Sunday, September 11, 2016

Two thoughts for Sunday: on the economic and political situation

 - by New Deal democrat

First of all, my apologies for the light posting the last few weeks.  This is one of those periods where I am incredibly busy i.r.l. and don't have a lot of time to spare for putting together any in-depth posts. 

If there were any sea change in the economy, though, I would let you know.  But there isn't.     
  • Energy prices, and the profits of energy companies, have bottomed, and the US$ has been going sideways for over half a year, so the dynamic behind the shallow industrial recession has largely disappeared. 
  • There is still international weakness.  It is likely that part of the run-up after 2009 in commodity prices and production was Chinese stockpiling.  The stockpiling appears to have ended, and that  continues to feed through into weakness in things like shipping.  
  • Recent lows in interest rates are helpful to borrowers.  This should feed through into improvement in housing and consumer spending generally (I've taken to calling it "Indian Summer.")  
We are past mid-cycle, so the next recession is out there.  But it doesn't look imminent.

Which makes for a nice segue into the political environment.

Because almost certainly we are not in a recession, by the simplest metric the Presidential candidate of the incumbent party is favored.  But not by much:  when we look at growth in the most historically accurate economic series over the last 3.5 years, they forecast something close to a nail-biter -- a 51/49 election.  Since there no significant ongoing casualties in war, and no large scale civil unrest, those factors (like the "Bread and Peace" election model) aren't in play. 

Which means that the variance from the 51/49 scenario is the personalities of the candidates.  And this year, we have the two most disliked candidates ever running.  The election result is going to boil down to, who is the most disliked.

Here, there has been a sea change -- that began on or about August 19.  And Trump played Clinton and the media like violins in so doing.

Remember that Donald Trump is first and foremost a salesman/entertainer.  He actually participated in WWE wrestling!  The scenario there is that there are "good guys" and "bad guys" but they can occasionally switch sides.

For the last year, Trump's persona was the "bad guy" wrestler.  That all changed on August 19, when Trump suddenly changed from being bombastic to magnanimous.  It began with his 63-word long nonspecific statement of "regret"
Sometimes, in the heat of debate and speaking on a multitude of issues, you don't choose the right words or you say the wrong thing. I have done that. And believe it or not, I regret it. And I do regret it, particularly where it may have caused personal pain. Too much is at stake for us to be consumed with these issues.
From that day forward, from his "reaching out" to blacks and Latinos, to his visit to Baton Rouge, to his Presidential-sounding statements in Mexico City, to his statement yesterday that he "respects" all Clinton supporters, he has suddenly switched to being the consummate "good guy."  The mask has only dropped twice: in his Phoenix speech on immigration, and his promise to commit an act of war against Iran if the people in their "little boats" use rude gestures. 

While Trump has been playing the wrestling "good guy," his surrogates are providing a drip-drip-drip of allegations about Clinton's use of emails and the Clinton Foundation, allegations which will probably continue right up until election day.
This has ensured that the personality of Clinton, not Trump, is the narrative.  

Meanwhile, Clinton, who blew a massive lead in 2008 to Obama, and nearly blew a massive lead in the primaries this year to Sanders, started to measure the White House draperies, announcing her Transition Team headed by Ken Salazar on August 16.
It was famously said in football that the only thing a "prevent defense" prevents, is victory.  In this case, Clinton and all of her surrogates went almost completely quiet in the latter part of August, allowing the focus to completely shift from Trump's negatives to Hillary's negatives.  Meanwhile Trump seized the positive initiative, for example with his August 19 visit to Baton Rouge while Clinton and Obama both remained passive.

Clinton and Obama have even failed to make an issue over Trump's threat to start a war with Iran over their sailor's rude hand gestures -- proof positive if ever it was needed that he is unfit to be Commander in Chief.

Unsurprisingly, the race has tightened ever since.  The race will continue to tilt in Trump's direction unless and until 2 things happen:
  1. Hillary develops an "elevator pitch" of broad policy goals that benefit average Americans, and 
  2. She and her surrogates get out of "prevent defense" mode and aggressively go after Trump on his myriad of what should be fatal weaknesses.
Update.  One other comment:  Americans have almost always preferred candidates -- from Jefferson to Jackson to FDR to Truman to Kennedy to Bill Clinton to W. -- who appeared to be happy political warriors, to candidates -- from John and John Quincy Adams, to Hoover to Dewey to Nixon to George H.W. Bush to Gore -- who appeared wooden and wonkish.  I think we know who is who in this race.

Update 2:  Here's another thing that went completely unremarked by both the media and the Clinton campaign. During his August 31 speech on immigration Trump said:
in several years [ ] we [will] have accomplished all of our enforcement and deportation goals and truly ended illegal immigration for good, including the construction of a great wall which we will have built in record time and at a reasonable cost, which you never hear from the government
Now, if Mexico were going to pay for the wall, why would "we" build it "at a reasonable cost?"  Obviously Trump was recognizing at any border wall would be built at US taxpayer cost, not paid for by Mexico. This is a major flip-flop on one of his central tenets.  And the press couldn't be bothered to notice, and Hillary was too busy taking the election for granted to make it an issue.