Why Our Government Is Failing Us

Plus, the Trump boom is heading for a speed bump By Yuval Rosenberg and Michael Rainey The Government Isn’t Giving Americans What They Want With less than a week to go before the midterms, both Democrats and Republicans are campaigning hard on the message that the [stakes]( on Election Day couldn’t be higher. That may be true, but it doesn’t mean that politicians will receive, or act on, whatever message voters send next Tuesday. In an [opinion piece]( at The New York Times, a trio of academics from Columbia University and The University of California, Santa Barbara, say that our elected officials and their aides have “wildly inaccurate” ideas about what policies Americans really want. “The current Republican-controlled Congress is a good example,” Alexander Hertel-Fernandez, Matto Mildenberger and Leah C. Stokes write. “Its signature accomplishment is a tax-cut bill that hardly anyone likes or asked for and that is estimated to add about $2 trillion to the national debt over the next decade.” The authors asked senior staff members on Capitol Hill — “the people who help their bosses decide what bills to pursue and support” — about public opinion in their districts on some key issues and [compared]( the answers they got to the results from large surveys. The result: Both Republican and Democratic lawmakers missed the mark, sometimes dramatically, though the Democrats tended to be more accurate. Why the disconnect? The authors say that aides tend to assume the public agrees with their personal policy views. And they note that Hill staffers rely on the information they get from special interest groups, particularly those representing business and conservatives, in lieu of fielding expensive public opinion surveys. “The public contributes to the problem,” they say, “by not taking the time to express its opinions to politicians or vote.” So what does the American public want Congress to do? In a separate piece, Gallup Editor-in-Chief Frank Newport offers some [big-picture answers]( - Invest in infrastructure. “A huge percentage of the American public agrees that their tax dollars should be invested in infrastructure, even when the question wording says this would involve a trillion dollars (with a "t"),” writes Frank Newport, Gallup’s editor-in-chief. “Legislation has been discussed. Nothing has been passed. The people's wishes continue to be unfulfilled.” - Fix the dysfunction. Americans say that the way government is run is the most important problem the country faces. “The public has good suggestions for the people they send to Washington: Compromise to find solutions,” Newport says. “This hasn't been happening. Why not? In part because our current system ends up electing ideologues to office.” In an age when partisanship pays off politically, don’t hold your breath for elected leaders to suddenly come together for more kumbaya moments. - Do more to protect the environment. This includes investing in alternative energy and setting tougher emissions and pollution standards. “The majority also say protecting the environment should be given priority over emphasizing economic growth,” Newport notes. - Reform immigration policy. Most Americans support stronger border security and providing a pathway to citizenship for undocumented immigrants living in the United States and adults who were brought to the country illegally as children. Most oppose building a border wall. - Pass stricter gun laws. “Supermajorities favor requiring background checks for all gun purchases, enacting a 30-day waiting period for all gun sales and requiring all privately owned guns to be registered with the police,” Newport says. Americans also wants the government to address health care, including ensuring that all Americans are covered by health insurance, “but there is no strong consensus on how that should be done,” Newport says. And they want political leaders to ensure the viability of Social Security and Medicare. That’s a long to-do list, and the odds of it getting done seem even longer. But as the Times op-ed suggests, whatever it is you want the next Congress to do, voting on Tuesday is only the first step in the process. Quote of the Day “This is the most focused and concerted effort to use all of the powers of the presidency to shape a midterm election that I have ever seen.” – William A. Galston, a senior fellow at the Brookings Institution’s Governance Studies Program and former domestic policy adviser in the Clinton White House, in a [Washington Post piece]( looking at how Trump “is mobilizing the vast powers of the military and other parts of the federal government to help bolster Republican election efforts.” Chart of the Day: Who Owns U.S. Debt? At [Bloomberg]( bond strategist David Ader suggests that, while there are plenty of threats that could drive interest rates higher, the idea that foreigners are pulling back from U.S. debt isn’t one of them. “Foreign ownership is flat at $6.2 trillion, or 47.8 percent of privately held debt,” he writes. “Although that’s down from 59 percent in 2014, foreign ownership is flat in nominal terms. This is mainly due to rising demand a category of buyers dubbed ‘other’ as well as purchases by mutual funds and governmental entities including the Fed. Foreigners are not shying away; others have just been more assertive.” Why the Trump Boom Is Heading for a Speed Bump Kevin Hassett, chair of President Trump’s Council of Economic Advisers, insists that contrary to what many analysts are saying — see [here]( [here]( and [here]( for example — he doesn’t think the economy is coming off a short-term “sugar high” produced by the Republican tax cuts. Instead, Hassett said that he believes the economy is on a path that will produce a long-term increase in productivity, sustained higher growth and, eventually, higher wages. "The story of the tax cuts is they cut the cost of capital, which should lead to higher capital spending,” Hassett [told]( Politico’s Ben White. “If we continue to see a capital spending boom, then productivity goes up and wages go up and you can sustain higher consumption because you increase supply. And all that can happen without causing runaway inflation." However, The Wall Street Journal’s Greg Ip cast fresh doubt on the White House’s optimistic view of the economy Wednesday, [arguing]( that it’s not clear yet that the GDP growth of more than 3 percent we’ve seen over the last two quarters is sustainable. In fact, there’s good reason to think the growth cannot be sustained: - The economy will run out of new workers. The unemployment rate is at a 49-year low of 3.7 percent, and at the current pace of improvement the rate would go negative in eight years, which is impossible. Even with thousands of workers coming off the sidelines and back in to the labor force, the economy will face a shortage of workers at some point, Ip said, dragging on growth. - Demand-side boost will fade, supply-side boost looks weak. The tax cuts provided some boost in demand as consumers found a bit more money in their paychecks, but that increase won’t repeat itself. And while new rules have increased capital spending, the boost has been modest and may have already fizzled. “Excluding mining, oil and gas, business spending on structures such as offices, factories and stores did jump in the first quarter, perhaps because of the tax cut, but then cooled,” Ip wrote. “Spending on equipment doesn’t seem to have responded: It was solid from early 2017 but has weakened in recent months.” - Financial markets appear to be plateauing. Stocks are unlikely to repeat the big gains of the last year and interest rates are climbing, creating a drag on household spending. Financial conditions are now a net negative for economic growth, Ip said, citing a recent estimate from Goldman Sachs. In the long run, there are factors that could theoretically push GDP growth above its current 2 percent long-term trend, Ip said, including robotics and artificial intelligence. “But absent another tax cut, oil boom, bull market or some other stroke of luck, a slowdown from the last 12 months’ 3% pace seems inevitable.” Number of the Day: $22 Billion The Pentagon increased its spending on intelligence to more than $22 billion in 2018, “a sign the military is ramping up its spying-and-intel-gathering activities around the world,” Defense One’s Marcus Weisgerber [wrote]( Wednesday. In addition to supporting ongoing combat operations in Syria, Iraq, Afghanistan and Africa, military intelligence has boosting spying efforts against Russia, Weisgerber said. News - [Trump Vows to Pay Down Exploding Debt]( – The Hill - [Trump Says Ahead of Midterms That He May Send 15,000 Troops to U.S.-Mexico Border, More Than in Afghanistan]( – Washington Post - [What Democrats Want to Do on Taxes If They Win the House]( – Bloomberg BNA - [10 House Races Where Health Care Could Swing the 2018 Election]( – Vox - [How One State That Hates Obamacare Still Makes It Work]( – Politico - [Job No. 1 for a Democratic House? A Sweeping Good-Government Bill, Groups Say.]( – Washington Post - [Biden: Republicans Are Either Liars or 'Really Stupid' for Claims About Pre-Existing Conditions]( – Politico - [Rising National Debt to Affect Voters' Midterm Election Decisions, Poll Says]( – CNBC - [Wages and Salaries Jump by 3.1%, Highest Level in a Decade]( – CNBC - [Training the Next Generation of Doctors and Nurses]( – New York Times - [Avik Roy Says Obamacare Is Here to Stay]( – The Hill - [The Trump Administration Flunked Its Math Homework]( – The Atlantic - [As House Republicans Brace for Losses, Freedom Caucus Prepares for Growth]( – Roll Call - [Parts of America Are Still Struggling Economically. They Don’t Matter Much in the Midterms]( – New York Times - [Disputed IRS Debt Collection Program Shows Gains in New Report]( – Government Executive - [We Posed as 100 Senators to Run Ads on Facebook. Facebook Approved All of Them.]( – Vice News (video) Views and Analysis - [Why the Trump Boomlet May Soon Fade]( – James Pethokoukis, The Week - [Trump’s ‘Booming’ Economy? The Sugar High Is Wearing Off]( – Tim Mullaney, MarketWatch - [GOP’s Tax Law Will Bring Them Down in the Midterms]( – Richard Kirsch, The Hill - [Big Pharma's Price Freezes Aren't Fooling Anybody]( – Max Nisen, Bloomberg - [Trump Surrenders to the Socialists on Drug Price Controls]( – Ryan Ellis, Washington Examiner - [The Great Center-Right Delusion]( – Paul Krugman, New York Times - [Arizona's Senate Race Illustrates Republicans' Health-Care Bind]( – Paige Winfield Cunningham, Washington Post - [NASA Searches the Stars but Can’t Keep Track of All Its Earthly Goods]( – Joe Davidson, Washington Post - [However the Midterms Go, the Republican Party Is Going to Get More Extreme]( – Jonathan Chait, New York Copyright © 2018 The Fiscal Times, All rights reserved. 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