Economics Trumps Polling
One of the big news stories today is how the national polls got the results of the presidential election so wrong.
Part of their problem was the demonization of Trump by the media. When media bias turns a policy or person into the instantiation of evil as they did with Trump, those who favor that policy or candidate will not want to side with that “evil” when answering poll questions. So they tell pollsters what they think people want to hear.
One older lady told me she planned to vote for Trump but asked me not to tell anyone. I read about a rabid Clinton supporter who wrote that his mother had promised him she wouldn’t vote in this election because she didn’t like either candidate. But when he wasn’t looking she slipped out and voted for Trump. The media shot themselves in the foot on this one.
Back in July I wrote a post on economic models that were Trumpeting a win for the Republican candidate or modestly admitting the outcome was too close to call. The accuracy of those models showed that people consider the economy their most important issue.
The media rarely reported the top issues from exit polls much. That would restrict the talking heads and their opinions about why people voted as they did. Why would the media care about what people were really concerned about when it’s so much fun to fabricate evil intentions for voters? The few media outlets that reported the top concerns of voters showed that around 52% were mostly concerned about the economy. Other issues were much more fragmented with number two garnering just around 25%.
The smartest politician (that’s not a compliment, by the way) since Reagan, Bill Clinton, got it right when he said, “It’s the economy…”
The economic models have been extraordinarily prescient in predicting presidential elections, most pollsters ignore them. I follow a lot of economic blogs and none of them even mentioned the economic models.
In addition to the demonization problem, each election cycle has a significant percentage of voters who are undecided until they get into the polling booth. Or the “undecided” were Trump voters who didn’t want to admit it. The undecided usually determine election outcomes. They are undecided because they know little about either candidate or any of the issues, but they believe the president controls the economy. If they perceive the economy is doing well they will vote for the incumbent party. If not, they side with the challenger.
Most people look to unemployment as the indicator of the state of the economy, but those numbers didn’t fool everyone. Voters probably didn’t know that the official numbers are low because record numbers of discouraged workers have shrunk the work force, but they can see unemployment around them in families with only one person working or unemployed college graduates living with mom and dad.
It’s also visible in the large crowds of unemployed protesting Trump’s win. Or it’s blatant in the retail workers whose employers cut their hours back to 29 per week in order to avoid the high costs of Obamacare. That alone may be the reason women who didn’t go to college voted strongly for the Trump.
What should we expect from a Trump presidency? No one knows, because politicians rarely govern the way they campaigned. The economists I read regularly fixated on his international trade and immigration issues. If Trump persuades Congress to go along with him on renegotiating trade deals with other countries, it will have little impact on the country because international trade is only about 20% of the economy and those policies will impact a small percentage of that.
The bigger issues are taxes and regulations. Trump has proposed a moratorium on new regulations. That’s a good first step. But the Federal Register of new regulations has grown by over three million pages since 1970 and currently runs about 100,000 pages per year. He will have to persuade Congress to abolish about a million pages of regulations to have any positive impact.
I think he has a much better chance of reducing federal taxes on corporate profits, but I doubt he will be able to shrink them enough to do much good.
The Dow hit another record high last week on the expectation that Trump will spend massive amounts of tax payer money on “infrastructure” to stimulate growth. That just shows how medieval (that is, Keynesian) in their economic thinking most investors are. Have they forgotten the Bush/Obama $800 billion spent in the years after the Great Recession? It accomplished nothing but amassing greater debt for our great-great-grandchildren to pay through higher taxes.
And I am 100% confident that the US will experience a severe recession in the next four years. Trump will get the blame for it, just as Jimmy Carter did, and he will be a one-term president.
Originally published on ABCT Investing.