History is a great teacher if you bother to “read the minutes of the last meeting,” which many lost in the “Twitterverse” generally fail to do. In March, 1991, following the invasion of Iraq, President George H. W. Bush enjoyed a 90 percent job performance rating. Bill Clinton, a little-known governor of Arkansas, was looking for a campaign theme for his 1992 run against a popular sitting president.
At an internal staff meeting, strategist James Carville wrote three potential campaign themes on a white board — the economy, stupid; change vs. more of the same; and, don’t forget health care. A variation on Carville’s bromide, “It’s the economy, stupid,” lives in political history. In a little over a year after his high approval rating, Bush lost the presidency with Clinton taking 43 percent of the vote versus 37.4 percent for the incumbent. Independent spoiler Ross Perot snagged 18.9 percent of the vote. Is Howard Schultz the Perot of 2020?
With America’s rabidly partisan divide dominating punditry, expect a cascade of pro/con commentary as to how the economy will influence the election. Will the economy slow down? A Feb. 21, 2019 piece in Forbes by Chuck Jones stated odds of a “Trump recession” had risen to a 30-37 percent chance per two major forecasters. Conversely, an April 17, 2019, Washington Post article opined that a U.S. recession looks less likely, boosting Trump’s chances. The Post thinks GDP growth will slow below White House visions of 3 percent-plus, however, “most forecasters are now in the range of 2 to 2.5 percent for 2019 and around 2 percent for 2020, which is probably good enough to keep unemployment low and wages rising at a robust pace.”
The renowned Austrian School economist Murray Rothbard (1926-1995) penned a series of monthly essays, “The Free Market,” from 1982 to 1995. A collection of his work was published by the Ludwig von Mises Institute in 1995, “Making Economic Sense.” In an essay, “Is It The ‘Economy, Stupid?,” Rothbard said, “To capture the Clintonian meaning, the sentiment should be rephrased as ‘it’s the business cycle, stupid.’” Observed Rothbard, what Carville perceived was “business-cycle determinism—if the economy is booming, the ins will be reelected; if we’re in recession, the public will oust the ruling party.” How this plays into the power split between the House versus the Senate and White House is fodder for the chattering classes.
Beyond pure economics, Rothbard outlined what matters to voters. “What’s happening to taxes and secular living standards (such as) the intangible, immeasurable but vital concept of the ‘quality of life,’ is extremely important, often more so than whether we are technically in the expansion or contraction phase of the (business) cycle.”
George Bush caved relative to his “read my lips, no new taxes” pledge, and that killed his chances. With the current split in Congress, little will get done pre-election, but noise about raising taxes will hurt any Democratic hopeful. What was the public concerned about in 1991? Wrote Rothbard, “The public is particularly exercised about crime, gun control, the flood of immigration and the continuing wholesale assault by government and the dominant liberal culture upon religion and upon ‘bourgeois’ as well as traditional ethical principles.” Twenty-eight years later, it’s “déjà vu all over again!”
The economy is strong. Employment statistics and other metrics favor a general sense of job security and wellbeing. An April 30, 2019 Gallup survey showed that “since the start of 2019, Americans’ optimism about their personal finances reached levels not seen in more than 16 years, as 69 percent expected they would be better off in a year.” Of survey participants, 66 percent say they have enough money to live comfortably versus 33 percent saying they do not.
Conference Board Consumer Confidence Index data released May 28, 2019, showed consumer confidence rising in May, with positivity “now back to levels seen last fall when the index was hovering near 18-year highs.” Inflation remains subdued. Oil prices have dropped which should keep fuel costs in check. The Fed is likely to stay restrained relative to interest rate increases. When people feel financially secure, they’re more inclined to travel. Airplanes are full, cruises are in, highways crowded. Millennials, in particular, are traveling in greater numbers, seeking experiences reflecting a YOLO philosophy, “you only live once.”
It’s a long way to Election Day, November 3, 2020, and much could go wrong for Trump and the Republicans. Tariff wars or other surprises could upset Wall Street, and potentially, consumer and voter confidence. Equally probable, much could go awry for Democrats. Regard all forecasts and punditry as entertainment. Continue to adhere to your personal long-range investment and wellbeing enhancement strategies.
Politicians and presidents come and go. Your current and future security and peace of mind rests largely on what you do, not what they do! Enjoy the rest of your summer.
Lewis Walker, CFP®, is a financial life planning strategist at Capital Insight Group; 770-441-3553; firstname.lastname@example.org. Securities & advisory services offered through The Strategic Financial Alliance, Inc. (SFA). Lewis is a registered representative and investment adviser representative of SFA, otherwise unaffiliated with Capital Insight Group. He’s a Gallup Certified Clifton Strengths Coach and Certified Exit Planning Advisor.