In Brief
- Category 4 Hurricane Harvey pummeled the Gulf coast of Texas causing billions of dollars of damage, but thankfully few deaths. Much more flooding is certain. The flooding is devastating the Houston area and much of east Texas. It will not subside for several days. Rescues are occurring by the thousands. Expect quick action by the Trump administration and Congress on funding for relief and rebuilding efforts. Relief efforts by the state, local and the federal governments will go on for years. Private and faith based groups will also be essential to getting devastated families and communities back on their feet.
- Controversial Chief Strategist Steve Bannon left the White House after a series of run-ins with new Chief-of-Staff, General John Kelly. His departure elicited positive reactions rather than negative reactions from Republicans by a 5 to 1 margin, but the most extreme right-wing partisans in Trump’s base were appalled.
- China continues to become more authoritarian as well as to confront India in several geographic areas. Also, China’s flat bond-yield curve is signaling economic and financial trouble ahead.
- A Gallup report last week showed that just 37% of Americans think the press “gets their facts straight”. Just 1 in 7 Republicans think they do so. The same study showed just 1 in 4 of all Americans have much confidence in newspapers or in the TV news.
- Dr. Sebastian Gorka is the latest to depart the White House after confrontations with General Kelly. He was an effective foreign policy spokesperson for the President but was a close ally of recently departed Steve Bannon.
In-Depth
Forecasts
… I see no cause to modify my forecasts this week.
Current POLITICAL Forecasts
- The chance the Rs will lose at least a few seats in the 2018 House elections is 80 to 90 percent.
- The chance the Rs will lose their 241-194 House majority in 2018 is 10 to 20 percent.
- The chance the Ds lose two or more of their 48 Senate seats in ’18 is 85 to 90 percent.
- The chance that Donald Trump will be the 2020 R nominee is 90 to 95 percent.
- The chance that Trump will win a 2nd term is 80 to 85 percent.
Media
Americans say media accurate just one-third of time
A study released by Gallup last Friday yet again shows that Americans don’t trust that the media “gets the facts straight”.
Just 37% of Americans now say that…” In general, news organizations get their facts straight” as compared to “stories and reports [that] are often inaccurate”.
The partisan differences are stunning now in 2017, when as recently as 1998 there were no partisan differences. In 1998, 53% of both Rs and Ds said the media “gets their facts straight”. After the divisive 2000 election “tie” just 40% of Ds thought the media was accurate and only 23% of Rs.
Today just 14% of Rs think the media gets their facts straight but 62% of Ds do so. Just one-third of political independents think the media gets its fact straight. That is abysmal.
The study also shows just one-in-four Americans have a high or moderate degree of confidence in newspapers.
Just over one-in-five have confidence in TV news.
Less than one-in-six have confidence in internet news.
Overall…THE MEDIA IS NOT TRUSTED TO BE ACCURATE.
Incredibly Gallup ascribes these low ratings to Trump but that is ludicrous. Democrats believe nothing Trump says but only 38% of Ds have confidence in TV news even though it is, with the exception of FOX, mostly dominated by left oriented broadcasts.
This is not a Trump phenomenon but a media bias and incompetence phenomenon.
Don’t forget the Tuchfarber 30 Day test—when you get upset about something in the news ask if it is likely to be IMPORTANT IN 30 days or so. Only seldom will it be so and you can usually ignore it.
Global Politics
The Chinese Navy conducted live-fire drills in the Indian Ocean in what Hong Kong media described as a warning to India. India and China are in a dispute over territory in the tiny Himalayan country of Bhutan. There is now an additional dispute and confrontation hundreds of miles to the west between the world’s two most populated countries.
Trump and the White House
Bannon Departure a yawn for Trump’s base
When Steve Bannon was fired from his White Post as Chief Strategist for the President there was much hype in both the mainstream media and extreme right-wing media. The extreme right was outraged at Bannon’s sacking explaining that Trump was abandoning the principles on which he had run and won.
The left, which includes most of the media, hoped that was true and predicted Trump’s base would abandon him.
Polling after Bannon’s departure from Fabrizio-Lee, Trump’s chief pollster, showed the opposite. In a poll of 1500 Republicans– 29% said Bannon’s exit made them feel more favorably about Trump and only 6% said less favorably.
In a lesson to all about White House appointees, even senior officials, 64% said Bannon’s departure didn’t matter or that they didn’t know enough about Bannon to say.
This is an example of a broader truth. The “inside baseball” nonsense within the Washington Beltway and the 24/7 news cycle is of no interest to most Americans.
Another wrinkle on this story is that Dr. Sebastian Gorka, a foreign and defense policy expert, also left the White House staff in somewhat murky circumstances…some say fired, others resigned. He was an effective spokesperson for Trump’s foreign policies but also very close to the departing Steve Bannon.
The house-cleaning in the White House by General Kelly continues.
Trump’s approval ratings are low and likely to stay low. Voters are worried about the direction of the country. But the economy is performing well with low unemployment. We’ll watch all three indicators as we proceed into 2018 and move toward the November Congressional elections.
Sherriff Joe’s pardon
President Trump pardoned ex Arizona Sherriff Joe Arpaio of a misdemeanor contempt of court conviction. Some cheered, others booed.
As I have noted previously there is no question that any President has comprehensive pardon powers.
Arpiao’s extreme stances against illegal immigrants made him a bete noire for the left and hero for the right. Trump was clearly playing to his base with the pardon accompanied by the media going crackers over something fairly minor.
The press coverage of Hurricane Harvey will make this story go away faster than usual and from a PR standpoint.
China’s Politics and Economy
China’s politics and economy are so important to the global economy and the general situation around the globe I am adding a regular section on it to the newsletter. The section will periodically include detailed articles on specific things but will also list each week evidence that suggest an economic soft landing for China—a controlled slowdown to “normal” economic growth levels—or a hard-landing—a more rapid, extended and dangerous bursting of China’s asset bubbles.
I WILL ADD AND DELETE ITEMS TO THIS SECTION AS RELEVANCE DICTATES. “NEW” ANALYSES WILL BE SO LABELLED AND REVISED SECTIONS WILL BE LABELLED “CHANGED”.
New or Major Evidence for Soft Landing
- The WSJ reports that Chinese regulators removed emergency measures they put on the Chinese stock exchanges in support of equities following crashes in 2015 and 2016. This is a sign of confidence and stability.
- The political leadership, including President Xi, and the financial regulators have promised to rein in excessive speculation and credit growth. [We’ve been promised that for many years and the debt has continued to sky.]
New OR Major Evidence for Hard Landing
- NEW—A WSJ article today points out that the yield curve in China has flattened—the prices of 3-year bonds are essentially the same as 10-year bonds. Such flattening is often, but not always, indicative of an economic slowdown on the horizon. The article also mentions the mantra that I have been preaching…that the government of President Xi is manipulating the economic and financial system to assure no major problems before he is re-elected as party leader this fall and President next spring.
- NEW—The conviction of three young pro-democracy campaigners in Hong Kong moves the authoritarian mainland government ever closer to the control of Hong Kong. This is a clear violation of the letter and spirit of the agreement with the British when they returned Hong Kong to China’s control. Steadily, the rights of Hong Kong’s people are being reduced. They have not revolted in a major way and probably won’t. Chairman Xi clearly plans an non-democratic future for Hong Kong and Taiwan as well. Taiwan will fight.
- China and its President Xi are walking a tightrope over the N Korea-US tempest. To mix metaphors, they are between a rock and a hard place. The only way China can “win” is if Trump backs down and that is most unlikely.
- China’s UN vote for strong new sanctions on N Korea is an indication of at least two major things: [1] China wants the N Korea nuclear crisis resolved very soon and, [2] China fears President Trump will launch major trade sanctions bursting its asset and debt bubbles.
- Two weeks ago, the IMF raised its projections for Chinese growth but sternly warned that rapidly increasing Chinese debt will hit 300% by 2022. Others like the Institute for International Finance [IIF} asserted in June that Chinese debt already totaled over 300% of GDP, a high percentage for a developing country.
- President Trump ordered a formal investigation of China legal and illegal methods of stealing or extorting intellectual property from US firms. He is considering more trade sanctions against China, especially due to his frustration with their limited actions against N Korea’s rogue regime. China did vote to add serious new sanctions on Kim Jong-un’s regime in a UN vote last week.
- China is now officially and publicly instructing its companies that they must stop foreign investments in areas like insurance, hotels, other real-estate, gambling facilities, etc. Foreign investments are to be directed to two areas. The first is into strategic areas, as defined by the government, such as technologies where the intellectual property gained fits with government plans for China to become a major, worldwide competitor in various fields. [Sound like Japan in the 1970s and 80s?] The second area is into investments consistent with China’s One Belt-One Road strategy to tie it more completely with all of Asia as well as Europe and Africa.
- Reuters reported that… “China will strengthen oversight of arbitrage that takes advantage of uncoordinated regulations and increase penalties to prevent structural risks from getting out of control, a senior banker said”. TRANSLATION—we’ll crack down hard on companies and individuals skilled at gaming the system.
- Beijing is tightening its grip on Chinese state-owned companies listed in Hong Kong reported the WSJ.
These all indicate concern that economic, financial and political risks are rising.
Until next week…
Al Tuchfarber
Professor Emeritus of Political Science, University of Cincinnati
Tuchfarber Political-Economics LLC, Inc.
Dr. Tuchfarber founded the Ohio Poll, one of the nation’s most accurate, while directing the social science Institute for Policy Research from 1975 to 2004. He also founded and directed the Institute for Health Policy from 1996 to 2004. He is an engaging speaker and has published over 100 articles and papers about politics, society and research methods.
He will be expanding this publication’s treatment of national societies across the globe, especially their politics, demographics and economics.
Disclaimer: This publication and its contents are not intended in any way as investment advice. They represent solely the political and economic analyses and opinions of Dr. Tuchfarber.