Thursday, July 28, 2016

July 28, 2016 - The Politics of Good Intentions, Heckling for Peace, and the Fed Holds Interest Rates Steady

Update on the DNC
President Obama was the headliner at Day 3 of the Democratic National Convention, and he didn't disappoint. A solid speech as normal and, sadly, no memorable teleprompter interruptions. The message was one of optimism for the future and celebration of the accomplishments made already--not by him, but in typical Democratic fashion, by all of us. At one point, in a pointed rebuke to Donald Trump's popular slogan, Obama remarked "America is already great."

Obama's speech highlighted the important tension Democrats have to wrestle with this season. They have to simultaneously acknowledge that things aren't perfect while taking credit for some progress. That's a difficult balancing act, particularly in an environment where many people clearly are not happy with the country's current trend lines. If all was well, the Bernie and Trump movements would not have been more than a blip this year.

After the speech, it's clearer than ever that Hillary is running as the continuation candidate, and Obama's rhetorical effectiveness reminded us why she is inclined to be framed as his third-term.

It is far less clear that this will work, however.

If it was literally Obama's third-term, he would probably win easily. But Obama has the ability to deliver effective speeches and isn't widely disliked as a human being. Inexplicably high speaking fees notwithstanding, Hillary doesn't have either of those qualities. That's going to make the general election an uphill battle.

One other item evident from Obama's appearance is that the Democratic Party is cementing its brand as the politics of good intentions. It does not matter whether something is right, or whether it might have disastrous long-term effects. What matters is what they meant to accomplish. Thus, in an introductory video, the auto bailout program was not presented for what it was--namely, massive corporate welfare for a company that did not deserve more resources. In the video though, this was an act of political courage because Obama did it to protect the workers.

President Obama also took the opportunity to spike the football on the Affordable Care Act, noting that health care is no longer a privilege but a right. It doesn't matter that that system is already showing clear signs of breaking down, and is, as we suggested in a prior article, inherently unstable economically. No problem, the goal was to give people access to healthcare. The fact that in the long-run, it will work directly counter to this end does not matter. Only the intention counts.

The same analysis could be offered of many other points in the speech as well. Interestingly, the disastrous Libyan intervention--perhaps,the greatest example of good intentions gone awry in the Obama years--did not appear in the speech. This is intriguing since, to counter Donald Trump, Democrats have lately been making much ado about the importance of facts. The truth is that neither party has shown much interest in them--not in the ones that matter.

Heckling for Peace
Amid otherwise predictable proceedings at the DNC, there was one bright spot that the Bernie folks (and apparently Oregonians) most likely deserve the credit for. When former Defense Secretary Leon Panetta came to the podium to explain why Hillary Clinton is the best warmonger for the Oval Office, he was interrupted with chants for peace: "No More War!" It's a nice reminder that, in spite of President Obama, at least some Democrats are still on the side of peace.

Federal Reserve Keeps Interest Rates Flat
The Federal Open Market Committee finished today, and Fed Chair Janet Yellen announced that the Fed will be keeping a key interest rate target stable. The Fed implied that the economy is clearly strengthening, which has many people expecting the next rate hike in September.

In reality, it's very unlikely the Fed will raise rates again before the election is over. The last time they tried this, the stock market quickly plummeted. Their cautious actions since suggest they understand just how fragile the economy is, even if they're unwilling to say so publicly. That's why they won't raise rates and won't risk throwing the election even more certainly to Donald Trump.

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