Posts filed under “Politics”

Between the Fed and a Hard Place

In our view, it appears as though just about everyone is awaiting Friday’s Employment Situation report with baited breadth: Portfolio managers, Bond traders, Fed Chair Alan Greenspan, and of course candidates George W. Bush and John F. Kerry. Will this be the one that finally meets or beats economists’ consensus?

The range of estimates for tomorrow’s report is exceedingly broad – from a pessimistic 75,000 new jobs, to an optimistic +175,000 (Brian Wesbury of GKST is the outlier at +225,000). Bloomberg Consensus is for 130,000. A self-sustaining, non-inflationary expansion occurs when job creation is beyond population growth: about 200-250,000 per month.

The challenge of the so-called “goldilocks economy” for the stock market – not too hot, not too cold – is staying within the sweet spot. We continue to enjoy the effects of massive stimulus: ultra-low interest rates, falling U.S. currency, increased money supply, tax cuts and deficit spending. And while everyone wants to see improving job creation, the market is well aware that the Fed stands ready to initiate a tightening rate cycle as soon as any signs of inflation appears. Improvement in Employment is one of the signs eventually leading to rate hikes.

Yet from a political perspective, the jobs creation issue remains crucial. At least, according to a recent study by the Pew Research Center which cited Jobs over all other factors. One need only look at an electoral map from 2000 to see why it is so crucial to the 2004 Presidential election.

Zogby International did just that, coming up with a short list of Electoral College swing states. Not coincidentally, many of these states are in the industrial heartland, which has borne the brunt of the manufacturing job losses. In at least 6 of the key states – Minnesota, Missouri, Ohio, Tennessee, West Virginia and Wisconsin – there has been a mixed economic picture: The Federal Reserve Beige Book shows an expansion of Manufacturing Activity in these states, but only anemic improvement in the Employment picture.

The President’s main opponent is not Kerry, but Time. The White House seems to be racing the clock: They need sufficient job creation before November to blunt that as a major issue in the swing states.

What is George W. Bush’s biggest electoral risk? Like his father before him, it may be a belated improvement in the Employment Situation – but one occurring too late in the electoral cycle to help his re-election bid.

Category: Finance, Politics

Manufacturing, Jobs and States “In Play”

Category: Finance, Politics

Determining the Outcome of the 2004 Election

Category: Politics

Projected Electoral College Vote, 2004

Category: Politics

Oversimplifying the Complex

Category: Finance, Politics

What Will Determine the Outcome of the 2004 Election

Simple analysis: the 2004 Presidential election will turn on economic issues — notably, jobs.

Complex analysis: While a number of other issues will continue to get media play — the Iraq situation, the National Guard story, Gay Marriage — I’m not convinced that these are outcome determinative. They will very likely reinforce partisan views, perhaps moblilize one side or the other. They may impact some (but not many) swing voters. Perhaps the negative issues softens up the incumbent up a bit, and distracts his team from pursuing their own media agenda.

But none of these are unequivocably conclusive.

Tactical considerations aside, these are not the strategic issues (and I’m all about strategy) which will swing an election. More likely, these issues offset to some degree the awesome advantage incumbency gives a sitting President. But I remain unconvinced they will swing the election.

On the other hand: Two charts demonstrate where Presidential vulnerability lay. The first, from Thursday’s WSJ, shows the increasing job losses in rust belt state Ohio. As much as the Dems would like to blame this on W., its part of a longer term trend going back decades. The past few years do look particularly awful, however:

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Source: WSJ

This is not the chart which will swing the election. Manufacturing jobs have been leaving the Mid-West for a long, long time. And while it probably is not a good election strategy to say, “Hey, that’s global trade for ya!” — just ask Greg Mankiw — this is by no means a new phenomena.

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Category: Finance, Politics

Tax Increases Ahead

Category: Finance, Politics

Tax me if you can!

Category: Finance, Politics

It’s not whether the Medals matter or not

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Today’s New York Times has an OpEd titled “The Medals Don’t Matter.” It’s by Jake Tapper, who is a well regarded ABC News Correspondent (formerly of Salon). The article reaches the conclusion that voters do not care about the military service of their Presidential candidates.

To reach this feat of logical deduction, Jake focused primarily on the 1992, 1996 and 2000 Presidential elections (and the 2000 GOP primary), and the Military Service of each candidate.

There are many, many analytical errors in his approach, sample size being the most obvious. But let’s focus instead on a very common logic error which seems to catch most people unaware:

Controlling for a single variable instead of many when analyzing complex systems.

I would be oversimplifying the situation were I to call this error, well, a mere oversimplification. But that’s what lay at the heart of this fallacy: Taking an extremely complex and dynamic issue — who won the Presidency and why — and then boiling it down to a single, and in this small sample, mostly minor issue. The author might as well have based it upon how many letters were in the men’s first and last names.

Presidential victories are the result of a far more nuanced and multi-faceted set of factors. This issue deserves to be examined in far greater depth . . .

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Category: Media, Politics, War/Defense

Why the president’s record matters

Category: Politics, War/Defense