That's (Republican) Debatable! With 12% More Players!

There’s another Republican debate tonight. If we ask nicely, perhaps T-Rav, Emperor of Sockpuppets, will do a play by play? If not, we’ll mock him mercilessly. Anyhoo, this debate will be in Florida, and given the outcry surrounding Rick Perry’s description of Social Security as a “Ponzi Scheme,” expect that to be a big issue. Also, welcome a new player! Here's what you need to know.

First, the race has turned into a two man race: Perry and Romney. The others are still technically in it, but the polls are beginning to coalesce around these two: Perry holds a 28% to 24% lead over Romney, with no one else in double digits. That’s not surprising, as that happens once front-runners emerge. What is surprising is that Romney is catching up. Perry's 11% lead is down to 4%.

More surprising, Tea Party people in South Carolina apparently are shifting away from Perry toward Romney. I think there are two primary reasons for this. First, Romney has done an effective job of defusing the RomneyCare issue. Whether his defense is true or not, he presented what sounds like a very credible distinction between RomneyCare and ObamaCare. That makes him less toxic, especially as he promises to repeal ObamaCare.

Secondly, Perry is suffering from an unending assault over cronyism -- and has yet to do a good job explaining this away. Cronyism is an issue that sticks in the craws of most Tea Party people. And with Warren Buffett, Solyndra and LightSquared dominating the right-wing blogosphere, cronyism remains a hot button issue. This hurts Perry, especially as no one has made a cronyism charge against Romney.

Does this mean Perry is finished? Hardly. It means Romney will be a stronger competitor than expected and rather than watching Perry run away with the nomination, either one can win this thing. Romney needs to pound away at the crony issue if he wants to win. Perry needs to disarm that issue and find a way to point out that Romney isn't really proposing conservatism.

The other candidates are probably done at this point unless Romney or Perry slips up and falls out. Alternatively, they need to find a way to shock everyone to such a degree they become “buzz-worthy.” Newt is planning to give the intellectual speech to end all speeches. . . but we’ll see. It’s hard to get traction when people assume you can’t win.

One guy who actually has an outside chance tonight is Gary Johnson. He’s the libertarian-leaning former governor of New Mexico. He will be allowed to participate because he cleared the 1% hurdle in the polls (McCotter didn’t). If he comes across as a sane version of Ron Paul or simply as a genuine conservative, he could literally surge into the race as voters still don’t seem happy with Perry or Romney.

The other issue that is hurting Perry is his description of Social Security as a Ponzi Scheme. It is a Ponzi Scheme, but you can’t say that. Even Mitch Daniels, who is known for being truthful and breaking bad news to the public, described this as “too truthful.” A Ponzi Scheme (named after Charles Ponzi) is a fraud that takes the form of an investment that promises each investor more money than they put in, but which doesn’t earn enough money to pay what it promises. So long as enough new people get suckered in, the fraudster is able to pay what he promised to those already in the investment. But once the flow of new people slows, the whole thing collapses.

That’s exactly how Social Security works -- it pays people more than they paid in and it makes no money on its own. That was fine for decades, but when the baby boomers didn’t have enough kids, they triggered its collapse. Now we face a series of bad choices: cut the promised benefits, raise taxes, add more taxpaying workers (i.e. immigration), or let the system collapse. Unfortunately, voters are unwilling to accept any pain in finding a solution to this pending disaster. That hurts anyone who raises this issue, i.e. Perry.

But the real problem for Perry came when he proposed handing Social Security off to the states. Not only does this set off alarm bells for people who think they are going to get their benefits cut, but it sounds like an accounting gimmick that will crush state budgets. Romney is already pounding away at Perry on it. Indeed, Romney has asked Perry six questions, including how a state-run program would be administered or funded and how people could move from state to state under his plan. Look for this to come up a lot tonight (as the average age in Florida is 107).

Finally, I suspect you'll hear a lot about Israel as well, with Obama making such a mess of it, with Rick Perry using that issue to discuss foreign policy, and with Florida being heavily Jewish. Also, expect Perry to play to Hispanics tonight, who dominate parts of Florida. Perry did a fundraiser with Hispanic businessmen this week and is actively courting them. Other than that, expect a LOT of Bernanke bashing after he broke the stock market yesterday.

Bring your popcorn!