Tuesday, December 26, 2017

Animal Spirits

Investors are enthusiastic about Trump economy.

Democrats will be stronger if they recognize and learn from things that are aiding Trump's popularity.  Trump unleashed the "Animal Spirits" of consumer and investor confidence.

A great many people consider Trump to be vulgar, narcissistic, autocratic, unstable, intemperate, manipulative, dishonest, and racist.  I ask readers to accept for a moment that all these things are true. Then simultaneously acknowledge that it is possible for even such a man as Trump to have done something right. 

Even a stopped clock is right twice a day.

Trump pushed the psychological "RESET" button on the American economy.  For better or worse, Trump represented the possibility of dramatic change.   Possibly it would be terrible change--nuclear war with North Korea. Even the imagined potential for catastrophe had a purpose that helped Trump: it made realistic the notion that Trump could create dramatic change.  

Trump was a shot of adrenaline to the system, particularly to the investors and entrepreneurs of America. Beginning the morning of the election the stock market was swamped with buy orders.  Mutual fund managers, hedge fund principles, institutional traders and the body of independent investors all simultaneously, on balance, made an estimation:  Trump would be good for American business.  

They estimated that Trump would eliminate some of the regulations intended to keep banks from self destructing. They assumed Trump would unleash petroleum frackers, drillers, and marketers. And Trump would support tax cuts for businesses thus increasing corporate after-tax earnings.  Plus tax cuts for the very wealthy.  And Republican Trump could get an infrastructure bill through a Republican Congress that had stifled Obama accomplishing. They estimated that judges conservative on abortion and gay rights would be conservative on business issues.

At bottom, they calculated that Trump's populism was just surface deep sweet talk to get the gullible coal miners and nationalist flag wavers and Christian evangelicals and modern day Archie Bunkers to vote Republican, but that Trump's main instinct and policy would be to protect the interests of people doing business.   

They were right.

Post election.  I saved jobs.
On the day after the election Donald Trump turned from pessimist to optimist. Trump announced a demarcation line.  Before him, misery and job loss and bad deals and carnage.  After his election, happy days.

Days after the election he had photo ops with labor leaders and with businesses planning to move factories to Mexico.  Tump had his story.  A new era.  He sold it.  The media and Democrats looked like whiners.  

Obama had not stood in front of a factory in Indiana, claiming to have saved jobs. Trump did.

As this blog as reported, in fact the economic recovery is continuing a trend line started eight years ago, but the psychology and narrative is in fact different.  The president is saying things are good now. 

Investors believe it.   The stock market has climbed 28% in the one year after election day.  

Democrats need to understand and integrate this reality of sentiment and create a narrative to explain it.   Trump has his narrative: It was me.

Democrats are late to create a counter narrative.   Obama never pushed RESET after the 2008 financial crisis, no other Democrats sold the idea of optimism and recovery.  Too many people still felt blue.  

The next Democratic message can not be "we need economic change" because Trump has claimed the success and no one wants to change success, full employment, a booming stock market, and an economy running at full tilt. 

Democrats wasted a year telling people what they already knew: that Trump was an unstable, impetuous, narcissists. That may not be relevant, if the issue is a strong economy and Trump owns that. Democrats have not been telling people what they needed to know, which is that Trump inherited a booming economy.  Those banking "regulations" are actually protections to keep the bankers from stealing us blind once again and to keep the rebounding economy on track.  And the environmental "regulations" are actually protections to keep the oil and gas people from using our air and water as a dump so their billionaires can get even richer.
It is too late for to change the past. Trump claims credit for the optimism.  Democrats let him.

Events might reverse the narrative.  A recession is overdue. Trade war might break out.  Trump might stumble us into war somewhere. But Democrats made a major mistake when they let Trump claim credit for the current recovery.


Thad Guyer said...

I'm in South America now, with a cohort of business people. After the obligatory denunciations of Trump personally, they say this: "If only we had a president who slashed regulations burdening business, and who would make business friendly tax laws a priority." Many foreign politicians dislike Trump, but business people in South America are envious.

Rick Millward said...

Perhaps inadvertently, the Obama recovery was in part due to policies, including tax policy, that had at their core a long term view. It was nearly a trillion by itself, likely more than enough to stimulate the US out of a recession.

Regulation attempts to put in place structural controls that otherwise would lead to the boom/bust dislocations evident in the last 50 years.

Rather than be seen as a burden they should be seen as a way to more accurately reflect the true costs of productivity, environmental, social, and so on, which is a recognized role of government. If these costs are ignored profits gravitate to a minority, the group addicted to greed and materialism, who "Invest" at the Wall Street Casino. Wealth inequality is a threat to social stability and democracy, as we are currently experiencing.

Intelligent people know this, but a fundamental problem is convincing those who are benefitting from an unfair and unsustainable system to give up some of their wealth in the interests of overall future prosperity. The politics of the 19th century will not work in the 21st.

Robert Mann said...

Yes, the Democratic Party stands by and lets Trump take credit. I think it has to transform itself from a sort of advertising agency that goes into action periodically with ads and sound bites to an kind of higher education institution that studies issues and informs the public in depth.