Site icon Tuchfarber Report

A Surprising Trump at Davos; DACA Deal Complexities; Democratic Wave?; Americans Have Negative View of Media; Grandstanders in the Senate

Al Tuchfarber

In Brief

  1. Trump’s speech at Davos surprised many, having the expected America First emphasis, but, also, a measured presentation and no incendiary comments. It embraced free trade as long as predatory trade is prevented.
  2. Will there be big political impact for Ds or Rs in November elections from the recent or any near-term government shut-down? Not likely!
  3. Watch voter’s answers to the “right direction-wrong track” polling question [direction of the country question] if you want to handicap who will win in November.
  4. Gallup Poll-Knight Foundation study—more Americans have a negative view of the media [44%], than have a positive view [33%].
  5. The politics around the DACA – border wall debate is complex, but a deal is likely by early spring.
  6. Another voice on China’s coming debt crisis raises fears of a collapse.

In-Depth

What’s Important

Trump at the Davos world economic forum

President Trump’s speech to the World Economic Forum was much anticipated. The coverage of it has been limited and constrained because he did not make any big mistakes or say anything incendiary as the press hoped.

The Wall Street Journal news section, which loves to beat-up on Trump, unexpectedly reported… “John Chapman, head of the London-based International Institute for Strategic Studies think tank, agreed that the speech was ‘very pro-business, marketing the U.S.’ But was also delivered in a way that was ‘very mainstream. It is difficult for people to contest the assertion that he is in favor of free trade and critical of predatory trade.’”

The main theme of Trump’s speech was America is Open for Business. Probably its most enduring line is… “But America first does not mean America alone.”

This speech is consistent with what I believe to be Trump’s actual trade strategy as compared to most analyst’s assertions that he wants a global trade war. He doesn’t.

He wants free trade and a growing, prosperous world economy. But, he also demands a level playing field. He wants predatory trading policies of countries like China and S Korea reined in.

He does NOT want to end NAFTA, but wants it modified so it doesn’t create such a large trade imbalance with Mexico.

As he said in the speech, to the astonishment of many, he is open to rejoining the Trans-Pacific Partnership [TPP] negotiations.

The one place he will launch a major trade war is with China, but only if they don’t adequately rein in Kim Jong-un of N Korea.

All should remember two things about Trump. First, he has make billions in international trade with “Trump Inc.” His kids will make many billions more. Why kill the golden goose?

Second, Trump is a deal-maker and negotiator. He wants deals to close, not to waste a lot of time. That often involves a multi-step strategy that begins with bluster and over-the-top demands and ends up with a win-win deal.

Test that hypothesis as many trade deals are negotiated over the rest of Trump’s tenure in office.

Elections 20183>

Democratic Wave?

The conventional wisdom among almost all pundits and political journalists at this point in the 2018 Congressional election cycle is that the Democrats will be the big winners. They may be correct but remember Hillary was going to win in a landslide in 2016 according to the same analysts.

They point to the President’s low approval ratings, which usually are predictive of major gains by the opposition party. They look to political history which, based on averages, predicts dozens of lost House seats by the Rs this year. And, they point to the “generic ballot” question in many polls that asks who the respondents want to win or will vote for. At this point the Ds have a sizable lead.

I’ll suggest some caveats and give you a metric you can follow daily if you are that crazy…like me.

My own prediction of the 2018 election results, as of January 2018, is that the Rs will lose 5-15 House seats but will gain 2 to 7 Senate seats. The predicted Senate result is an anomaly, because, by an accident of history, the Ds have 14 vulnerable seats and the Rs only 2.

The caveats are:

  1. As demonstrated by a Gallup study out recently, Trump’s low approval rating may be 5 -10 points lower in the polls than his true level of approval. Gallup points to statistical evidence of the significant relationship of economic and US satisfaction measures to presidential approval for previous presidents. Trump’s current approval level is far too low considering the economic and satisfaction metrics being moderately positive. [I explained this research in the January 22 blog.]
  2. Although the average across all off-year elections shows the “out” party doing well, it doesn’t always go that way. Both in 1998 [Bill Clinton] and 2002 [George Bush], the “in” party did very well in the off-year elections.
  3. The generic vote measure of which party you want to win is useful but needs careful analysis. It can be highly volatile—in the last 30 days it has gone from D+13 to D+8, probably because of the initial popularity of the Tax Bill. And, remember, it is more than nine months until the elections. And, because of several structural factors the Democrats need a 5-point lead in the generic ballot to be sure they are actually near parity with the Rs.

So, take the Presidential approval numbers with a grain of salt and watch the generic ballot bounce around through the year.

What I will be looking at as predictors are:

  1. Do we get into a disastrous war? Not likely, but possible, and bad for the Rs.
  2. Does the economy stay strong—high growth and low unemployment? If so, advantage R.
  3. What is the “direction of the country question” showing in the polls. Since at least 2006 it has been an excellent predictor of every election—presidential year or off-year. If it is at 62% or higher “wrong track” just before the election it is ominous for the Rs. If it is below 58% it is good for the Rs.

Right now, it is at about 55% ”wrong track”.

We’ll have plenty of ups and downs for both parties, so stay tuned…

Impact of government shut-down

Don’t expect the recent government 3-day shut-down…the so-called “Schumer Shut-down” or another near-term shut-down … to affect either party very much in the 2018 elections. But, should there be a shut-down right before those November elections the story would be different. That is always possible as the US budget year ends September 30 requiring a new budget.

The reason for the minimal impact of the recent or any near-term shut-down is that the elections are over nine months away…a lifetime in politics.

Go back to 2013 when the Republicans purposely and openly shut-down the government from October 1-17. They got appropriately blamed. The favorable rating of the party tanked in the polls and the predictions were that the voters would punish them in the 2014 elections a year later.

What happened?

Rather than being punished, the Rs added 12 House seats to a comfortable majority they already had. In the Senate, they took 9 seats and surged into majority control.

This is not to say that the recent shut-down and its resolution are not important, but, regardless of who the voters blame in the short run, it is unlikely to matter much in November.

What happens throughout the year, especially with the economy and the conflicts with N Korea and Iran, will be much more important than the current shut-down kerfuffle.

And, of course, we have another budget deadline on February 8.

Legislation and Policy

Understanding the Upcoming DACA-Border wall bthattle

It is impossible to say for sure if and when the DACA/” Dreamers” v Border Wall fight will be resolved through legislation. It could be as part of the budget battle that next goes into crisis when the CR runs out on February 8. Or, it could be March 5 when Trump said he is ending the DACA protections imposed by Obama executive action or, it could slip past that date.

Please know for a fact, that a large majority of Americans, almost all Democrats, a substantial majority of Republicans in Congress and President Trump do NOT want the DACA “kids” deported unless they commit crimes unrelated to their parents bring them to the US illegally. That statement is an absolutely hard fact that you would never know from listening to the press or the Democrats. [Listen to or read what the President says about DACA in the Tuesday State-of-the-Union address.]

The President’s plan, which will be rolled-out in detail later today, includes four components:

  1. Let all 1.8 million DACA “kids” stay and earn citizenship. [The public strongly favors.]
  2. Allocate $25B for a physical and electronic border wall. [Public mixed.]
  3. Limit chain migration to nuclear families [mother, father, children only], not extended families. [Public supports limits.]
  4. End the visa lottery program [50,000 people picked at random from countries with few current US residents]. [Public supports ending.]

The vote counting realities include these:

  1. 60 votes are needed in the Senate because of the filibuster.
  2. 30 to 40 Republican votes in the Senate are easy to get for a reasonable bi-partisan deal. That means 20 to 30 Democratic Senate votes are needed.
  3. D Minority Leader Schumer has four different groups in the Senate from which to locate those votes.
    • Strong supporters of the DACA “kids”—DACA deal at any cost
    • “Progressives’ who say Resist Everything Trump proposes—no compromise with Trump
    • Traditionalist/ Labor Democrats—could go either way
    • The 10 D Senators up for re-election this year in states Trump won—their mantra—”get a deal”.
  4. About 216 total R & D votes are needed in the House—enough for a 50% + 1 majority.
  5. A substantial number of Rs in the House, perhaps half of the 241 Rs, will resist supporting the legislation calling it “amnesty”. By any conventional definition it is not amnesty, especially because the DACA “kids” themselves committed no crime; their parents did. True amnesty would be if all 11-12 million illegal aliens currently in the country were given immediate citizenship with no fines or special requirements. No significant Republican is proposing that.
  6. Minority Leader Pelosi in the House doesn’t have many incumbents worried about re-election but has the other three sub-groups that Senator Schumer has.

The press and some pundits are saying the chance of a deal and passed legislation is minimal because there are strong voices in both parties opposing Trump’s proposal. But, those opponents tend to be the extremists in both parties and their votes are not needed if the left-center and right-center agree on a bill. There are plenty votes in both the Senate and House to get large majorities for a truly bi-partisan bill.

Expect a hue and cry and a great deal of gnashing of teeth in public from both sides.

But, the important action will be occurring behind closed doors at the level of Trump, Schumer, McConnell, Ryan and Pelosi.

Don’t be surprised if this war goes through several more battles, but, a resolution is likely in the next few months.

The status of Obamacare

“The Hill”, an important news source on the Congress, accurately, in my analysis, describes the current state of Obamacare in an article titled…” Congress takes the sting out of Obamacare.”

The article begins…” Congress is steadily taking the sting out of ObamaCare, removing the most unpopular parts of the law while leaving the most popular parts in place.”

I would add that the same thing is true about the policy changes the executive branch is making to the program.

The very popular expansion to Medicaid is still in place but will become unaffordable in a few years and will have to be changed. The dreaded mandate that almost all have health insurance was repealed in the Tax Bill.

The subsidies for low and moderate-income Americans not eligible for Medicaid remain in-place.

Media

Gallup-Knight Foundation Study Results – January 2018

 

No commentary by me is needed here.

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.

China’s Politics and Economy

China Watch

  1. NEW–Reuters headlines: “China’s state-owned firms to face more mergers and bankruptcies.” This is occurring because of excess capacity and inefficiency. Reuters: ” In a rare interview with a foreign news outlet, Xiao Yaqing, chairman of the State-owned Assets Supervision and Administration Commission (SASAC), stressed Beijing’s commitment to streamline its bloated and debt-ridden state-owned sector and create conglomerates capable of competing globally.”
  2. A Council on Foreign Relations study reports that China’s last decade of economic success has been founded on a growing mountain of debt and will “end in crisis”. I have been making the same point since 2012 and predict that for political reasons, President Xi will permit that crisis to begin later this year or in 2019 as by then he will have gathered to himself almost all power in China. He seems to believe that, he, the regime, and the country can weather the coming economic storm.
  3. China just announced a record trade surplus with the US. All await Trump administration sanctions by the US against China on a number of different products.
  4. Reuters reports: ” China’s leaders fret over debts lurking in the shadow banking system. The complex lending hidden in the shadow banking sector compounds the threat posed by China’s rapid accumulation of debt. Economic pain from a string of defaults would present a challenge for a one-party regime that draws its legitimacy from the promise of prosperity.”
  5. During its key Central Economic Work Conference held December 18-20 the Chinese leadership declares “war” on financial risk, poverty and pollution. China’s debt load is crushing, most of its citizens live in poverty or modest means, while many in the rich provinces thrive. And pollution is a major health and political hazard.
  6. China is placing its para-military police under the direct control of General Secretary Xi giving him even more extra-ordinary power.
  7. Next spring China is likely to modify its Constitution to allow Xi to serve more than two terms as President.
  8. The ambiguity, contradictions, and risk of China’s economic policy is illustrated by two contradictory policy statements. On 12/20, the WSJ reported President Xi’s Economic Blueprint for 2018 stresses debt reduction less. Two days later Reuters reports that “China curbs lender-trust cooperation in fight against shadow banking” curbing a trust industry that has grown five times in five years to $3.51 trillion in an “industry which helps channel deposits into risky investments via products often designed to dodge capital or investment regulations”. China wants it both ways…continuing high growth and societal stability, but also reining in the debt creation that created the high growth. The two are incompatible and a crash is guaranteed with only the timing in doubt.
  9. The International Monetary Fund [IMF] reported recently that China’s banks have insufficient capital to weather a credit or debt crisis. The problem is widespread but especially focused in the rapidly exploding wealth management arena and in the broader shadow banking arena where the authorities have not been able to keep up with “innovative” approaches by a variety of financial actors.
  10. China is becoming more and more authoritarian, forcing its tech companies and US tech companies to monitor Chinese citizens and make the results available to the government.
  11. The US and Europe are increasingly unwilling to let China flout the World Trade Organization rules it pledged to abide by when admitted in 2001.

Musings

Gaggle of Grandstanders

I’m going to start a new club, THE GAGGLE OF GRANDSTANDERS. To become a member, you must stand-out in the US Senate as being more interested in your own pomposity, ego, or ideology than working for the good of the people you represent. The initial charter members are…

Republicans— Collins [ME], Cruz [TX], Graham [SC], Lee [UT], Paul [KY], and Rubio [FL].

Democrats—Booker [NJ], Harris [CA], Sanders [VT], and Warren [MA].

I’m giving John McCain a pass because of his severe illness.

Don’t hesitate to nominate others for Club membership or recommend removal of someone I have mis-judged.

No New Predictions—several editorial changes

Election Predictions

  1. The probability the Rs will lose seats in the 2018 House elections is 80 to 90%.
  2. The probability that the Rs will lose control of the House in 2018 is 10 to 20%.
  3. The probability that the Rs will still control the Senate in 2019 is 90 to 95%.
  4. The chance that the Ds will lose seats in the 2018 Senate elections is 90 to 95%.
  5. The chance that Donald Trump will be the 2020 Republican nominee, unless he decides not to run, is 90 to 95%.
  6. The chance that Trump will be re-elected in 2020 is 80 to 85%.

Policy & Legislative Predictions

  1. The chance that Donald Trump will be impeached and removed from office by the Congress in the next three years is less than 1%. *
  2. The chance that Trump will be removed from office in the next seven years is less than 5%.

Until next week…
Al Tuchfarber
Professor Emeritus of Political Science, University of Cincinnati

Exit mobile version