Coalition Building, Before Election Day

My previous criticism of those deciding to absolve themselves of responsibility by opting for a third party (at least in competitive states) has within it the underlying hypothesis about how presidential (and most Congressional) politics work in the United States.

In countries like the United Kingdom, a “third” or minor party can dominate in certain locations, like the Scottish National Party in Scotland. That happens to work, because after the election, if a single party in parliament does not have an outright majority, the elected MPs from different parties can work to form a coalition to get to a majority, and they decide on a prime minister to represent this coalition, usually selected from the dominant party in the coalition. Think of the Conservatives and Liberal Democrats in the 2010 election (although this happened to be a disastrous choice for Lib Dems). Crucially, the Scottish voter doesn’t need to concern himself with throwing his vote away, although he is certainly aware his elected representative will join a coalition (possibly for getting some substantive policy in return).

In the United States, coalitions are built before election day, with the understanding that the elected will govern in such a way as to represent the voter groups involved in that process, or they will be pressured to do so over the course of their term. The process of electing a president is distinct from selecting Senators or House representatives. It’s possible that a third party (or independents, as it has happened more often) wins a particular local election. But in the first place, no Democrat or Republican is particularly bound to vote a particular way. And the centrist to leftist independent members of Congress tend to ‘caucus’ with Democrats so that they have some influence in the processes that develop policy.

My thinking, then, is that we have these supremely long campaign seasons because the process is about first building support among the base (for Democrats, a center-left base, for Republicans, an increasingly far-right base), and then building some support outside of the base once the primary season is over in order to win the election. It’s a process of building coalitions analogous to MPs from different parties joining together to get a majority.

And then the election will decide who is president, whether they have 51% of the vote or a plurality of the vote (e.g. Bill Clinton with 43% in 1992). Voting for a third party, then, is nice in that it lets you say, “I don’t like either major candidate, they suck,” but it seems less clear what it actually does: no one gets points for coming in 2nd or 3rd. The most plausible argument seems to be if you really are a Libertarian, and you want the Libertarian party to get above the 5% threshold to get some public financing in the next election (and automatic ballot access in all 50 states), and they happen to be close to that threshold this election. But this means you are less interested in the immediate outcome that will impact the next 4, or 8, or 12 years.

And how many of the people who are against Clinton and Trump are actually Libertarian? The Republican party already wants to gut the safety net, Medicaid and Medicare: the Libertarian party follows this path while also cutting defense, which I guess is kind of honest according to its own internal logic. But do people really want all income taxes replaced by consumption taxes (this is highly regressive)?

And with the Green Party, are they worthy of the attention they clamor for? Fighting for a leftist agenda is great, but lazy thinking is decidedly not fine.

An interviewer asked Jill Stein about the possibility of playing the role of spoiler like Nader in Florida in 2000, and helping Trump win in the process. Her response:

What we know from history, and what we know from the current situation, we are seeing a rise in right-wing extremism, not just in the United States, and it’s not just Donald Trump, it’s also throughout countries in Europe [. . .] The answer to neofascism is stopping neoliberalism. Putting another Clinton in the White House will fan the flames of this right-wing extremism. We have known that for a long time ever since Nazi Germany. We are going to stand up to Donald Trump and to stand up to Hillary Clinton!

To be fair, I was never going to be convinced of her reasoning, regardless of her response, although I acknowledge anyone’s right to run for office (and anyone’s right to vote for them). But this answer is garbage and nonsensical. If you’re running as a third-party in a post-2000 election world, you should have a better response than this. You should have thought about this.

Jonathan Chait responds brutally (and correctly):

In fact, the one time in American history a Clinton held the White House, it did not lead to fascism. True, it did lead to a Republican administration, but it wouldn’t have if it weren’t for, among many factors, a Green Party candidate who siphoned off enough votes in Florida to tilt the outcome.

[. . .]

This, however, is also a strange conclusion to draw. The crisis in Weimar Germany had many causes, but one of them was the Communist Party’s insistence on destroying the Social Democrats. Because the Communists would not support any center-left government coalition, it was impossible to form a parliamentary majority without the Nazis. So whatever lessons about left-wing political strategy we should draw from the Nazi era, “withhold votes from the mainstream party that is the only viable alternative to the far right” is definitely not one of them.

What’s most fascinating is that Stein does not try to downplay the danger of a Trump presidency. Instead, she likens it to fascism and Nazism (a comparison that I actually think, for all of Trump’s authoritarian tendencies, goes too far). And yet, proceeding from her premise that Clintonism will lead to fascism, she concludes that she must “stand up to” both Donald Trump and the only candidate who can prevent Donald Trump from winning the presidency, in equal measure. “Neoliberalism” — the left-wing term of abuse for liberalism — leads to fascism, so we might as well skip the neoliberalism step and go straight to the fascism.

The assertion is that the Democratic party is fundamentally corrupt, and is no better than the Republican party, basically. This despite that the way our elections work, someone can win a presidency with a plurality of the vote: a least-preferred candidate (Trump) can win by enough people voting for their most-preferred candidate (Stein) rather than the second-least preferred candidate (Clinton) who is the only viable opposition. This is the reality of our election system, regardless of our internal moral quandary about picking. And the point is, there is no regrouping after the election. The regrouping is going on now. Whether people vote in a way that lets them sleep at night or not, the outcome is what matters.

Bernie Sanders mounted a challenge against Clinton from within the Democratic party, and he pushed the conversation towards his end, and got changes in the platform. It’s not clear he would have done this had he skipped the Democratic primary process altogether and joined the Green Party. The Democratic Party is probably better for it, though a minority of his supporters have not yet come to the same conclusions he has.

The Libertarian party would also not likely withstand scrutiny, although they have actual governing experience in diverse settings, so perhaps there’s less concern there. William Weld, the vice presidential nominee for the party, was a moderate Republican governor of Massachusetts. It seems, though, that actual libertarian and conservative commentators don’t like his views on how to govern.

On the supreme court:

JOHNSON: Really, there are going to be no litmus test. You’re going to appoint good people, and you’re going appoint people that look at the Constitution of original intent.

WELD: Well, I don’t think you have to panic and say it has to be a way lefty or way righty. Steve Breyer has been a good justice. He was appointed by Democrats.

GILLESPIE: A Massachusetts guy, right?

WELD: A Massachusetts guy. Merrick Garland, I think, would have been a very good pick, and he’s nominated by Obama.

Weld’s answer is a reasonable answer; but it’s not an answer that can satisfy the Libertarian or conservative die-hards, and it seems his running mate doesn’t agree either.

Leon Wolf writes:

Johnson’s answer is pretty good. Weld’s is awful, and if Johnson disagrees with him he should tell him to shut up about it. Breyer has been a “good justice” in the sense that he hasn’t been openly corrupt and he’s reasonably intelligent, but he’s also a doctrinaire liberal who has stood blithely by and endorsed the massive expansion of the Federal government and the administrative state in particular. His jurisprudence shows no respect for any even theoretical limit of the commerce clause. His philosophy isn’t conservative, and it sure as hell isn’t Libertarian. What is Weld even driving at? This country doesn’t need two Democrat parties.

[. . .]

Leave it to the Libertarians. They have a once-in-a-lifetime opportunity to remove their party from the fringes and they blow it by putting this buffoon Weld on the ticket.

It’s telling that Wolf thinks being more libertarian and more idealogical would be the tactic that would remove the party from the fringes. That seems counter-intuitive to me.

It seems that the third parties want the attention but maybe not the scrutiny that comes with it: maybe we’ll find out that they’re as human and impure as the rest of us.


Putting July’s job numbers into perspective

Or, why the Fed should not raise interest rates in September.

The BLS reported that 255,000 jobs were added in July. The New York Times ran a story quoting Michelle Meyer of Bank of America Merrill Lynch saying, “This was everything you could have asked for, maybe more.” The unemployment rate held steady at 4.9 percent, and wage growth has finally picked up a bit, growing at 2.6 percent year over year. After years of nominal wage growth that barely kept up with inflation, 2.6 percent represents real gains, if only just so.

The underlying threat to any good jobs report over the last few years is that the Federal Reserve will potentially overreact and raise interest rates prematurely, just as the recovery is gaining steam, and despite constant threats to recovery from a tumultuous world. I am not in the Fed prediction business, but prior to the release of the report, Fed watcher Tim Duy stated that July’s FOMC meeting was really just laying the markers for a showdown between hawks and doves in September, and with July data now in hand, a good jobs report may make it untenable to push off on raising rates again. September may be the month interest rates go up to 0.50%.

Why do I worry that the Fed raising rates in September is premature?

It’s true that job growth was strong in July. And it’s also true that the unemployment rate stands at 4.9%, which might normally be considered full employment, which is the unemployment rate where people think things can’t get much better without inflation spiraling upwards.

But, there are a few charts and data points that better describe the status of the labor market than the headline unemployment rate, and they show that the recovery from the greatest recession since the Great Depression is still far from complete, and that there is no sign of inflation getting out of control. The downsides of not raising rates, then, are minuscule compared to the downsides of raising rates, which could harm the still fragile and incomplete recovery.

The headline unemployment rate doesn’t count a lot of people who have exited the labor force: if the jobs just aren’t there, people don’t look, and thus aren’t included in the relevant denominator of the calculation. The BLS thankfully calculates an alternative measure: the unemployed (those actively looking for work but not employed) as well as those who are part-time for economic reasons, plus those who are “marginally attached” to the workforce. This latter category includes those who are available for work, but who didn’t bother looking for various reasons, including the belief that there were no jobs available.

fredgraph1

U-6 Unemployment Rate

 

As of July of 2016, this expanded-definition unemployment rate stood at 9.7%, much higher than the troughs in the previous economic expansions at 7.9% in December of 2006 and 6.8% in October of 2000. The usual suspects argue that this is structural: that there is a mismatch of skills, and that this is just the new normal. But these people were wrong at the start of the recovery, and there are few reasons to believe they are right now.

The employment-to-population ratio for ages to 25 to 54 is another metric that is more informative than the headline unemployment rate. This “prime-age” ratio captures employment in the part of the population you’d like to see employed. It captures similar trends to what we saw in the expanded unemployment rate: again, we see an incomplete recovery:

 

fredgraph2

Employment to Population Ratio, 25-54 Years

 

The peak in the prior economic expansion was 80.3%, and we are still at 78.0%. There’s clearly been improvement, but there’s also still quite a bit of ground to make up. A back-of-the-envelope calculation shows that if an employment to population ratio of 80% represents full employment, and the estimated population ages 25-54 stands at about 125 million, then we are still short 2.5 million jobs.

I hopefully have convinced you that there’s still considerable slack in the job market. Is inflation the metric that is then pushing the Federal Reserve to raise rates?

Various measures based on the consumer price index (CPI) make it hard to think inflation is getting out of control. I plot a few here for reference:

fredgraph3

16% Trimmed-Mean and Median CPI

Median CPI and 16% trimmed-mean CPI, both intended to get at the momentum or inertia of inflation without being affected by volatile outliers like food and energy, show 2.2% and 1.9% inflation, respectively, in June of 2016. This is right around the Fed’s target (and one could argue the target is far too low).

So: inflation is right around the 2% target, and there’s still significant slack in the labor market. What, then, is the hurry?