THE TUCHFARBER REPORT
Accurate Facts, Analysis, and Forecasts
In-Brief
- The Trump-Kim summit is back on after Kim blusters, Trump cancels, and Kim blinks.
- Trump’s trade policies are erratic, incoherent, and flawed.
- Watch the key primaries tomorrow… especially California.
- China manipulates its stock markets by preventing sell orders. Investors beware!
- PREDICTION: The Democrats will gain 5 to 15 US House seats this fall, almost all in coastal, metropolitan districts. They will not take control from the Republicans.
- PREDICTION: The Republicans will gain 4 to 7 US Senate seats, almost all in “heartland” states. They will add to their current razor-thin majority.
In-Depth
What’s Important
Gamesmanship in Korean Negotiations — But Summit On For Now
Early this year in Korea, Kim Jong-Un launched a charm campaign and unexpectedly offered to meet directly with President Trump.
Trump immediately accepted.
Kim then decided to bluster and play hardball… to play games… after engaging in a couple weeks of sweetness and light.
Trump said, in effect, “meeting off… if you want to be serious let us know.”
Kim blinked.
LOOKS LIKE THE SUMMIT IS ON… WE’LL SEE…
The implicit and quite serious message from the US is that Kim has two options. The first is to completely denuclearize the North and the entire peninsula. If that happens, Kim stays alive, keeps his luxuries, and the family dynasty survives. The second option is the Libyan option… Kim ends up dead or in prison for the rest of his life.
I’m not being hyperbolic here. Those are Kim’s choices. Many suggest Kim has room to maneuver. I suggest he has little maneuvering room. Neither Trump nor China offer him much flexibility on his nuclear options.
The June 12 meeting may or may not occur, but the status quo on the Korean peninsula will not persist as it has during the Clinton, G W Bush, and Obama presidencies. Major change may require a series of meetings and difficult negotiations, but there will be major change… one way or another.
Stay tuned…
Strong Economy – Low Unemployment
It’s hard to imagine a much better economic environment for the Republicans going into the November elections. As I write here in the TR almost every week, low unemployment, a strong economy, and the lack of a major, unpopular war makes it very hard for the “out” party, in this case the Democrats, to do well in the upcoming elections. Never in the last 60 years has the “in” party suffered a major election defeat when the economy was strong, jobs plentiful, and no major war was being waged.
Almost all the same pundits, analysts, and media types who got 2016 wrong are predicting a US House takeover by the Democrats this fall.
Count me a big skeptic. I now forecast modest US House LOSSES by the Republicans, but substantial US Senate LOSSES by the Democrats.
Each week I make predictions about the Senate and House races. I update those predictions as new data becomes available through polling, economic statistics, and world events.
We’ll all see what the voters decide in five months.
Elections
Texas and California
Watch the primaries in California tomorrow. We’ll likely see more of the Democratic Party’s civil war between the establishment and its ascending progressive movement.
In Texas, it once again looks like D hopes of a breakthrough are tanking. Ted Cruz is now well ahead of his November opponent, Beto O’Rourke, for whom Ds had great hopes.
Polls and Media
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 relevant then. So, ignore it and lower your blood pressure.
Correction
I made a stupid mistake labelling the Democratic winner in the GA governor’s nomination race as Stacey Adams. It is Stacey Abrams.
Roseanne Barr
Roseanne Barr sent out a totally reprehensible racist tweet last week and her career and show were ruined by it. It will be interesting to see if the entertainment and media moguls apply the same standard to the dozens of other figures in their industries, who also spew hate, vile filth, and racism.
The MeToo sexual abuse hysteria ruined many and will for years. Whither the Roseanne hysteria?
Equally applied to all… conservatives and liberals? All races and ethnic groups? All religions?
“Spygate” or Legitimate FBI Investigation?
Many Republicans, conservatives, and the President accuse the Obama administration’s FBI of improperly spying on the Trump campaign, starting in early 2016.
A few Republicans, and most liberals and Democrats say “No”, it was perfectly sensible to use the FBI to monitor individuals connected to the campaign who had known connections to Russians.
We’ll see. Expect many more facts to come out about this issue in coming weeks and months.
We’ll keep our powder dry for a while, but repeat our question from last week… “Will it be OK for the Trump administration to monitor the 2020 Democratic campaigns using the FBI?”
Global politics
Understanding the Political Situation in Italy
There is enormous angst in Europe over the political situation in Italy. In an election several months ago, the centrist parties and center-left parties were overwhelmed by votes for populist anti-establishment parties on the right and for a party of the downtrodden.
The highest vote recipient, by far, was the 5-Star Movement. This is a new populist, anti-establishment party that rails against Italy’s elites and entrenched interests. The Movement also has deep skepticism about the Euro and Eurozone in terms of whether they are good for Italy’s people.
“The League” party was the other big winner in the election. They are a right-wing party that is very anti-immigrant. They are especially strong in northern Italy, while the 5-Star party is very strong in poor southern Italy.
With their combined votes they control a large majority in the Italian parliament.
They agreed to form a coalition and name a government. After typical Italian political drama, they will take control.
Expect conflict with Germany and with the EU bureaucrats in Brussels. Count on left-wing outrage and much drama. Italy’s very high debt level, its new government, and large economic importance make its future both important and questionable.
Global Economics
Investors… Beware of China’s Stock Markets
Beware if you need to buy or sell stocks on China’s stock markets. The totalitarian government may or may not let you. That is especially true if you have large positions and want to sell.
Last Friday, China’s stocks were included in the MSCI global stock indices. This is an important event for China, giving international financial recognition to its $8T equity markets.
There is a very important caution though, for both foreign and domestic investors. China directly controls the volatility of its stock markets, in part, by telling those with large positions when and if they can trade, especially sell.
The WSJ on Friday had an excellent piece on this phenomenon, entitled, “Calm Chinese Stocks? It’s the State’s Doing.”
So, beware, if you own stocks through Chinese markets you may or may not be able to sell when you want or need to.
This is but one more indicator of the overall fragility of the Chinese economy and financial system. Ask yourself, “What would it tell you if the US or major European nation did something like this?”
Predictive Political & Economic Measures
2018 Election Prediction Summary
Below are several election and policy predictions that I present each week and change if my indicators change. Speaking only to the 2018 election predictions, my current evaluation is:
- The Republicans will lose 5 to 15 net US House seats but maintain a small majority.
- The Democrats will lose 4 to 7 US Senate seats with the Republicans adding to their current razor-thin 51-49 majority.
POLITICAL MEASURES
- Right Direction-Wrong Track— “Wrong Track” is now at 54%, up 1% from last week. It has proven to be a good indicator if the party “in-power” was going to do well or badly. [If the “wrong-track” reading is 62% or higher, it bodes ill for them. If 58% or lower, they do well.]
- Generic Congressional Ballot— The polls I’m averaging are at 42% D and 39% R, the D lead down 1% from last week. More important is that the Democratic lead has fallen from double-digits at the beginning of 2018 to 3% now. [Because D voters are so concentrated in urban cores, Democrats need to be ahead 4 to 6% on this measure to tie the Rs for the 435 US House seats spread across urban, suburban, small town, and rural districts.]
- Presidential Approval—Trump’s approval rating is 46%, unchanged over the week.
ECONOMIC MEASURES
- U-3 official unemployment rate—The current level is 3.8%, a 18-year low. Low or falling levels of this measure are a positive for the “in” party. It is low and falling now, down from 4.8% a year ago.
- U-6 unemployment rate [broadest measure, including under-employment]—The current level is 7.6%. This is a very low level and fell from 9.4% a year ago.
- GDP GROWTH—Growth last quarter was 2.3% which is significantly higher than the average growth over the last eight years. Forecasts for the current quarter suggest growth over 3%.
WAR
- The jobs and war issues are the 500-pound gorillas of American public opinion. If the economy is bad or there is a major unpopular war, the party in power is in trouble. Neither is the case now.
WEEKLY ANALYSIS
Last Week’s Important Events Were:
- N Korea reverted to its typical bombast and rhetoric. It threatened to cancel the June 12 summit between Trump and Kim, but Trump cancelled it first. Kim clearly blinked when Trump pushed back on his gamesmanship. The summit is now on again for June 12.
- The jobs report on Friday showed a large gain in jobs and a historically low unemployment rate, especially for minorities. The strong economy makes it very hard for the Ds to make signicant gains in the fall elections.
- The Trump administration began tariffs on steel and aluminum imports from almost all corners of the globe and is sure to cause major retaliation. The administration trade policies make little sense at this point.
- Italy’s new government is anti-Euro, anti-immigrant, and populist. It will cause real problems for the EU.
- The political metrics I use to judge political trends continue to move in favor of the Republicans. The generic Congressional ballot lead for the Democrats is down to 3%. They need a lead larger than that to gain a US House majority.
It is still five months to the key November mid-term elections, but momentum just now is clearly with the Republicans. Watch the upcoming primaries for evidence the Ds are regaining momentum.
Predictions
Election Predictions
- 80-90%: the probability the Rs will lose seats in the 2018 House elections
- 10-20%: the probability that the Rs will lose control of the House in 2018
- 90-95%: the probability that the Rs will still control the Senate in 2019
- 90-95%: the chance that the Ds will lose seats in the 2018 Senate elections
- 50%: the chance the Republicans will gain five or more Senate seats in the 2018 elections
- 80-85%: the chance that Trump will be re-elected in 2020
Policy & Legislative Predictions
- There is more than a 70% chance that pressure on the DACA– “Dreamer” — issue will force the Democrats to negotiate a deal with President Trump on the border wall and other immigration issues this year.
- The chance that Donald Trump will be impeached and removed from office by the Congress in the next three years is less than 1%. *
*NOTE: Remember that after being impeached by a Republican controlled House in 1998, not one Democratic Senator voted to remove Bill Clinton from office. It takes 67 votes and is more of a political process than a legal one. NO President has ever been impeached and removed. Richard Nixon resigned before the House and Senate could impeach and remove him from office.
Musings
In this section I allow myself a bit of leave-way and room to speculate… more so than in the rest of the report.
Little Coherence Behind Trump’s Misguided Trade Attacks
Readers of the TR know I am a “free-trader” who understands that international trade is a net benefit to almost all nations. But, I am also a strong opponent of predatory trade where a country, such as China, cheats on its trading partners by breaking the rules and trading in an unfair manner.
Because of the combination and interaction of those two positions, I have been mostly positive about the Trump administration’s efforts to highlight predatory trade practices and reduce them.
But, there is a big problem with where Trump has now taken his assault on our main trading partners. Many of the efforts are misguided or unwise. Most emphasize the wrong problem and have dubious logic or coherence. They are like using a shotgun to kill a mouse in the basement, destroying much as a result.
Trump’s attacks focus on short-term relatively unimportant or unachievable goals rather than long-term, balanced ones. They emphasize the trade deficit when they should emphasize intellectual property protection, unfair tariffs or protections by others, and the forced “sharing” or our company’s trade and technology assets.
Some of the arguments being used by Trump are nonsense. Auto imports a national security threat? That argument is a non-starter.
A major irony of the trade policy weakness is the very high level of international success Trump has had in other areas of foreign policy. He has been strong and pursued reasonable, long-term goals almost everywhere but trade.
Let’s hope there is a method to the seeming madness on trade.
Until next week…
Al Tuchfarber
Professor Emeritus of Political Science, University of Cincinnati
Al.Tuchfarber@gmail.com
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 and dynamic speaker and has published over 100 articles and papers about politics, society, and research methods.