God is a Capitalist

Saturday, July 30, 2016

Trump wins election, not that it matters

For someone who despises politicians as much as I do it’s really hard to avoid political news lately. But there is a nexus between the presidential election and economics: most voters think the president controls the economy. The evidence for that is the fact that economic models predicting the winners of presidential elections are the best forecasters, far superior to the myriad of polls, except the exit polls, and vastly superior to the legions of political pundits in the media. On the superiority of simple regression models over that of experts for forecasting anything, even the price of wine, read Super Crunchers.

One economic model predicting presidential elections using just GDP growth shows that the economy must grow at an annual rate of 2.5% in the second quarter of the election year in order for the incumbent party to win. Based on the latest release showing Q2 growth at an annual rate of 1.2%, Trump has virtually won.

The model created by Ray Fair at Yale University agrees, according to a story on NPR: "It's based on economic growth per capita in the four years before the election. According to Fair, because of the sluggish growth in this recovery, his model now predicts the Republican candidate will win. Fair's model has picked the winner in all but two elections since 1916."
Moody's Analytics predicts a win for Hillary Clinton using a model that includes price changes for gasoline and housing as well as changes in income. But the results are well within the margin of error so the vote should be close. But Moody's model has accurately predicted elections since 1980.

Of course the President doesn’t control the economy, but who does? Large corporations for the most part do so by bribing politicians to appoint their people to regulatory agencies where they are cranking out like sausage over 75,000 pages of new regulations each year. And while they always advertise the health and safety benefits of the regulations, and they fool most of the people most of the time, the real purpose of those regulations are to crush small competitors and leave markets concentrated in the hands of oligopolies.

So when the talking heads on both sides of the aisle are proclaiming this election to be the most important in the history of the US, possibly in the history of the world, and the fate of civilization, democracy and white bread hang in the balance, how could anyone say it doesn’t matter? After all, Justice Ginsburg promised to move to New Zealand if voters elected Trump because of the plague of locusts on the land he would attract.

In every presidential election since WWII politicians and the media have predicted disastrous consequences for one side or the other winning. Politics is the meaning of life to them. Nothing else matters. But not much has changed, in spite of the horrific predictions. I have been reading William F. Buckley’s book, Up from Liberalism, first published in 1959. The most striking thing about the book is how little anything has changed. How can people say this election matters when no other election has?

A Tea Partier might ask, “What about Obamacare?” Well if you read my article about it on the Mises Institute website you’ll find that there was very little that was new in it. Most states had already legislated the core of Obamacare. All Obama did was federalize what the state had already done. Besides, I’m confident that McCain or Romney would have signed off on essentially the same bill.

The election doesn’t matter because politicians don’t lead the country into change as most academics, politicians and their media groupies think. Politicians reflect the voters. Politics is a mirror held up to show the people what they really look like. Sometimes it’s a carnival mirror, but still a mirror. In other words, people get the government they deserve, as some great historians have said. Mises and Hayek wrote that even brutal dictators have to submit to the will of the majority in the long run or the people will rebel and kill them, as history has proven many times.

The problem with the US is not the politicians; it’s the people. The people are for the most part very socialist. Those who call themselves Republicans, or even Tea Partiers, would be so offended at my calling them socialists that they would probably bloody my nose. But here is an acid test suggested by Buckley in his book: how many of you would vote for ending the social security program?

Or who would advocate for overthrowing the Fed and establishing a gold standard for money? Not many except for the handful of libertarians. Consider the following points from the Communist Manifesto. The US began implementing many of those ideas in the early twentieth century.
1. Abolition of property in land and application of all rents of land to public purposes.
2. A heavy progressive or graduated income tax.
3. Abolition of all rights of inheritance.
4. Confiscation of the property of all emigrants and rebels.
5. Centralisation of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly.
6. Centralisation of the means of communication and transport in the hands of the State.
7. Extension of factories and instruments of production owned by the State; the bringing into cultivation of waste-lands, and the improvement of the soil generally in accordance with a common plan.
8. Equal liability of all to work. Establishment of industrial armies, especially for agriculture.
9. Combination of agriculture with manufacturing industries; gradual abolition of all the distinction between town and country by a more equable distribution of the populace over the country.
10. Free education for all children in public schools. Abolition of children’s factory labour in its present form. Combination of education with industrial production, &c, &c.
Socialism has always been more about savings humanity from itself than economic issues. Destroying private property and wealth distribution were only means to that end. The idea that the state has the power to transform and perfect human nature is just too alluring to even Christians to resist. As long as the majority of Americans believe that, nothing will change no matter how hysterical the politicians and pundits become.
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