June 30, 2023

Thought of the Week:

It’s no secret that all administrations, whether Democrat or Republican, cherry pick statistics to bolster their accomplishments. For instance, you’ll hear Biden administration officials claim that they’ve cut inflation by more than half from a high of 9.1% in March 2022 to 4% today. Whereas the Trump team might highlight  the Presidential Inflation Rate, which measures the total price increase over the entire time a president has been in office; while Joe Biden’s is 15%, former President Trump’s was just 4.1%. But have you ever wondered how an administration is able to get party members, staff, campaign surrogates, and media allies all on the same page? In fact, it’s almost eerie how politicians and party supporters can stay on message and use almost identical statistics and attack lines. Going into the important two-week July 4 Congressional recess, how the White House is managing what it terms “Bidenomics” provides an example. Late last week, the Biden administration circulated its pitch deck to Hill allies. The deck urges congressional Democrats to tout the administration’s economic achievements, pointing specifically to job gains, cooling inflation, and inbound infrastructure investments. Although voters haven’t quite bought into “Bidenomics,” Democratic Party leaders see a political runway, and think that it’s only a matter of time before the public embraces the unpredictable-but-pretty-good economy heading into the 2024 election cycle. First and foremost, the White House encourages allies to point to the strength of the labor market, saying President Biden “brought the unemployment rate below 4% four years before experts projected and kept it there for the longest period in more than 50 years.” One chart in the deck says Americans’ job satisfaction “is at the highest level in decades,” referencing data from the Conference Board. The White House also argues the economy is experiencing lower inflation than its peers, and packaged in the document are several attack lines, saying the GOP: (1) plans to “enact massive tax cuts” for the richest Americans; and (2) will target social spending programs like Medicaid for cuts. See for yourself, here is the actual deck the White House sent out prior to the July 4 recess—Bidenomics Slide Deck. Given that Congress will be in session for just 12 days prior to the month-long August recess, the current July 4th break represents an important stretch for the White House, with the president on a mission to convince voters that the economy is performing well. The White House’s effort is focused on reframing the narrative by focusing on post-pandemic recovery, strong job creation, recent declines in inflation, and the administration’s role in containing the banking crisis. It will be an uphill climb given that voters are still more concerned with elevated inflation levels than the unemployment rate. Unless progress can be made, low support for the president’s economic policies stands to benefit GOP candidates. In fact, the most recent Gallup economic confidence index shows that confidence in the economy is near its lowest point since the 2008 financial crisis.

Thought Leadership from our Consultants, Think Tanks, and Trade Associations

Doug Sosnik’s Look Ahead to the 2024 presidential election. The 2024 presidential race is taking shape during a period of deep turmoil when all the rules in American politics are being rewritten. Yet, for all the uncertainty, the roadmap to the 2024 election outcome could not be clearer. In the past, the best indicators to gauge the state of play in elections and likely outcomes were national polls, the mood of the country, and the incumbent President’s job approval numbers. The last several elections have debunked conventional wisdom. The strongest predictors of the 2024 outcome have zeroed in on polling of likely voters in eight battleground states—Arizona, Georgia, Michigan, Nevada, New Hampshire, North Carolina, Pennsylvania, and Wisconsin. The voter characteristics that keep these states competitive come down to educational attainment. Increasingly, voter education levels have become the new fault line in politics, with highly educated voters supporting Democrats and less educated voters skewing Republican. The eight competitive states are right in the middle with education levels neither extremely high nor extremely low. If a Biden-Trump 2024 presidential rematch is assumed, the changing political dynamics will drive the outcome, along with a unique set of swing voters:

  • Double Doubters – People who have a negative view of both Biden and Trump; a significant voting bloc.
  • Abortion Rights Voters – The 2022 Supreme Court ruling overturning Roe v. Wade had a seismic impact on American politics and totally reshaped the outcome of the 2022 midterm elections.
  • Republicans – A group of Republican voters will be up for grabs in 2024, particularly if Trump is on the ballot; 21% of Republicans said that they would not vote for Trump under any circumstances.
  • Independents – The winning party in the last four election cycles carried political independents. 2022 exit polls showed that over 30% of voters were independents, the highest since 1980.

An additional factor that could redefine the presidential election would be the introduction of a third-party candidate. Biden’s narrow margin of victory in 2020, the nature of his support, and how evenly divided the country remains all contribute to the potential impact of a third-party option. The case may very well be that Trump cannot win without a third-party candidate dividing the anti-Trump vote. What’s more, it’s difficult to overstate how fragile Biden’s victory over Trump was in 2020, with his winning margin comprising less than 1.2% in four of the most pivotal states. If fewer than 40,000 voters in Arizona, Georgia and Wisconsin had switched their support, Donald Trump would have been reelected President.

Eurasia Group Sees Recession Prospects Looming Large, While Russian Turmoil having Little Impact on Oil Markets. Weak trade and industrial data point to a continued economic malaise that will weigh on oil demand, despite the recent upheaval in Russia. In fact, absent a decisive sign of stronger growth, prices are unlikely to break out of their short-term band in the mid-$70s per barrel in the immediate future. Global trade and container data also point towards slowing trade and weakened economic activity as higher interest rates and a sluggish recovery in China continue to take their toll; the volume of globally traded merchandise goods dropped by 1.4% in April 2023 compared with the previous month, and global industrial production was down 1.4% month-on-month. What’s more, any new economic-support measures by Beijing are not expected to change the currently bearish outlook fundamentally, as Chinese officials recognize that stimulus measures will have limited impact while demand is tepid and the external environment is weak. While the government is still likely to announce a broad economic support package in July, the upside for oil demand in the second half of the year will be capped. Restoration of Iraqi oil exports will further loosen crude fundamentals and undermine OPEC+’s supply strategy.

Observatory Group—The U.S. Outbound Investment Whipsaw. While President Biden’s executive order (EO) on outbound investment has been “weeks away” for nearly two years, there had been speculation that the administration would delay announcement of the order to avoid alienating China and due to the complexities of establishing such a new program. However, the White House appears to be reassessing this view, and in contrast to the prevailing notion that the EO would be delayed until after a Biden/Xi meeting at the APEC summit in November, it is believed that an executive order on outbound investment is likely to come before the APEC meeting and possibly as early as next week. An EO on this “reverse CFIUS” program will be just the start of the process toward implementing any new program. Before any outbound investment review program is fully realized, clarity on outstanding issues will be informed by the formal Notice and Comment Rulemaking process, which will take months. At the same time, there are indications that the administration is willing to risk diplomatic friction by pushing forward with national security export controls related to dual-use goods that have the potential to enhance the Chinese military. Specifically: (1) the administration has signaled a final rule fully implementing the October 7, 2022 export controls is coming in July; and (2) it was leaked that the administration is looking to go beyond the October 7 export controls to restrict further advanced graphic processing units needed for AI development. In an attempt to package them together diplomatically, the administration is considering having the October 7 export control final rule, new AI-focused export controls, and the outbound investment EO all hit at the same time. The strategy comes with risk, especially as Treasury Secretary Yellen, Commerce Secretary Raimondo, and other senior officials are gearing up for trips to China.  Rolling out an export control package in advance could impair the progress made during Secretary of State Blinken’s visit earlier this month.

“Off the Record”

Senior House Republicans remain skeptical about putting a resolution on the floor to expunge the second impeachment of former President Trump. House Republican Conference Chair Stefanik (R-NY) and Rep. Greene (R-GA) introduced a symbolic resolution last week that would expunge the January 2021 impeachment, despite the fact that the former president remains under criminal investigation over his role in the Jan. 6 insurrection. Although Speaker McCarthy has expressed some support for the expungement, several GOP sources say they don’t know whether there are the votes to pass the measure. To begin, Reps. Newhouse (R-WA) and Valadao (R-CA) both voted to impeach, and taking up a resolution would put them in a difficult political predicament. Also, there are a host of GOP lawmakers in districts that President Biden won in 2020. To vulnerable lawmakers, such theatrics open them up to a no-win scenario. If they vote to expunge, they appear like they’re involved in Trump-centric score settling; if they oppose, they risk coming under heavy criticism by Trump loyalists. A number of GOP moderates have already voiced displeasure with the expungement push, dismissing it as a waste of time. Rep. Bacon (R-NE) said he wouldn’t vote for the resolution, saying “It is what it is, it happened.” The episode neatly encapsulates the House Republican Conference in 2023—a constant tug-of-war between moderates looking to govern and hardline conservatives looking to score political points or settle grievances (Reps. Greene and Stefanik also have another non-binding resolution that would expunge Trump’s 2019 impeachment as well). At the same time, Speaker McCarthy is moving toward impeaching Attorney General Garland, Homeland Security Secretary Mayorkas, or both. The effort seems to have more support from House Republicans than expunging Trump’s impeachments.

In Other Words

“What we’ve done in our politics is create a situation where we’re electing idiots,” Former Rep. Cheney (R-WY).

“What’s a Uyghur?” Miami Mayor Suarez (R) when asked about China’s human-rights violations.

“It’s hard to tell, but he’s clearly losing the war in Iraq. He’s losing the war at home. And he’s become a bit of a pariah around the world,” President Biden misspeaking on Russian President Putin’s weakness.

Did You Know

Former President Trump is the only living American president not descended from slaveholders. Five living presidents, two Supreme Court Justices, 11 governors, and 100 members of Congress had ancestors who owned slaves.    

Graphs of the Week

In an election year, companies should tread carefully on political and social issues. The latest data from Ipsos shows consumers are increasingly energized to take their political and social views to the mall with them. The first chart shows that nearly half of respondents say that if a company takes a stand on political issues they don’t agree with, they will be less likely to buy that company’s products. While the feeling isn’t quite as high as it was in 2021, it is notably higher year-on-year. Social issues (the second chart) can ignite similar fervor on both sides of the political aisle, too.


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