Arlen Specter's switch...

...to the Democratic Party has two major implications. The first is that, assuming Al Franken is declared the winner in Minnesota, the Democrats are on the verge of a 60 vote, filibuster-proof majority. This obviously means a lot for the Obama agenda. The second is that this could lead to a smaller, more regional, and more conservative Republican Party.

One of Specter's main reasons for leaving the GOP was that he faced a difficult primary challenge from the right wing of the party. Polls showed him running 20 points behind Pat Toomey, the Club for Growth's candidate. Since Pennsylvania's election laws prohibit a candidate from running as an independent after losing a primary, Specter concluded that running for reelection as a Democrat would be his best bet. As a result, the Republicans lose another senate seat as the true believers push another northern moderate out of the party. At this rate, they could go the way of the Whigs. You have to wonder, how much worse can things get for them? And how much better can they get for the Democrats? If I'm not mistaken, I think I can hear them humming that old Timbuk 3 song, "The Future's So Bright, I Gotta Wear Shades."

It reminds me of the year 1994, when Timbuk 3 was still performing. Senator Richard Shelby of Alabama switched from the Democratic Party to the GOP. The Republicans had defeated health care reform in the first two years of the Clinton Administration and the president was on the defensive. Newt Gingrich and Dick Armey engineered the Republican takeover of the House with their Contract With America. The wind seemed to be at their backs. But then in 1995 the Republicans overreached and shut down the Federal government. The public turned against them as they rejected their small-government philosophy. It could be argued that the GOP hasn't regained its footing since.

After a career watching markets behave, I've learned that things often look their best at the top and their worst at the bottom. If Richard Shelby "bought the top" when he joined the Republican Party in 1994, then Arlen Specter could be doing the same thing now with the Democrats. As a supporter of Obama and his agenda, I hope not. But I also hope that the Democrats don't get overconfident, because fortunes have a way of changing. These next two years may be their best window of opportunity to get their agenda passed. And it had better work, because if the economy doesn't recover by 2012, there could be a resurgence of the Gingrich-Armey crowd.