The Economy Is What Matters to Voters

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In 1992 the victorious Clinton campaign's war cry was a slogan as pithy as it was subsequently famous: "It's the economy, stupid." This was a not-so-veiled reference to President Bush 41's seeming pre-occupation and preference for foreign affairs, and his relative indifference to the tepid economy at the time - an economy his errant policies of higher taxes, more job-killing government spending and regulations, and an ill-considered war in the Middle East (that later turned into a strategic catastrophe for the United States) created. Mr. Clinton correctly adduced what, so far, only Donald Trump and Bernie Sanders have discerned in the current election cycle: economic issues (jobs, wages, upward mobility and a yearning for prosperity) are what matter most to voters, as Gallup and other polling organizations have consistently shown over time.

Let's hope this is top-of-mind foreknowledge for the three Fox News Channel moderators at Thursday night's Republican Party debate, the seventh in its 2016 presidential nomination contest and the final one before actual voting starts next week in Iowa. This isn't a vain musing, for if the moderators (Bret Baier, Megyn Kelly, and Chris Wallace) of this week's tilt follow their confreres at Fox Business Network's recent broadcast from Charleston, SC, voters will be deeply cheated. To see how bad it was for the 11 million viewers of the January 14 debate, consider the following:

There were 42 primary questions rendered to the seven candidates, with each receiving between 5 and 7 (thanks to follow-up and cross-parry commentary, candidate talk-time was relatively even in the 16 minute range, with only Messrs. Carson and Kasich lagging). But the topical coverage across the 42 questions was decidedly unbalanced, with 36 of them breaking down as follows:

(i.) 19 questions on foreign policy and national security (ISIS, Syria, Muslim refugees, Iran, Saudi Arabia, immigration, strength of and deployment strategy for our armed forces, and tech company assistance to federal government surveillance)

(ii.) 8 questions designed to spark interpersonal exchanges (Goldman Sachs loan, natural born citizenship, New York values, Nikki Haley critique, assets in a blind trust if elected, Bill Clinton as a legitimate issue, Trump/Cruz and Rubio/Christie conflicts)

(iii.) 6 questions on guns and gun rights (2nd Amendment right to bear arms)

(iv.) 2 questions on policing and police training

(v.) 1 question on the meaning of the rise of Bernie Sanders in American politics

That left a whopping total of SIX questions - or, only 14% of the total - that dealt with the economy: 2 on the state of the economy and how to induce faster growth, and one each on tariff policy and international trade, repairing the nation's "roads and bridges" infrastructure, corporate inversions (cross-border mergers motivated by tax avoidance), and entitlements. Dear reader, please note again the last: ONE question on retirement and health care entitlements, which face massive unfunded liabilities in the tens of trillions of dollars, in a debate lasting more than two hours on a business network presumably focused on the health of the economy and our future.

For the respected and usually-astute moderators Maria Bartiromo and Neil Cavuto, this represented a major fail, and a disservice to the viewers who tuned in as serious voters seeking insight into the candidates at the very moment of the worst-ever early January performance of U.S. equities in history.

As a public service to Fox News and all future debate moderators, here, in rough order of importance, balancing short-term and longer-term issues, is what matters to the American electorate at the moment:

1. Sclerotic labor market. There is way too much under- and un-employment in the U.S. economy at the moment, with millions worried about paying the bills and remaining employed. How can we jump-start a durable expansion that brings jobs with it, akin to the 165,000 per month in the 40 years before Bush 43's inaugural, rather than the 60,000 per month in the 15 years since?

2. Stagnant wages for 15 years now. Median household income is still, 6+ years into a "recovery", 7% below its 1999 peak. Macro data and cross-time comparison problems notwithstanding, millions of Americans "feel" that their standards of living are threatened.

3. Out of control federal spending that saps private sector productivity, job creation and output (thanks to usurping resources available to the far more productive private sector). This over-spending is due to both stupid "cronyist" political decisions as well as waste and fraud. This out of control spending entails a $200 trillion "fiscal gap" on a present value basis according to Laurence Kotlikoff of Boston University, and ensures eventual bankruptcy and economic collapse (though this could be some decades away, it's continual worsening erodes the capital structure that undergirds the US economy). How can we return to fiscal prudence in our policies?

4. The U.S. economy is plagued with a long term gap/deficit in investment (the first quarter 2006 peak in corporate investment was not equaled again until 2015), that saps the productivity gains that yield rising living standards and a better tomorrow, thus portending a harsher future. How can we gain generate the "animal spirits" of investors and entrepreneurial risk-takers who create the better tomorrows for all?

5. 80,000 page tax code and tax system that foists $500+ billion in annual compliance costs (including lost productivity, according to Arthur Laffer), as well as IRS abuses that are endless and feed corrupt big government cronies. What meaningful tax reform can be pursued that will induce greater prosperity for all?

6. The United States has a quasi-socialist health care model now causing massive dislocations, dropped coverage, higher costs and poorer service, and perhaps even earlier or needless deaths now. Our health care system is further dragged down by >$100 billion in fraud alone (never mind the billions wasted "honestly", too, thanks to inefficiencies). What reforms make sense?

7. The Federal Reserve is, to its critics, an out of control monopoly central bank that "throws gas on the fire" of fiscal profligacy, malinvestment, waste, and irresponsibility, via monetizing our debt and creating future bubbles that will burst and end badly in recurring boom-and-bust cycles. Attempts to audit the Fed in recent years have been stillborn, including the latest vote failure in the U.S. Senate on this last month (after passage in the House). To its supporters, however, the Fed is a net generator of macro-stability and helped save the world from a depression in 2008. What is the truth between these differing claims, and what monetary and banking institutions will induce and sustain prosperity in the future?

8. American businesses and entrepreneurs face a stifling regulatory apparatus through an alphabet-soup of permanent-bureaucrat staffed federal agencies that are an out of control separate arm of the federal government. From the perspective of America's job creators, these regulators foist hundreds of billions of dollars of needless costs on our producer class, stifling output and job growth and hence wealth gains for all. How can this be ameliorated? (This topic is huge in and of itself and could be subdivided into several topics, such as the harm caused by the SEC, Fannie/Freddie oversight or lack thereof, as well as EPA, Bureau of Land Management, and dozens of others).

9. According to economists such as Professor Kotlikoff as well as U.S. government staffers, the U.S. faces a looming nightmare of bankrupt retirement, welfare and transfer programs (Social security, Medicare, Medicaid, etc.), and related pension programs, too, including at the state level, all collectively tens of trillions of dollars under-funded. The inexorable math behind these shortfalls will necessitate massive cutbacks in "benefits" in the coming 20 years across the board. How can these challenges be addressed in the most equitable and least-painful way? (Related fiscal challenges at the state and local level in some cases portend regional problems - e.g., when California goes bankrupt, will Wash DC be required to bail it out?).

10. By international comparative standards, the U.S. has a second-rate public education system that is fails its students, and is, additionally, too costly, and run for the favor of its union-membership. American students thus enter their age of majority with skills deficits in the hyper-competitive modern world. What reforms make sense here (or, said directly, how can greater levels of competition be infused into the education monopoly)?

11. Hovering over all of these, rampant corruption at every level of government via both pure illegalities (bribes, crony deals effected via payola) and what the great political writer H.L. Mencken called "honest graft" a century ago, place enormous burdens on the honest citizens among us. Part of the rage fueling the rise of Messrs. Trump and Sanders this year is public disgust with these unethical and often illegal practices, as they see the quid pro quos of campaign contributions, the wink-and-nod deals such as former House Speaker Denny Hastert buying cheap land in front of an interstate expansion in central Illinois and then flipping the land when the deal happens for millions in profits, or the husband of Senator Diane Feinstein (D-CA) winning a fat contract for rail infrastructure build-out in California. Whether petty or grand, this Beltway corruption is pervasive, and saps economic energy at every turn (i.e., an investor is less likely to take risk in such an environment where we are more like Mexico or Greece now, dominated by payola-schemes, and less like we were in our prior history when high-octane growth was the norm). What will end or mitigate this never-ending stream of corrupt practices? Why are term limits for all federal officials, supported by 75% of the American electorate, never even considered?

This list of economic issues is hardly exhaustive, but it does contain the most important discussions that we should be hearing at the moment in our public square. One hopes for more serious debate in the weeks and months ahead on what really matters to voters in times of economic uncertainty.


John Chapman is an economist and merchant banker at Hill & Cutler Co. in Washington, D.C. 

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