Gingrich regains momentum, but downside risk remains

The fall of Newt Gingrich is delayed...or so it would seem based on recent polling (see RCP) and investor sentiment on Intrade.com.  To be fair, Gingrich has shown some remarkable resiliency to the significant "inside the beltway" skepticism that has come out in full force regarding the long-term viability of his presidential campaign.  However, a closer look at his rise on Intrade.com reveals a pattern similar to Governor Rick Perry's late-summer rise and fall.  Take a look at the Intrade.com charts for both of them:

Even with perhaps the worst run presidential campaign since Phil Gramm (R-TX), Perry was a legitimate threat to Mitt Romney for over two months.  Only after some disastrous debate performances and a weak response to the naming controversy concerning his family's hunting lodge did Perry's probability of getting the nomination precipitously fall.  More interestingly, both Perry and Gingrich seem to max out around a 40 percent chance of getting the nomination.  This seems to be the upside limit of any challenge to Romney -- at least for now.  Adding weight to that conclusion, according to Intrade.com's reporting of unmatched trades on the Gingrich nomination contract, is the selling pressure that likely will hit Gingrich shares should any buyers emerge at $3.86 a share (that is, a nomination probability of 38.6 percent). 

However, nobody could have forseen Romney making one of the dumbest (and most avoidable) debate mistakes in presidential election history.  The '$10,000 bet' with Perry will haunt Romney for the rest of his campaign and has provided Gingrich the upper-hand going into the last debate prior to the Iowa Caucus.  Perhaps more startling, Romney's bet made the former Texas governor look like the only adult in that exchange.  Making Perry look good on his feet is a real challenge, but Romney may have done it.  While too early to know for sure, in a year that bet may be described as the campaign killer.  Much like Mondale's "Where's the beef?" retort to Gary Hart in the 1984 Democratic nomination race or Ford's "Soviet non-domination of Eastern Europe" assertion in 1976, this debate gaffe will have legs because it builds on an existing narrative that Romney is out-of-touch with us 'normal folk.'  The Romney campaign staff's tepid attempt at damage control lends credence to the assertion that this mistake might have cut to the bone. 

So, is Gingrich on his way to the nomination?  I still don't think so.  I do believe Gingrich is more disciplined today than he was as House Speaker, but his existing baggage cannot be ignored.  It's not his infidelities or his stunted intellectualism regarding the historical context of the Israeli/Palestinian conflict that will do him in with Republican voters -- rather, it his is proclivity to see the nuance in public policies and to utter opinions that are sometimes in direct conflict with the sentiments of the Republican base.  His thoughtful stance on the status of current illegal immigrants or on Rep. Paul Ryan's Medicare plan are just two examples of this tendency.  It is not a bad tendency in a general election, mind you, but it is not one that works well with the partisans that show up for Republican primaries and caucuses.  Gingrich will pay a steep price with Republican voters for his willingness to deviate from party doctrine, particularly Tea Party Republicans.