It's fun to watch how the news affects the numbers, but let me tell you why I think Obama is still a good bet: The Field of Republican Candidates.
First of all, I think there are only three candidates with decent shots of winning the nomination: Mitt Romney, Rick Perry, and Michele Bachmann. I think the primary will boil down to Romney, who seems to have lots of establishment support, versus an anti-Romney candidate who will have the Tea Party and the Religious Right. I think Perry will end up being the anti-Romney candidate. And I think Perry will be the nominee. Romney disappoints too many people on the right, whereas everyone on the right can find something they like in Rick Perry. He executes innocent people, is literally crazy about guns, kicks thousands of kids off S-CHIP insurance, champions a low-wage high-polluting economy, isn't very bright, and has ties to the neo-Confederate movement. What's not to like?
But it's not just that Perry is too far right to win the general election, it's that he will have to move farther right and put his wing-nuttiness on display for the next six months in order to win the nomination. That could be quite a display, because the Republican Party has moved even farther away from mainstream America in the last several years.
For example, remember how George W. Bush used to call himself a compassionate conservative? He knew he needed to present a humane side to independents and moderates to balance out his right-wingery. Republican politicians today don't give a damn about that! If a candidate brought up "compassion" in a Republican presidential debate, one of the other candidates would whack him over the head with some Ayn Rand quote about compassion being the utmost evil. They wear nastiness as a badge of honor now. They no longer talk about just "reforming" Social Security and Medicare. Rick Perry says Social Security and Medicare should be repealed. Even with unemployment above 9%, today's Republicans want to eliminate unemployment insurance altogether. Why? "Because it makes people lazy." Oh, and according to today's Republican orthodoxy, global warming is a hoax and the Earth is 6,000 years old. That's the party in which Rick Perry has to appeal to the most rabid activists.
All the while, Obama will be "negotiating" and looking for "grand bargains" with the House Republicans and generally looking like a reasonable and good intentioned (if weak) problem solver. That won't excite people on the left like me, and it certainly won't get the economy back on track. But it will allow him to pitch himself to a very broad swath of the electorate in 2012.
Of course there are still questions. Will left activists be so depressed that they don't turn out and volunteer? Will the economy be so bad that independents are willing to try anyone else, even Perry? We will see. But for now, if I had any cash laying around, I would be buying "Barack Obama to be re-elected President in 2012" at Intrade.