A Test of Democracy

December 27, 2020

by Steve Stofka

In 2008, Barack Obama won almost 25% of counties, a high percentage for a Democratic candidate. In 2016 and 2020, a sixth of counties voted for a Democratic President. Though a small percentage, those counties represented more than 2/3rds of the nation’s GDP. The most productive part of our economy votes Democratic, but a county electoral map looks mostly red. How can that be?

More than half of the U.S. population lives in less than 5% of counties (Census Bureau, 2019). A county electoral map gives the same weight to a county in Colorado with a few hundred people as it does to L.A. county which has 10,000,000 inhabitants. A person looking at that map gets the impression that “most of the country” votes Republican but land doesn’t vote – people do.

A more accurate electoral map is by congressional district like this one at FiveThirtyEight (2018). Voting districts are assigned by population, not land area. I’ll copy their Colorado map to illustrate the point. There are as many people living in a few square miles in Denver as there are in more than half the state.

As the population concentrates close to urban areas, a county-by-county analysis reveals some long-term trends. Historian David Kennedy recently noted a shift in sentiment over the past four decades (2020). In 1980, 13% of counties were dubbed “landslide” counties in which the Presidential candidate won by 20% or more of the vote. By 2000, 19% of counties voted that way. In the 2020 election, more than 50% of counties were landslide.

Kennedy referred to Bill Bishop’s 2009 book The Big Sort which described how Americans were moving to places where they lived with others whose political sentiments were like their own (2009). For more than a century, we have been moving from the country to the city. After World War 2, the automobile gave us the freedom to move further away from where we work. We like living with people who resemble us.

A trend that has been going on for a century is likely to continue. Those hoping that election tensions will ease in the future will be disappointed. Although social media helps spread election conspiracy theories, Americans are fond of such theories. Those on the left side of the aisle were convinced that the governor of Ohio stole the 2004 election for George Bush (Weiss, 2020). That was on the heels of the 2000 election which Florida governor Jeb Bush stole for his brother George.

Each election begins in earnest on inauguration day. Immediately after President Obama’s inauguration in 2009, Mitch McConnell succinctly summed up his job as the Senate’s Minority Leader – his job was to make sure Obama was a one-term President. With the nation deep in a financial crisis and millions of people out of work, Democrats condemned McConnell’s remark.

From the first day of President Bush’s presidency in 2001, Democrats rallied and protested the boy made king by an activist Supreme Court. In a 5-4 decision, five supposedly conservative justices tossed aside conservative jurisprudence and voted to overthrow the decision of Florida’s Supreme Court. Henry Monaghan argued against the hundreds of legal scholars who condemned the court’s jurisprudence. The first few pages summarize the circumstances of that election and the many criticisms of the court’s decision (2003).

Eighty years ago, FDR wielded his executive pen like a sword to cut through any Congressional opposition from those on either side of the Congressional aisle. In his 3-1/2 terms, he signed more than 3000 orders, a record that will likely never be broken. Today, our Presidents rule by executive order. Each President spends his first year undoing the executive orders of the last President if that President was from the other party. Without the consistency of law, the American people lose respect for the law, regarding it as little more than personal whim.

The Constitution gives the President the power to grant pardons for Federal crimes. Each President’s use of the pardon power demonstrates that personal sentiment and political alliances matter more than justice. After President H.W. Bush pardoned all the co-conspirators in the Iran-Contra scandal, the American people began to lose faith in the law.

The Supreme Court’s 2000 Bush v. Gore decision reinforced the notion that America was like the old European nations, a country of patronage and favor, not one of law. Mr. Bush disregarded good judgment, the law, and his own intelligence services to justify an attack on Iraq in response to the 9-11 tragedy. Business scandals punctuated the first four years of his administration. His re-election in 2004 convinced many Americans that corruption, not competence, was the American way. Mr. Bush’s second term reinforced that impression.

President Obama’s political rhetoric was strong and even-tempered, but his policy response to the financial crisis was weak and un-tempered. Within two years the American people chose political paralysis, wresting control of state governments from Democrats and handing the House to the Republicans. Like Mr. Bush before him, Mr. Obama found fault with others, not himself.

After electing an unseasoned backbench Senator Obama to office, the American people elected a TV star to the Presidency. Why not? America, the competent, has become a country of fools. Why would we not elect New York City’s leading buffoon?

Each day more people die of Covid than lost their lives in 9-11. The country now turns from the Jester to a seasoned former Senator, Mr. Biden, to lead the country. Unlike Mr. Obama and Mr. Trump, Mr. Biden is not in love with his own rhetoric or his judgment. Can he restore competence to the White House? Perhaps.

What he can’t do is restore the competence of the voters, who love their opinions more than their interests. Regardless of his success or his policies, half the country will condemn him because we have sorted ourselves into them and us. James Madison, the chief architect of the Constitution, worried most about the rise of factions because that is what brought down the Roman empire. We fought a Civil War and have not been a United States since then. We are transforming ourselves into a type of European confederation, divided into regional, rural, and urban interests, clutching our contempt for our fellow Americans to our hearts. Is this the century when we finally abandon the experiment of the United States?

/////////////////

Photo by Den on Unsplash

Bishop, B. (2009). The big sort: Why the clustering of like-minded America is tearing us apart. Boston: Mariner Books. [Kindle price $1.81 from https://www.amazon.com/Big-Sort-Clustering-Like-Minded-America/dp/0547237723/ref=sr_1_1

FiveThirtyEight. (2018, January 25). The Atlas Of Redistricting. Retrieved December 25, 2020, from https://projects.fivethirtyeight.com/redistricting-maps/

Kennedy, D. (2020, December 9). David Kennedy: The Future of Democracy in America. Retrieved December 25, 2020, from https://www.commonwealthclub.org/events/archive/podcast/david-kennedy-future-democracy-america

Henry P. Monaghan, Supreme Court Review of State-Court Determinations of State Law in Constitutional Cases, 103 COLUM. L. REV. 1919 (2003). Available at: https://scholarship.law.columbia.edu/faculty_scholarship/164

US Census Bureau. (2019, May 23). Big and Small America. Retrieved December 25, 2020, from https://www.census.gov/library/stories/2017/10/big-and-small-counties.html

Weiss, J. (2020, December 21). What Happened to the Democrats Who Never Accepted Bush’s Election. Retrieved December 25, 2020, from https://www.politico.com/news/magazine/2020/12/19/2004-kerry-election-fraud-2020-448604

A Man and his Kingdom

November 22, 2020

by Steve Stofka

In Shakespeare’s tragedy, King Richard III offers his kingdom for a horse after his is struck down in battle. Mr. Trump echoes the reverse sentiment, bargaining and plotting to retain his kingdom.  

The White House has archived a Heritage Foundation sampling of election fraud (Heritage Foundation, n.d.) Most of them are for local and state elections because fraud has some degree of potency in smaller elections. In a Presidential race, an attempt at fraud is like pouring a cup of water in a lake. Some of the cases are sad. A son is convicted for submitting a ballot for his mother who has just died. Some vote twice in an election even after being warned not to by election officials. Some cheat to get their friend or their boss elected to city council.

Conspiracy theorists claim that this is just the tip of the iceberg. “Absence of evidence is not evidence of absence,” they claim. Christians explained that objects fell to the ground because angels pushed them. They used the same reasoning, evidence of absence, to counter Newton’s claim that it was a force called gravity. Newton’s theory was more predictive, but I dare anyone to show me that angels are not making things fall to the ground.

Why won’t President Trump concede the election? Trump’s efforts have been dismissed by courts, including one state Supreme Court. Some on the right point to the 2000 election and the lawsuits brought by Democrats in the Florida count as a justification for Trump. The 2000 Presidential election was decided by 537 votes out of 6 million in the state. That is a small probability multiplied by the small probability that such a result would matter in the Electoral College. Perhaps 2 in a 1,000,000; it had never happened before in U.S. history. The probabilities indicate that it has never happened before in human history. Are Mr. Trump’s election numbers as close as the 2000 election? Hardly.

Katherine Harris, Florida’s Secretary of State, may have committed fraud in the 2000 election; it makes sense to risk fraud when the vote difference is that narrow. A difference of 10,000 votes – the smallest difference in any of the states that Trump is contesting – is not narrow.

Mr. Trump claims fraud before every contest. When he picked one wrestler in the 1988 WBF wrestling championship that he sponsored, he claimed that the other side was cheating. His guy won despite the cheating. Huzzah! He is a promoter. If accusations of cheating arouse the crowd, let’s do it.

After the 2008 election, Mr. Trump led the “birther” movement, claiming that Mr. Obama had cheated because he was not born in the U.S. Before – not after – the 2016 face off with Ms. Clinton in 2016, he claimed that Democrats were stealing the election (Zeitz, 2016). What works in wrestling works in elections, doesn’t it? Get the crowd’s attention. Play to the 5-year old in each of us.

Supporters of Mr. Trump point to the 1960 Presidential election as evidence for fraud. JFK (this is the anniversary of his assassination) won Illinois’ electoral votes by a slim margin of almost 9,000 votes in Cook County, where the mayor was a supporter of JFK and a family friend (Zeitz, 2016). Absence of Evidence is not Evidence of Absence.

Did Nixon throw the 1968 election? Just before the election, President Johnson called a halt to bombing in South Vietnam to give Vice-President and candidate Humphrey a boost in the polls. The Nixon campaign countered by promising a better deal to the other side if Nixon was elected. Aiding and abetting a foreign enemy? (Kilgore, 2018).

To distinguish this from election fraud, let’s call it election rigging; a campaign conducts a strategy which will help win them the election without altering votes per se. The Watergate scandal in advance of the 1972 election was an attempt by the Nixon campaign to get intel on the other side’s campaign. If Nixon had admitted to it early on, the press might have made a big brouhaha for a few months and it would have blown over. The public might have regarded it as corporate espionage – an attempt to discover the competition’s secrets. Nixon kept it within the American family.

That was not the case in the 1980 election; like the 1968 Nixon campaign, the Reagan campaign sought help from a foreign power, Iran. The Carter Administration had negotiated through Algiers a release of American hostages who had been in captivity for a year. The Reagan camp promised better terms to Iran if they would delay the release of American hostages until after the 1980 election and the swearing in of Ronald Reagan. The drawn-out hostage crisis was one of several key events that cost President Carter re-election, and Reagan handily defeated Carter. Iran released the hostages the day that Reagan took the Presidential oath (U.S. Dept. of State, n.d.). Americans spent an additional 90 days in prison so that Reagan could win an election. Election strategy, not election fraud.

Voting is essential to a democracy. So is free speech. Unless one can control speech as they do in Russia and China, the best offense is to add more speech to dilute authentic opinion. When Mr. Trump claims that more “illegal” votes were added to dilute the votes of true American opinion, he is taking a page out of the playbook that the KGB and Communist Party use.

He has cozied up to Vladimir Putin, to Kim Jong-un, and Xi Jinping, all Communist dictatorships. That is the America that Mr. Trump wants – a private kingdom of his own just like those guys have. He is jealous of their power and their control of the media. He wants his own kingdom for just four more years. How many Republicans will help him achieve his dream?

//////////////////

Photo by Annie Spratt on Unsplash

Heritage Foundation. (n.d.). A Sampling of Election Fraud Cases from Across the Country. Retrieved from https://www.whitehouse.gov/sites/whitehouse.gov/files/docs/pacei-voterfraudcases.pdf. (Notice that this report by a private foundation has been archived at the White House).

Kilgore, E. (2018, October 16). The Ghosts of the ’68 Election Still Haunt Our Politics. Retrieved November 21, 2020, from https://nymag.com/intelligencer/2018/10/1968-election-won-by-nixon-still-haunts-our-politics.html

U.S. Dept. of State. (n.d.). An End to the Crisis. Retrieved November 21, 2020, from https://history.state.gov/departmenthistory/short-history/hostageend

Zeitz, J. (2016, October 27). Worried About a Rigged Election? Here’s One Way to Handle It. Retrieved November 21, 2020, from https://www.politico.com/magazine/story/2016/10/donald-trump-2016-rigged-nixon-kennedy-1960-214395

Jobs Affect Elections

September 15, 2019

By Steve Stofka

“It’s the economy, stupid,” James Carville posted in the headquarters of Bill Clinton’s 1992 Presidential campaign. The campaign stayed focused on the concerns of middle and working- class people who were still recovering from the 1990 recession. Jobs can make or break a Presidential campaign.

Each month the BLS reports the net gain or loss in jobs and the unemployment rate for the previous month. These numbers are widely reported. Weeks later the BLS releases the JOLTS report for that same month – a survey of job openings available and the number of employees voluntarily quitting their jobs. When there are a lot of openings, employees have more confidence in finding another job and are more likely to quit one job for another. When job openings are down, employees stick with their jobs and quits go down as well.

President Bush began and ended his eight-year tenure with a loss in job openings. Throughout his two terms, he never achieved the levels during the Clinton years. Here’s a chart of the annual percent gains and losses in job openings.

As job losses mounted in 2007, voter affections turned away from the Republican hands-off style of government. They elected Democrats to the House in the 2006 election, then gave the party all the reins of power after the financial crisis.

As the 2012 election approached, the year-over-year increase in job openings slowed to almost zero and the Obama administration was concerned that a downturn would hurt his chances for re-election. As a former head of the investment firm Bain Capital, Republican candidate Mitt Romney promised to bring his experience, business sense and structure to help a fumbling economic recovery. The Obama team did not diminish Romney’s experience; they used it against him, claiming that Romney’s success had come at the expense of workers. The story line went like this: Bain Capital destroyed other people’s lives by buying companies, laying off a lot of hard-working people and turning all the profits over to Bain’s fat cat clients. The implication was that a Romney presidency would follow the same pattern. Perception matters.

In the nine months before the 2016 election, the number of job openings began to decline. That put additional economic pressure on families whose finances had still not recovered following the financial crisis and eight years of an Obama presidency. Surely that led some working-class voters in Michigan, Wisconsin and Pennsylvania to question whether another eight years of a Democratic presidency was good for them. What about this wealthy, inexperienced loudmouth Trump? He didn’t sound like a Republican or Democrat. Yeah, why not? Maybe it will shake things up a bit.  Enough voters pulled the lever in the voting booth and that swung the victory to Trump.

In the past months the growth in job openings has declined. Having gained a victory based partially on economic dissatisfaction, Trump is alert to changes that will affect his support among this disaffected group. As a long-time commentator on CNBC, Trump’s economic advisor, Larry Kudlow, is aware that the JOLTS data reveals the underlying mood of the job market. Job openings matter.

Unable to get action from a divided Congress, Trump wants Fed chairman to lower interest rates. There have been few recessions that began in an election year because they are political dynamite. The recession that began in 1948 almost cost Truman the election. The 1960 recession certainly hurt Vice-President Nixon’s bid for the White House in a close race with the back-bench senator from Massachusetts, John F. Kennedy.

In his bid to unseat President Carter in 1980, Ronald Reagan famously asked whether voters were better off than they were four years earlier. The recession that began that year helped voters decide in favor of Reagan.

Although the 2001 recession started a few months after the election, the implosion of the dot-com boom during 2000 certainly did not help Vice-President Al Gore’s run for the White House. It took a Supreme Court decision and a few hundred votes in Florida to put Bush in the White House.

As I noted earlier, George Bush began and ended his eight years in the White House with significant job losses. Those in 2008 were so large that it convinced voters that Democrats needed a clear mandate to fix the country’s economic problems. After the dust settled, the Dems had retained the house, won a filibuster-proof majority in the Senate and captured the Presidency. Jobs matter.

The 2020 race will mark the 19th Presidential election after World War 2. Recessions have marked only four elections – call it five, if we include the 2000 election.  An election occurs every four years, so it is not surprising that recessions occurred in only 25% of the past twenty elections, right? It’s not just the occurrence of a recession; it’s the start of one that matters.

Presidents and their parties act to fend off economic downturns with fiscal policy or pressure the Fed to enact favorable monetary policy that will delay downturns during an election. Trump’s method of persuasion is not to cajole, but to criticize and denigrate anyone who doesn’t give him what he wants, including the Fed chairman. To Trump, life is a tag-team wrestling match. Chairman Powell can expect more vitriolic tweets in the months to come. Trump will issue more executive orders to give an impression that his administration is doing something. The stock market will probably go up. It usually does in a Presidential election year.

Economic Cracks

February 17, 2019

by Steve Stofka

As the recovery enters its tenth year, there are signs of strain. As debtors struggle to pay their loans in a weakening economy, the percentage of non-performing loans increases.  The current rate of one percent indicates a healthy economy (Note #1). When the annual change in the rate of delinquency increases, that has been a reliable indicator that the economy is growing stagnant. Here’s a chart of the percent change in non-performing loans. A change above zero has preceded the last three recessions.

Non-PerfLoansChange

Let’s add one more series to the graph to help us understand the cycle of consumer credit. In the graph below, the red series is the percentage of banks tightening lending standards. Notice how the banks respond to a rise in delinquencies by being more selective in their credit criteria. Eventually, this tightening of credit leads to a recession. The cycle is as natural as the ocean currents that distribute heat around the planet.

NonPerfBankTighten

The financial news agency Bloomberg reports that delinquent auto loans are the highest since 2012 (Note #2). Bankrate reports that credit card debt has risen since last year. Less than half of people surveyed have emergency funds (Note #3).

December’s retail sales report, released only this week because of the government shutdown, showed a surprising decline of 1% from November. Have some consumers reached their limit? Retail sales, adjusted for inflation and population growth, does not show the strain so far. Look at the period from late 2015 through late 2016 when sales growth consistently slowed below 1%. That was a key factor that cost Hillary Clinton the election. Trump turned voter dissatisfaction into an electoral victory in the Midwest.

RetailRealAdjPop

Politicians ride to power on the anger of voters. In 1994, Republicans overcame forty years of Democratic rule in the House by promising less regulation and lower taxes in a “Contract with America.” When the Supreme Court decided the 2000 election in favor of a Republican president, they enacted tax cuts to reverse the tax increases passed by Democrats in 1993. In 2006, voters were angry with the incompetent Bush administration and reinstalled Democrats in the House.

In the depths of the Financial Crisis in 2008, Democrats rode a wave of anger, despair and hope to take the White House and command a filibuster proof majority in the Senate for the first time since the post-Watergate Congress thirty years earlier. Such a rare majority indicated that voters strongly wanted a solution to the crisis (Note #3). The Obama administration and Democratic Congress protected the financial and insurance industries while ordinary people lost their homes and their savings. The one piece of legislation that emerged from that majority was Obamacare, the bastard child of back alley compromises between mainstream Democrats and the health care industry. Few who voted for it knew what was in the bill.

In 2010, Republicans rode the anger wave of the Tea Party caucus to retake the House. With an equal number of Senate seats up for re-election, Republicans took six seats from Democrats and ended their filibuster proof majority (Note #4). In 2014, voters handed the Senate back to Republicans, then gave the reins entirely to the Republicans with the election of Donald Trump to the presidency in 2016.

In 2018, Democrats rode a wave of anger to take back control of the House. Social media campaigns whip up indignation to fan the flames of voter anger in the hopes that Democrats can at least take back the presidency in 2020. Voters may not be in enough economic distress to give Democrats control of the Senate in 2020, but it is the Republicans who have the most seats up for re-election this coming Senate cycle (Note #4).

Credit expands and contracts in a seasonal multi-year cycle. Banks are tightening in response to higher delinquencies. Will the timing of the credit cycle coincide with the 2020 election?

///////////////////////////

Notes:
1. In 2016, China, Japan and Germany had rates below 2%; the U.K. and Canada had less than 1%. On the high side, Greece had 36%; Italy had 17%, and Spain had 7%.
2. Why are so many people delinquent on auto loans? Bloomberg
3. In 1964, the Supreme Court forced the states to redistrict their state legislatures based on population changes. For fifty years, Democrats were sometimes able to forge filibuster proof Senate majorities because racist Southern states were effectively one party Democratic states. Reynolds v. Sims . Since the ratification of the 17th Amendment in 1914, Republicans have never had a filibuster proof majority
4. A third of Senators are up for election every two years so party advantage shifts with every election cycle.

Voter’s Guide

November 4, 2018

by Steve Stofka

This week – a break from personal finance and economics to bring you a voting guide for Independent voters who make up more than a third of the electorate. Circle which position you favor in each category below. Add up the choices. Vote for whichever party gets the most circles.

Role of Federal Government
If you believe that the Federal government has too much power over individual lives, Vote Republican.
If you believe that the Federal government should have more power to promote an egalitarian society, Vote Democrat.
////////////////

Political Structure
If you want to change the existing political structure to a democratically elected Parliamentary Republic, Vote Democrat.
If you like the existing system of a Constitutional Republic of democratically elected state legislatures, Vote Republican.
///////////////////

Regulation
If you think that regulation should be primarily left up to state and local agencies who will be more responsive to the people of that district or state, Vote Republican.
If you prefer federal regulation because you distrust the ability of state and local agencies to apply regulations fairly and evenly, Vote Democrat.
/////////////

Family Planning
If you think state and local agencies acting as agents of God’s will should control your family planning decisions, Vote Republican.
If you believe in personal autonomy in family planning decisions, Vote Democrat.
///////////////

Equality of Social Contracts
If you believe that all people should have equal rights to make legal contracts regardless of their social or sexual identity, Vote Democrat.
If you believe that an elected government has a right to restrict access to legal contracts to promote certain moral values and behaviors, Vote Republican.
/////////////////

Defense
If you believe that national defense is the primary legitimate function of a Federal government, Vote Republican.
If you believe that the Federal government should provide a safe environment for all citizens, and that defense is just one part of that safety net, vote Democrat.
/////////////////

Taxes
If you believe that taxes for common benefits should be applied more evenly so that everyone has “skin in the game,” Vote Republican.
If you believe in progressive taxation, that the Federal government has a right to take more from you, so it can give more to someone else, Vote Democrat.
///////////////////

Immigration
If you believe that we are a nation of laws and that foreigners coming into our country should respect our laws, vote Republican.
If you believe that the administration of immigration law must respond to the plight of human beings seeking a secure home for their family, vote Democrat.
////////////////////

Environment
If you believe that there is not yet enough actionable evidence for climate change caused by human activity, Vote Republican.
If you believe that we should pursue policies that limit activities which promote climate change, Vote Democrat.
/////////////////////

Social Welfare
If you believe that government has a responsibility for the welfare of all Americans, Vote Democrat.
If you believe that state and local governments have a responsibility to act with charity toward those who cannot care for themselves through no fault of their own, Vote Republican.
////////////////

There are many particular issues, some of which are sub-genres of these categories, at https://www.isidewith.com/polls.