Dale Franks’ QandO posts
Today’s economic statistical releases:
Personal income rose 0.5% in December, while personal spending remained unchanged. On a year over year basis, income rose 3.8 %, while spending rose 3.9%, once again exceeding the rise in income. The Core PCE Price Index, an inflation measure,rose 0.2% for the month, and is up 1.8% over last year.
The Dallas Fed Manufacturing Survey shows that manufacturing picked up the Texas Fed District last month. The general business activity index rose from -3.0 in the prior month to 15.3, and the production index rose to 5.8 from -1.3.
This week, Bruce, Michael, and Dale talk about the SOTU speech, Republican race, and slow collapse of the EU.
The direct link to the podcast can be found here.
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Today’s economic statistical releases:
The advance estimate for 4th Quarter GDP came in at 2.8% annualized growth. This beats the 3rd Quarter’s 1.8%, yet still falls below analyst expectations of 3.1%. GDP was up 1.6% over last year, a relatively anemic rate of growth.
The University of Michigan reports their Consumer Sentiment index continues to rise, coming in at 75, compared to 74 from two weeks ago.
Today’s economic statistical releases:
Durable goods orders for December rose a sharp 3%, and ex-transportation orders were up 2.1%. November orders were also revised upward sharply to 4.3% from 3.7%
Initial claims for unemployment rose 21,000 to 377,000. The 4-week moving average still dropped, however, to 377,500.
The Bloomberg Consumer Comfort Index rose 1 point to -46.4.
The Chicago Fed reports its National Activity Index rose to 0.17 in December from -0.46 the prior month. The 3-month moving average stands at -0.19, which is slightly below-trend growth.
New home sales in December fell 2.2% to a disappointing 307,000 annual rate, well below analyst expectations of 320,000.
The Conference Board reports that the Index of Leading Economic Indicators—which has received a huge revision to the components that make it up—rose 0.4% last month. In the LEI, money supply has been removed in place of a new credit measure, and deliveries have been dropped in favor of the ISM New Orders index. As part of this makeover, previous months have been revised sharply downward to 0.2% and 0.6%.
Now, before I ask this, keep in mind that I’m a National League fan, being a life-long Astros fan, as well as a Dodgers fan. I also like the Rangers and the Tigers, but I’m primarily an NL devotee. As such, I am inclined against the designated hitter, because I grew up watching the National League brand of Baseball, prefer it, and only later developed a taste for AL teams.
But here’s the thing. Albert Pujols is 31 and has a shiny new 10-year contract with the Angels. As of today, Prince Fielder(28) is going home to Detroit for 9 years with the Tigers. That puts them at 41 and 37, respectively, when their contracts are up. Do we really think Pujols will be holding down the first bag at 41? Jeez, will Prince Fielder be able to play first at 31 with his…ahem…physical stature. No, of course not.
But, they can work out big deals in the AL because of the Designated Hitter rule. Even when they can’t play a position any more, big hitting still gives them a place on the roster.
But what NL team can take a risk on long-term contract for a big-hitting position player in his 30s? Doesn’t that force star hitters into the AL, and make the NL a weaker league offensively? I mean, not only do you have the pitcher at bat, but the remaining players are lesser sluggers than the AL guys. Is the NL really all about pitching, or is it just weaker hitting?
There seems to be a bit of a push to make the DH apply to the NL, in order to keep the leagues competitive offensively. The reasoning is that, at this point, everybody but the NL uses the DH, and it’s a bit silly for the two major leagues to play two different brands of baseball. And the DH really does result in a different kind of game. Not only would applying the DH to the NL equalize the game, it would allow sluggers—and teams—more options to keep sluggers kin the game, even when they get a bit too old to hold down a position well.
Could the NL just give in and accept the DH? Should they?
Political parties exist for a reason, and it’s a pretty simple one: to implement the policies their voters prefer. It’s a pretty straightforward deal. The voters pick the candidates that best embody their policy preferences, and the candidate, if elected, implements those policies. It works most of the time.
But not always. Parties sometimes go astray for an election cycle or two. Generally, they are pulled back into line by the voters. But, once in a great while, a political party simply fails. The most recent failure of a major political party in the United States was that of the Whigs in the 1850s, when the issue of slavery so divided the northern and southern factions of the party that its voters were simply unable to continue as a unified political entity. Pro-slavery elements absconded to the Democratic Party, while the anti-slavery elements created the Republican Party.*
It is interesting to note this history when viewed against the current state of the Republican Party. What seems to be developing in the GOP is a similar fissure over the size and scope of government. It seems not to be so much a debate among the rank and file, however, as it is between the grass roots and the party establishment.
When I speak of the GOP establishment, I will define it, for convenience, as those members of the GOP whose incomes and/or professional lives are derived primarily from participation in electoral politics, either directly, as a candidate or staffer, or indirectly through journalism, consulting, policy study, or party activism.
There is an increasing sense that the party establishment is more interested in the process of politics, bipartisanism, and policy than they are about the principles behind the party’s ostensible ideology.
The result seems to be a long succession of candidates for whom the principles of limited government and fiscal responsibility seem to have taken a back seat to "getting things done" and "working with the Democrats" to "solve problems". The perception seems to have taken hold that this has resulted in accepting to some extent the collectivist ideological premises of Democrats, though in a milder form.
Bob Dole, famously criticized as "the tax collector for the welfare state", was generally thought of as a political moderate. George W. Bush’s compassionate conservatism was essentially an embrace of big government for socially conservative ends, rather than limited government, and ultimately, through No Child left behind and Medicare Part D, an embrace of big government for political ends. John McCain was notorious for his "maverick" ways, which came to be generally defined as siding with the Democrats on domestic issues. The GOP seems incapable of producing identifiably limited government conservatives as national candidates.
During this same time, the GOP electorate has become increasingly interested in restraining the size and scope of government, reducing regulations, reducing taxes, and balancing the Federal budget.
Indeed, it’s important to remember that the TEA Party movement began not as a reaction to Mr. Obama’s election, but rather in opposition the Bush Administration’s push for TARP and the bailouts, all of which President Obama embraced and expanded.
This increasing divide between the GOP electorate has led to some embarrassing moments, such as the candidacies of Sharron Angle and Christine O’Donnell in opposition to the GOP establishment, but also some successes, such as the candidacies of Marco Rubio and Allen West. Both, however, often came in opposition to the wishes of the GOP establishment. Some results of this tension are not yet fully known, such as the ultimate outcome of Sarah Palin’s position as a sort of spokesperson and power-broker for a large percentage of the GOP electorate, at the same time her reputation among the GOP is establishment is, shall we say, mixed.
So, we come to the 2012 election, and the primary candidates for the GOP presidential nomination are Mitt Romney and Newt Gingrich. Both men are identifiably part of the GOP establishment. Both are flawed candidates from the point of view of limited-government conservatives. Frankly, neither of them would have a chance at winning an election against Mr. Obama in a normal political environment. Their one hope for beating Mr. Obama in the fall is that this election year is decidedly not normal.
From a policy point of view, Mr. Romney simply isn’t a conservative. He is merely somewhat more conservative than the average Democrat, which is to say he is noticeably more liberal than the GOP rank and file. His record gives every indication of willingness to "work with" Democrats, which can be best understood as code for doing nothing that Democrats strongly oppose. In a normal election, this would translate into a deep sense of ennui among GOP voters that would probably doom his chance of victory.
Mr. Gingrich has a more credible argument for supporting and implementing conservative policies than Mr. Romney in many ways. He is also one of the most actively disliked politicians in the United States. He seems utterly incapable of seeing himself in anything other than world-historical terms, and the result is a noticeably overweening ego. He is the modern embodiment of General George McClellan, Abraham Lincoln’s opponent in the 1864 election, who once remarked about himself, "I know that I can save this country, and that I alone can." The instinctive dislike of Mr. Gingrich by the general electorate would normally doom his candidacy in an election as well.
Mr. Romney carries Romneycare like a millstone around his neck, yet does so gladly, and refuses to repudiate it. One of his advisors, former MN senator Norm Coleman, said yesterday that Obamacare would not be repealed. Though the campaign quickly came out in opposition to that position, Mr. Romney’s continued defense of the Massachusetts health care plan remains troubling to GOP voters. He speaks about conservative ideals, but his entire political history is one of compromise with them. This may have been a necessity in a deep blue state like Massachusetts, but it translates poorly to a far more conservative national GOP electorate.
Mr. Gingrich managed to make himself so unpopular as Speaker, even with his fellow Republicans in the House, that he was driven out of Washington like some sort of poison troll. Moreover, as recently as last March on Meet the Press, he supported the individual mandate for health insurance, the key controversy over Obamacare. Mr. Gingrich still defends his support of Medicare Part D. Mr. Gingrich was also one of the primary movers behind the K Street project, which tied the Republican Party deeply with lobbyists, pushed the party into supporting lobbyist pet projects, and ended with the fall of Jack Abramoff, as well as some leading GOP politicians like Tom DeLay. His recent criticisms of Bain Capital, and the concept of private equity firms in general, are also troubling, coming, as they do, from a progressive viewpoint.
In short both men have troubling histories that raise serious questions about their ability to govern as conservatives. I would suggest that if the next president is a Republican, and does not do everything in his power to repeal Obamacare, the Republicans will be finished as a national political party. The same holds true of they fail to restrain federal spending or the growth of the national debt. That would be the short path to the GOP going the way of the Whigs.
Irrespective of presidential politics, however, the GOP is still on the path to decline under their current leadership. If, over the next few election cycles, the GOP establishment cannot bring themselves to actively push candidates of distinctly limited government views, and if they do not actively push for smaller government, less spending, and less debt in Congress, the GOP rank and file will abandon the party and create a replacement for it.
Barry Goldwater’s motto in 1964 was, "A choice, not an echo". Sadly, the GOP establishment seems most comfortable offering a moderately less radical echo of the Democrats. The GOP electorate, however, increasingly wants a choice. A party that is incapable of promoting candidates with a distinctly fiscally conservative, limited government ideology is also incapable of providing that choice.
That is a path to extinction.
*Interestingly, the southern Whigs imparted a more conservative, business-friendly element into southern Democrats, the vestiges of which still remain, and one result of which was the general electoral success by southern Democrats for the Presidency, opposed to Northerners. Of the Democratic presidents in the 20th century, Wilson, Johnson, Carter, and Clinton were all distinctly southerners, while only Roosevelt and Kennedy were northerners. Truman is the odd man out, being from Missouri, though it certainly was at least as much southern as it was northern.
Today’s economic statistics are all about housing:
After last week’s huge rise, the MBA is reporting a sharp pullback on mortgage applications. The composite index fell -5% last week, with the purchase index off -5.4% and refinance index down -5.2%.
FHFA reports house prices rebounded a bit, up 1% for the month, but still down -1.8% compared to last year.
The Pending Home Sales Index fell to 96.6 from 100.1 this month. Pending home sales volume is down -3.5%.
Today’s economic statistical releases:
The week has started slowly, as there were no releases yesterday, and only minor releases today.
Retail sales, as reported by Redbook, have slowed substantially in January, as last week was…weak, and so is this week, with the year-on-year same-store sales rate falling 0.5% 2.8%. ICSC-Goldman Store Sales also fell steeply, down -1.4% from last week, and up only 2.8% from last year.
The Richmond Fed index rose strongly from last month’s 3 to 12 this month, indicating expanding growth in the richmond district’s manufacturing sector.