed Dean, saying he left too much money in the bank that could have been used to seize an even larger Democratic majority in Congress.

In one interview, Carville called Dean's errors "Rumsfeldian," a reference to the Defense secretary. In the past, Rumsfeld has railed about "Old Europe" and its reticence in the leadup to the Iraq war.

"The people who complain always get the headlines," Dean said, adding there are other high-profile Democrats who support his initiative. "But the fact is that this strategy not only works, it works in states Democrats have given up on for 30 years.

"We cannot give up on anybody."

The Association of State Democratic Chairs, gathering at this ski resort getaway, adopted a resolution voicing strong support for Dean, who turned 58 on Friday. The resolution said the state chairmen "honor and thank Governor Dean for his tireless commitment to state Democratic Parties and the '50-state strategy' ... and for never retreating from what was right for every Democrat in every state."

Not only did Democrats reclaim the House and Senate, they increased their control of governorships and legislatures. In January, Democrats will have 28 statehouses to 22 for Republicans. The breakdown of state legislatures are 24 with Democrats in full control, 16 Republican, nine split and one nonpartisan.

Dean said the victory included Republican strongholds that Democratic strategists wrote off. Even where they lost, he argued, Democrats made their best showing in years because of the beefed up state organizations.

"That is what the 50-state strategy is about," Dean said.

State party chairmen who receive their checks from the Democratic National Committee clearly took Dean's side.

"I don't think Mr. Carville knows what he's talking about," said Richard Stallings, the Idaho party chairman. "Democrats haven't been winning on the kind of stuff Carville is talking about. The 50-state strategy is the future."

The state chairmen and vice chairmen were key to Dean's successful campaign to become national chairman in 2005, giving him the votes he needed to trump critics from inside the Beltway, where he is not a favorite of the party's established powerbrokers.

The strategy worked, the state chairmen said, who hailed Democrats' victories not only in Congress, but in state legislatures and all the way down to county commissions.

"So when the James Carvilles of the world question the money given to state parties, I have to wonder why," said Mike Gierau, the Wyoming Democratic Party Chairman.

Dean was undeterred by the Washington criticism.

"We are going to do the 50-state strategy for the next 150 years so we can be the dominant party power in this country again," he said. "You can't be the powerful party in this country who controls the government unless you are willing to let the people control you. And the only way you can do that is ask everybody for their vote, understand everybody is our boss even if they vote for you or not."

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CORRECTED: Next U.S. vote on India nuclear deal may be December

WASHINGTON (Reuters) - The U.S. Congress, following a strong Senate vote, aims to complete work in early December on legislation to allow nuclear cooperation with India for the first time in three decades.


An overwhelming majority has now endorsed separate versions of the bill in both the Senate and U.S. House of Representatives, although different wording, including on nuclear-armed India's ties to Iran, could cause problems.

Still, supporters are optimistic the bills can be reconciled in negotiations between the two chambers and given final passage before the "lame duck" Republican-led Congress surrenders power to Democrats in January.

"I am confident that we can now work closely with our colleagues in the House to get this important measure to the President (George W. Bush) as swiftly as possible," Senate Majority leader Bill Frist, a Tennessee Republican, said in a statement after Thursday's 85-12 Senate vote.

The 45-nation Nuclear Suppliers Group and the International Atomic Energy Agency still have to approve the agreement that would allow New Delhi to purchase U.S. nuclear fuel, reactors and related technology.

The U.S. Congress gets another chance to vote on the deal, probably next year, because it must approve technical details.

Bush and his administration argue nuclear cooperation is essential to relations between the world's largest democracies that will be pillars of security in the 21st century.

Opponents contend the agreement harms U.S. security by allowing New Delhi to expand its nuclear weapons arsenal, by fostering an arms race in Asia among India and nuclear rivals Pakistan and China and by undermining decades of U.S. non-proliferation policy.

CONTAINING IRAN

Thursday's vote approved changes in U.S. law to allow nuclear cooperation with India, which never signed the nuclear Non-proliferation Treaty. The House had voted last July.

Rep. Joseph Crowley (news, bio, voting record), a New York Democrat who expects to be a House negotiator with the Senate, said New Delhi is unhappy with a Senate provision requiring Bush to certify that India is "fully and actively" participating in efforts to contain Iran's nuclear program before U.S.-India nuclear cooperation could proceed.

The House version addresses the issue in a way that is "less offensive to the Indians and yet serves the same purpose," he told Reuters.

But, he added: "I think we will be able to work something out."

Secretary of State Condoleezza Rice said she looked forward to the House-Senate negotiations "when remaining issues of concern to the U.S. government can be addressed." She did not specify those concerns.

"This initiative will help India meet its growing energy needs, enhance cooperation on energy security and nonproliferation, and increase economic investment opportunities," she said in a statement.

She also stressed the need for both sides to fully meet their commitments.

Daryl Kimball of the Arms Control Association and a leading opponent of the nuclear deal called the Senate bill a "great mistake for security and non-proliferation policy."

But the Senate version is better than the House version because it bars transfers of technology related to uranium enrichment, reprocessing and heavy water production, which can aid nuclear weapons production, he told Reuters.

He said the nuclear agreement still faced substantial hurdles. "This is far from over." Kimball said.

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