Articles

Mar. 27, 2004

New Leadership

For a while now I have been bashing Bush for almost all of his policy decisions. The bashing is not prejudicial, but comes from looking through to the potential outcomes. It is obvious politicians in general are poor students of history, or they would not act in the way they do,

Joe took issue with me for being naive about the Middle East and oversimplifying the situation. Seriously, does any one with half a brain really expect peace in the Middle East? If you do I am sure the world would love to hear the solution.

Every President since Truman helped create the State of Israel has had a peace plan. The only two to have any minor success are Clinton and Carter. Maybe all presidents dealing with the Middle East should have names beginning with C'.

Kissinger's "shuttle diplomacy" was an utter failure. Bush's arms for hostages ran into trouble when North sent them a chocolate cake to compensate for the over change. Nixon managed to create an energy crisis. So far the "Road Map to Peace" is a disaster. The Iraq invasion is a disaster and will take the US 25 years to extract itself.

So while I am bashing Bush I am sure my readers get the impression I am favoring Kerry. In politics, it is easy to fall into the trap accepting someone inferior because the other guy is so off the mark. In the last election as many people voted against the other candidate as for theirs.

Since no one know who will be the next president it is important to allow for either choice. A couple of weeks back I wrote a piece on what would happen if Gore had been allowed to take office. Now it is time to look at what one can expect from Kerry and how the impact of changed polices will affect investment and play into the Long Wave.

I have an advantage over other political analysts. Politicians rarely follow their promises and principles and instead respond to current conditions. Since the Long Wave dictates to some degree the high profile issues that will face the next president the next issue is to figure out how an administration will react.

The first question is - Can Kerry get elected? Even considering it is difficult to defeat an incumbent, I am inclined to say yes. Kerry has a better than average chance. Lets look at demographics.

From the last election and current approval ratings for Bush it is clear the public is closely divided. Kerry commands the solid Democratic base that will never vote Republican. Some of this segment is female dominated because of the Republican's stand on women's rights and abortion.

The next group are the extreme left who voted for Nader. While Nader and the Greens did not get on the score board last time, they did impact the outcome through their vote in Florida. Had Harris had any integrity she would have called the Florida vote a draw and held a run off, which would have given Gore a clear victory. A segment of the population dislikes and mistrusts Bush for his actions in Florida. Instead of voting Green or Nader this time will back Kerry just to get Bush out.

The next group are those in the tail end of the Manufacturing sector who were first downsized and now are being outsourced. While manufacturing represents under 20% of the work force of the country it is still a segment. Last time Gore lost some of this group by telling them the truth. His solution was to use technology to solve their problems. Bush appealed to them by making America great. Four years later they are still out of work and their sons and daughter are dying in the Gulf. I do not think Bush gets this group.

Finally, there are the veterans. Bush had these over Gore last time, yet he has treated the veterans badly. To many these Kerry is seen as a hero and Bush a coward. Kerry's big win in Ohio - coming from behind was boosted by campaign ads featuring his war record. Along with the vets there are the left over peaceniks who are attracted to Kerry for opposing the war. Kerry actions took integrity, were right in a historical context and will gain the respect from this group.

So based on the demographic above Kerry has an excellent chance of winning. His success will in part depend on who he chooses for VP. Historically presidential candidates do a bad job of choosing running mates. Probably the two most successful were Kennedy with Johnson and Clinton with Gore.

The picking of a VP also gives insight into the level of creativity a future president will bring to the office. With Bush picking Cheney it was clear people were voting for a return to the Reagan / Bush era. With Gore picking Lieberman it was clear Gore was an idiot and lacked leadership ability.

The next factor to consider is the Kerry Platform - or in this case a lack of one. A lot can be learned from a web site. The Green Party clearly broadcast they were warmed over Communists from their platform. Bush does not have to have a platform - we know what he will do the next four years.

Since it is impossible to derive anything Kerry will do from his web site and platform, we have to look elsewhere. Kerry has high marks as a liberal and the Bush campaign will attempt to use this against him as they did with Dukakis, but the impact will be small. A liberal president opposing a conservative Congress is not going to make much headway in pushing liberal programs.

Kerry has not been a leader in authoring legislation either. This may change if he is head dog, but probably not by much.

So what is left. A couple of significant things

First Kerry is a visionary in addressing problems and seeking solutions. While he has not authored much legislation, he has instigated many of the important trends in Congress. He traveled to Latin America to get evidence on North's dealing with the Contras and was instrumental in getting a prosecution going. In many areas he has dug in and gotten things going only to pass them off to colleagues who later carried the ball and got legislation passed.

This type of leadership goes to make a leader unpredictable. Clinton had some of this going on. Clinton probably had more vision than Kerry and the ability to see the end goal, but Clinton lacked the courage to tackle intractable problems. Clinton was a gambler and took chances a fiscally conservative Kerry will not. Clinton's opening up NAFTA Mexico under the advice from Rubin was a gamble that paid huge dividends. Kerry's approach will probably be not to spend where he should to get leverage for growth as Clinton did.

There is nothing in the Kerry platform for any type of sweeping reforms. All of his approaches to the issues are middle of the road. This may be a campaign management issue as who wants to rock a boat and risk an election. As can be seen in the primaries Kerry is a solid campaigner. So the question will his spirit and history of digging deep into issues and starting the ball rolling on significant change follow him into the presidency or will he just go with the flow?

The closeness of the campaign now and probably through the summer gives an uncertainly to the economy. Underlying growth will continue without concern for politics. This is clear from the Long Wave and current conditions. But political uncertainty hurts the stock market.

The stock market has not liked Bush since he was appointed president. The fledging stock recovery may turn into another bear leg should Bush be re-elected. As Kerry and the Democrats were making headway in knocking down Bush's approval rating during the primary the stock market was rallying. So stocks perceive Bush as bearish and Kerry as bullish.

The same applies more so for the Dollar. Certainly huge deficits are not good for the Dollar. There is no reason to believe a second Bush presidency will suddenly balance the budget. If anything, the administration may see re-election as a license to spend. At some point US debt reaches the no recovery point and the dollar becomes so much wall paper. We are a long ways from that point, but in half trillion dollar annual bites, we are progressing towards that point only to be exacerbated by the eventual high interest rates. Anyone care to guess what percent of GDP debt must rise to before the Federal Government goes over the edge?

Technically, I have projected the summer for the US market to be a rocky affair. As these two battle for the middle set of voters the market should respond in either direction. The firming up of the Dollar may be an indication Europeans are doing the same demographic analysis as I have above and are trying to get a front row seat in a Dollar bull market.

Should Kerry pull off the miracle of finding a personality and some charisma in the person of a running mate, he has the chance to gain a significant lead. Should Kerry blow it in picking a running mate and the Democrats fall back into their habit of being a squabbling family of raccoons, then Bush pulls ahead and the Dollar dumps and the market marks time compensating for the declining dollar as it has the past two years.

I will stand by my projection that this election will not be a photo finish as with Gore and Bush. Someone is going to catch fire. Either Kerry will strike a cord in America's heart or he will fizzle and Bush will win by default. Overall, I do think a second Bush term will displace the US from global leadership, creating a bigger catch up situation after 2008. Just by removing the restrictions on technology and balancing the budget, Kerry will push the US ahead of the curve a bit and the natural leadership of the US economy will emerge. I do believe the throw back to a "Cold War" mindset is damaging to the US and impedes its placement in the new global economy.

Will a Kerry win be the beginning of the Protector President? I am less sure. Certainly, the issues of global terrorism even when blown out of proportion as they are today are less than the issues facing the world in 1952 when Ike was elected.

Will Kerry (or Bush) end with a reasonable solution to Iraq - I doubt it. It will take 25 years to extricate our butts from the region and only after we no longer need oil. As with Cuba and Sugar the need was over long before we gave independence to the Cubans. The rational for occupation changed with each administration, but little did US foreign policy.

One thing I am sure of is we cannot continue in Iraq without replacing the Reservists. Since the nature of our armed forces has changed, continued occupation of Iraq will require either UN / NATO participation or a return to a Draft. Any president implementing a Draft is not going to be popular as a result.

As Korea was a driving wedge defeating Truman I think Iraq will be the driving wedge to defeat Bush. If Bush is re-elected I do not think he will make it through all four years. Iraq has to potential to turn ugly - real ugly. Yet for all the fuss in the 1950s over Korea and the discrediting Truman, Korea was a minor problem compared with the Russians seceding from the world and Mao sweeping over China. I suspect Iraq will fade as larger issues emerge.