My view on what's going on in the financial markets and the global economy, and a few other things that might interest me from time to time.

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The Dems are Gifting the White House to President Trump

Updated: Jul 19, 2020

Let’s be open at the onset - the Trump Administration is divisive, probably one of the most divisive administrations ever. President Trump's supporters think he walks on water, and his detractors think he is the devil incarnate. In between these two extremes are a significant chunk of people that aren’t sure what to think. On paper, with approval ratings that have hovered in the mid 30% to low 40% range most of his term, the Democrats probably thought that they had a great chance of reclaiming the White House in November 2020. But as I am about to discuss, President Trump is suddenly on a roll, experiencing his highest approval ratings ever, just as the Democrats seem to be self-destructing right before our eyes.


Before looking at the reasons why President Trump is surging ahead, let’s step back and look at the approval ratings (from Gallup, see here) of the last four U.S. presidents, during their first term, their second term, and their entire time in office. I have also included the highest and lowest approval ratings during their time in office (middle columns).


As you can see in the second-from-the-left column, President Trump’s average approval ratings during his first term (so far) are the lowest by a large margin compared to the three presidents before him. Nonetheless, President Trump’s approval ratings have improved markedly in the polls in the last few weeks (see second-from-right column), and the timing could not be better. As they say in the financial markets, “the trend is your friend.” Nonetheless, the fact remains that President Trump is - at the same time - highly polarising, as the last column to the right shows. He has the highest disapproval ratings of any of the last four presidents at this point in their first term.


There are two other things to point out regarding the table above, one of which is particularly relevant to President Trump and his re-election ambitions. You might recall that former President Clinton was impeached by House on December 19, 1998 and acquitted by the Senate on February 12, 1999. His approval rating hit its high of 73% in a poll conducted just before the House impeached him (poll Dec 17-18, 1998), and then fell to 66% by the time the Senate acquitted him several weeks later on Feb 12, 1999. Now this was a second term event (unlike the Trump impeachment) so Clinton was not standing for re-election. It is difficult to say if the impeachment mattered at the end of the day because the grounds for the Clinton impeachment were more dubious than the charges facing President Trump. But in spite of a strong U.S. economy (not to mention the last in a series of government surpluses run by the U.S., a topic for a future post), the follow-on Democratic candidate Al Gore lost a controversial election to the Republican candidate George Bush Jr. in 2000.


Secondly, if you are amazed at the remarkably high 90% approval rating of former President Bush (Jr), this occurred just after 9/11 (2001) as the country rallied around the response of the U.S. after the worst terrorist attack on American soil ever. However, for the record, President Bush’s approval ratings went steadily down thereafter (although he did manage to get re-elected in 2004).


So, let’s turn back to the present. What is contributing to the sudden improvement in President Trump's approval ratings? Some are self-manufactured by the Trump Administration, and others are a result of the Democrats shooting themselves in the proverbial foot. There are five things specifically that come to mind:


1. Impeachment: The very simple question to me is, why did the Democrats go down a path that was almost certain to result in the acquittal of President Trump by the Senate? I see no benefit really, although one might argue that an equally farcical waste-of-taxpayer money was the impeachment and subsequent Senate acquittal of former President Clinton. Perhaps this was payback. I guess it’s up to the reader to determine if lying under oath about getting oral sex from an intern, as Mr Clinton did, is as onerous as withholding aid to Ukraine (or threatening to) in exchange for dirt on the son of potential Democratic nominee Joe Biden, as President Trump did. In both cases, the party pressing for impeachment didn’t stand a chance of winning in the Senate that was controlled by the president’s party, so why bother? Both were clearly political outcomes, not at all a case of right and wrong, since the results in both the House and Senate (in both cases) were almost entirely along party lines. Although we can look back and laugh at the reason for President Clinton’s impeachment and subsequent acquittal, this is the distant past. In contrast to Clinton’s humility post-acquittal, President Trump has used his impeachment and subsequent acquittal to make the Democrats look petty, as he has so masterfully and effectively done throughout his term as president.


2. Iran: President Trump’s assassination of General Soleimani of Iran was a bold move, and looking back now, it actually looks very effective. What have we heard from Iran lately? Nothing. Having been exposed for shooting down a commercial flight departing from the Tehran airport in the aftermath of their retaliatory strike against U.S. bases in Iraq, and not disclosing this for several days - unless I have missed something in the news - the Iranians look to have gone quiet. I doubt that the various real (and proxy) wars going on in the Middle East are over, but for now, President Trump and his administration look very smart for this calculated move.


3. Iowa Caucus: What can be said about Iowa? Perhaps the Iowa caucus doesn’t really matter that much in the scheme of things with only four electoral votes when the election rolls around, but it nevertheless is the formal start of the Democratic nomination process, and it was an unmitigated disaster. It’s Friday morning here in London and there is still no clear winner. Any way you cut it, this reflects poorly on the Democrats even if they try to deflect blame by saying that it wasn’t directly their fault. Rest assured that the Republicans are loving this. I’ll add that – in any event – once the outcome is known, it doesn’t look like the winner (likely Pete Buttigieg or Bernie Sanders) would be a candidate that could defeat President Trump.


4. Who is going to be the Democratic candidate anyhow? Assuming the Democrats can move forward constructively from the Iowa caucus debacle, a Democratic front-runner will still need to emerge sooner or later that has a chance against President Trump. There’s no doubt that “Super Tuesday” on March 3rd, when Mr. Bloomberg is expected to make his first foray into the Democratic presidential selection process, is a key date, especially since California – with 55 electoral votes (highest by a wide margin of any state) – has moved its primary from June to Super Tuesday. In fact, by the end of March, both parties will have over 50% of their work done. The site 270toWin has a calendar for the upcoming caucuses, if you’re interested. I personally do not believe a too-far-to-the-left Democratic candidate has a chance of beating President Trump. People might argue that the recent U.K. election says nothing about the U.S., but I believe differently – the far left socialist Labour Party, led by Jeremy Corbyn, was absolutely (and somewhat unexpectedly) trounced by the Conservative Party, led by Boris Johnson. A Sanders or Warren style socialist agenda is not going to fly in the U.S. with its economy firing on all cylinders, no matter how it’s spun. Why change what is working? The only hope for the Democrats is to nominate a centrist candidate like Joe Biden or Michael Bloomberg. Whether or not the party recognises this remains to be seen, but the election is all but over as far as I am concerned if the Democrats lean too far to the left.

5. “It’s the Economy, Stupid”: My point here is simple – if the Democratic candidate ultimately tries to go toe-to-toe with President Trump on the economy, it’s lights out for the Dems. Yes, there are issues with wealth distribution, but the Fed’s accommodative policies since the Great Recession in 2008-09 are largely the culprit, not this administration. And although I favoured tax reform and a reduction in corporate taxes, I do not think that personal tax cuts made sense in a growing economy. (We are selling out our children and children’s children by growing the federal deficit, a topic which was sacred for the Republicans as far back as I can remember….well, until now that is!) And in any event, things like wealth inequality and record deficits get overshadowed by many positives in the U.S. economy at the moment, including record low unemployment, low interest rates, and record after record highs in the U.S. stock market. Although the Democrats can raise the issue of the economy during their party debates – and they do in every debate - I can’t believe they would be so naive as to drift into making the U.S. economy an issue in this election. (I will point out though that, should things turn for the worse, this might prove to be President Trump’s Achilles heel; but it sure isn’t at the moment!)


In conclusion, the election is a long ways off, and much can happen between now and then. However, the trends are not favouring the Democrats. If they seriously wish to make a run at unseating President Trump, they very much need to get their act together and fast. They need to recognise that the support amongst Republican members of Congress and the hard-core Trump supporters is fixed, no matter what President Trump does or says. This election will come down to the 30%-40% that are independents in the middle, not committed to either party’s candidate just yet. However, it seems to me that President Trump is gradually winning the fight for the middle, which bodes poorly for the Democrats at the moment.

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