The Sum of all Fears: It is Far More than the Fed*

The stock market by declining 7.1% thus far this month is having a December to remember putting it on track to have its worst December since the depression year 1931. Indeed the S&P 500 is now off 18% since its September high. While most market participants have been blaming Fed Chairman Jerome Powell's remarks last Wednesday, the market's troubles extend well beyond the Fed. (See https://shulmaven.blogspot.com/2018/12/no-powell-put.html) Why? On Friday New York Fed President John Williams at a live CNBC interview walked back most of the comments made by Powell perceived to be bearish by stating that the Fed remains data dependent, two rate increases next year are not cast in stone and the timing and the extent of the Fed's balance sheet reduction program is dependent upon market conditions. 

The market got everything it was asking for and remember everything that Williams said was pre-cleared by Powell. In response stocks quickly rallied and then sold off hard ending the day much lower. So if it is not only the Fed, what is it? The market's weakness has everything to do with Trump's trade policies especially with respect to China that is throwing a monkey wrench into business capital spending plans. Further complicating the situation the USMCA Treaty (the new NAFTA) is in big trouble with the Democrats in House. 

Overlaying everything is the increasing erratic behavior of President Trump. His abrupt pull-out from Syria and his firing of Defense Secretary James Mattis were hardly confidence builders. Now throw in a partial shut-down of the government, Trump musing about firing Powell and more indictments coming from the Mueller probe you have witches brew of chaos that is hardly market friendly. Moreover there are no calming figures in the Administration.  Treasury Secretary Steve Mnuchin is no Hank Paulson and he is no Bob Rubin. Knock, knock nobody is home.   

As a result the biggest fear in the market is that things will get worse and that weakness in the market transmitted via the wealth effect to economy will lead to a recession. Our 3-2-1 forecast for 2018-2020 GDP growth could very well turn out to be 3-0- Minus 2. 

The big question is whether or not all or most of this is priced in, if not we are headed lower; if it is we will soon find a bottom. As they say, only time will tell.

*-With apologies to Tom Clancy.

No Powell Put

If market participants thought there was going to be Powell Put coming out of today's FOMC meeting, they were sorely disappointed as the the S&P 500 sold off by 92 points (850 Dow points) from the timing of the 2:00 PM announcement of  an increase in the Fed Funds rate by 25 basis points to the intraday low.  Perhaps more important 10-Year Treasury Yields declined by 9 basis points intraday. Put bluntly, the markets now believe that the Fed is making a major policy mistake. Powell's money quote during his press conference was "policy at this point doesn't need to be accommodative."  

My sense is that the markets are protesting too much. After all the Fed downgraded the potential for rate hikes next year from four to two, lowered it long term federal funds rate estimate from 3.0%-2.8%. He also noted that the Fed will continue to be data dependent which means the Fed doesn't have to do anything at all next year. He buttressed that point by stating the Fed policy is now at the low end of neutral for the Fed Funds rate. This is way more dovish than last September, but with the 13% sell-off in stock prices since then the market wanted more.

Nowhere is it written that the path to interest rate normalization would be trouble free. The markets are now paying the price for a 10 year policy of extraordinary monetary ease.  My instant analysis is that both stocks and bonds over-reacted, but higher volatility will be here to stay.

One last point the Fed did downgrade its GDP growth outlook from 2.5% to 2.3% next year, getting close to our UCLA Forecast of 2.1%. However the Fed is at 2.0% for 2020 while we are at 1.0%.

My Amazon Review of Eric Rauchway's "Winter War: "Hoover, Roosevelt and the First Clash Over The New Deal"

Not Quite a War

UC Davis economic historian Eric Rauchway elevates the personal dislike between Herbert Hoover and Franklin Roosevelt into a war that would determine the future of both the Democratic and Republican parties. Simply put, he way overstates his case and demonstrates his very clear left-liberal bias. To be sure Hoover is a sore loser and acts that way, but their disagreements can hardly be characterized as “a war”.

Rauchway’s thesis is that Hoover consciously acted to abort the New Deal in the womb.  To me the disagreement was far more personal than political and given the economic crisis it would have been far better for both of them to work together the way George Bush and Barack Obama did in 2008, but alas that was not the case. Beneath the surface while Hoover and Roosevelt were having their spat Hoover treasury officials Ogden Mills and Arthur Ballantine were working hand-in-glove with income treasury secretary William Wooden to deal with the banking crisis. In fact Jonathan Alter in his "Defining Moment" noted that “the Hoover men essentially designed the blueprint of FDR’s rescue of the banks.” Thus if the generals were at war the lieutenants certainly were were not.

Rauchway argues that Hoover’s ideas were a precursor to the Republican southern strategy of the 1960s. To his credit he does note that the African-American vote began deserting the party of Lincoln in response to Hoover’s treatment of them during the 1927 Mississippi River Flood and his failed supreme court nomination of the racist John Parker in 1930. That is all true, but the fact remains Roosevelt sold out to the southern barons of the Senate to pass his program and it was the Republican Party that was the party of civil rights well into the 1960s and especially with the nomination of Wendell Willkie in 1940.

He also argues that Roosevelt as early as 1932 was well aware of the threat that the rise of Hitler presented to the democracies. Yet he blew up the 1933 World Economic Conference that sent a clear signal to Hitler that the U.S. was abandoning Europe. Indeed from 1933-38 was probably the most isolationist period of the 20^th Century. Being worried about Hitler and acting are two different things.

Moreover while Roosevelt was worried about fascism abroad he was implementing it at home. What else can you make of the cartelization caused by the Agricultural Adjustment Act and the National Industrial Recovery Act, if not a form of proto-fascism? Moreover it was hardly progressive to plow under crops and slaughter piglets to prop up farm prices during a period of real starvation. Thankfully the Supreme Court saved us from these failed experiments.

Rauchway conveniently leaves out the crackpot ideas of Cornell economist George Warren who influenced Roosevelt on farm and monetary policies. He also ignores that one of the causes of 1920s farm crisis was the mechanization of agriculture as 40% of cropland was devoted to forage crops that were no longer needed.

Let me say that this review is not intended to be an all-out attack on the New Deal. Much good came from leaving the gold standard, banking and securities reforms and the beginning of massive public works projects. The country was in a crisis and we have to put ourselves into the shoes of the decision makers of the time, but we also have to heed Keynes admonition that “reform is the enemy of recovery.” I wish Rauchway would see things that way.

For the full Amazon URL see: https://www.amazon.com/review/R1VJ9V9PPKXS9F/ref=pe_1098610_137716200_cm_rv_eml_rv0_rv

My Amazon Review of Susan Schulten's "A History of America in 100 Maps"

Map Geek

I must confess that I am a map geek and there are some really terrific historical maps in Denver University Professor Susan Schulten’s book of 100 maps. I especially liked the maps portraying the slave trade, the Anglo-French rivalry over North America in the 1700s, the 1823 map that made manifest destiny so evident 20 years before the phrase was coined, Sherman’s use of census maps to plan his march through Georgia, Harlem nightlife in the 1930s, the 1961 Freedom Rides and Disneyland.

My problem with her book is what she leaves out, her negative characterizations of industry and she is way too equivalent with to the Cold War. To me any map book on the history of America would have to include three maps on the wiring of America. Specifically the electrical, telephonic and internet grids. The same holds true for the expansion of the railroads. Her comment on the railroads largely follows the populist narrative not how the strategic vision of Abraham Lincoln bound the nation with the Pacific Railway Act. It is obvious to me that she is not familiar with Robert Gordon’s now classic “The Rise and Fall of American Growth.”

With respect to the Cold War she views it more as a big power rivalry rather than in Ronald Reagan’s words a fight against “the focus of evil in the modern world.”

We were the good guys. She soft pedals the role of Soviet agents in the counsels of government by calling them “a few civil servants in the Roosevelt and Truman administrations.” I don’t think Alger Hiss at State and Harry Dexter White at Treasury viewed themselves as cogs in the bureaucracy.

Those criticisms aside, there is much to be learned from Susan Schulten’s book. Look at the maps and read the commentary with a critical eye.

For the full amazon URL see: https://www.amazon.com/review/RYPW1A2TGM0ZS/ref=pe_1098610_137716200_cm_rv_eml_rv0_rv

My Amazon Review of David Levering Lewis' "The Improbable Wendell Willkie: The Businessman who Saved the Republican Party...."

Republican Rebel

NYU historian David Levering Lewis tells the story of how and why Wendell Willkie, a lifelong Democrat temporarily seized control of the Republican Party to become its presidential nominee in 1940. This often told story normally focuses around the Republican Convention where the eastern establishment finance and media elite orchestrated Willkie’s sixth ballot victory. Out of that flowed enough Republican support for conscription, the destroyers for bases deal and lend lease which enabled Roosevelt to overcome the isolationists in both parties to move our country closer to confrontation with the Axis powers.

Lewis’ book is far more than that. He takes us back to Willkie’s progressive roots in rural Indiana where is his family was enraptured by Bryan and Wilson with the latter’s influence being making Willkie a full-throated internationalist. Moreover Willkie was a serious activist as he attended the 1924 and 1932 Democratic conventions. While being an activist Willkie develops a very strong legal reputation and he rises to become president of Commonwealth & Southern (C&S), a giant utility holding company that lives on today as The Southern Company. In his position at the C&S he takes on the newly formed Tennessee Valley Authority and then most of the New Deal.

Willkie becomes nationally known as a critic of the New Deal, but with the coming of the 1937-38 recession his criticisms begin to bite. Although supportive of Social Security and collective bargaining, he attacked the growing tax and regulatory state that was stifling business and thereby inhibiting the recovery from the depression. He bests solicitor general and future Supreme Court Justice Robert Jackson in a national radio debate in 1938 and from there his presidential prospects take root.

It is here where I have my main difference with Levering because it was Willkie’s attacks on the New Deal that made him palatable to the largely isolationist Republican Party. Levering should have devoted far more effort in this regard in flushing out Willkie’s economic ideas that drove a dagger into the heart of the tax and regulatory state the New Deal was building.

I gasped when Lewis recounted Willkie’s acceptance speech to hundreds of thousands of people in Ellwood, Indiana. He attacked Nazi Germany for its “barbarous and worse than medieval persecution of the Jews” calling it “the most tragic in human history.” Roosevelt never went close to making comments like that, to his eternal discredit. Willkie was also far ahead of his time with respect to race. He was close friends with NAACP chief Walter White and he called racism a form of “domestic imperialism.”

Lewis also touches on Willkie’s affair with Irita Van Doren, book review editor of the New Yok Herald Tribune, who introduced him to New York literary society. His marriage to his wife Edith was largely loveless. He also had an affair with Madame Chiang Kai-shek, who was using him to further her husband’s political goals.

After his defeat in 1940 Willkie becomes Roosevelt’s personal emissary to Churchill and in 1942 he does a round the world tour for the Administration. Out of that came his bestselling book “One World” which outlined a new era of de-colonialism and global integration. That was too much for the Republican Party and Willkie was rejected in the 1944 primaries. He died at 52 in late 1944 just when Roosevelt was toying with the idea of forming a new liberal political party with Willkie.

Lewis as offered us a good read into an important aspect of our history where one individual really made a difference and it saddened me to see how today’s Republican Party is digging itself back into the isolationist hole of the 1930s.

For the full amazon URL see: https://www.amazon.com/review/RR5GROLG3YQIJ/ref=pe_1098610_137716200_cm_rv_eml_rv0_rv

"Downshifting to Slower Growth," UCLA Anderson Forecast, December 2018

Downshifting to Slower Growth

David Shulman

Senior Economist, UCLA Anderson Forecast

December 2018

After growing at a 3.1% pace on fourth quarter to fourth quarter basis, the growth in real GDP is down shifting to 2.1% in 2019 and 1% in 2020. (See Figure 1) This is consistent with our prior forecasts characterizing a 3-2-1 growth path for the economy.[i] The down shift in growth is based upon our view that above-trend growth is difficult to achieve for an economy operating at full employment given the sub-1% growth rate in the labor force and productivity gains just above 1%. So unless we witness surprising gains in productivity, the speed limit for the economy is around 2%. Then you might ask, why are you forecasting a further slowdown to 1% in 2020?

Our explanation is that the benefits coming from the huge fiscal stimulus of tax cuts and spending increases will wane by the end of 2019 and the lagged effects of the Federal Reserve’s normalization of interest rates along with the negative effects of the administration’s trade policies will dampen growth further.

Figure 1. Real GDP Growth, 2010Q1 -2020Q4F, Percent Change SAAR

                      

Sources: U.S. Department of Commerce and UCLA Anderson Forecast

In this environment payrolls will continue to expand, but the 190,000/month average gain thus far this year will slow to 160,000/month in 2019 and a much weaker 40,000/month in 2020. (See Figure 2) The unemployment rate will continue to decline from the current 3.7% to about 3.5% for most 2019 and then gradually increase to 4% by the end of 2020. (See Figure 3)

Figure 2. Payroll Employment, 2010Q1- 2020Q4F, In Millions, SAAR

Sources: U.S. Bureau of Labor Statistics and UCLA Anderson Forecast

Figure 3. Unemployment Rate, 2010Q- 2020Q4F, Percent, SAAR

         

Sources: U.S. Bureau of Labor Statistics and UCLA Anderson Forecast

The Fed Normalizes Policy

The Federal Reserve has been on a policy of gradually normalizing interest rates. After years of holding the Federal Funds rate at 0% - .25%, over the past two years the policy rate has increased to its current 2.0%- 2.25%  and we expect another 25 basis point increase to 2.25% -2.50% later this month. Further we anticipate three or four rate hikes in 2019 that will bring the funds rate up to 3.25% -3.50% by late 2019 or early 2020.

Why so high? We perceive that the normalized funds rate, what the Fed calls R*, to be equivalent to a real rate of 1%. With inflation running somewhat above 2%, that implies a normalized funds rate somewhat above 3%. We would note that prior to the financial crisis R* was perceived to be 4% (2% real) and in the post financial crisis environment it was perceived to be 2% (zero real). We split the difference at 1% real. Given the 2+% inflation environment we foresee along with the Fed’s balance sheet shrinkage and trillion dollar federal deficits, more on all of this below, we forecast that 10-Year U.S. Treasury yields will exceed 4% by yearend 2019, up from the current 3.2%. (See Figure 4)

Figure 4. Federal Funds vs. 10- Year U.S. Treasury Bonds. 2010Q1 -2020Q4, Percent

  

Sources: Federal Reserve Board and UCLA Anderson Forecast

Underpinning the Fed’s move to higher interest rates is that inflationary pressures in the economy are growing.  At long last wage rates are increasing and employee compensation is on track to increase 3.3% in 2019 and 4.0% in 2020. (See Figure 5). Simply put the tight labor market is now showing up in the form of higher wages and benefits. Similarly inflation as measured by the consumer price indices will approach 3% both 2019 and 2020 largely driven by higher service sector prices. (See Figure 6)

Figure 5. Employee Compensation/Hour, 2010Q1 -2020Q4, %CHYA

Sources: U.S. Bureau of Labor Statistics and UCLA Anderson Forecast

Figure 6. Consumer Price Index, Headline vs. Core Inflation, 2010Q1 – 2020Q4F,

%CHYA

 

Sources: U.S. Bureau of Labor Statistics and UCLA Anderson Forecast

Moreover the long end of the Treasury curve will be pressured by the Fed’s balanced sheet normalization program and trillion dollar federal deficits as far as the eye can see. (See Figures 7 and 8) During the financial crisis and its aftermath the Fed increased its balance sheet through three round of quantitative easings from $800 billion to $4.5 trillion, an unsustainably high level for it to conduct monetary policy.  Now that policy is being reversed with the Fed selling government securities on the order of $40-$50 billion a month. You can call this policy quantitative tightening.

However the Fed is not the biggest seller in the market, the federal government is. The trillion dollar deficits that we envision means that the U.S. Treasury will be net new issuance of between $80- $100 billion a month. Thus the path for long term interest rates is higher. It also implies that interest payments on the debt will double from the current 1.4% to 3.1% of GDP thereby crowding out other federal spending.

Figure 7. Federal Reserve Assets, 12-18-02 to 11-14-18, In Millions $

    

Source: Federal Reserve Board, via FRED

Figure 8. Federal Deficit, FY 2010 – FY2028F, Billions $, Annual Data

Sources: Office of Management and Budget and UCLA Anderson Forecast

Financial Turbulence Ahead

The recent volatility in stock prices appears to be signaling that the era of benign financial markets we have been used to for the past several years is coming to an end. (See Figure 9) Although most market pundits blame the increased volatility of Fed policy and a peak in the growth rate in corporate profits, when you look under the hood you will notice perhaps more serious risks facing the financial markets, namely over-leveraged corporations and escalating trade tensions, especially with China. And don’t forget the energy, social media, banking and pharmaceutical industries will soon find themselves in the crosshairs of the newly elected Democratic House of Representatives.

Figure 9. S&P 500, 17 Nov 17- 16 Nov 18

 

Source: Standard and Poor’s via BigCharts.com

While the zero and low interest rate policy of the Federal Reserve helped pull the economy out of the Great Recession and later stimulated growth, it also induced corporations to leverage up. For example AT&T borrowed $190 billion to finance its acquisitions of Time Warner and DIRECTV.[ii] And AT&T was far from alone with such debt financed acquisitions made by Bayer, Verizon Communications, Abbott Laboratories, Walgreens Boots Alliance, CVS and Broadcom. As a result about half of all investment grade corporate bonds now rated Baa by Moody’s, their lowest tier. That means the slightest of economic downturns can force many of these credits into “junk” territory. And this data does not take into account the huge issuance of less than investment grade paper that has taken place over the past decade that now accounts for about half of the $9 trillion corporate bond market.

Further exacerbating the corporate credit situation has been the “huge deterioration,” in Janet Yellen’s words, in the $1.3 trillion leveraged loan market.[iii] Although not as over-extended as the mortgage market was in the mid-2000’s, the corporate debt market has the potential to trigger the next recession. We do note that the credit risks we are discussing have only just begun to materialize in the bond market with high yield credit rising from 3.22% in early October to 4.11% in mid-November as the market responded to problems at General Electric, PG&E and oil exploration companies. (See Figure 10) It is important to note here that the last three recessions had their origins in the financial markets with the 2001 recession being caused by the collapse in the high flying technology/telecom shares and the 1990 recession was caused by over-zealous lending to the commercial real estate sector.

Figure 10. BofAML U.S. High Yield Option Adjusted Spread

 

Source: BofA Merrill Lynch via Fred

With respect to trade it appears that we are in the process of entering an economic cold war with China. President Trump is threatening to impose tariffs on up to 25% on all $537 billion of Chinese imports. At an average rate of 20% that would amount to a $107 billion tax on the U.S. economy. Although most market participants cling to the hope that a reasonable deal can be made I would caution them to take careful note of the recent remarks made by Vice President Pence and  former Secretary of the Treasury and Goldman Sachs CEO Henry Paulson, a longtime friend of Beijing.

Pence speaking to Hudson Institute said the following:

   “America had hoped that economic liberalization would bring China into

     a greater partnership with us and with the world. Instead, China has chosen

    economic aggression (emphasis added), which has in in turn emboldened its             

     growing military.”[iv]

And:

   “Beijing provides funding to universities, think tanks and scholars, with

     the understanding that they will avoid ideas that the Communist Party

     finds dangerous or offensive. China experts know that their visas will be

     delayed or denied if their research contradicts Beijing’s talking points.”

Although the rhetoric coming from the Trump Administration might have been expected, Henry Paulson’s comments were not. Paulson has long championed engagement with China, but in his Singapore speech he noted that an “economic iron curtain” may soon descend between the two parties. The result of which would be “a long winter in U.S-China relations” and “systemic risk of monumental proportions.”[v]

In other words both countries are playing with fire. In fact China is already feeling the pain with slowing economic growth and a nearly 30% stock market decline. (See Figure 11) There are few winners in a trade war with lots of collateral damage.

Figure 11. Shanghai Composite Index, 17 Nov 17 – 16 Nov 18

Source: MarketWatch.com

China is not the only trade issue the markets face. With the Democrats taking control of the House of Representatives in November it is not clear that the newly signed substitute for NAFTA, the USMCA Treaty will pass muster. Remember that the Democrats are less free trade oriented than the Republicans and it is our guess that come this spring the markets will once again be worried about the deal. Further the risks remain that BREXIT will blow-up and Italy will slug it out with the E.U. over its nonconforming budget. Thus unless cooler heads prevail the risks to our forecast coming from the trade sector are all on the downside.

Meantime the U.S. trade deficit continues to expand as the Trump administration unconsciously uses the trade deficit to finance the budget deficit. As long as the United States is a capital importer it has to, by definition, have a trade deficit. In real term the U.S. trade deficit will increase from $914 billion this year to $1.04 trillion and $1.1 trillion, in 2019 and 2020, respectively. (See Figure 12)

Figure 12. Real Net Exports, 2010 – 2020F, In Billions $, Annual Data

   

Sources: U.S. Department of Commerce and UCLA Anderson Forecast

Sources of Strength and Weakness

Our main theme is that growth will gradually taper off in all of the major sectors of the economy. It looks like real consumer spending growth peaked at 4% in the second quarter and it will likely taper off to 2% by the fourth quarter of 2019 and 1.5% by the fourth quarter of 2020. (See Figure 13) Although consumer spending has been strong of late, we can’t say the same for housing activity. Put bluntly housing activity remains in a rut. Housing starts will advance to 1.26 million units this year up from 1.21 million units in 2017. We forecast further modest gains to 1.31 million and 1.32 million units in 2019 and 2020, respectively. (See Figure 14) This level of activity lags below the 1.4-1.5 million units that we believe to be consistent with long run demand.

Figure 13. Real Consumption Expenditures, 2010Q1 -2020Q4F, Percent Change, SAAR

Sources: U.S. Department of Commerce and UCLA Anderson Forecast

Figure 14. Housing Starts, 2010Q1 -2020Q4, In Millions of Units, SAAR

Sources: U.S. Department of Commerce and UCLA Anderson Forecast

A real bright spot in the economy has been investment in intellectual property which is forecast to increase a white hot annual rate of 9% this quarter. This broad category consists of computer software, research and development and filmed entertainment. To be sure growth in this sector will taper off, it will still be consistently growing faster than the economy as a whole. (See Figure 15)

Figure 15: Real Investment in Intellectual Property, 2010Q1 -2020Q4, Percent Change, SAAR

Sources: U.S. Department of Commerce and UCLA Anderson Forecast

Another bright spot for next year will be the continued strength in real defense spending. After increasing at 3.4% this year, real defense spending is forecast to rise by 4.9% in 2019 and level off with a 0.8% gain in 2020. (See Figure 16) The Trump defense buildup is for real.

Figure 16. Real Defense Purchases, 2010 -2020F, Percent Change, Annual Data

Sources: U.S. Department of Commerce and UCLA Anderson Forecast

Conclusion

The economy is in the process of down shifting from the 3% growth in real GDP this year to 2% in 2019 and 1% in 2020. At full employment 3% growth is not sustainable. With the Fed tightening, trade tensions rising and the impact of the fiscal stimulus coming from tax cuts and spending increase waning, financial markets will likely experience increased turbulence.  Over-leverage in the corporate sector represents the major financial risk to the economy. Nevertheless Main Street will likely experience higher real wages coming from a very tight labor market as evidenced by a 3.5% unemployment rate. Thus a good year for Main Street and choppy year for Wall Street.

    

   

---

[i] See Shulman David, “Sunny 2018, Cloudy 2019,” UCLA Anderson Forecast, December 2017 and Shulman David, “Regime Change,” UCLA Anderson Forecast, March 2018.

[ii] Smith, Molly and Christopher Cannon, “A $1 Trillion Powder Keg Threatens the Corporate Bond Market,” Bloomberg, October 11, 2018.

[iii] Fleming, Sam,  “Janet Yellen Sounds Alarm Over Plunging Loan Standards,” Financial Times, October 24, 2018

[iv] Seib Gerald F., “The Significance of Pence’s China Broadside,” The Wall Street Journal, October 9, 2018.

[v] Ip, Greg, “Paulson Forewarns on China,” The Wall Street Journal, November 8, 2018

My Amazon Review of H.W. Brands' "Heirs of the Founders: The Epic Rivalry of Henry Clay, John Calhoun and Daniel Webster"

When Giants Roamed the Halls of Congress

University of Texas history professor H.W. Brands has written a biography of the three giants who dominated Congress in the first half of the 19^th Century, namely Henry Clay, John Calhoun and Daniel Webster. All three were great intellects and orators who had a common dislike, for different reasons, of President Andrew Jackson.

Clay comes on the scene in 1811 where in his first term he becomes Speaker of the House. He and Calhoun would join together as the leading “war hawks” and push Madison into war against England. They would later split over the issues of tariffs, slavery and most important, the preservation of the Union. Clay would become the author of the American System based on protective tariffs, internal improvements and a national bank which made him the true heir to Alexander Hamilton. In 1820 he would put together the Missouri Compromise which delayed the ultimate reckoning of the slavery issue and thereby allowed the continued development of a growing America.

Calhoun, who served as vice-president to both John Quincy Adams and Andrew Jackson, quite a feat in its own right, became the tribune of the South. He fought tariffs, championed slavery and the ability of states to nullify federal laws they opposed which offered the theoretical basis for secession.

Webster had a brilliant career as a lawyer where he was victorious in such major Supreme Court cases as McCulloch v. Maryland, Dartmouth College and Gibbons v. Ogden. Although he is most remembered for his “Union, now and forever” speech in his Reply to Hayne, he supported New England secession during the War of 1812.

In 1850 all three of them, now all over 70, came together in the great debate over the admission of California into the Union as a free state, the treatment of fugitive slaves and the extension of slavery into the New Mexico Territory. The end result of the debate was yet another successful Clay compromise. And it was here where Webster in order to save the Union bent over backwards against his abolitionist constituency, on the issues of fugitive slaves and slavery in the New Mexico Territory, to agree with Clay. Oh to be in the Senate Gallery to hear the debate. The next best thing is reading Brands’ account. All three would be dead within two years.

Brands brings to life these three great personalities as they dominated the Congress for 40 years. It is history at its best. I only wish our current Congress had at least one Clay or a Webster and unfortunately too much of the nullification spirit of John Calhoun is alive and well in both parties today.

The full Amazon URL appears at: https://www.amazon.com/review/R2JBQPK21E3ID1/ref=pe_1098610_137716200_cm_rv_eml_rv0_rv