Monday, February 29, 2016

It’s the Economy, Stupid!—2016 Redux

Journalists and analysts are shocked, shocked that the GOP voting base has apparently thrown their support behind a rabble-rousing troll hate-spewing twitter troll with a Queens accent who speaks with a fourth grade vocabulary.  Many also appear flummoxed that Democrats have bestowed so much of their support to an elderly Socialist Jew from Brooklyn who wants, like Jesus (another Socialist Jew), to throw the moneychangers out of the temple.

The sense of outrage and dismay is palpable in nearly every political talk show and across news networks from Fox News to MSNBC. Even President Barack Obama admitted that he was surprised by their popularity, but felt that the race would ultimately give way to more "serious" candidates.

Election analysts have proven rather flat-footed this election cycle. David Karol, co-author of The Party Decides: Presidential Nominations Before and After Reform (which argues that in the U.S. parties play a crucial role in winnowing election choices) acknowledged in an interview that “Donald Trump is really a unique candidate. It just has to be said: He doesn’t fit a lot of…paradigms and models. In some ways every election is different.”  According to Political Scientist Larry Sabato, however, “If Trump is nominated, then everything we think we know about presidential nominations is wrong.”

Nate Silver, statistical Wunderkind who has predicted numerous US elections with scary accuracy, gave Trump only a 5 percent chance of winning the nomination as late as December. He too declared Trump not a serious candidate and has only recently conceded that he might have underestimated Trump's chances of winning the GOP nomination. 

What everyone can agree on is that this is the year of the “outsider.” The reasons given for Trump's rise in particular have ranged from differing amounts of free media coverage (Trump has by far the most) to an irresponsible media that privileges ratings over its traditional watchdog function to failure of establishment to take on Trump to no one actually taking Trump seriously as a viable candidate.

The actual supporters of "outsider" candidates, meanwhile, are widely derided in the media. Sanders supporters are unrealistic and "becoming a problem." Trump supporters suffer significantly more contempt for supporting a candidate who is poorly qualified for the job and unlikely to represent their interests. These voters are "living in a childlike fantasy land"and may also be idiots and racists.  

Some in the Beltway media are scratching their heads over the degree of populism and anger in the electorate. People should be more content. After all, consumer sentiment is at a multi-year high, unemployment at a multi-year low (at 4.5 percent), and people have made boatloads of money in one of the longest bull markets in American history.

What these analysts and pundits miss—and what both Sanders and Trump get on a visceral level—is that, for a large swath of voters, the economy (and their living standards) really are not fine. The middle and lower classes have had stagnating wages for several decades. Particularly since 2000, their productively has continued to increase linearly, while wages and median family income have not kept up.

It may be objected that wealth inequality and stagnating wages are a multi-decade, structural problem, and therefore cannot explain the voter revolt of 2016. But in fact, the problems—though long-festering—may have even gotten worse since the Great Recession of 2008 when Obama was first elected. Voters on the happy side of the economic divide have largely recovered from the recession, having gained back their stock losses and then some. On top of this, they generally have job security, excellent employer-provided benefits (including good health insurance), and the like. For them, a Rubio or Clinton victory offers what they want--basically, the status quo.

For voters on the wrong side of the economic divide, however, most of their wealth has been in home equity, not stocks. And millions of Americans lost their houses after the crash, or have mortgages that are now unaffordable or underwater. Many others are in a situation where buying a home is not an option but rents are sky-high, while their income and wealth never really recovered from the losses of 2008.

The above chart shows that the percentage of people suffering significant ongoing economic hardship is both substantial and has not really declined since the Global Recession. Meanwhile, all but the wealthiest Americans have experienced wage stagnation.

Reporting on a 2014 survey by Pew Trust, Clayton Browne said, “One of the most troubling findings in the new Pew survey is that the rate of Americans falling behind financially remains stuck at 56%. This statistic hit an all time-low of 57% during the financial crisis of 2008, and refuses to budge upwards despite all of the economic “good news” over the last six years.” 

These two charts show that a large chunk of the public is still in the same or worse economic position as in 2008-9, and they also believe that America is going on the wrong track--an excellent proxy for voter dissatisfaction with the institutional status quo.

This dissatisifaction extends to the presidential race. 

On the left, Clinton has staked out a moderate position, promising to build on the achievements of the Obama administration. Speaking to supporters in Alabama, the New York senator offered, "Although I'm not running for my husband's third term or Obama's third term…. I will proudly carry forward the record of Democratic achievement." According to one of Clinton's surrogates, "Hillary is a pragmatic progressive--she's not an advocate...She quietly pulls people together and gets things done. Even though that's not in vogue right now, i think that' what voters will want in the end." 

On the right, current establishment favorite, Senator Marco Rubio, stands for mainline GOP party positions, including building up the military while slashing all other government spending to 2008 levels, promoting rights of unborn fetuses, repealing Obamacare and offering tax credits for people to buy private insurance, opposing climate change legislation, and opposing net neutrality.  It is worth noting that there are not many programmatic differences between Rubio and those remaining in the GOP field

The outsider/insider divide maps onto class differences. Rubio enjoys the backing of people who have college degrees and are wealthy, while "outsider" Donald Trump does best with poorly educated and working class voters. On the Democratic side, Clinton enjoy the support of older and wealthier voters. Exit polls conducted in the New Hampshire primary indicated that Sanders won every demographic group except voters who made over 200,000 dollars a year, who went for Clinton.   A CNBC poll even had her winning a hypothetical match-up against Jeb Bush among millionaire voters

Whatever you may think about Trump and Sanders (who are polar opposites politically and in nearly every other way), they appeal to disaffected Americans on both ends of the political spectrum. The very promise of revolutionary change (no matter how apparently ill-conceived) is becoming ever more attractive to the growing percentage of Americans who find themselves shut out of the American Dream.

Many Americans do not understand these sentiments, in part because they are not living it--the economic status quo is serving them quite well. However, this year the winds of change are stirring, as many Americans no longer willing to buy what the establishment is selling.