Reading the tea leaves for 2019

Little was accomplished in DC last year, as most of the available political energy was focused on the mid-term elections.

A new Congress is now in place and no more elections are scheduled until November 2020. So will this year bring solid progress on policy goals (e.g., balancing the budget, stopping illegal immigration, and fixing the healthcare system)?

Perhaps, but most of the political players seem to be already looking ahead to the 2020 elections. So when is the business of intelligently governing the country supposed to get done? There doesn’t seem to be any satisfactory answer to that question – wish we had one.

Also, it’s unrealistic to view the events of 2019 as truly predictable. The world in which we live is complicated and fast moving; many things could happen that would change the outlook dramatically. Here’s a reminder of how little we actually know about the future. Que sera, sera, Doris Day, youtube.com,
audio (2:32).

Just for fun, this entry will recap the views of five observers (Karl Rove, Jared Bernstein, Kurt Schlichter, Veronique de Rugy & Justin Wallin) who weighed in on the 2019 outlook. They are an eclectic group, with diverse policy interests and political loyalties, which serves to make their observations interesting and/or entertaining.

Some of the views expressed seem aspirational vs. predictive. In some cases we felt motivated to note recent developments (updates) or throw in our “two cents worth,” but for the most part we left the pundits speak for themselves. Enjoy!

1. Karl Rove was a long-time political adviser of the Bush family, and his views carry a lot of weight in traditional Republican circles. He noted the outcome of his predictions for 2018 in a January 2 column in the Wall Street Journal, including an errant assessment that the GOP would narrowly retain control of the House, and then offered “a look ahead” at 2019.

#The Mueller report will be damaging to the president, but not fatal, e.g., the special counsel may claim that Trump knew about the June 2016 Trump Tower meeting with the Russians, but won’t present evidence of the Trump campaign conspiring with Russia. Accordingly, the House will bring impeachment charges against the president, but the Senate won’t convict him.

#US economic growth will be less than 2.5% (versus about 3% in 2018;
4th quarter and full year results are due out on January 30).

#The president’s “approval ratings will hold steady but with “strongly disapprove” in the high 40s versus “strongly approve” in the mid-20s.

#Congress will end 2019 less popular than it began, and Speaker Nancy Pelosi’s favorability rating will be almost 20 points lower than Mr. Trump’s.

#There will be at least 20 Democratic presidential candidates for 2020, with Elizabeth Warren, Bernie Sanders, and Robert Francis [Beto] O’Rourke leading the pack. Joe Biden won’t be a factor.

We predict that Joe Biden, the vice president during the Obama administration, will decide to run and prove to be a leading contender. The biggest obstacle would be his age, which might be mitigated by naming an attractive younger running mate. If Joe Biden runs in 2020, he should name his vice president early, Philip Klein, Washington Examiner, 1/7/19.

#Whatever promises it may make, China will keep facilitating intellectual property theft. Russia will continue its bad behavior in the Ukraine and elsewhere. Iranian surrogates will increase attacks on Israel’s northern border.

2. Jared Bernstein formerly served as chief economist for Vice President Joe Biden and is now a senior fellow at the Center on Budget and Policy Priorities. His economic predictions were presented in a January 2 column of the Washington Post, including subjective probability estimates.

#The federal deficit will keep rising (90%). Bernstein cites the Congressional Budget Office prediction of “a deficit of 4.6 percent of gross domestic product in 2019 (just under $1 trillion), up from 3.8 percent this year,” and takes a swipe at revenue loss from the tax cuts.

#Economic growth will slow (75%), which is said to be “by far the standard forecast.” With the “sugar high” from the tax cut and fiscal year 2019 spending splurge fading, “we’ll divert back to the trend growth rate of around 2 percent (though at least one credible forecast is for 1 percent).” Result would be to deprive Trump of a simplistic talking point, i.e., look how great the economy is.

This is indeed the “standard forecast,” i.e., most economists are ruling out the possibility that there has been any longer-term improvement in this country’s economic growth rate as the result of pruning regulatory red tape and cutting business taxes. US economy, SAFE newsletter,
Winter 2018.

Some observers have gone so far as to suggest that liberals are hoping the economy will weaken to deny the president a success. Why the left hates prosperity, Stephen Moore, Townhall.com,
10/30/18.

#The Fed won’t stop raising interest rates, but will slow its rate hike campaign. (65%). A full stop isn’t likely because unemployment is currently running at 3.7% vs. the Fed’s estimate of the lowest rate (4.4%) to which unemployment can fall without being excessively inflationary.

#Wages and inflation will both rise, but wages will rise faster (60%). With energy costs staying “pretty low,” real wages for mid-wage workers should grow “at a rate of around 1 percent to 1.5 percent, at least in the first half of the year.”

#The trade war will escalate (50%). Will Trump’s tariff rate on a $200 billion subset of imports from China rise as planned from 10 percent to 25 percent in early March? I’ve got this as a coin flip. I believe the administration would like to go there [hike tariffs], but if the economy is looking softer than expected by then, they could decide not to. If that happens, look for markets and investors to breathe a real sigh of relief, which yields an insight into Trumpian policy strategy: "Create needless chaos so that when you cease the cray-cray, everyone applauds."

#Trump fatigue will set in, and the media will turn away from the worst of it (35%). Why? “I just find it hard to believe that the media — mainstream and social — can remain so focused on this reality-show presidency,” but admittedly “this one is wishful thinking.”

3. Kurt Schlichter is a successful Los Angeles trial lawyer, a veteran with a masters in Strategic Studies from the United States Army War College, and a former stand-up comic. He was personally recruited to write conservative commentary by the late Andrew Breitbart. Enough said! His overall thought about 2019 was that it will be “even crazier than 2018.” Top 10 predictions for 2019, townhall.com, 1/3/19.

# Out of Afghanistan (on top of Syria): After 17 years of that war, it’s time for a strategic rethink and most of our troops will be coming home. The president’s enemies will “go nuts,” but don’t expect them to offer alternative goals or a rational strategy to achieve them. What we’ll see is “another tired embrace of the useless status quo and fury that Trump is finally rejecting it.”

#Michael Cohen: Trump’s fixer will join a prison gang: Not really, but he’ll get a book deal and libs will put it on the shelf next to Stormy Daniels’s tome.

#Monster tech: The Silicon Valley titans have aspired to wield unchallenged power over what we can and cannot say and think. I guess they hoped that parroting the term “private companies” would protect them from conservative pushback. Look for all sorts of fun initiatives to curb their power.

#Lindsey Graham: The most improbable conservative icon of 2018 will become the Right-Wing Avenger as head of the Judiciary Committee and provide us with endless moments of amusement.

#Hollywood: Did they ever pick a new host for the Oscars, one free of the sins of wrongthink and badsay? Who cares? And despite a flood of options, when you look at the marquees and click through NetFlix, there’s a plethora of stuff to watch yet there’s nothing on.

Update: The Oscars will go on without a host for the first time since 1989, Gabriella Munoz, Washington Times, 1/10/19.

#Presidential race: Some Democrats we thought might be 2020 contenders will either not run (Felonia Milhous von Pantsuit, Old Joe Biden) or stumble at the gate (Tex Kennedy O’Rourke, Big Chief Warren, Nuke ‘Em Swalwell). Kamala Harris will become the frontrunner. Pray for America.

#Economy: Nearly full employment has helped many Americans put pressure on the wealthy Democrat donor class to pay workers more, and they hate that. Nancy Pelosi’s House will do what it can to derail the Trump economy, with the Fed’s help, but the economy will do surprisingly well in 2019.

#Justice John Roberts: Look for the chief justice to keep drifting left in 2019, maybe even going “full Souter” [a reference to former Justice David Souter].

#Another Supreme Court vacancy: There will be a liberal SCOTUS justice leaving this year, and the left will go totally bonkers. Look for Trump to shrewdly pick a female Catholic (Guess who!). Democrats will alienate Catholics with ugly, bigoted attacks, but she’ll get confirmed anyway.

The departing justice would presumably be Ruth Bader Ginsberg. The “guess who” candidate is probably Amy Barrett, recently appointed to the 7th Circuit. One of these women could be Trump’s Supreme Court pick, Jonathan Allen, nbcnews, 7/2/18.

#Mueller’s probe and impeachment: Righteous Integrity Bob and his pack of Democrats will drop their report in 2019, which will show no collusion with the Russians but hint at all sorts of nefarious stuff. The House Democrats are going to impeach Trump, no matter what, but there aren’t 20 or so GOP senators willing to destroy their careers and their party by voting to convict. This cheesy coup will actually boomerang and help the president. If you’re going to strike at the king, you really ought to make sure you don’t miss!

4. Veronique de Rugy is a senior research fellow at the Mercatus Center (George Mason University), whose beat includes the US economy, federal budget, and tax issues. Her list of “projects that this new divided Congress and the administration could work on in 2019 to make up for 2018’s dismal performance” reflects her policy views versus what she necessarily expects to happen. Here’s to making 2019 a year for DC to remember, townhall.com, 1/3/19.

#First and foremost, take steps to put the government on more solid financial ground. Driven by excessive spending, Uncle Sam has now accumulated nearly $22 trillion in debt. That's roughly $67,000 for each man, woman and child. Some of this repayment will demand future tax increases, precipitating lower growth, lower wages and, hence, lower standards of living.

The Republican tax cuts won’t generate enough economic growth to fully pay for the loss in revenue, but focusing on this point misses the bigger picture. We're in a fiscal mess because nobody wants to reform the programs that are the main drivers of our debt: Social Security, Medicare and Medicaid.

I want to believe that many Republicans and Democrats are aware of our fiscal condition and that, deep down, they know that they must start to take the first steps toward finding a solution. Sadly, the incentives of politics are so biased toward fiscal irresponsibility and big government that meaningful reform will be borderline miraculous. “However, I still have a little of that Christmas spirit left in me, so I'll allow myself to dream for the span of one column.”

#Next on my wish list for 2019 is the termination of all crony programs that benefit well-connected and large companies at the expense of everyone else. The list includes the US Export-Import Bank, the Department of Commerce (excepting the Census Bureau and the Patent & Trademark Office, both of which are mentioned in the Constitution), many Department of Energy programs, agricultural subsidies, special favors for small businesses, wasteful defense spending and, of course, tariffs.

# Months have passed since President Trump canceled the Obama-era administrative program that protected individuals living in the country illegally whose parents brought them to this country when they were children. The threat of deportation leaves these “dreamers” in limbo in a country that, for all intents and purposes, has become their home. There's bipartisan support for providing them with a pathway to citizenship, and the president himself seems empathetic to their plight. So what are the members of Congress waiting for?

Resolving the status of the “dreamers” is long overdue, but it should be paired with other actions to secure the border and stop illegal immigration – not done on a standalone basis leaving conservatives without much to offer in further negotiations. See, e.g., the other actions that the president asked for when this issue was under discussion last year. GOP won shutdown skirmish, 1/29/18.

“Actually (as was announced on January 26), the administration has offered a path to citizenship for the dreamers to be paired with measures to combat illegal immigration. Said measures would include assured funding (not promises of funds to be appropriated later) of $25 billion for a ‘wall’ on the southern border, more border agents, dialing back of ‘chain migration,’ an end of the visa lottery system, and a reduction in legal immigration quotas.”

5. Justin Wallin heads a national opinion research firm with business, political and government clients, which has “delivered strategic direction” to hundreds of political candidates and organizations. His advice for the president seems to be along the lines of “don’t panic” and “keep doing what you have been doing.” Five political predictions for 2019, Justin Wallin, realclearpolitics.com, 1/3/19.

#Recent economic results have been solid, with unemployment at a 49-year low, inflation running under 2%, and 3.4% GDP growth in the 3rd quarter of 2018. Yet the news is about economic risks, the trade war, stock market volatility, and the government shutdown. Democrats are driving this narrative “in an attempt to capitalize on a slowing economy,” but Trump will be fine unless the fundamentals of the economy falter (as happened under our last two one-term presidents, Jimmy Carter & George H.W. Bush).

#Trump believes the Federal Reserve is raising interest rates too quickly, and he has expressed the view that its policies are “the single greatest threat to the US economy.” So look for Trump to “declare verbal war on the Fed in 2019,” although it’s not clear that he could fire Fed Chair Jerome Powell (or would want to try).

Less drastic options might be leaving Powell as a Fed governor, but appointing someone else as chairman, or pulling the pending nomination of Nellie Liang and putting an interest rate dove, e.g., Minneapolis Fed President Neal Kashkari, on the Board of Governors.

Update: Fed nominee Nellie Liang withdraws board nomination, Megan Henney, foxbusiness.com, 1/8/19.

#Democrats may face what amounts to a “civil war” in Congress, notably in the House (which is now under their control). It’s not just progressives vs. moderates, but also Nancy Pelosi’s old guard versus young firebrands like Alexandria Ocasio-Cortez. Can the Democratic Party afford to go further left, as AOC et al. want, or would that turn off the voters who voted for moderate Democrats in swing districts in the mid-terms?

#Tom Steyer could lead the Democrat field for the presidency. He has spent some $280 million (including $50 million for a “Need to Impeach” campaign) in the last three electoral cycles, and his NextGen America organization blossomed in the 2018 mid-term campaigns (hired 750 paid staff, recruited 16,000 volunteers, registered 260,000 voters, and operated at 420 colleges). Steyer has established himself as the most powerful player in state Democratic politics, and he could benefit from an early California primary (which is apparently going to happen).

Update: Billionaire anti-Trump activist Tom Steyer says he won’t run for president, Alicia Luke, godfatherpolitics.com, 1/10/19.

Although Steyer has apparently taken himself out of consideration, it remains possible that some other billionaire will try to enter the race. Campaign finance restrictions help billionaires like [former New York City Mayor Michael] Bloomberg, Washington Examiner,
12/29/18. And according to a WSJ editorial, Bloomberg “would be a welcome addition to the Democratic field, offering some centrist views on crime, education, and perhaps even taxes and spending.” Take the over on Bloomberg, Wall Street Journal, 12/28/18.

#Trump may face a challenger in the GOP primaries. – Shades of 1976, when Ronald Reagan nearly upset Gerald Ford, or 1968 when Eugene McCarthy and Robert Kennedy pressured LBJ out of the race. But there have been many primary challenges for incumbent presidents, and most of them went nowhere, e.g., when Vice President John Nance Garner tried to primary FDR in 1940 saying “the vice presidency is not worth a bucket of warm spit.” So don’t read too much into reports that pundit Bill Kristol is trying to promote a candidate, John Kasich has visited New Hampshire several times, Jeff Flake has declined to deny possible interest in running, etc.
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