"It's the economy stupid!"

Black Swan

This famous slogan of US politics was attributed to the 1992 Bill Clinton presidential campaign strategist James Carville; i.e., that the economy, not politics, was most important to election results.

On election day 6 November 2012 Bloomberg Businessweek had predicted that the US economy would continue to recover and grow during the next 4 year presidential term. They further contended that such would happen regardless if Obama or Romney won the 2012 election. As predicted, it seems to be happening during early 2013.

Of course both the Democrats and Republicans campaigned that times would be better under their administrations, and not under their opponents. The Tea Party faction of the Republican party claimed the same.

Although a very gross indicator of American business, given the dynamics of speculation and investments, it has been reported that the DJIA has now hit an all time record high, and appears to be growing further this year if projections hold.

The DJIA has doubled its value since its 2008 bottoming out at the end of the GW Bush administration, housing is in recovery, the 2 wars are winding down with continuous troop withdrawals, and unemployment is very slowly declining, now about 7.7, but may drop to the 5 percentage range by 2016, which tends to be normal for the US during non-recessionary times.

What impacts will US economic recovery have on the 2014 and 2016 national elections? Will the Democrats continue to gain seats in the US House, as they did in 2012? Will they win a majority in either 2014 or 2016 and also gain the powerful Speaker of the House position?

What will happen to the Tea Party faction of the Republican party? Will it wither away with the economic recovery, or attempt to fill the vacuum in Republican leadership caused by the November 2012 defeat, perhaps moving the political platform further to the right?

KyussBishop

Well, the big problem now is the end of the payroll tax holiday, along with the sequester (and the potential 'solution' to it, i.e. other cuts), and other measures being engaged in for cutting spending; all of these things are (and will be) pulling money back out of the US economy, at a time when it has been recovering nicely due to the deficit spending (not to mention dismantling social buffers, social security/medicare, which won't be there in the same capacity for the next crisis).

If that goes on, the US is likely to slow recovery a good bit (perhaps re-enter a recession), leading to a repeat of what happened in the latter half of the 1930's, where economic recovery was progressing well, until the US government suddenly cut funding again (leading to a repeat of the problems); that went on until spending increased again in WWII.


One notable thing under Clinton, is that he brought the US government into surplus, but think about what that means and whether or not that really is meritorious:
When a government goes into surplus, it is removing more money from the private economy than it is putting in, and that money usually ends up getting replaced, with the primary other source of money into the economy being private debt through bank loans (there is also trade, but this was also in deficit).

This means that Clinton's surplus, was forcing an uptake in private debt in the economy, which is explained well here:
http://www.businessinsider.com/how-bill-clintons-balanced-budget-destroyed-the-economy-2012-9
http://www.forbes.com/sites/johntharvey/2012/07/18/why-you-should-love-government-deficits/

Clinton's surplus there, by simple sector balances (taking money out of the private economy), lay the seeds for the future debt crisis by setting that pattern in place, of economic growth fuelled by private debt (which becomes extremely unstable, as private-debt vs GDP increases).


I think that really, there isn't any separating the economy or discussion about economics, from politics; all economic narrative in the US (and much of the world), is actually very conservative, tending towards public belt-tightening and deficit/debt reduction, which usually goes hand-in-hand with a continuance of privatization and destruction of public services (very politicized topics).

There is potential to completely disarm that conservative economic narrative though, because it is not in line with how economies really should work; a few simple changes, could completely change economic discourse.

For instance, private banks (through the central bank) have exclusive use of money creation, through issuing debt-based money (loans), and once the penny drops with the public, that money creation can be used for public purposes as well (through government spending, which can be limited by an inflation target instead of by taxes), with taxation being to public money creation, what repayment of debt/interest is to private money creation; once the penny drops there, it pretty much makes most conservative economic discourse obsolete overnight.

No longer is deficit/debt reduction a good thing (you don't even need debt), and the "my taxdollars pay for x, y, z" conservative economic narrative is no longer true; pretty much transforms economic narrative into being about progressive social purpose instead, as it should be.

Black Swan

The Bloomberg Businessweek article was of utmost interest in that it concluded an Obama or Romney win for the next 4 years really didn't matter, but whomever won (and their party) would get credit for the recovery and gradual return to growth. If this bears fruit, it says a lot about US politics, and the associated spin of political leadership.

The implications of this conclusion and its impact on elections reminds me of an old Huey Long political metaphor: Find out where the band is marching, place yourself in front of it, and all those you pass will think you are leading it, and give you (undeserved) credit for it.

KyussBishop

I can see where that is going alright, though I'm not sure recovery in the next 4 years is a certainty now, given the fiscal-cliff/sequester stuff, causing an introduction of austerity (there are also future economic crisis to come, possibly quite soon, due to fossil fuel prices and such), and such economic predictions lately are always on the suspiciously-optimistic (and often wrong) side; certainly, with both parties engaging in counterproductive policies, I don't think either of them should get 'credit' for anything, though can see how one may gain superficial credit in public eyes

The problem with that interpretation, is that it seems to imply policy choices by either government, would be economically neutral (with recovery coming anyway), but I think the difference between Republican policies and the 'slightly-less-worse' Democrat policies, could make for a rather big overall economic difference (which could be the determining difference in whether recovery is achieved or not); I don't think it's a certainty recovery would be eventually achieved under Republican government, and don't think it's necessarily a certainty now under the Democratic government (due to the sequester and such).

Will be interesting to see, by the end of the year, the true effect of the slow-introduction of austerity we are seeing in the US; the effects of the taxes/cuts at the start of the year, plus these additional sequestration cuts, will take a bit of time to sink in.

InTheTrees

Black Swan wrote: »

The Bloomberg Businessweek article was of utmost interest in that it concluded an Obama or Romney win for the next 4 years really didn't matter, but whomever won (and their party) would get credit for the recovery and gradual return to growth. If this bears fruit, it says a lot about US politics, and the associated spin of political leadership.

Economically, perhaps it may not have mattered, but certainly not socially.

A romney win would have been disastrous.

Amerika

Unemployment at 7.7%, but the real number is closer to 23% when you factor in those who have given up trying to find employment. And 46,609,072 people on food stamps. But my stocks are doing great!

Yipee!

So are companies making profits because they have learned to do more with less? Are they reluctant to make risk investments in capital, production and people because they are fearful of the imposing regulations being put in place?

And even with all this "recovery," the Federal government still needs to borrow about $.35 on every $1.00 they spend right... and can't afford to spend any less or we will have to furlough federal worders, close down public parks, fire teachers, police, firemen, and TSA Agents in the their shiny new uniforms? I got that right?

InTheTrees

Black Swan wrote: »

What will happen to the Tea Partyfaction of the Republican party? Will it wither away with the economic recovery, or attempt to fill the vacuum in Republican leadership caused by the November 2012 defeat, perhaps moving the political platform further to the right?

I can see the tea party making gains within the republican party, which will ultimatly alienate the republicans from the mainstream even more and hand the election in 2016 to the Democrats.

I see strong similarities between the current republican party and the brit labour party under michael foot in the thatcher years. The tea Party = Militant.

Brian?

Amerika wrote: »

Unemployment at 7.7%, but the real number is closer to 23% when you factor in those who have given up trying to find employment. And 46,609,072 people on food stamps. But my stocks are doing great!

Source for the 23% figure?

I seem to remember you predicting a complete melt down of the financial markets if Obama won and advising me to pull my money out of the stock Market and buying gold. If I'd followed your advice I would be quite a bit poorer now.

Now you don't care that the Dow is up? Hilarious.

So are companies making profits because they have learned to do more with less? Are they reluctant to make risk investments in capital, production and people because they are fearful of the imposing regulations being put in place?

No. Employment is rising and the economy is recovering, despite your doomsday predictions.

And even with all this "recovery," the Federal government still needs to borrow about $.35 on every $1.00 they spend right... and can't afford to spend any less or we will have to furlough federal worders, close down public parks, fire teachers, police, firemen, and TSA Agents in the their shiny new uniforms? I got that right?

No you haven't got it right. That help?

KyussBishop

Here is a really good speculative analysis on what may be likely to happen with US politics in the next couple of years:
http://neweconomicperspectives.org/2013/03/is-it-really-about-dysfunctional-partisanship.html

Describes in detail, how rather than any party getting to take credit for recovery, the Democrats may be likely to weaken their political power through their current policies, potentially leading to a resurgence of the Republicans (if they don't screw up again, by presenting unelectable candidates).

Black Swan

Joe Firestone (in the article cited above) would have us believe that the reason why Democrats gained seats in the US House during 2012 was due to the Republicans nominating unelectable candidates, and ignoring the interests of women and large numbers of minority voters (e.g., Hispanic, African Americans, etc.). Further, that such GOP actions were cause for the voters to ignore "It's the economy stupid" maxim in 2012 during a period of high unemployment, and reelect Obama and increase Democrats to the US House. If so, what's to keep the Republicans from repeating their 2012 performance in 2014, and perhaps surrender the control of the US House to the Democrats, along with its powerful Speaker position?

One party rule in both Congress and the Executive is bad news for the US political system, regardless if the ruling party are Democrats or Republicans. It greatly reduces the checks-and-balances of their system.

KyussBishop

Well, the article was preconditioned on the Republicans not screwing up again with unelectable candidates If they do that, screw up again (not unlikely given the tea partiers and other economically-hard-right factions gaining ground in the GOP), it certainly may turn out that the Democrats gain more ground in 2014.

However, I (and I would judge Joe Firestone as well) think that the current cuts and tax increases (i.e. austerity measures) being enacted, are going to lead to a slowdown of the US economy and perhaps recession, so that is the other factor to consider, that may turn in the Republicans favour by 2014.

I guess that would be kind of the mirror of what you were describing in the OP, where instead of the ruling party getting credit for economic recovery, they get discredit/unpopularity, since the current (slow) economic recovery looks like it will be derailed (and it is a bipartisan effort as well in my view, to enact austerity).


I agree with you on the executive/congress one-party-rule, and that it's better to have a mix; as far as the economy goes in that respect though, I view both the Republicans and Democrats as on the same side, of wanting cuts/higher-taxes, i.e. austerity, but only differ on the distribution of those cuts/taxes; that's bad for the economy, in my view, no matter where the cuts/taxes fall.

Black Swan

KyussBishop wrote: »

However, I (and I would judge Joe Firestone as well) think that the current cuts and tax increases (i.e. austerity measures) being enacted, are going to lead to a slowdown of the US economy and perhaps recession, so that is the other factor to consider, that may turn in the Republicans favour by 2014.

The original Bloomberg report suggested slow, gradual recovery, not recession during the next 4 years. This was also one possibility offered in the Firestone article. Given that the theories, methods, and predictions made for this time period fall short of being a rigorous science, I guess we shall see as time passes.

It would appear that the Republicans, as well as the Tea Party faction of the Republican party, need to rethink their political platform(s) in very short order, given that 2014 campaign season draws near quickly. Barring a double dip recession before the election, which I think unlikely, they may lose the US House in 2014 if they do not significantly change their image(s) with large segments of the electorate, especially women.

InTheTrees

Black Swan wrote: »

It would appear that the Republicans, as well as the Tea Party faction of the Republican party, need to rethink their political platform(s) in very short order, given that 2014 campaign season draws near quickly.

The republicans have taken the rejection at the ballotbox that was delivered to them by the voters last year as a sign that they arent extreme enough, so the move has been to go further to the right.

Brian?

Black Swan wrote: »

The original Bloomberg report suggested slow, gradual recovery, not recession during the next 4 years. This was also one possibility offered in the Firestone article. Given that the theories, methods, and predictions made for this time period fall short of being a rigorous science, I guess we shall see as time passes.

It would appear that the Republicans, as well as the Tea Party faction of the Republican party, need to rethink their political platform(s) in very short order, given that 2014 campaign season draws near quickly. Barring a double dip recession before the election, which I think unlikely, they may lose the US House in 2014 if they do not significantly change their image(s) with large segments of the electorate, especially women.

Fotunatly the GOP haven't learned their lesson yet.

Have you seen any footage from C-PAC this week? Same old faces with the same old rhetoric:

Trump
Romney
Santorum

Rand Paul got trotted out, I get the feeling they are worried about losing the libertarian wing. Marco Rubio did a great impression of Romney with a tan. Bobby Jindal seems to be the only one who gets it.

InTheTrees

Brian? wrote: »

Fortunately the GOP haven't learned their lesson yet.

+1

The blind leading the blind.

Basically bipartisan collaboration doesnt work with these people so Democrats need to take control of the House of Reps in 2014.