The Turning Point in the Election

History will likely record that October 27th, the date of Trump’s Madison Square Garden rally, was the turning point in the 2024 presidential election. The vitriol he spilled that night sent the message, “enough is enough.”

Something similar happened on September 11, 1941 when America First leader Charles Lindbergh made a viscous antisemitic speech in Des Moines, Iowa. It was widely criticized and signaled the end of his organization.

Put very bluntly, Trump lost the election with his Madison Square Garden ego trip.

A Realigning Anti-Incumbent Election

I normally write my election outlook on the weekend before the election. (See my earlier commentary: Shulmaven: The State of the Presidential Race) However, this year, because of my travel schedule I am hesitantly putting it out now. When historians 20 years from now look back at the 2024 election they would note that a major political realignment between the two parties took place. (See: Shulmaven: Political Realignment is Here) Simply put, the Republican Party, by eating into the Democrats hold on Black and Latino voters, has put together a broad multi-racial working class party with a strong populist bent. This is a far cry from the business and country-oriented party of two decades ago. Lurking behind all of this is an ever-widening gender gap.

On the other hand, the Democrats have picked up voters from hitherto high-income business oriented suburban Republican voters, especially women. The Democrats are now firmly the party of the elites buttressed by Black and single women voters. The union-oriented lunch pail Democrat is a relic of the past. The Democrats are the party of women, and the Republicans are the party of men.

Part and parcel with the realignment is that the county is moving towards Trump on many issues, specifically on trade, immigration, and crime. Witness Democratic Senator Bob Casey praising Trump on trade. In contrast the country is moving towards Harris on the potent issue of abortion. It remains to be seen which dominates. What is really surprising is that the race is so close given that nearly all of the propaganda arms of the state are firmly in the Harris camp.

Further the global electorate including ours is in anti-incumbent rage. (See: Shulmaven: Incumbents Beware) This is crucial for both Trump and Harris. Whomever the electorate perceives to be the incumbent will lose. That is why Biden had to drop out. To be sure Harris is the incumbent vice president, but we have been living in the age of Trump for nine years. My guess is that the electorate will not want to witness another four years. The problem for Harris is that she is too tied to Biden, and she has yet to articulate a clear vision of the future. Her closing argument is that Trump’s narcissistic criminality has to be stopped.

The electoral college arithmetic for both candidates is challenging. For example, if Harris holds the “blue wall” states of Pennsylvania, Michigan, and Wisconsin, and picks up the one electoral vote coming out of Omaha, Nebraska she will hit the 270 electoral vote magic number. However, if she loses one of those states, she going to have to make it up in North Carolina, Georgia, Arizona, and Nevada. Given today’s polls, which is doable, but difficult. At the end of the day the key to a Harris victory is her ground game. She has paid staff and volunteers everywhere, while Trump’s campaign is sorely lacking in this regard. At least to me, if Harris loses Pennsylvania, her biggest mistake would be not picking Governor Josh Shapiro as her running mate (See: Shulmaven: Kamala Harris Fails Her First Test with VP Pick)  and her failure to counter Trump’s attack on her position supporting federally paid for gender reassignment surgeries.

I also have a hunch that the election might not be as close as the polls suggest. It is equally likely that either candidate will receive more than 300 electoral votes. Stranger things have happened in the last two weeks of the election and if there is going to be a wave, I would give the edge to Harris. Recall that the polls were wrong in 2016, 2020 and 2022.

In keeping with my anti-incumbent thesis, I think the Democrats will retake the very dysfunctional House and end up with a majority of around 10-12 seats. On the other hand, the Democrats will lose the Senate with the Republicans ending up with 52 seats. Although most Senate Democrats are leading in the polls there are too many targets of opportunity for the Republicans.

Most disappointing about the election is that two particularly critical issues, the elephants in the room, are not being discussed. The first is the out-of-control deficit spending of both parties that putting the U.S. on the path of have highest debt/GDP ratio in history and the underspending on defense that will put our country at grave risk in the years ahead.

 

My Review of David Brown's "A Hell of a Storm: The Battle for Kansas......."

 1854: The Hinge Year on the Road to Civil War

 

Historian David Brown has given us an important and very readable book on how the events of 1854 set America on course to our civil war. The critical event was the passage of the Kansas-Nebraska Act which broke the Missouri Compromise of 1820 by allowing the territories north of 36 degrees 30 minutes latitude to decide for themselves whether or not they wanted to allow slavery under the doctrine of popular sovereignty. Prior to that enactment slavery was prohibited in most of the Louisiana Purchase. The notion of popular sovereignty was first introduced by Senator Stephen Douglas in the 1850 compromise that brought California into the Union, but, allowed for the New Mexico and Arizona Territories to vote on whether or not they wanted slavery. Stephen Douglas would then build on the 1850 compromise to champion the Kansas-Nebraska Act.

 

The notion of popular sovereignty seems quaint today, but I would note we are yet again living with this on the issue of abortion. The overturning of Rowe v. Wade returned the question of abortion to the states where each state would determine how it deals with this question.

 

Leading the charge against the Kansas-Nebraska Act was Free Soil Party Senator Salmon P. Chase. Chase would go on to help found the new Republican Party in 1854, become Lincoln’s Secretary of the Treasury, and then become Chief Justice of the Supreme Court. His leadership on this issue established him as a national figure and the issue brought Abraham Lincoln out of his successful law practice into the national limelight. The growing chasm between north and south was occurring against the backdrop of rising industrialization and a growing abolition movement. It would become a battle between free labor and slavery.

 

So great was the controversy over the act, that the Whig Party would collapse as the northern Whigs could no longer countenance being in the same party as the southern Whigs. Most of the northern Whigs became Republicans and the Democrats solidified their position in the South and picked up those northern Whigs who didn’t become Republicans. The reason why the act passed was because the slavery-oriented Democratic Party was at the height of its power controlling the presidency and both houses of Congress. Indeed the New Hampshire native Franklin Pierce was the last Democratic president to receive a majority vote for president until Franklin Roosevelt in 1932.

 

Brown brings into the mix Harriet Beecher Stowe of “Uncle Tom’s Cabin” fame published in 1852, Henry David Thoreau and his “Walden Pond” (1854), and Harriet Tubman’s underground railroad. All of this was going on in and around 1854. Further, in 1854 the full ramifications of the Fugitive Slave Law, part of the 1850 compromise, was being felt in the North, especially Massachusetts.

 

David Brown gives us a very real sense of our country heading towards civil war. Unfortunately, the parallels for today are more than disquieting.

My Thoughts on the First Anniversary of October 7th

 There are many dates that are seared into our memory.  President Roosevelt, responding to the Japanese attack on Pearl Harbor, called December 7^th, 1941,” a date which will live in infamy” and demanded a declaration of war against Japan. December 7^th,1941, resonates with me because that was that was the day my Dad proposed to my Mom in Central Park.  Four days later Hitler asked for and received a declaration of war from the Reichstag against the United States. Sitting in the audience cheering him on was Amin al-Husseini, the Grand Mufti of Jerusalem. Yes, the antagonism between Jews and Palestinians predates 1948 and 1967. Indeed, well before 1941.

 

On September 11^th, 2001, Al-Qaeda crashed two airplanes into the World Trade Center towers and one plane into the Pentagon, killing nearly 3,000 people. I witnessed the attack on the towers from across the street.

 

Today, we memorialize another date, October 7^th, 2023, Israel’s, and World Jewry’s day of infamy. On that day 1200 hundred people in Israel’s Gaza envelope died and 240 were kidnapped by the Hamas terrorists. To put this event into perspective 1200 dead in Israel is equivalent to 40,000 dead in the United States.

 

Now, a year later, a war rages on in Gaza and Lebanon testing whether Israel, a light unto the nations, can remain true to its founding as a democratic home to the Jewish people. It is a war where about 725 soldiers, who in the words of Abraham Lincoln “gave the last full measure of devotion.”

 

It is my hope that “these dead have not died in vain.” (Again, from Lincoln) Just as our Civil War can be viewed as the second American revolution, so too can Israel’s war in Gaza and Lebanon be viewed as its second war of independence. And it is my hope the war will midwife a new generation of Israeli leadership that will have the wisdom to rise above the country’s divisive internal politics and find a path to seek peace with its neighbors.

My Review of Nicholas Meyer's "Sherlock Holmes and the Telegram from Hell"

 Sherlock Holmes in His Majesty’s Service

 

Nicholas Meyer has reincarnated himself as Arthur Conan Doyle. His 1974 “The 7% Solution” was a bestseller and later a motion picture. From there he has written several novels in the tradition of Sherlock Holmes. His latest involves his hiring by Britain’s MI-6 at the height of World War I in 1916. His mission is to obtain a secret telegram sent by the German foreign office to Mexico’s president Carranza. The mission would challenge a younger Holmes and Watson, but here we see them it what is likely to be the last case of their lives.

 

Of course, any reader with a knowledge of history would realize that the telegram in question is the Zimmermann Telegram where Germany offered help to Mexico to seize most of what it lost in the Mexican War of 1848, namely Texas, Arizona, and New Mexico.  Britain needed to expose the telegram in order to bring America into the war.

 

In order to complete their mission Holmes and Watson journey to Washington D.C., and Mexico. In Washington they meet up with Alice Roosevelt Longworth, Teddy’s youngest daughter, who was having an affair with the German ambassador. This part is not true, but she did have an adventurous sex life and had a long running affair with Senator William Borah. Her husband Nicholas would be Speaker of the House from 1925-1931. Alice is helpful in that she puts Holmes on the trail to Mexico.

 

In Mexico, with the aide of a communist housekeeper, Holmes comes up with the telegram and escapes Mexico via a British destroyer sent especially for him and Watson. Along the way there are attempts on Holmes’ life on the ship to the U.S., in Washington D.C., and in Mexico. It seems that the Germans were not oblivious to his mission.

 

I had a lot of fun reading this book. It was a pleasure to catch up to the great detective as Meyer does Doyle justice.

My Review of John Valliant's "Fire Weather"

 The Fire Beast of Fort MacMurray

 

Journalist John Valliant tells the horror story of the great fire that engulfed Fort MacMurray in May 2016. It was truly a beast that acted like a conquering army as it burned most of this city of 90,000 to the ground. Fort MacMurray is the home of the Canadian oil sands industry where oil is mined in the form of bitumen that requires huge energy inputs to process it. Hence it requires oil prices in excess of $60/barrel to be profitable. Although high in cost, it does not require any exploration costs, because the location of the deposit is known.

 

Valliant has really written three books in one. The first comes from eyewitness accounts of how the fire enveloped the city as brave firefighters and citizens fought a near hopeless battle. Remarkably the city was evacuated with minimum casualties. Here we see heroism in action.

 

The second is a history of climate science going back to the 1700’s. He particularly pays attention to boreal forests, like the one that surrounds Fort MacMurray, that have become exceptionally stressed in a hotter world. In May 2016, the temperatures rose to above 80 degrees and the humidity dropped to a desert-like 12 percent. In that environment any small spark could and did ignite a conflagration. Thus, in a hotter world the boreal forests of Canada, America and Russia are all set up for great fires in the future. Indeed, the release of the stored carbon resulting from the fire has the potential to undo much of the progress being made in decarbonizing society. This clearly is not a hopeful conclusion.

 

The third book is a screed attacking the oil companies and the “petroscene” age they brought about. He recounts the oil industry’s early research into climate change and then their campaign of denial. I think he overdoes it. Valliant also seems to look with disdain at the vehicle heavy lifestyle of the oil workers. With incomes of around $200,000 a year, the workers had the wherewithal to multiple cars and trucks and all-terrain vehicles, not a bad lifestyle for the Canadian working class.

 

Nevertheless, the main message of the book is that we will be living with great forest fires in the future and more fires in the wildland urban interface neighborhoods which are prevalent in the American west.

The Fed's "Coup de Whisky" to the Stock Market

 Last week’s 50 basis point cut in the federal funds rate to 4.875% served up a “coup de whisky” to the stock market. Those words were spoken in July 1927 by Benjamin Strong, President of the New York Fed to Charles Rist, the Deputy Director of the Bank of France at secret central bank meeting on Long Island.* Much like today the U.S. economy was humming along, but Britain was rapidly losing gold. To take the pressure off the British Pound, Strong and several other regional banks cut the discount rate from 4% to 3.5%.

 

In response an already strong stock market was off to the races and would double over the next two years. That move put the roar in the roaring twenties. Although today’s circumstances are far different, but not so different; the economy is at roughly full employment, real GDP has likely grown at a 3% clip over the past six months, and inflation remains moderately above the Fed’s 2% target. Nevertheless, just like 1927 stocks roared in response to new highs.

 

The Fed’s move and it signals of further cuts of 100-150 basis points over the next nine months, is a bright green light for the stock market as investors now believe that the risk of recession is off the table and faster growth will ratify the very optimistic profits estimates for next year. I don’t think that we will repeat the late 1920’s blow-off but further new highs in stock prices appear likely.

 

Interestingly the yield on longer maturities increased. Why? On the margin the 50bp cut will increase both growth and inflation. The lower short-term interest rates will support corporate borrowing and auto finance. Housing, on the other hand, won’t be helped all that much because mortgage rates responding to higher long rates actually increased. That will force house buyers into variable rate paper.

 

The real risk in the Fed’s move is that inflation will not be as quiescent as it now believes. Simply put, the rate-cutting cycle that the market is banking on might be cut short.

* For a full discussion of this event see Ahamed, Liaquat, "The Lords of Finance" (New York: The Penguin Press, 2009) pp. 290-304