To: Our Readers

• Despite Huckabee surge, Romney still favored in Iowa
• Romney set to give 'Mormon speech'
• Clinton battling Edwards for second place in Iowa
• GOP senators could derail energy bill that offers nothing for conservatives
• Alexander leads Burr in race for Senate Republican Conference chair following Hutchison exit
• Saxton's New Jersey seat now looking like a Democratic takeover

Outlook

1. Despite a slip in the polls by front-runner Sen. Hillary Clinton (D-N.Y.),
   Republican confidence about winning the presidency actually has declined. The reason is the dispiriting performance put on by the Republican candidates in last Wednesday's debate in St. Petersburg, Fla. We have had several Republicans tell us that after watching that affair, they wondered not only about the outcome of the '08 presidential election but also the long-range future of the GOP.
2. With time running out for the year, Congress is off to a very slow start following the Thanksgiving recess. Instead of preparing during the recess, Senate Majority Leader Harry Reid (D-Nev.) was leading a congressional delegation to Latin America. House Speaker Nancy Pelosi (D-Calif.) is off this week to the global-warming conference in Bali. Nothing much is expected to be done this week. Republicans are blaming Democrats for further delays in next year's tax refunds by failing to promptly fix the alternative minimum tax (AMT).
3. Junior conservative Republican senators fear that Senate Minority Leader Mitch McConnell (R-Ky.) is about to cut a deal with Majority Leader Reid for a compromise omnibus appropriations bill. They want McConnell to hold fast and force a continuing resolution that would set spending for the rest of the year at the level proposed by President George W. Bush.
4. The CIA's new report claiming that Iran ended work on nuclear weapons two years ago was an enormous embarrassment for President Bush that he tried -- but failed -- to make the best of in a press conference Tuesday. It raises new doubts about the CIA, where the desire to undercut Bush cannot be denied.

President 2008

Iowa-Republicans: Polls in Iowa now consistently show that the challengers, Sen. Barack Obama (D-Ill.) and former Arkansas Gov. Mike Huckabee (R), have surged ahead.

1. While Huckabee is certainly for real, he is still not the favorite to win the Hawkeye State. Huckabee leads in two of the four polls conducted since Thanksgiving, and former Massachusetts Gov. Mitt Romney (R) leads in the other two. None of the leads are outside of the margin of error, and only the Des Moines Register survey, with Huckabee up by five points, had anyone with a significant lead.
2. Polls in Iowa are poor predictors of caucus performance because organization and boots on the ground matter so much. This means that as long as Romney is near the top and former New York City Mayor Rudy Giuliani (R) is far behind, Romney is still the favorite, thanks to his money, staff and organization.
3. Huckabee has a few advantages in Iowa, though. Having gotten a free pass from the mainstream media for the most part, he might be a handy second choice for GOP caucus goers. Although Huckabee is not a conservative in the Reagan/Goldwater mold, he could certainly pick up some supporters of Rep. Duncan Hunter (R-Calif.) or Sen. John McCain (R-Ariz.) who have already formed negative opinions of Romney and Giuliani.
4. Also, Huckabee doesn't have to win Iowa to be branded the "winner" in Iowa. A strong second-place finish on his paltry budget would be played in the favorable media as a moral victory for Huckabee (although surging ahead in the polls this early may blunt that effect). However, in New Hampshire, Michigan and Florida, he will still need money to compete. The more compressed calendar makes it tough for him to raise funds after Iowa and before the next big contests.
5. If Huckabee wins Iowa and South Carolina, he could do very well in the South while limping along in other states. This at least raises the possibility of a brokered convention, with Huckabee delegates deciding the nomination between Romney and Giuliani.

Romney: After months of media speculation and advice, Romney has decided to give a speech dealing with his Mormon faith. The need for the speech -- and the perils of actually delivering it -- highlight the difficult terrain that is religion in public life in 21st Century America.

1. Republican activists of all kinds -- Protestant, Catholic, secular, Jewish -- are uncomfortable with what many consider the "weirdness" of Mormonism. The religion's teachings and its exclusivity can seem bizarre to an outsider, and many people don't know any Mormons. This has led many old Republican hands to say they can't really support a Mormon for President.
2. Separately -- and this is where Huckabee enters the picture -- many evangelical Christians have real problems with Mormonism. For some Christian leaders, the President ought to be a Christian, and Mormonism does not count for them. There is also the fear that a Mormon President will boost the popularity of the Church of Latter Day Saints.
3. Addressing these two concerns simultaneously will be difficult. To claim his religion doesn't matter and is a private concern flies in the face of the conservative Christian view. If he suggests that Mormonism is basically like Christianity, Romney could offend Christians even more. He certainly cannot get involved in a theological debate. His best hope is to tap into the impression of Mormons as upstanding family-centered people and to agree that the United States is a Christian nation. But how will this latter point strike the mainstream media, who are very hostile to any intermingling of religion and public life?
4. The speech is billed as a speech on religious liberty. This could be an opportunity for Romney to tap into a vein of resentment and fear that has been largely ignored by much of the Republican establishment and the mainstream media: Conservative Christians being forced by government to violate their consciences. Taxpayers are forced to fund cloning and blasphemous art, and pharmacists are forced to prescribe morning-after pills. If Romney hits this theme, he could rally some of the base that is now floating towards Huckabee.
5. Finally, in calling for religious tolerance, Romney must not come across as branding his opponents -- or even those wary of Mormonism -- as religious bigots.

Democrats: The race has finally gotten interesting, both in the closeness of polls and in the escalation of rhetoric.

1. Sen. Barack Obama (D-Ill.) has gone on the attack against Sen. Hillary Clinton (D-N.Y.), and she has not reacted well. Clinton's poor reaction last month to a series of attacks in a debate, and her attack on Obama's "ambition" for wanting to be President in grade school draw out one concern among many Democrats—that she is creepy. Along those lines, she told CBS's Katie Couric that she "never considered" the possibility she could lose the election.
2. Obama leads in the latest Iowa polls, and a victory there would set up a legitimate one-on-one between him and Hillary. It's will be difficult for Hillary to recover in the last month. The question now is: Will she beat former Sen. John Edwards (D-N.C.) for second place in the caucuses.

Congress

Energy Bill: The Republican minority in the Senate might derail an energy bill, boosting the upper chamber's reputation this session as the graveyard of Democratic legislation.

1. The energy bill in any of its forms offers almost nothing for conservatives, and President Bush's expressed desire to sign some sort of energy legislation is hard to explain. Most Republicans, however, support the bill's heightened subsidies for renewable fuels (such as ethanol) and for research and development. Otherwise, the bill is full of taxes and mandates on fuel efficiency and fossil fuels.
2. One point of contention is a mandate for renewable electrical generation. Sen. Pete Domenici (R-N.M.), ranking member of the Energy Committee, accused House Speaker Nancy Pelosi (D-Calif.) of reneging on a deal from earlier this year to keep out the Renewable Portfolio Standard (RPS), requiring utilities to buy 15% of their electricity from renewable sources other than hydro-power or nuclear power. A bill with this mandate could not likely garner the 60 votes it would need to clear a Republican filibuster.
3. The RPS is a top demand of environmentalist groups, and it is unacceptable to Domenici. This puts Democrats in a tough spot: Anything they can pass will be condemned as insufficient by their activist base.

Republican Leadership: Sen. Kay Bailey Hutchison (R.-Tex.) aborted her bid for Republican Conference chairman, thus changing the whole GOP Senate leadership picture in the wake of Sen. Trent Lott's (R-Miss.) announced resignation this month.

1. With Sen. Jon Kyl (R-Ariz.) guaranteed Lott's minority whip job, Hutchison was quick to jump into the race for Kyl's No. 3 post as conference chairman, although she would probably be resigning in 2010 to run for governor. This week, she dropped out of the three-way race, and decided to stay in the No. 4 slot, chairman of the Republican Policy Committee (RPC).
2. The conference chairman race is between Senators Richard Burr (R-N.C.) and Lamar Alexander (R-Tenn.), to be played out Thursday in the weekly meeting of the Senate Republican Conference. While Burr's staff persists, Senate sources indicate Alexander has the race won easily. Alexander is definitely more liberal than Burr, and he is an appropriator, which helps him with the moderate wing and the establishment wing of the party. Burr also has not earned as many chits as Alexander by helping colleagues.
3. As an appropriator, Alexander is aligned with the party's old bulls, who are currently being irritated by a fiscal conservative revolt in the Senate. One conservative Senate staffer said Alexander fit into the "Dole-McConnell-Lott" faction. This consolidates McConnell's control of the conference.
4. With Hutchison staying put at RPC, Conference Vice Chairman John Cornyn (R-Tex.) is blocked from climbing the ladder, which eliminates the vacancy Sen. Jeff Sessions (R-Ala.) had hoped to fill.
5. A week ago, it looked like the GOP Senate leadership would move a step to the right, trading out Lott for Sessions. Now it appears it will move a step to the left, with Alexander as the new man in leadership. The chart below shows the current leadership lineup and the lineup we expect will be in place after Thursday's votes. Next to each senator is his lifetime rating from the American Conservative Union, which is an imprecise, but still useful, measure of a senator's conservatism.

House 200

New Jersey-3: When Rep. Jim Saxton (R) last month joined the long list of retiring Republican congressmen, his district, while competitive, appeared to be more likely than not to stay in GOP hands. Now, that has changed, and the 3rd District in New Jersey has become the fifth GOP open seat to move into the Democratic column.

State Sen. Dianne Allen (R) was the initial favorite here. She represents a Democratic part of the district in Burlington County, which borders with Pennsylvania and is near Camden, N.J. and Philadelphia. Ocean County is the other half of the district, and the more Republican part. Allen would have had a leg up in the race once she combined her own base in Burlington with the GOP leaning Ocean County.

But Burlington County Republicans decided it was their turn and started a push to field their own candidate, such as Ocean County Freeholders Joe Vicari (R) or John Kelly (R). County GOP Chairman George Gilmore (R) has suggested the county party would hold a convention to chose its candidate, who would challenge Allen (who is fairly liberal) in the primary. Allen, however, did not have great relationships with her own county's GOP and did not relish struggling against two county parties in a primary before facing a tough general election. Last week, she dropped out of the race.

Nominating an Ocean County politician without self-funding ability would be dangerous for the GOP. Burlington County has a majority of the district and leans Democratic. Without inroads into Burlington's Democrats, a Republican will be hard-pressed to win.

Democrats probably will nominate State Sen. John Adler (D) from near Camden. Adler was the Democrats' pick to challenge Saxton, and he will be well funded. Leaning Democratic Takeover.