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Posts Tagged ‘Gridlock’

If you look at my election predictions from 2010, 2012, 2014, and 2016, you’ll see that my occasional insights are matched by some big misses. So I don’t think I offer any special insight.

But since readers seem to enjoy these biennial predictions, I’ll once again go out on a limb. The bottom line is that my Democratic friends will be happy.

Since so many Democratic seats are up, it will be a big defeat if Republicans stay at 51 seats in the Senate. And the loss of more than 45 seats in the House is approaching bloodbath territory.

This outcome is why I advised my GOP friends that it might have been better to lose the 2016 presidential election.

Now let’s consider the potential economic implications, which is what I care about.

The first-order effect is that we’ll have gridlock and that’s not a bad outcome as far as I’m concerned. Simply stated, that means less legislation, which presumably means less mischief from Washington.

But not all gridlock is created equal. Here’s a chart published a couple of days ago by the Washington Post. I’ve highlighted in green relative stock market performance when there’s good gridlock with a Republican Congress and not-so-good gridlock with a Democratic Congress.

I don’t think S&P performance is the best indicator of prosperity, and the “sample size” produced by American elections it rather small, so I caution against over-interpreting this data.

That being said, I’ve crunched budget numbers and revealed that Republican presidents generally allow more spending than Democrats. The only exception to this rule is Ronald Reagan.

Unfortunately, as I warned the day after the 2016 election, Trump is no Reagan. As such, I wouldn’t be surprised if the net result (assuming my predictions are remotely accurate) is that the already-excessive growth of spending becomes an even bigger problem.

P.S. There are some very important ballot initiatives that will be decided today.

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The pro-statism crowd routinely argues that we need more government. Every so often, though, one of them inadvertently stumbles on the truth. But they then refuse to draw the logical conclusion. For instance.

We now have another example to add to the list. Thomas Friedman is a columnist for the New York Times, where he specialize in ponderous columns that reflect the views of the left-wing establishment. Today, he has a column complaining about gridlock in America. Here are some key excerpts.

Does America need an Arab Spring? …has American gone from a democracy to a “vetocracy” — from a system designed to prevent anyone in government from amassing too much power to a system in which no one can aggregate enough power to make any important decisions at all? …A system with as many checks and balances built into it as ours assumes — indeed requires — a certain minimum level of cooperation on major issues between the two parties, despite ideological differences. Unfortunately…several factors are combining to paralyze our whole system.

This is remarkable, in part because he is stunningly wrong. The political class in Washington manages to spend about $4 trillion per year and churn out tens of thousands of pages of new regulation annually.

The politicians also manage to enact dozens of new laws every year, almost all of which expand the size and scope of the federal government. If that’s gridlock caused by “vetocracy,” then I shudder to think what activist government looks like.

But the part that really shocked me was that Friedman basically acknowledged that the problem is big government.

…the huge expansion of the federal government, and the increasing importance of money in politics, have hugely expanded the number of special-interest lobbies and their ability to influence and clog decision-making.

This is a facepalm moment. Friedman begins his column by complaining that our system is sclerotic and that this makes it hard for politicians to enact more laws, yet he then admits that our system is sclerotic because government is too big already. And it goes without saying (but I’ll say it anyway) that Friedman wants to make government even bigger – which is why he’s complaining about gridlock in the first place!

By the way, I can’t resist correcting some of Friedman’s sloppy analysis in the final excerpt above. He complains about role of money and special interests in politics, but he fails to connect the dots. If he did, he would understand that political money and interest groups are inevitable consequences of a bloated public sector.

As I explain in this video, big government facilitates and encourages corruption. To put it in colloquial terms, if you create a big pile of garbage in your living room, don’t be surprised when you get infested by rats and roaches.

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The new unemployment numbers show a joblessness rate of 8.3 percent.

From a political perspective, this is good news for the White House. Even though the Obama Administration projected that the unemployment rate today would be about 2-percentage points lower if the so-called stimulus was adopted, most people aren’t looking at the numbers analytically.

Instead, what matters most is the trend. And since there’s been steady movement in the right direction, the President can say it’s somehow because of his policies.

Whether that’s true or not doesn’t matter. Politics is about perception. And since I began predicting, back in 2010, that Obama would win reelection if the joblessness rate was 8 percent or below, the folks at the White House should be smiling.

But there’s another group of people who should be happy. Republicans can argue that the improvement began almost precisely at the moment they took control of the House of Representatives.

Here are the monthly numbers, beginning in November 2010.

But I’m not here to spin a happy story for either Obama or House Republicans. The real story is that gridlock works, just as our Founding Fathers envisioned.

Once Republicans took control of the House, it meant that there was almost no chance that Obama would be able to impose more of his agenda.

This means no possibility of cap-and-trade industrial policy. It means no big new spending initiatives. It means no threat of a value-added tax.

And this means that the private sector finally has some degree of comfort that things won’t get worse in the future. This is not a trivial matter. Indeed, the Great Depression lasted so long and was so deep in part because Hoover and Roosevelt kept expanding the burden of taxes, spending, regulation, and intervention. The productive sector of the economy kept getting knocked to the canvas, so there’s was never an opportunity to adjust to the new burdens.

This isn’t to say gridlock, by itself, solves problems. Necessary reforms such as the Ryan budget can’t be implemented if we have gridlock forever, and that means America eventually would become another Greece.

But if the choice is between moving in the wrong direction and treading water, then the latter is better. It means the economy can adjust and slowly recover.

Yes, the potential long-run growth rate won’t be as high because of the bad policies implemented in Obama’s first two years, but gridlock means that nothing really bad will happen in the near future. As such, we can at least expect continued improvement in the jobs market and decent – albeit not impressive – growth.

Ironically, that’s good news for Obama. If he wins reelection, he should send a bouquet of roses to John Boehner.

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