Prognostications about the November House elections fall into three categories: Nancy Pelosi and the liberal media who are measuring the drapes based on the inevitable "blue wave" that will result from everybody hating the usurper, Donald Trump; professional forecasters such as Charlie Cook and Kyle Kondrick who analyze the details and - chastened by their mammoth failures in 2016 - give the probability of Democrats taking over the House a 50-50; and those of us who are influenced by James Carville's admonition to the 1992 campaign of the first President Clinton, "It's the economy, stupid".
Let's deconstruct the "economy" argument. What is there in the economy that might intrude into the back of the voter's minds when they pull the curtain on the voting booth, or complete their tamper-proof mail-in ballots as we do out here on the Left Coast. And let's give the low information voters credit for making some association between the economy and the party in power.
First, "Results" measures - Am I better off? How are things going in the areas that directly impact my family? (Confession, this is the Republican phrasing; the Democratic phrasing would include a lot of gender and ethnic oppression stuff.)
1. At 3.9%, "official" unemployment is below the theoretical "full employment" level. After a decade of decline, the Work Force Participation Rate (the portion of working age residents working or actively looking for work) has stabilized at around 63% - meaning that the unemployment rate is no longer being artifically made to look better by having people give up. Long term unemployment claims are the lowest that they have been in 45 years. The boom is evident across all demographic categories.
2. Wages and salaries have been increasing at 2 to 3%, faster than in the Obama years when employers were absorbing more healthcare costs, but still below what "full employment" might call for. Inflation remains slightly lower, but gasoline prices are rising. For most workers, significantly improved income comes from longer hours rather than higher rates.
3. The stock market was up 23% in Trump's first year, about half of what it achieved in Obama's eight years. This year it is flat, with increased volatility. Past performance is no guarantee of future returns (or some such language), but personal account balances are up, IRAs are healthy, pension plan funding is less daunting, bank account balances are starting to show some return, and the 2008 recession is firmly in the rear view mirror.
4. Interest rates remain historically low, with 30 year mortgages under 5%. In the predictable future, refinancing will be severely curtailed, and housing will become relatively more expensive with higher finance costs, but that is a different election cycle. For now, people are comfortable borrowing for houses, cars, college costs, and credit card purchases.
5. Courtesy of our grandchildren, Congress and the president have given the average American family a tax cut in excess of $1000. The amount varies based on many factors, including whether you live in a high tax (e.g. Blue) or low tax (e.g. Red) state, but for most, withholding payments have been reduced and April 15, 2019 will be a "feel good" day for American voters.
6. The Conference Board's Index of Leading Economic Indicators (factory orders, interest rate spreads, jobless claims, building permits,and such) projects continued solid expansion well beyond November.
And some "Causal" discussion - who deserves credit? Is this all that there is?
1. True, economic expansion began under President Obama, but the pace was anemic by historical standards, averaging about 2%, before accelerating to 2.5% in Trump's first year. Through the Obama years the Federal Reserve held interest rates near zero, and maintained "quantitative easing" (purchase of government debt to lubricate markets.) Rates are now up to 1.7%, and on a projected path to get to a "new normal" of about 3% within a year. Bankers are paid to divine the future economics, but there is consensus that we are enjoying a healthy, growing economy, capable of withstanding higher interest rates.
2. It will take a year for the tax cuts enacted in December to fully make their way into the economy, but many voters are seeing reduced withholding from their paychecks, international corporations are repatriating money previously held overseas, and many have given a portion of their lower tax rates to employees or shareholders. Democrats (none of whom voted for the tax bill in either house of Congress) can scream about "crumbs going to the workers", but most voters think of $1000 as more than crumbs.
3. Trump, Commerce Secretary Ross, and Foreign Trade Negotiator Lighthizer are making a multidimensional high stakes effort to correct the structural $700 billion imbalance between imports and exports of goods. Half of the deficit is China, but Mexico and Germany are also problems that must be dealt with. Relative to the mid-term elections, voters understand the problem, and that action is being taken.
4. From January 2017, Trump has been a zealot in reducing regulations, whether from the Environmental Protection Agencvy, the Department of Labor, bank regulators, or other federal agencies, while operating under Reagan's premise that " government is not the solution to our problem; government is the problem." In the long run this may present negative consequences, but in November 2018, the voters know that Trump (and Republicians in Congress) are all in for economic growth.
Democrats are starting to realize that they need to stand for something beyond opposition to President Trump, but they face a dilemna. The energy in the party comes from the progressive left wing who want universal healthcare, free childcare, and guaranteed government jobs, while the state of the economy makes it hard for moderates to gain much traction as an alternative to Republican financial management. A tough spot, in James Carville's terms.
------
This week's video is a brief Richter Scales ditty about being a Republican in San Francisco.
bill bowen -
SENATOR HARRY REID
Many of us have been influenced in our thinking over the past 40 years by my friend Senator Harry Reid. This influence has ranged from intellectual thought to furious reactions to his behavior as a Politician. Many questioned his veracity and his intent. For me it was easier to interpret his motives and actions for two reasons:
First, I have known him personally for more than 45 years and that allowed me to understand what he believes, where he comes from, what influences him, his moral values and his integrity. He is a fighter, he is a brilliant strategic thinker, he cares about the "little guy" in America and he cares about the America we will leave to our grand children.
Second, as a Republican business owner I have had the opportunity to confer with him and debate with him on many, many issues throughout the years. So I know how hard he fights for what he believes. And, I know how carefully he listens to the views of others. If you can make your case sufficiently then Senator Reid will change his approach. But, anger and emotion will not do it. You have to be logical. I found his ideas on what America needs and mine were pretty close. Our debates were always respectful and for the most part more about ways to get to the outcome we wanted rather than the final objective. They were debates I enjoyed. And, he is a man who served us most of his life and always had my respect no matter how much he frustrated me.
When a group of this blog community came to visit Washington DC, and knowing full well most were conservative Republicans, Senator Reid, Majority leader of the Senate and arguably one of the 3 most powerful men in the USA, took his time at my request to visit us at our location. That personifies the man he is. He was very gracious, even in the den of the Lions.
Now, having recently lost an eye and less than 2 years into retirement, he is fighting once again. This time against cancer. If you can win this fight, he will. Whether you agree with him and his tactics or not, please keep him your thoughts and prayers. He worked for us all and still is.
Posted by: Bill McCormick | May 21, 2018 at 11:17 AM