Probably not, but here’s why he might.

There has been speculation that the whole Tom Ridge trial balloon is to with Rudolph Giuliani rather than Joe Lieberman. Rudolph Giuliani has a strong regional appeal in the North-East and New England. His selection would potentially put New York, and its thirty-five Electoral College votes, into play. As Mayor of a city larger than many states, Giuliani spent pushed through policies that promoted the idea that anyone, including immigrants, could succeed as long as they worked hard and obeyed the law. This would be especially welcome in a Republican Party where some demonise immigrants in a manner little different from Jeremiah Wright’s anti-American rants. As drug dealers, corrupt cops and Michael Milken found out, Giuliani is a strong leader who is unafraid of confrontation, either on the campaign trail, or in office.

If selected, Giuliani would need to open his activities as a security consultant out to public scrutiny and he will need to emphasise his willingness to select pro-life judges. He also runs the risk of his private life and questions over his planning for terrorist attacks overshadowing the campaign. Personally, I think the fact that he is being given a keynote spot at the convention means he won’t be the running mate. However, I could well imagine a scenario where he is the nominee and Lieberman claims the vacant keynote speaking spot. McCain has gone out so far on a limb that Lieberman is still the only person he should select. However, were he to select Giuliani (or Graham) as his running mate and give Lieberman the keynote spot, then he could at least claim that to have reached out beyond the base.

Why McCain should choose Lieberman as his running mate

The big issue of last week was McCain’s announcement that he would consider picking a pro-choice running mate. Although this was nominally in the context of former Pennsylvania governor Tom Ridge, this was really about the possibility of putting the Independent Senator Joe Lieberman on the ticket. Unsurprisingly, this has generate a lot of controversy, with Evangelical leaders and even the McCain supporting Weekly Standard say that this would be inadvisable. My take, as someone who has wagered money on this election, including on McCain’s vice presidential pick, is that McCain must ignore such ‘advice’ and choose Lieberman.

The conventional wisdom is that McCain will need someone who is either young or female, has a lot of expertise on the economy and will satisfy more conservative Republicans (or the ‘base’ as it is often called). Governors Sarah Palin and Bobby Jindal would satisfy the first and the third criteria, while the current favourite, Mitt Romney, would seem to tick the last two boxes. However, Jindal and Palin do not bring any geographical advantage and are too young and inexperienced. Mitt Romney has had a lot of private sector experience and could help McCain in Michigan. However, even voters in the Republican primaries clearly preferred McCain’s inexperience to Romney’s reiteration of Bush’s economic philosophy.

In contrast Lieberman’s stance on the Iraq war, and his hawkish views on foreign policy, have made him the conscience of the Democratic party, at the same time that he has become an outcast from it. Selecting Lieberman would thwart Obama’s attempts to sideline foreign policy. It would be a powerful signal to swing voters who are disillusioned by both the antiwar stance of the Democrats, and the domestic policy stances of the Republicans. Selecting someone who marched for civil rights would stymie Obama’s cynical attempts to insinuate that McCain is a racist.

Most importantly, it would be a way for McCain to demonstrate that he is truly a maverick. McCain was courageous on foreign policy, but he has made too many concessions on domestic issues. Party identification figures suggest that the only way that McCain can win is if he manages to convince the electorate that he is neither a generic Republican nor someone who will be subservient to the GOP ‘base’ and their self-appointed leaders. Most importantly, the fact that the race remains deadlocked means that driving up Obama’s negative isn’t enough. McCain needs to offer some positive reasons for sending him to the White House.

Interestingly, the reactions to McCain’s musings, although largely negative, have been surprisingly muted. Although Evangelicals and economic conservatives were intensely critical, the hysterical threats of third party candidacies that plagued Giuliani and the calls for a fight at the convention were absent. Even the National Review, which once ran an article demanding that McCain stuff his cabinet with luminaries such as George ‘Macaca’ Allen, seemed prepared to accept McCain’s choice. Having lauded Lieberman for his work on violence in television, and relied on his support when a prominent pastor’s disgraceful views were exposed, the Evangelical Right cannot credibly oppose him.

However, Lieberman will need to acknowledge that he, rather than McCain, will be doing most of the compromising on domestic policy. Lieberman will also have to modify his pro-choice position, which puts him at odds with McCain’s opposition to abortion. However, although he was ultimately unsuccessful, Rudolph Giuliani made a pretty convincing case that a willingness to select pro-life judges is more important than a specific stance on abortion. Ultimately, McCain needs to reassert his position as a moderate on domestic policy and a hawk on foreign affairs, rather than using his running mate to pretend that he doesn’t ‘have more scars than Frankenstein’.

In any case, having floated the idea, McCain will look weak if he doesn’t follow through. If he fails to face down the Republican establishment on such a symbolic issue, he will have difficulty convincing American voters in November that he can be trusted to face down the leadership of Russia and Iran. I’m not American, and my objectivity is compromised by the money that I have staked on Lieberman being McCain’s vice president, but it would be strange if McCain was unable to do what Truman (with Eisenhower), Clinton (with Collin Powell) or even a hack like Kerry (with McCain himself) did and at least offer a place on the ticket to someone from outside their party.

A narrow victory for McCain

After a quick read of the transcript, I’ve come to the conclusion that both McCain and Warren were the winners of the Saddleback forum last night. The fact that posters on Daily Kos are talking about ‘bias’, and even insinuating that Warren somehow leaked the questions to McCain beforehand, tells you all you need to know. Ironically, I was impressed by Warren. Although he had set expectations low by hinting he would ask bland questions more suited to a job interview than a Presidential forum, he managed to keep his questions relevant.

McCain clearly had two things in mind; to throw red meat to the base on abortion without ruling out Lieberman and to quash the spin that he was incoherent. He accomplished both things and also managed to raise the tone of the evening by mentioning John Lewis as one of those he would listen to closely. He clearly isn’t going to make inroads into Obama’s support in the African-American community, but it is nice to see him acknowledging it’s existence, something Hillary Clinton failed to do. His conservative stance on taxation was disappointing. However, McCain will hopefully have used his choice of running mate to demonstrate that he is not a generic Republican by the time the Presidential debates begin.

McCain also made the strategic decision to answer the less important questions more quickly, allowing him to give a detailed response on the issues he wanted to emphasise. Obama, on the other hand, took around the same time on each question, which meant that Warren was forced to cut him off on some of the questions. McCain also directly confronted the question about his first marriage without prompting, thus removing one of Obama’s possible lines of attack. The only slightly hollow note was the reference to the Obama’s decision to educate their daughters privately.

Obama will gain some credit for showing up in what is Republican territory. However, the way his appearance had been over-hyped and the fact that this was a relatively sympathetic environment, means that any boost on these grounds will be marginal. The only positive thing that Obama did well was to mention his elderly grandmother as one of those whom he consults regularly, though that risks re-dredging up memories of Wrightgate. Reading the transcript Obama seemed hesitant and nearly avoided making a major gaffe in his speech about Clarence Thomas. As someone who has money on McCain I am happy that my worst fears were not realised.

Why it won’t be Eric Cantor.

Another candidate who is being supposedly vetted by McCain is Eric Cantor, a congressman from Virginia. The idea is that he is young, hawkish and appeases the right. However, like Jindal and Palin, he is simply too inexperienced and too right-wing. The Republicans cannot criticise Obama, only to pick someone who is less experience that he has.

The Senator from Indiana surges on Intrade

Ever since Erza Klein pointed out that someone had registered a Obama/Bayh website that just happened to redirect to the DNC, there has been a surge in interest in the Senator from Indiana as Obama’s running mate. I have to admit that it makes a lot of sense, though it isn’t as dramatic as choosing Kaine, Hagel, Bloomberg or Richardson. I have to admit that before I started to get really interested in the election, I thought that Bayh might have had a good chance for the top shot.

John McCain continues to improve on intrade

As the chart shows, McCain price is still improving, albiet at a slower rate. Even a conservative estimate would put McCain’s chances of winning at about 65%, while I feel that they could be closer to 70%. However, I did make the mistake of underestimating’s Obama’s chances during the Democratic primaries, so it is possible that I could be wrong.

Finally, I can show a McCain lead on my chart

My latest projections are:

John McCain 46.7
Barack Obama 45.83

McCain having his first definite lead in my projections since May 31st (likely voters only, filtered through Samplemiser) I am breathing a little more freely. However, even I have to admit that one swallow doesn’t make a summer. With the exception of a few poll readings during Wrightgate, McCain has failed to break 50%, while Obama has never got a majority of voters to back him.

Although it might be the beginning of the end for Obama, it is definitely not ‘mission accomplished’ for McCain. Against my expectations, Schmidt has managed to cauterise the wound. However, now is the time to do something radical, like picking Lieberman or Giuliani, to seal the deal.

The second ‘McCain surge’ continues

With McCain ahead in Rasmussen’s tracking poll and the Barack Obama campaign proving that it can shoot itself in its foot, the betting markets are starting to realise that they have underpriced McCain. This doesn’t mean that they have made McCain the favourite (although he should be) but the difference between market perpceptions and reality is a little bit closer than it was a week ago. However, McCain’s price still has a long way to rise, before it becomes fair value.

How will ‘playing the race card’ affect the Presidential contest?

The past two days has been taken up by the great race controversy. John McCain put out an advert comparing Obama to two white celebrities. Obama, and the rest of the left-wing blogosphere, then claimed that McCain was playing to some subliminal racist sentiments. McCain’s campaign then claimed that Obama was ‘playing the race card’. Now, I have been critical of McCain’s flip-flop on Affirmative Action and I think the McCain campaign made a strategic mistake in wading into a debate about race. Even though I freely offer my £0.02 on most aspects of this contest, I’ll admit that American racial politics is also something that it hard to appreciate 3,000 mile across the ocean.

However, my guess is that this will backfire badly on the Obama campaign. Firstly, only an exceptionally paranoid mind can honestly claim that comparing Obama to Ms Hilton on a par with the infamous ‘Harold, call me’ advert of 2006. Whether a left-liberal bias exists in the media, there is clear polling evidence that the public think that the media want Obama to win. Secondly, the popular desire to right a history of slavery and segregation is one of the most poweful forces behind Obama’s campaign - and probably the only positive thing that could come out of an Obama victory in November. However, by exploiting it in a cynical fashion, Obama risks diminishing it - and his campaign.

So, I don’t think McCain is repeating the huge errors that Hillary Clinton made. He isn’t comparing Obama to Jesse Jackson (though I personally think that Jackson’s outburst was calculated to garner sympathy for Obama) and he isn’t ranting about ‘hardworking White people’. I would suggest, on the principle that his behaviour should be above the smallest hint of question, that McCain should avoid talking about Affirmative Action or getting involved in any debates, but I think that the Obama team are crying wolf. More importantly, I think Obama is digging a hole for himself.

Markets start to reflect reality a little bit more

With Obama less than two points ahead of McCain, there was no way that McCain’s prices could remain in the low 30s. My guess is that after both the conventions McCain’s price will be above 45 and heading up (though it should be around 60 if he was properly valued).