Key Takeaways

1.   These are the most important words in American history … “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among those are Life, Liberty, and the Pursuit of Happiness.” Think about those words in the Declaration of Independence.

2.   We Americans have so very much to be thankful for. Celebrate!

3.   The US midterm elections now handicap as few gains for either party in the House or Senate.

4.   Even if the Iran War resumes, the US economy is on an even keel and is now gaining momentum.  

5.   Ukraine is now clearly winning its war against Russia.

Celebrate America! 

There are so many wonderful things to celebrate in and about America. Step back from doom and gloom and count our blessings. We certainly have many problems but so many more positives than negatives. Think about … really think about our great blessings and the things the American people have created.

·      The goodness and fairness of the American people

·      The military vets who have fought for our freedoms

·      The magnificent Declaration of Independence, Constitution, and our unalienable rights

·      The entire Bill of Rights

·      Freedom of religion

·      Freedom of speech

·      Freedom of the press

·      Freedom of association

·      The right to bear arms

·      Democracy/rule by the people

·      A market economy where the people make choices, not the government

·      An economy where innovation and risk-taking are encouraged

·      The rule of law

·      Private property rights

·      Energy independence

·      Food independence

·      The wealthiest nation ever to exist

·      The most powerful nation ever to exist

Think about all the rights we have that most of us take for granted. But note that they will exist only if we work to keep them.

The Iran War

FACTS AND REALITIES

Iran and the US signed a Memorandum of Understanding (MoU) setting up negotiations to settle the Iran War and have agreed to a 60-day ceasefire to negotiate that deal. Those negotiations are underway but have yet to make much progress. Progress is likely to be painfully slow.

We’ll see where things go from here. Don’t expect a quick positive resolution. Do expect a long tedious unsatisfactory process which may or may not end in real peace. Also expect numerous twists and turns.

The Iranian leaders are delusional about what they can win in the negotiations.

President Trump has established three red lines for the negotiations he is highly likely to stick to and enforce.

They are:

1.   A free, open, and safe Strait of Hormuz and Persian Gulf guaranteed.

2.   Shipment of Iran’s current supply of enriched uranium out of that country or otherwise disposing of it.

3.   An enforced prohibition on future uranium enrichment or other means of obtaining a nuclear weapon by Iran.

Those red lines are real. If they are not met through current or future negotiations the shooting war will restart.

Trump will suffer serious political damage at home and internationally if he does not insist on maintaining his own red lines.

The US and Israel have been in a major war with Iran since February. Below is a list of realities I think will help you understand where we are and where we are probably going even as we proceed to the next stage, negotiating a peace deal.

1.   Iran’s military has been mostly defeated. It has lost almost all its defensive capabilities against air and naval attacks except hiding its remaining missiles, drones, small boats, and other weapons. But Iran still has offensive military capabilities, especially missiles, drones, and small boats with weaponry which can swarm ships in the Strait of Hormuz. An important consideration is that Iran can still do major damage to the Gulf Arab countries.

2.   The Iran defense industrial base (DIB), its various defense industries, has been mostly destroyed.

3.   A large ground invasion of Iran by the US will not occur and was never in the cards.  

4.   Do not count on regime change in Iran. The regime may survive even if it ends up accepting a demeaning settlement of the war.

5.   The Israel-Hezbollah War in Lebanon is near certain to continue even if there is a deal in the Iran war.

Supreme Court Decisions 

Last week the Supreme Court issued four major decisions. Three pleased conservatives and one upset them.

The displeasing case was in Trump v. Barbara, the birthright citizenship case. The court upheld the current interpretation of the law that almost anyone born in the US is automatically a citizen. That long-standing precedent was upheld but exceptions might be upheld for laws passed by Congress that limit special cases. The best example will likely be restrictions on the currently common “birth tourism” where a pregnant woman travels to the US for the purpose of gaining US citizenship for her child.

Two transgender cases were resolved in favor of the conservative position. It confirmed that states have the power to prohibit transgender women/biological men from competing in womens’/girls’ sports. About half the states now have such rules and the others will face the decision of whether to join them. Public opinion is very strongly in favor of such rules.

Over 100 years ago, during the first “progressive era.” Congress began setting up independent agencies which were partway in the executive branch but not fully so. These agencies and commissions like the Federal Trade Commission (FTC) and Federal Reserve had their leaders appointed by the President. But unlike other senior executive branch officials he could not fire them except “for cause.” The Court last week ruled such a restriction on the President was unconstitutional because there is no provision for agencies with such limitations on Presidential power in the Constitution. An exception was made for the Federal Reserve because of its unique role in carrying out the explicit power of Congress to “coin money.”

The third conservative win was in a freedom of speech case. Previously the Court ruled that political donations are a legitimate form of free speech. But federal rules had restricted coordination by the political parties and individual candidates in spending campaign funds. That restriction was overturned last week.

Overall last week was a good week for conservative decisions by the Supreme Court as was the entire 2025-26 term.

A New Reality for the Midterms 

WHERE STAND THE DEMOCRATIC AND REPUBLICAN PARTIES

The Republicans

The Republican Party is now in the typical position for the party  controlling the White House. President Trump leads the party organizationally, politically, and programmatically. There are always conflicts in the diverse “big tent” mass American parties over policies and power. That is normal. President Trump is very controversial and aggressive. He is also clearly in charge. He draws adulation and loyalty from millions of voters and contempt and disdain from millions of others. In this year’s midterms he will gain votes for his party but also drive other voters away.

The biggest threat to the Rs for the midterms is the affordability/inflation crisis which carried over from the Biden-Harris years but is now owned by the Rs. The Iran War has exacerbated the affordability problem by pushing up gasoline prices, but those prices are now falling rapidly.

The Democrats

The contrast between the Democrats and Republicans could not be starker. Where the Rs have Trump and his leadership, the Ds have no leader or leadership. Biden is in dementia, Harris is clueless, and Obama’s time has passed. In the Senate and House, Schumer and Jeffries are weak and trying to figure out what to do about the startling rise of radical democratic socialists in their party. Their policy leadership consists of just saying NO to everything the Rs try to do.

Since the 2024 elections, which they lost badly, the Ds have been in a civil war pitting the traditional libs against the younger radical democratic socialists. With the election of Zohran Mamdani in NYC, other democratic socialist mayors in big cities, and numerous radical Ds winning primary victories this year the battle is on for control of the Party.

That battle has flared in recent days with legendary Democratic strategist James Carville so outraged at the beliefs of many radical democratic socialists that he said on-air, “And I actually do think it’s time for the Democrats to talk the S word; schism. I really do.” He clearly wants the anti-American, antisemites out of the Democratic Party. But they are not going away. They seriously threaten taking over the Democratic Party.

The battles in the Democratic Party are not just policy debates, it is a vicious civil war over ideology, power, and leadership.

The faces and voices of the Democratic Party are no longer the Clintons, Obama, or Biden. They are now Bernie Sanders, AOC, Mamdani and other radical democratic socialists. Many of them hate America, its history and values. Many are looking for racial spoils and reparations. Those ideas will not sit well with centrist Middle America.

I’m going out on a limb and suggest that the way we have been analyzing midterms for decades is now misleading us. Fundamental changes have occurred and are still underway in various structures and realities of our politics, especially for the election of House members.

Historically, the party controlling the White House has lost an average of 26 House seats in midterm elections. But this year’s midterms now handicap far differently than that.

The structure and realities of US election campaigns have changed dramatically. The old rules and formulas are no longer reliable. Consider the evidence for that.

·      The Democrats have moved significantly to the left and away from the center, while the Republicans have remained right of center where they have been for years. The US is still centrist.

·      Widespread redistricting/gerrymandering, especially since the last election, has markedly cut the number of House races likely to be competitive. As recently as the 2022 midterms, about 60 House races were rated as competitive while this year it appears the number of such races will be less than half of that.

·      Trump, the Rs, and the Ds ALL have much higher disapproval scores than approval scores. THE VOTERS ARE VERY UNHAPPY WITH TRUMP AND WITH BOTH PARTIES. Normally the party controlling the White House/presidency gets punished because the party out of power looks more appealing. That is the “throw the bums out” phenomena.

But this year both parties and the President are being rejected. Trump’s approval rating in the recently released Harvard/Harris poll among likely midterm voters was 46% approve and 52% disapprove – a net of minus 6%. The R party was at 45% approve and 55% disapprove – a net of minus 10%. The D party was at 44% approve and 56% disapprove – a net of minus 12%. That same poll now has the Ds ahead of the Rs by 4% (52% to 48%) in the choice between House candidates.

·      Led by President Trump, R fundraising this year is likely to be much higher than D fundraising.

·      With the Democrats now lambasting billionaires and campaigning across the country to “tax the rich,” it is less likely that the rich will fund D campaigns, which many of them have done in the past.

·      The trend so far this year is for the Ds to nominate candidates farther to the left than they have in the past. That will continue. By contrast, the Rs are nominating few kooks and mostly conventional center-right candidates. D candidates farther to the left are likely to find winning in November harder than traditional center-left candidates would.

·      Avowed socialists like Zohran Mamdani and AOC have become the faces and voices of the Democratic party. That may not go over well with centrist American voters. Many Democratic candidates believe socialism can work and will forcefully push it. That will work against them and the Democrats in general.

·      The Ds are in the process of nominating quite a few kooks and extreme radicals this year. Senate nominees Graham Platner in ME and James Talarico in TX are kooks. The Ds also look headed toward choosing radical nominees in the important MI Senate contest and in the MN Senate race. Numerous D nominees are socialists, and/or antisemites, and/or anti-white racists. They are far from the center of American politics.

·      THE BOTTOM LINE ON THE FUTURE OF THE DEMOCRATIC PARTY IS THAT THEY ARE SLOWLY DESTROYING THEIR BRAND AND THEIR PARTY.

·      Earlier this year, it looked like the redistricting wars would end up close to a draw. But recent events now suggest the Rs will have a net redistricting gain of 10 to 14 seats.

Considering these major changes which have occurred or are now occurring, I am shifting my previous analysis. My analysis is that neither party will gain or lose many seats in the House or Senate.

Four factors are most likely to determine the outcome of the midterms. They are:

1.   Does the affordability/inflation issue continue to dominate public concerns? If so, it will harm the Rs.

2.   Do the Rs raise far more money this year than usual and spend it effectively? If so, it will harm the Ds.

3.   Will the Rs develop effective messaging against the growing radicalism and socialism of the current young leaders of the Democratic Party? If so, it will hurt the Ds.

4.   Will the Rs do a substantially better job this year of getting out the vote (GOTV) than they usually do? If not, the Ds will have an advantage.

We’ll see. But remember, it is four months until the midterms, and much can change. I’ll update my analysis regularly.

The Economy and Markets

Economic Data

·      NEW – The June employment report showed an increase of 57,000 jobs and a decline in the unemployment rate from 4.3% down to 4.2%.

·      NEW – The latest job openings report showed them unchanged and high at 7.6 million.

·      The Q1 estimate of GDP change was raised from +1.6% to +2.1%, an important increase.

·      The Fed’s favorite inflation measure, core PCE inflation, were unchanged month-to-month at +0.3% and +3.4% year-to-year. 

·      The Federal Reserve just released an update of the net worth of US households. At the end of March that statistic was an amazing $174 trillion. Such a huge amount of wealth is one of the reasons stock market records continue to be set. This huge wealth stabilizes the economy by keeping consumer spending high, especially by upscale households. The wealth creates and supports employment, the stock markets, and the economy in general. But US wealth is very unequally spread across the population. 

·      Last week the S&P500 was up1.6%, the NASDAQ was up 1%, and the Dow was up 2.3%. Gasoline was down 4% and crude fell 6.2%. 

·      Retail sales rose a strong 0.9% month over month, a positive sign of a growing economy.

·      NEW - The latest estimate for Q2 GDP from the Atlanta Fed GDPNOW is a modest 1.2%.

·      NEW – Earnings reports for Q1 continue to look very strong.

·      NEW – New claims for unemployment insurance last week stayed low at 215,000. This demonstrates that layoffs are still quite low.

UPDATE - The US Economy Overall

We are now over three months into the Iran War. With the peace negotiations beginning, the ceasefire may run 60 days or longer.

For us at home, it is comforting to see how limited the effects of the Iran war have been on our economy and on the financial markets. It is very unlikely the war will seriously harm the US economy even if the shooting war resumes. Consider:

·      10-year treasuries are now up about 35 basis points (.35%) from the first of the year, before the war started. That hurts but not seriously.

·      The major stock market indices rose last week and are still at or near record highs.

·      The US job market has turned positive over the last six months.

·      Unlike almost all other nations, the Iran War has had only limited negative effects in the US with the worst widely felt negative now being a $.50 rise in the cost of gasoline.

As we move further into summer, the economy looks positive overall. Corporate earnings have been very strong and look like they will continue that way. Real economic growth in 2026 looks likely to be solid and a 2026 recession looks very unlikely.

Stats just out suggest hiring is picking up while layoffs remain low and with unemployment claims low in June the employment market looks solid.

Crude oil and gasoline prices are coming down quickly. They will continue to do so if the peace negotiations are successful.

Global Watch Updates 

Ukraine Goes on the Attack 

Ukraine President Zelenskyi has ordered a 40-day Strike Campaign on the Russians in occupied Ukraine and in Russia itself. Even prior to this campaign being ordered, Crimea was in a official “state of emergency” brought on by recent Ukrainian missile and drone strikes. Petrol supplies are not available there to the public but only for government vehicles. Thousands of Russian tourists and Crimean citizens are trying the escape to the Russian mainland.

In Russia itself, numerous large Ukrainian missile and drone strikes have destroyed energy and defense industry infrastructure as well as anti-aircraft defenses.  Most Russian regions now have petrol shortages and are rationing supplies. The war has been brought home to the Russian people.

Zelenskyi’s Strike Campaign has seriously ratcheted up the quantity and intensity of the missile and drone strikes. The goal is to create an economic and political crisis in Crimea and Russia to get Putin to abandon the war and negotiate a settlement.

UKRAINE WAR REALITIES 

·      In Russian occupied Ukraine both civilian and military vehicles are being hit by Ukrainian drones making transport very hazardous. Logistical transport of military supplies and even civilian transport of people and goods are getting very hazardous in Crimea and in other Russian occupied Ukrainian provinces.

·      Neither side is making significant ground gains. The stalemate has hardened even though the shooting continues.

·      Russia is now losing the war militarily, politically, economically, financially, and technologically.

·      Almost all Russian attempts to gain ground this year have failed badly with large manpower losses for them.

·      Russian casualties have been unsustainably high, higher than their ability to replace lost troops with new recruits.  

·      Ukrainian missiles and drones are also doing increasing amounts of serious damage to Russian energy and defense industries in the western half of Russia.

·      Week after week Ukraine’s missiles and drones are seriously cutting Russia’s ability to export oil from their Black Sea and Baltic export terminals.  

Zelenskyi’s 40 Day Strike Campaign may speed up the end of the war.

Ideas to Remember 

1.   The US is the world’s dominant power. China and Russia are declining in power relative to the US.

2.   Take Trump seriously but not literally. Remember he is always setting up the next negotiation. His off-the-cuff comments frequently cause major confusion.

3.   The Republicans have become the party of the working-class and middle-middle class.

4.   In politics, it’s the economy, stupid. The average household will be able to balance their budget or else the party in power will be punished.

Political Psychiatry 30-Day Test

With daily disturbing news, teach yourself to take a deep breath and ask if that news will matter much in 30 days or so. Only rarely will it be important. So, ignore it, and lower your blood pressure. 

Tuchfarber Report Goals

Predictions – Methods & Standards

My method – gather accurate facts, analyze them with no biases, and make accurate predictions.

The Tuchfarber Standard – make predictions on important issues when I’m over 80% convinced the prediction will be correct.

I’m sure many of you chuckle when I claim I do unbiased analyses. But if my biases, which I do have, and hopes influenced my predictions, how did I get 97% of my 248 predictions correct over the last four years?

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Al Tuchfarber PhD -- Professor Emeritus of Political Science, University of Cincinnati

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Tuchfarber Political-Economics LLC

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Dr. Tuchfarber founded the Ohio Poll, one of the country’s most accurate, while directing the Institute for Policy Research at the University of Cincinnati for four decades. He is an engaging, informative, and dynamic speaker. Al has published well over 100 publications about politics, political-economics, society, and research methods.

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