Economic Impact of U.S. Presidential Candidates Policies
by Victor Sperandeo with the Curmudgeon
All opinions expressed herein are those of Victor Sperandeo. The Curmudgeon is so disenchanted with all candidates from both parties that he may not even vote for President in this November's election. That will spoil his record of voting in every U.S. election since 1968.
The Curmudgeon blog does not branch out into discussing politics, or other non-financial/economic areas except on important occasions. This is one of those times. It's very important to examine the politics of the upcoming U.S. Presidential election, because of its potential impact on the economy and subsequent consequences for the markets.
The two foundation organizations of neo-conservatives and the Republican (GOP) establishment are explained along with an analysis of the top Presidential candidates.
The first primary votes from Iowa were cast, and on the Democratic side it was a virtual tie with Hillary Clinton winning by the smallest of margins in a photo finish. Ted Cruz won the GOP vote, upsetting the favorite - Donald Trump. Cruz worked hard. He had a superior ground operation, added to an artful, (perhaps deceitful?) play of gamesmanship to make him win. Placing third in the GOP vote was Marco Rubio, the "establishment's” choice. His speech made it sound like he won the Presidency?
Presidential campaign politics has run the gamut from the great 1858 Lincoln-Douglas Debates to the current GOP debates for the 2016 Presidential nomination. The latter seems to be like a reality show about moderators looking for a "gotcha" questions with the cast being judged for their personalities and rhetorical skills. Very little is discussed about what the candidate "believes in" or what his or her principles or policies are.
In my opinion, principles are the most important aspect to judge candidates, and therefore what they will stand for on any example of a concrete issue that comes up. As Ayn Rand defines it as follows:
A principle is “a fundamental, primary, or general truth, on which other truths depend.” Thus a principle is an abstraction which subsumes a great number of concretes. It is only by means of principles that one can set one’s long-range goals and evaluate the concrete alternatives of any given moment. It is only principles that enable a man to plan his future and to achieve it.
For example, there was an important principle that President (Tricky) Dick Nixon never grasped when on August 15, 1971 he instituted Executive Order 11615 on "wage and price controls" (and officially took the U.S. off the gold standard). Nixon failed to comprehend that price controls create shortages (which fueled inflation in the 1970's) while price subsidies (like for sugar and steel) create surpluses which distorts the allocation of resources.
With the exception of Bernie Sanders, the front runners of each party are not stating their "principles" or showing genuine consistency.
Trump and Clinton are 100% pragmatic. No way to predict what he or she solidly believes in. In Trump's book "Crippled America" he sounds far more conservative than any "establishment" GOP candidate! I had liked Ben Carson as a conservative and principled Constitutionalist. But after the terrorist raid in Paris, France and San Bernardino, CA, U.S. citizens want a tough leader and fighter. Ben Carson didn't exemplify a fighter's character trait after those terrorist attacks.
U.S. Economic Assumptions/Outlook for 2016-2026:
Let's pause for a moment to look at the CBO report published at the end of January 2016, titled "The Budget and Economic Outlook 2016-2026." It's a 165 page projection of economic numbers, but only for geeks...the Gross Debt in 10 years will be “$29,314. Trillion" with a high average interest rate of 3.5%. Today, we have $19 trillion gross debt, and an average interest rate paid of 1.7%. This does not include off budget spending or deficits which are estimated to be $10 Trillion, and also does not include unfunded future liabilities of about $100-200 trillion.
The projected numbers in the report are without any recessions projected (which would make it 198 months without an economic downturn). That would be the longest recorded recovery ever since 1854, according to the National Bureau of Economic Research (NBER).
Side Note: I'm giving 100:1 odds a recession hits within 5 years and I am open to a counter. Contact me via the Curmudgeon's email address (below) if interested.
These numbers apply to all candidates so it's not wasted on just Bernie--who is also not likely to win, but is an 8:1 bet from "Odds Checker"...along with Donald Trump. You might note Jeb Bush is 50:1 to win the election.
Analysis of the U.S. Presidential Candidates:
So let's explore the future based on the likely candidates who can win as of today.
1. Bernie Sanders is an avowed Socialist who calls himself a "Democratic Socialist." Just like Hugo Chavez (Venezuela) was! This is opposed to "Authoritarian Socialists," who had previously controlled elections in other countries. Bernie is very popular with students and those who believe in increased social services. He is offering " free college tuition, free health care, a $15 minimum wage, and expanded Social Security benefits. All to be paid for with (undisclosed) higher taxes on "the rich." Total cost $18 Trillion over 10 years.
Details and Analysis from the Tax Foundation of Senator Bernie Sanders’ Plan, by Alan Cole and Scott Greenberg:
GDP will be -9.5% less; Capital Spending -18.6% less; wage rate -4.3% less; and full time jobs -5,973 (in thousands) in 10 years.
Not a pretty picture! More like the economic disaster that Venezuela is today.
2. Hillary Clinton is the odds on favorite to win it all, according to the polls and odds makers. However, Bernie whipped her in all aspects during the debate between them on 2/2/16. This is terrifying the Democratic establishment more than Trump does to the GOP establishment.
Hillary is not liked by many Americans. She has the lowest trustworthy ratings in both parties. That's hurting her, but far worse is the 100 FBI agents combing through her emails and personal email server and the controversy around her tax free foundation. Let me be polite and say this drama needs to play-out, but does not look good for Hillary.
Mrs. Clinton's economic policy is a mystery. Nonetheless, her website does propose “A plan to raise American incomes.”
Hillary is totally controlled and does not give press conferences. She does one-on-one interviews with left leaning reporters, and she controls who asks what specific questions. She does not seem to have solid principles like Bernie (who at least is an honest Socialist that can be judged). While we don't really know what Hillary would do if she wins, we do know she is for more government involvement. That would not help the U.S. economy, which would likely sink at a slower rate than if Sanders were elected President.
Sidebar: Who's More of a Progressive- Sanders or Clinton?
The funny part of the debate between Bernie and Hillary Clinton was the argument over who was more "progressive,” which was defined as:
A. Favoring or advocating progress, change, improvement, or reform, as opposed to wishing to maintain things as they are, especially in political matters.
B. Making progress toward better conditions; employing or advocating more enlightened or liberal ideas, new or experimental methods, etc.
Explanatory Note: The notion of a “progressive” started with Woodrow Wilson in 1913. Woodrow hated the Constitution because it didn't allow him to do what he wished. So mostly a Progressive wants to go around the Constitution for its own ends, and or “change it" by hook or crook. However, liberals want more taxes for their poorer constituents, but don't want to change the Capitalist system i.e. kill the "golden goose."
3. Republican Candidates:
The GOP will really have only a few candidates left standing after the New Hampshire primary vote. Christie, Kasich, Fiorina, Carson, and Jeb Bush should show poorly if the trends continue, and they will most likely all be out by the end of March. Bush has the money to continue his campaign, but no one is buying/nor eating his dog food. I think he will just continue to embarrass himself staying in the race.
The remaining candidates Trump, Cruz, and Rubio are still in battle. Trump seems to be the people's favorite. Rubio is now the favorite of the "GOP establishment" and is being pushed ahead of Bush. His tax policy is by far the WORST in the GOP field of candidates.
If Marco Rubio wins, think of “George W Bush lite” on all matters. That's not pretty to me! Cruz has a good tax policy, but a minus is the what he calls the "Business Flat Tax" which it isn't. It is more like a VAT tax in which corporate profits aren't taxed, but sales are. Guess who pays that? It's we the people. It is still better than today, but a true fair and/or a flat tax, as promoted by Carson, Rand Paul, and Mike Huckabee would be best. However, those presidential candidates are no longer in the running for the GOP nomination.
Neo-Conservatives, FPAC & NPI - Other Side of a Two Headed Coin:
Neo-Conservatives (neocons) are best represented by Bill Kristol of the "Weekly Standard." His father (Irving Kristol) was called "the godfather of neo conservatism." This quote from Bill Kristol says a great deal about the GOP:
"A welfare state, properly conceived, can be an integral part of a conservative society." Or why things never change.
If you want to know why the GOP likes war, start with the Project for the New American Century (PNAC),1 which has changed its name to Foreign Policy Initiative (FPI).
PNAC was founded by Dick Cheney, Scooter Libby, Donald Rumsfeld, Jeb Bush, Paul Wolfowitz, and other top neocons. In a January 26, 1998 policy statement, Jeb Bush and 24 other members of PNAC demanded then President Bill Clinton undertake the "removal of Saddam Hussein's regime."
I didn't hear about "weapons of mass destruction" in Iraq then- did you?
Note 1. "Project for the New American Century" was a neo-conservative think tank (from 1997 to 2006) that had strong ties to the American Enterprise Institute. PNAC's web site states it was "established in the Spring of 1997" as "a non-profit, educational organization whose goal is to promote American global leadership." PNAC was started by the same people that started FPI, including William Kristol and Robert Kagan.
All the GOP establishment candidates belong to FPI. They include: Jeb Bush, John Kasich, Marco Rubio, Chris Christie, and Carly Fiorina. Recently, Ted Cruz was recruited by the FPI. Cruz used to like Ed Snowden, now he hates him, and calls him a traitor. What a flip!
A lot of the campaign financing money comes from FPI, which wants U.S. military power domination of the world. The NSA provides a great deal of intelligence to the FPI, which has received donations from 19 major companies (including Google and Verizon).
You can read the FPI's mission statement here:
Words and phrases like: NSA intelligence/monitoring, increased defense budget, bombing/drone strikes, new world order, military leadership, “Edward Snowden is a traitor,” etc. are the calling card of the GOP establishment. Those words are vital for GOP candidates to get donations from defense companies and others in favor of a strong military or wars.
The only candidate that is not controlled by special interests or the establishment is Donald Trump. That's why he is hated by the GOP leadership. On the Democrat side, Hillary Clinton is favored by the establishment, but there's serious concern about trusting her due to the private email server fiasco and questions about her charitable foundation.
Rather than waste time guessing who will win the primaries or election, I'll update what happens in a future Curmudgeon blog post when the battle is completed. -->Let us know if you'd like an analysis after each major party chooses a candidate for President, after the Democratic/Republican Conventions or after the November elections.
When voting in the Presidential primaries or the November elections, remember the words of a very unique man in history named Lysander Spooner who wrote: "Those who are capable of tyranny are capable of perjury to sustain it."
Good luck and till next
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Curmudgeon is a retired investment professional. He has been involved in financial markets since 1968 (yes, he cut his teeth on the 1968-1974 bear market), became an SEC Registered Investment Advisor in 1995, and received the Chartered Financial Analyst designation from AIMR (now CFA Institute) in 1996. He managed hedged equity and alternative (non-correlated) investment accounts for clients from 1992-2005.
Victor Sperandeo is a historian, economist and financial innovator who has re-invented himself and the companies he's owned (since 1971) to profit in the ever changing and arcane world of markets, economies and government policies. Victor started his Wall Street career in 1966 and began trading for a living in 1968. As President and CEO of Alpha Financial Technologies LLC, Sperandeo oversees the firm's research and development platform, which is used to create innovative solutions for different futures markets, risk parameters and other factors.
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