A weekly commentary on current events. Follow populyst to receive notification.
This week: A Better Process; Spend and Don’t Tax; Demographics Will Rule; Coronavirus Surge; Reading List.
A Better Process
As we write, there is still no declared winner of the Presidential vote. The delay in results is leading to suspicions of fraud by either side and it risks undermining trust in the process.
One way to avoid a repeat in the future is to have a time limit by which all ballots must be counted. States can then create the necessary rules and allocate the needed resources to produce a result before an agreed deadline, say noontime on the day after the election. Under rare circumstances, a state would be granted additional time by a court if it is unable to count all the ballots by the deadline. Trust in governance is upheld when people get what they expect when they expect it.
Spend and Don’t Tax
The stock market is booming in the immediate aftermath of Election Day, powered by confidence that the Senate will remain in Republican hands and that this status quo would stall any effort by a President Biden (if he is declared the winner) to raise income taxes. Meanwhile, it is a quasi-certainty that a new fiscal stimulus will be coming in the next few weeks, in particular as the number of new confirmed daily COVID-19 infections continues to climb (more on this below). The prospect of more government spending without new taxes is what the markets love right now. But a protracted court battle to determine the winner of the election could derail this momentum.
Demographics Will Rule
Every major election is important whether or not it is “the most important of our lifetime or of our history”, as the media and many politicians like to say every four years. But there is a general propensity to overrate the role and power of the President (whoever he is) and to underrate the more impactful general trends of the nation. The President is very powerful but mainly in crisis situations such as foreign wars, insurgencies, natural catastrophes etc. Outside of these rare and unusual events, the President has to work within a process and his powers are constrained by the opposition, by the Constitution and by other laws.
Therefore, absent a major crisis, the changeover from one President to another, or from one Congress majority to another, are important proximate events but not necessarily history-changing ultimate ones. They are surface waves that capture all the attention, excitement, grief or cheer but that also conceal or mask more significant undercurrents. The general direction of the country is steered by less visible trends that remain mostly steady during political changeovers.
Today, one of the most important of these undercurrents is the demographic disinflation of the US population, accompanied by low birth rates and a rising dependency ratio. As shown on the chart, the annual growth of the population is trending down to less than 0.4% by the year 2050. Meanwhile the dependency ratio (ratio of dependents to workers) will be rising from less than 0.5 to over 0.65. See also The Economy’s New Boss: Demographics and America Without Immigration: 2015-50.
This demographic disinflation and aging have set in motion a chain of events that have led to a less vigorous economy with real annual GDP growth rarely exceeding 3%, and a subsequent rise in cronyism and inequality as the top 1%, 10% and 20% maneuver to entrench their position within a more stagnant economic pie. None of this would change significantly with a new President, unless we experience a major crisis.
US daily new confirmed cases have soared and nearly doubled in October from 44,000 on September 30th to 85,000 on November 2nd. The rise in deaths was more muted from 735 to 842 in the same period (7-day averages). This lower increase in deaths is explained not only by the usual 3-week time lag between new cases and deaths but also by a nominal mortality rate that fell from 2% to 1.65% during October. Depending on your political perspective, this surge in cases / decline in mortality is explained either by a timely padding of confirmed cases or by an improvement in treatment of the disease. We lean towards the latter. Meanwhile the nationwide positivity rate (percent testing positive) has risen as expected in a new wave, albeit only from 5% to 7% so far. During the summer wave, the positivity rate peaked at nearly 10%.
After a difficult spring and a good summer, New York State is seeing an uptick in coronavirus numbers. Between August 31st and November 2nd, new daily confirmed cases have risen from 656 on 1,633; new daily deaths from 9 to 14; total current hospitalizations from 418 to 1.151; and total patients in intensive care (In ICU in the chart) from 109 to 276. While these figures represent a doubling or more in two months, they remain very low compared to the spring numbers and reflect a positivity rate of about 1.7% now vs. 1% on August 31st. So, while any increase is alarming, these figures are for now very manageable.
Recently read and recommended:
Access all Wednesday Briefs™ here.
Wednesday Briefs™ is a trademark of populyst and its owner. Copyright © 2020 populyst. All Rights Reserved.