Key Takeaways

1.   The extremism of the rapidly increasing number of democratic socialists in the Democratic Pary is a serious threat to the D’s image and brand as a mainstream party.

2.   American voters are now quite unhappy with the state of the economy, their family finances, and the direction of the country. They blame Trump, blame the Republicans, but also blame the Democrats.

3.   My handicapping of the US midterm elections continues to show few gains for either party in the House or Senate.

4.   As of early Sunday, we are in another negotiation period with Iran. But the hardliners in Iran are blocking any deal the US could accept.

5.   Even if the Iran War resumes, the US economy is on an even keel and appears to be gaining momentum.  

Serious Threats to the Democratic Party’s Future 

For years I have been writing about how the Democrats have driven the white working-class and white middle-middle-class out of their party. More recently, many analysts have documented that the minority working class, especially Hispanics, is also being driven away. Both shifts showed up in the 2024 election results. The Ds have gradually become an upscale elitist party instead of the party advocating for the well-being of the working class.

Now in just the last year there is strong evidence that the radical-leftist democratic socialists have gained a major presence in the D party and have become a serious threat to the Democratic Party’s future status as a mainstream party.

Liberal Democrat media analyst for CNN and the Washington Post, Fareed Zakaria, puts it accurately, “Democrats are facing a dilemma and Michigan’s Senate primary perfectly illustrated it. Abdal El-Sayed, the charismatic progressive, defeated Rep. Haley Stevens, the establishment-backed moderate. The energy was unquestionably with El-Sayed. But a Washington Post analysis finds his support was concentrated in the state’s most educated counties and college towns; Stevens did better in many rural and lower-income areas. The dilemma: The left has the passion, but the middle still has the votes Democrats need to win general elections.”

The Democratic Socialists of American (DSA) are competing with the traditional liberal Democrats to take control of the Democratic Party. The DSA folks have won a surprising number of primaries this year and will win more before the primaries end in September.

(See additional stories below about the parties and the midterms.)

The Iran War 

NEW – As of midday on Sunday the negotiations with Iran are still underway. After hearing all week that a deal was near, the hardliners in Iran added major demands over the weekend which the US cannot accept. I fault both the Trump administration and the Iranian hardliners for this impasse. Trump has been naïve and the Iranian generals are delusional.

If negotiations fail, the next step is likely to be an US escalation, including attacks on important Iranian economic assets.

REALITIES

The Iranian leaders are still delusional about how much they can win, but the war will likely have numerous more twists and turns before it ends.

President Trump has established three red lines for the negotiations.

They are:

1.   A free, open, and safe Strait of Hormuz.

2.   Destroy or remove Iran’s supply of enriched uranium.

3.   A prohibition on future nuclear weapons.

Iran’s military has been mostly defeated. It has lost almost all its defensive capabilities against air and naval attacks. But Iran still has offensive military capabilities, especially missiles and drones. An important consideration is that Iran can still do major damage to shipping in the Strait of Hormuz, to the Gulf Arab countries, and to US bases in the region. The US and its allies now have too few sophisticated weapons left to completely defeat the massive missile attacks of which Iran is still capable.

The Iran defense industrial base (DIB), its various defense industries, has been mostly destroyed. A large ground invasion of Iran by the US will not occur and was never in the cards.  Do not count on regime change in Iran.

The Democrats and Republicans

THE DEMOCRATS 

NEW - The contrast between the Democrats and Republicans could not be more stark. Where the Rs have Trump and his leadership, the Ds have no leader or leadership. 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 Trump and 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 growing power of the 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, a battle is on for control of the Party. Last week, Abdul Ei-Sayed, won the D nomination for US Senator from Michigan, defeating a traditional liberal. This week it looks likely that democratic socialist Francesca Hong will win the D Governor’s nomination in Wisconsin. Last week DSA candidates won congressional nominations in Tennessee. It is not just in big Democratic cities and deep blue D coastal states that the democratic socialists have burst on the scene with wins.

This Democrat civil war has flared in recent days. Legendary Democratic strategist James Carville is 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 to take over the party.

Another Democratic voice in the party fighting against the democratic socialists is Rahm Emanuel. He was a D congressman, President Obama’s White House chief-of-staff, and two-term mayor of Chicago. In a WSJ op-ed he wrote, “The DSA’s (Democratic Socialists of America) cultural agenda adds baggage for Democrats already saddled with the poor party image from the Biden era. … It was the socialists who led the charge to defund the police, open the borders, abolish prisons, release violent criminals into the streets and degrade the flag. We know those are electoral losers.”

New platform promises from the Democratic Socialists of America are to abolish the Senate, defund the War Department, abolish ICE, pack the Supreme Court, end all military and economic aid to Israel, and have the Congress appoint the President and federal judges, with only the House of Representatives with any real power. These are explicit written officially approved platform planks, not just the ravings of a few kooks.

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.

Some Ds and some in the media have been playing down the threat of the democratic socialists to the D Party but a just released CNN poll shows that about one-third of all Democrats now identify as democratic socialists. That percentage is growing and indicates how much of a problem the democratic socialists are to both the traditional liberal Dems and to the entire country.

And D officials like Senate Leader Chuck Schumer have made the problem worse by formally welcoming the democratic socialists into the “big tent” Democratic Party.

THE BOTTOM LINE ON THE FUTURE OF THE DEMOCRATIC PARTY IS THAT THEY ARE SLOWLY DESTROYING THEIR IMAGE, BRAND, AND THEIR PARTY. THEY HAVE ABANDONED THE WORKING CLASS AND ARE BEING TAKEN OVER BY UPSCALE OVEREDUCATED BUT IGNORANT DEMOCRATIC SOCIALISTS.

THE REPUBLICANS

Recent weeks have seen Trump and some Republican Senators in fights neither can win. Those fights look stupid and are, but pale in comparison to the civil war between the liberal Dems and the democratic socialists.

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.

THE MIDTERMS 

UPDATE - Fundamental changes affecting the midterms have occurred and are still underway in the various structures and political realities of our politics, especially for the election of House members.

Very recently election campaigns have changed dramatically. Consider the evidence.

·      Widespread redistricting/gerrymandering, especially since the last election, has markedly cut the number of House races likely to be competitive. Truly competitive seats are now probably just a dozen or two.

·      Trump, the Rs, and the Ds ALL have much higher disapproval ratings than approval ratings. 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” phenomenon. But both parties look inept now. Neither is presenting a clear positive plan for the country.

·      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. As of now, Trump and the Rs have a large lead in cash-on-hand. The Rs have about $1,060 million on-hand and the Ds just $410 million.

·      In addition, the increasing power of the democratic socialists in the D party is pushing money to the Rs.

·      It looks like the redistricting wars ended with the Rs netting a gain of about a dozen seats.

Considering all these changes and political realities my analysis is that neither party will gain or lose many seats in the House or Senate.

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

1.   The affordability/inflation issue is likely to continue to dominate public concerns. ADVANTAGE D   

2.   The Rs are raising far more money this year than the Ds and will add substantially to their already large lead. ADVANTAGE R

3.   The Rs are now certain to run a huge, multi-faceted media campaign with messaging against the growing radicalism and socialism of the Democratic Party. This is a major new facet of the current midterm campaign. ADVANTAGE R

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 continue to have an advantage. PROBABLY ADVANTAGE D BUT THE DEMOCRATIC SOCIALISTS MAY MAKE TURNOUT MORE DIFFICULT FOR THE Ds.

5.   Neither party is now presenting a clear appealing vision for America’s future? The one which does a better job at that will gain in the midterms. ADVANTAGE UNKNOWN

Political and Economic Tidbits 

1.   After much speculation that he would retire, Supreme Court Justice Samuel Alito announced he would return for another year on the Court this fall.

2.   Acting Attorney General Todd Blanche was confirmed as AG by the Senate after a grueling political struggle.

3.   The Senate and House are now in recess until mid-September.

4.   Both Houses of Congress passed bills continuing funding for the government through December 11 … after the midterms. But the bills are a bit different, and the Houses will need to resolve those differences when they come back in session.

The Economy and Markets

Economic Data 

·      NEW – The July unemployment rate fell from an already low 4.2% to 4.1% in June and is down from 4.4% at the beginning of the year. But 23,000 jobs were lost over the month. Both of these facts are possible because the overall size of the workforce and number of those looking for jobs both declined. We remain in a low layoff-low hire job market. (Don’t be surprised if the July stats are revised significantly in future months, either up or down.)

·      NEW – Last week’s unemployment insurance claims stayed extremely low at 199,000.

·      NEW - Last week the S&P500 was up 3.6%, the NASDAQ was up 5.2%, and the Dow was up 3.0%. Wholesale gasoline was down 4% as crude was down 8%.

·      The first official estimate of Q2 GDP was a somewhat weak +1.5%. That is down slightly from the Q1 level of +2.1%.

·      NEW - The new estimate for Q3 GDP from the Atlanta Fed GDPNOW is very strong at +5.8%. 

·      NEW – Q2 earnings continue to be released and are extremely strong. Corporate earnings are increasing dramatically across many industries but especially tech and energy. Those large and widespread increases are forecast to continue into 2027. That bodes well for stock prices over the next year but be aware that volatility will likely remain in the artificial intelligence arena.

UPDATE - The US Economy Overall

We are now five months into the Iran War.

For us at home, it is comforting to see how limited the effects of that 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:

·      UPDATE - 10-year treasuries increased to being up about 50 basis points (.50%) from the first of the year, before the war started. That hurts but not yet seriously.

·      UPDATE - The major stock market indices are at or near record highs, but volatility will continue. 

·      UPDATE - The US job market remains positive this year and trends look positive. The fear of massive layoffs being caused by AI was clearly misguided and incorrect.

·      UPDATE - 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 $1.00 rise in the cost of gasoline.

As we move toward the fall, the economy looks positive overall. Corporate earnings have been very strong and look like they will continue that way. Real economic growth in 2026 is likely to be solid and a 2026 or 2027 recession looks unlikely. With historically high corporate earnings and a positive job picture, the US economy looks good, and the 2027 outlook is positive.

Global Watch Updates

The Status of the Russian-Ukraine War 

Over the last year the Russia-Ukraine War has gradually shifted against the Russians and Putin. But that does not guarantee a quick end to the war.

Both sides are making technological and tactical adjustments with additional ones to follow. The Ukraine and Iran wars have both become testing grounds for the future of warfare.

A summary of where the Russia-Ukraine War is:

·      Russia is now losing the war militarily, politically, economically, financially, and technologically, but Putin shows no sign of giving up. 

·      The ground war is stalemated with neither side gaining more than a few square miles here and there along a front of over 1,000 miles.

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

·      Russia’s equivalent of Amazon, named Wildberries, now has its warehouses under attack by Ukraine’s missiles and drones. The company supplies military and non-military goods to Russian troops. But the real reason for the Ukrainian attacks on commercial enterprises is to frighten the Russian people who rely on the companies. Russia is now attacking commercial companies in Ukraine in retaliation.

·      Russia’s offensive attacks have failed badly with large manpower losses for them. Russian casualties have been unsustainably high.  

·      Ukraine’s cities are also being pummeled every day by Russia’s missiles and drones. Ukraine can now knock down most of Russian drones used in attacks on major cities but is almost out of weapons like the US Patriot missile to down Russian missiles.

·      But the Ukrainian people show no sign of losing their will to fight back and eventually win the war. In Russia the constant attacks by Ukraine are gradually shifting public opinion against the war.

South American Countries Move Further to the Right 

In the last few years many of the countries in South America have replaced leftist governments with rightist ones. Examples are Argentina and Chile, among others.

The latest edition, last week, was the inauguration of Abelardo de la Espriella as the new President of Colombia. He is a rightist and replaces the leftist President Gustavo Petro.

Leftist governments have dominated South America for the last decade, but rightists have dominated numerous elections very recently. Later this year is a very important election in Brazil where the incumbent leftist President Lula faces the son of the former rightist President Jair Bolsonaro, Flavio Bolsonaro.

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. Democratic socialism is now a serious threat to the Ds.

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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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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