Sunday, May 10, 2020

BTRTN: Bigfoot, Unicorns, and Superior Republican Stewardship of the Economy

Economic theory is only so much rhetoric. It is meaningless if not implemented, and irrelevant if grievously flawed larger decisions ruin the economy. Beyond economic metrics, we must take the measure the person in charge.

Believe it or not, there are still people out there today who believe that the moon landing was faked, that an alien being was recovered in Roswell, New Mexico, and that Republican Presidents are superior stewards of the economy. 

Sure, some cult beliefs will never, ever be eradicated, but let’s take that last one on.  

The purpose here is not to engage is an exhaustive, quantitative exercise designed to isolate all variables and publish the definitive analysis of supply side economics. 

No, the approach we use today is rooted in the liberal arts perspective, in which we apply reasoned observation from a wide variety of lenses to try to make sense of a simple fact: Democratic administrations result in better stock market performance than Republican administrations.

First, the raw facts.

Since 1992, two Democrats each presided over eight years of booming economic growth and left office with unquestionable statistical proof that the nation was better off than it had been went they took office. All you Republicans who vote solely based on your portfolios? In Bill Clinton’s eight years in office, the Dow Jones Industrial Average increased 227%. In Barack Obama’s eight years, the Dow increased 138%. 

Since 1992, two Republicans have served as President. The first, George W. Bush, ended his two terms in office with what was –pre-COVID -- the worst economic collapse since the Great Depression. At the end of his eight year term, the DJIA actually was down 25%.  The second Republican President, Donald Trump, approaches the end of his first term with the United States economy in free-fall. For all Donald Trump crows about the performance of the stock market under his leadership, the exact percentage increase as of Friday afternoon was 23%, far, far below the gains achieved by either Clinton or Obama. 

Ah, but I hear you, you stunned Republicans: that’s an unfair comparison! You’re comparing the two full terms of Obama and Clinton against the not-yet-complete first term of Trump! Ok, let’s do that math. At the equivalent point in Clinton’s first term – May 8, 1996 – the Dow Jones Industrial Average had increased by 69%.  The same comparison in Obama’s first term showed a gain of 61%.

And yet I can still hear you Republicans refusing to accept the truth: that’s an unfair comparison! You are just focusing on the last 30 years! If you took a much longer term view, surely you’d have a different answer.

Well, yes, you would. On the longer term, it is even more unambiguous that the performance of the DJIA is stronger in a Democratic administration than a Republican one. Since 1900, the average growth of the DJIA under Democrats has been 83%. The average gain under Republicans has been 45%.

The funniest thing? Even the articles I found on this subject in what I view to be conservative financial journals agreed that the stock market performed better under Democrats. They simply tried to make the argument that the 120 years of superior market performance was not because they were Democrats. Here’s my favorite tidbit from a conservative analysis aching to deny the reality: stock market gains were “easy” for Barack Obama, one writer asserted, because the stock market was so far in the toilet when he was elected. Uh, who do you think put it in the toilet?

Those gains were “easy?” The economy was in meltdown when Obama was elected President, and his decisive actions with the stimulus and saving the domestic automobile industry were critical to reversing a slide that could have gotten far worse. Many Republicans seem to have selective memory in their recollection of how a Republican administration cratered the economy and a Democratic administration saved it. 

It is a settled matter. When it comes to your investment portfolio, Democratic Presidents outperform Republicans. This is fact. Let’s talk about it. 

First, it is important for me to disclose any personal biases that may color my judgment and perspective on this issue. 

Here you go: in my personal finances and in the company I owned with a smart, disciplined, and high-integrity business partner, I have always been quite conservative in my approach to finances.  I am uncomfortable with debt and rid myself of it as soon as possible. I get jumpy if I veer anywhere near an unfavorable imbalance between spending and income. I keep budgets in anal-compulsive spreadsheets so that I can micro-manage my financial life.  

Once upon a time, this type of behavior might have been referred to as “Republican.” Throw in my personal beliefs about the importance of societal safety nets (Social Security, Medicare, Medicaid) and a desire to invest to equalize opportunity among our population segments, and you would have once called me a “Rockefeller Republican.” 

That is the bias I felt a need to disclose. It would be an error for a Republican to dismiss this essay as the work product of just another “tax and spend” Democrat. No, when it comes to fiscal policies, the double helix in my  “23 and Me” test would closely match that extinct species, the “centrist Republican.” 
What is apparent is that the two “Republican” presidents of this century have no idea of what even  being a “Republican” really is. When it comes to issues like economic controls, discipline, borrowing, debt, balancing budgets, free trade, and wise investment in growth industries and in our nation’s – and our planet’s -- future, these two Republican presidents have been catastrophes. Who even knows what economic label to put on Donald Trump, as his actions in regard to trade, the national debt, balanced budgets, and wise investment to protect our nation’s future appear anything but Republican.

However, far beyond alleged beliefs in and adherence to a code of economic principles associated with a political party, there is actually a far bigger determinant of our nation’s economic fate. This is where we depart from the theories of traditional economists and use our liberal arts discipline to arrive at a very reasonable explanation for the vast difference in performance between Republican and Democratic administrations over the past 30 years. 

Our hypothesis today is that the biggest reason for the strong performance of the economy under Bill Clinton and Barack Obama was simply that neither made a huge, stupid decision on a matter unrelated to the economy. Neither made a catastrophic decision that caused crushing damage to the economy, which meant that the commerce under their leadership hummed away uninterrupted for eight years. 

The two Republican Presidents in question, however, each made monumental errors on matters that, at face value, were not related to the economy. Except, uh, everything is related to the economy. If you make huge, stupid decisions about a war, a pandemic, or any natural disaster, you are going to have a huge impact on the economy. Throw in George Bush’s obscenely lax regulation of the financial industry, and you understand why the stock market actually declined over his eight years in office. 

Let’s review the Bush record first. George Dubya was steamrolled by Dick Cheney and Donald Rumsfeld to use phony intelligence about weapons of mass destruction to link Saddam Hussain and Iraq with 9/11.  Using this bogus justification, Bush allowed our country to become engulfed in an endless quagmire that divided the nation, drained our economic resources, and led to mushrooming debt. Bush’s administration turned a lazy regulatory blind eye to a tsunami of arcane financial instruments that were metastasizing on Wall Street, and could only watch as trillions of dollars of investment and savings was annihilated when the house of cards collapsed. Bush’s inexperience, poor judgment, terrible decision making, and abdication of financial stewardship led to economic carnage. 

On to Donald Trump: for the first three years of his administration, Trump claimed that his brilliant leadership was responsible for strong stock market growth and employment numbers. These assertions are easy to challenge. 

First and foremost, he inherited a strong economy from the Obama administration – unlike Obama himself, who won the Presidency in the darkest abyss of Wall Street carnage under Bush’s watch. Both GDP growth and the decline in unemployment recorded under Trump prior to the coronavirus were a continuation of the trajectory established for years under Obama. 

Second, Trump eased government regulations across a broad swath of industry sectors, particularly in the financial and energy sectors. It is a no-brainer that reducing the direct and indirect cost of regulations will pump up corporate profits and stock prices. America will pay the price in the long term, of course, as we fall behind in renewable energy sources and continue to damage our climate. 

Third, Trump’s tax policy – a sloppy wet kiss to his wealthy donors and big companies – was passed with the assurance that the Federal deficit would be reduced because of the organic growth the tax cuts would stimulate. Not only has this not been borne out, the deficit has ballooned under Trump. Indeed, according to the Daily Beast, Trump was warned in 2017 about an inevitable debt crisis, and an eyewitness reported Trump’s response: “yeah, but I won’t be here.” Hey, it’s easy to pump up stock prices if your grandchildren are paying for it.

It is worth noting in this context that Trump is just the latest in a long line of Republican presidents -- including Reagan and George W. Bush -- to promise that a tax cut will stimulate growth and result in increased revenues to the government by virtue of the expanding GDP. It never happens. Nothing ever trickles down. Deficits and debt rise faster in Republican administrations than when a Democrat is in office. Why? The last time a tax cut resulted in offsetting growth was during the administration of John F. Kennedy, who took this step in an environment of very high marginal taxes... a situation that did not exist for Reagan, Bush, or Trump. It is easier to get a stimulus when you are taking high rates down, not as easy when you are taking low rates down. And, yes, Kennedy was a Democrat.

Fourth, Trump likes to take credit for new trade agreements. It’s widely viewed that Trump’s new North American trade deal is merely a modest revision of NAFTA, and Trump has not replaced the Trans-Pacific Partnership that he allowed to lapse. His attempts to talk tough with China have largely puzzled Republicans, who readily acknowledge that it is Americans who pay the tariffs. Republicans  generally abhor tariffs as a bargaining tactic.

People who only look at the economy through the single lens of narrow fiscal policy theories can happily conclude that a person who claims to believe in balanced budgets, supply-side economics, and smaller government is the right candidate for them. Many of my neighbors here in this pleasant and heavily Republican suburb seem to begin and end their thinking on Donald Trump with exactly that much consideration. Somehow, they fail to assess whether this President actually understands, believes, or acts on those economic principles. 

And now, any claims to economic triumph – stock market growth, unemployment, trade agreements -- have been crushed by the emergence of a global pandemic, and Trump has been roundly criticized for exacerbating its impact on the American economy by virtue of his failure to act decisively, comprehensively, centrally, and quickly to contain the coronavirus. 

We return to our core thesis: there is no economic policy on earth that can devastate the American economy as quickly and as comprehensively as a lazy and ignorant President who is not up to the job, and who is an abject failure in a crisis.

It is Trump’s profound incompetence on matters unrelated to the economy have had a shocking and crushing impact on our economic vitality. He failed to grasp the potential scope and impact of the COVID-19 pandemic, and failed to take the rapid decisive actions that other world leaders took and that the medical and scientific community so strenuously urged. He failed to create a centralized, coordinated, and immediate national response based on mitigating contagion, and failed to invoke his President powers to ramp up a properly scaled national testing program. As a result, we as a nation are far less effective than most major nations in containing the virus, with no clear path to safety in sight. The damage to our economy is staggering. Sure, some of that damage is simply due to the existence of a global pandemic – but a very large part of the damage is a self-inflicted wound by a President who was not up to the job. 

So let me spell this out for all you Republicans, so you can baste is the sour brine of irony:  it is extremely reasonable to hypothesize that the economic toll of the coronavirus is far more devastating than it would  have been had an Obama, Bill Clinton, or Hillary Clinton been President. Any of those three individuals were completely committed to soliciting and respecting expert opinion. Each would have listened to the scientists, the doctors, and studied and learned from the experiences of other countries. They would have acted more quickly, and the economic impact of the pandemic would have been far less than what we are experiencing.

Still, though, Republicans somehow fail to see that a lazy, ignorant man who acts on hunches is far more likely to make catastrophically bad decisions on a wide array of topics, many of which have a direct bearing on the economy. 

To them, I recommend the enlightenment of the liberal arts perspective.

The single most influential book I read in college was Max Weber’s “The Protestant Ethic and Spirit of Capitalism.” In it, Weber argued that the changes in the essential nature of religious belief that emerged in the wake of Martin Luther’s break from Catholicism  – the notion of a radically transcendent God, the concept of predestination, and manner in which people demonstrated their religious conviction – all led directly to the “Protestant work ethic,” which in turn triggered the rise of capitalism. It was fascinating to track Weber’s logic and analysis and understand how a profound shift in one aspect of a society – its religious beliefs – could cascade across the breadth of its structure and result in profound changes to its economic principles. 

That is perhaps the single most important learning I took away from four years of liberal arts education: that it is essential to assess a situation or decision from many angles, to understand as many of the potential implications as possible. Martin Luther was not thinking about how his seismic impact on religious beliefs would ripple across society and contribute to a sea-change in economic practices. 

Today, it is myopic and foolish for Republicans to say, “Donald Trump is a Republican, therefore my investments and net worth will be better optimized if he is President than if a Democrat wins.” This fails to take into account the fact that he is a lazy, ignorant, and unqualified man who is wholly motivated by self-interest, and that such a person will be much, much more likely to make stupid decisions that could have a far more profound impact on the economy than mere nuances of policy. 

Whatever Republican economic leanings I may have had years ago, I am a fiercely committed Democrat today. But I will say this: I would rather have a wise, learned, thoughtful, and humble “Republican” as my President than have an ignorant, stupid, cavalier, and impulsive “Democrat.”

Perhaps even more bluntly: I would have been disappointed if Mitt Romney had defeated Barack Obama in 2012, but I would not have worried that our nation would be driven to ruin. It was easy to see that Mitt Romney is a smart, informed, thoughtful, principled man, a man likely to make good decisions. 
Perhaps Republicans should have applied a similar test to their options in 2016, because it is very likely that today their portfolios would be worth more if Hillary Clinton had been elected President. There are many, many reasons to support this contention, but the most simple is this: the economy would have continued to grow, as it had under Barack Obama, and she would have acted with urgency to contain the pandemic, minimizing its crippling impact on our economy. She would have not made a huge, stupid error unrelated to the economy, and therefore the economy would have been better off. 

In the end, Donald Trumped completely fooled the supposed “economic Republicans,” the wealthy suburban knowledge workers who only care about keeping their money. These people are different from the angry, unemployed factory workers who vented their rage about lost jobs and income by voting for Donald Trump in 2016. The educated, well-to-do Republicans in upscale suburbs willfully chose to accept the obvious phoniness, lack of qualification, corruption, deceit, and bigotry of Donald Trump on the grounds that “Republican stewardship” of the economy would better serve their economic self-interest. 

And now, if those same Republicans use that same rationale to vote for Donald Trump in 2020, I will be left to infer that their minds are populated with unicorns, aliens, and faked moon landings. 

Make no mistake, folks. Donald Trump has another eight months in office, and if you believe that “things couldn’t possibly get any worse than this,” you just don’t have enough imagination.

Vladimir Putin may well be observing the crushing weakness of the United States at this moment and thinking that now is the perfect time to invade Ukraine and some of the eastern European countries that used to belong to the Soviet Union. Or China may decide that now is a great time to take advantage of our economic weakness. Or somebody in the Middle East may be working to acquire a nuclear bomb, confident that Donald Trump is not paying attention because he is focused on spinning his handling of the pandemic in a desperate attempt to be re-elected. 

Yes, when your President is a lazy, ignorant moron, it really doesn’t matter to your portfolio whether he is Republic or Democratic moron. 

There’s an old expression – and please, forgive its gender bias, as it is rooted in another era – about the need to “take the measure of the man.” Its intent is to say that in evaluating another human being, one must try to take into account all aspects of their humanity… certainly their competence in specific tasks, or their expertise in a specific field, but also incorporate judgments about their character, wisdom, integrity, and decency.

What kind of human being are they? Principled? Honorable? Hard working? Empathetic? 

Or not?

This is the blind spot in so much economic theory, and in the crazed Republican obsession with Trump: both fail to take the measure of the man in charge. 

And, in so doing, that failure results in an inability to see the most consequential component of economic impact. 

It remains one of the most puzzling, indeed astounding facts of my lifetime: that so many Americans were unable to see – from a mile off -- what a lying, ignorant, lazy, and self-involved buffoon Donald Trump was in 2016, and what he has been all along as President. 

I knew it. I took the measure of the man. It wasn’t hard. Sixty-five million Americans took the same measure. Yes, that would be the majority of the voters in 2016. For all the pain that Trump has caused, it is important to remember that it was a minority of Americans who either lacked the emotional intelligence to see Trump’s human inadequacies, or willfully ignored them out of greed. 

This is what is astonishing: so many Republicans then, and so many Republicans today, are unwilling or simply unable to take the measure of another human being.  When it comes to economic metrics, the measure of the man may be the most important. 

Hey, all of you greedy, self-involved, money-grubbing Republicans who go into a voting booth caring only about which candidate is going to make you richer – I have a great idea for you.

Vote Democratic.

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1 comment:

  1. A fine "liberal arts" analysis of economics, straightforward enough that even I can believe what you point to.

    I try to stay away from the economics stuff, figuring my lack of a strong Protestant work ethic, failed faith in prosperity Jesus, disbelief in Invisible Hands, and distrust of the inevitable glorious conclusion of the Marxist workers' revolution limited my adoption of any grand scheme.

    I do have two additional items to mention

    -- describing any part of the current economy to a "plan" of Trump seems silly. His approach spins more than Tommy Smothers' yoyo, he says a variety of things until he gets a positive reaction, and he is nearly endlessly willing to claim credit for whatever ideas other people bring him.

    -- it is the Republican party's OVERALL mindset creating the problems. In so many areas, they have been willing to swallow the thought that they could get something for nothing. Trump sold people on the idea of building a wall and Mexico would pay for it. He continues to think he can build up American industry and that China will pay the tariffs. Military spending can go up and we won't have to cut any domestic programs or raise taxes. And of course, he signed a tax bill which said we would get more revenue from lower taxes. Bush 43 thought we could start a war, win quickly, and not have to raise taxes to pay for it. He was apparently convinced we could have a tax cut and somehow extend the government surplus.

    My approach to government is that if we want something, it needs a solid, certain plan which will pay the bills. I remember when Republicans backed that idea, too.


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