Wednesday, October 3, 2012

The first debate could be the last

This election has been Romney's to lose—given the very poor performance of the economy over the past four years—and tonight he demonstrated that he will not lose easily. In fact, he turned in a masterful performance that exceeded most supporters' expectations. The key for me was that Romney displayed a command of the facts and an understanding of how the economy works that left Obama mumbling, searching for talking points he could string together to mount a defense. It was at times almost pitiful. 

As readers of this blog know, I have been consistent in my belief that the economy would exceed the miserable expectations of investors. I have defended the economy every time the bears have called for an imminent recession. I have argued that the economy would continue to grow, albeit slowly, despite all of the faux stimulus that has been applied by the Fed and the federal government. And indeed that has been the case. Those that bet on the economy have been rewarded for the past three and a half years, whereas those who predicted disaster have lost. The rewards have gone to those who have believed in the inherent dynamism of the U.S. economy, and in its ability to overcome adversity. And there has been plenty of adversity, from massive income redistribution to the demonization of the successful, and the relentless increase in the size and burden of government and its regulations. In addition, we have suffered the fears of a Eurozone meltdown, an unprecedented housing meltdown, a rekindling of Middle East tensions, and repeated attacks on big business and the rich. Yet the economy has continued to recover. 

Romney was on the right side of this debate from the start, since he clearly believes in the power of the private sector to fix things. Obama is on the wrong side, since government has never demonstrated the ability to manage the economy better than the private sector can. It's very easy for the government to mess things up (think housing market bubble inflated by government mandates to Fannie and Freddie to buy absurd mortgages). And it's very hard for the government to fix things (think of all the unintended consequences of Obamacare that have already surfaced, such as taking $700 billion from Medicare and placing a new tax on medical devices in order to give the appearance of budget neutrality). The best line of the night was Romney's disparagement of "trickle-down government." It just doesn't work. Socialism doesn't work, because there is no way on earth that bureaucrats can manage things better than millions of private sector workers who have their best interests at heart.

The November elections present the best possible choice to the electorate: Do you believe in government, or do you believe in the people?

And for those who hate it when I take a political position, I promise to keep analyzing the economy and the market from a dispassionate and objective viewpoint. That's why I have been rewarded these past several years, even though both monetary and fiscal policy have gone the wrong way from what I would have liked to have seen.

18 comments:

Benjamin said...

I don't hate anything Scott Grannis does; his blog is too intelligent.

What I disagree with is the premise that the GOP is for smaller government. If this was true, the 2000-2008 period, when the GOP dominated government n DC, is very mysterious.

The GOP loves agency spending, and is too scared to really cut entitlements (old people vote). They have been "against abortion" for decades, but when they got control of DC and the Supreme Court, nothing happened on abortion.

As for limited government, explain ethanol or Homeland Security. Or the USDA. I could go on.

If Romney wins, and I very mildly hope he does, I wish him the best of success. But will the GOP cut deficits. Yeah, I head heard that one since Eisenhower. Never happened.

brodero said...

America is philosophically conservative but operationally liberal..."Cut that wasteful government spending but not in my
backyard"

steve said...

"This election has been Romney's to lose—given the very poor performance of the economy over the past four years". Seriously? obama is literally bribing his way back into the WH with govt giveaways. Gonna be tough to unseat him when the "dolee's" go to the polls.
be that as it may, Romney won the debate in a walk.

Gloeschi said...

When entire economy crashes under a Republican president, it's the fault of the greedy home buyers.

When economy recovers and Scott gets "rewarded" for his views, it's despite the Democratic president.

Sounds plausible.

Dr William J McKibbin said...

Regarding Romney, I need the details -- I do not understand why he wants to pour another $2 trillion into the military-industrial complex -- for what (?) -- I fear both, big government Democrats and military-industrial Republicans -- moreover, I am terrified that the big government Democrats and military-industrial Republicans will continue their "union" toward fascism, regardless of whether or not that would be good for the economy -- I found the debate last night to be terrifying for the political future of America...

Dr William J McKibbin said...

PS: Romney left me to believe that he intends to cut taxes and "print" the money he needs to fund his $2 trillion bonus for the military-industrial complex -- unless he can explain where the money is coming from, I can only presume he will "print" that money.

PPS: Obama left me to believe that he intends to pour vast resources into America's secondary school system -- money that he would raise with more taxes (which will not happen) or by "printing" that money.

PPPS: Neither candidate left me to believe they truly intend to reign in government spending -- in fact, both candidates left me to believe they intend to increase government spending.

PPPPS: We need a candidate who will commit to cutting real government spending by at least 40% within the next decade -- I am not seeing that candidate...

PPPPPS: Neither candidate even mentioned Main Street USA...

PPPPPPS: I remain terrified of big government Democrats and military-industrial Republicans...

Jake said...

Scott- thanks for interpreting the debate for us. I was scared I would have to use my own brain to interpret it.

marcusbalbus said...

masterly, not masterful.

Public Library said...

Such a silly blog title coming from an educated audience/blogoshoere here.

Seth said...

"... for those who hate it when I take a political position ..."

I don't hate it, but I do find it comic. You're repeating threadbare talking points that have been debunked ad nauseam. I keep visiting because you present economic data and make reasonably cogent arguments from that data, while retaining a basically bullish outlook that helps me balance my more bearish cast of mind. Then once in a while, you put on the Harpo Marx costume and honk that irritating horn in our faces ;)

An empirical look at the past 10-12 years certainly provides a strong case for the idea that Obama's flavor of to-the-right-of-Nixon 'liberalism' has been much better for the economy than GW Bush's "compassionate (to every corporate welfare recipient) conservatism".

But YMMV (your mileage may vary) and I'm glad you are uninhibited in announcing your frame of reference. It's both honest and a good form of "full disclosure" that probably should be a best practice for punditry.

B Terramorse said...

This quote is a real howler:

"Obama is on the wrong side, since government has never demonstrated the ability to manage the economy better than the private sector can"

I suppose the government should have just let AIG, and GM and Chrysler and all the money-center backs and everything else go flushing down the toilet after the geniuses on Wall Street lit the whole F***ing world economy on fire. And then gave themselves a bunch of fat bonuses for having done so.

Seriously, there IS a role for government in the general scheme of things and there are plenty of things the private sector will never want to do or do well. Blanket statements claiming that government is never right are ALWAYS wrong.

Benjamin said...

BTW, when Bush won in 2000, the Dow was at 10880. After eight years of Bush jr. and GOP domination of DC, the Dow closed at 9319, when Obama was elected. Down 14 percent in eight years.

Since Obama has been in, the Dow is 44 percent.

I may actually vote for Romney. But the GOP track record, on deficits, in wars, in government intrusion, is awful.

And as an investor, I am not comforted by what happened to the Dow that last time the GOP was in power. Not good.

Ralf Graute said...

Dear Scott, here in Germany I have watched the debate with intense relief. This election will be the most important election in a very long time. It is about doing the right thing or the wrong thing, doing the things that provenly work or doing the things that have brought misery and often death to tens of millions of people. With so many ill-intentioned people and ideas around, the world is in desperate need of a free and strong America. And again, thanks for your good work and for keeping it free of charge.

Kind regards,

Ralf

Public Library said...

Unemployment at 7.8%. Kiss that debate victory lap goodbye. Intrade has Obama trading at a 70% probability of winning. Decent volume of trading too.

Scott Grannis said...

Ralf: Thanks for your kind words.

Bill said...

Public:

U6 is still at 14.7%. Lots of temporary jobs added that suck and are merely replacing the extended unemployment benefits that have lapsed. Today's numbers don't change the fact that Romney cleaned Obama's clock at the debate. If the American people don't understand that he's an empty suit then there's no hope for the country.

Unknown said...

"That's why I have been rewarded these past several years, even though both monetary and fiscal policy have gone the wrong way from what I would have liked to have seen."

This merely confirms that you have been wrong about the correct approach to monetary and fiscal policy

Scott Grannis said...

No it doesn't. I've said all along that the economy was growing despite bad fiscal and monetary policy. Bad policies are the reason the recovery has been very sluggish. The economy has an inherent dynamism that allows it to overcome obstacles such as bad policies. If policies had been managed better, the recovery would have been much stronger.