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July 26, 1996
Mortgage rates had a couple of exciting days in both directions, but no net change for the week. 8.50% it is.
A little of Mr. Greenspan's hoped-for slowdown showed up in June: durable goods orders down .8%, and existing home sales down 2.3%. However, ready or not, next Friday is first Friday, and it's time again for Labor Department Roulette.
Writing about the election has become a grisly project. In particular, any mention of Bob Dole's chances puts the commentator on a level with the people who yell at some poor devil on a rooftop: "Jump! Jump! Jump!"
Oh, well. Can't ignore the election altogether, and there is one potential disaster for the financial markets.
The most likely election outcome won't matter much to the markets (or maybe to anybody), as a Clinton re-election and at least partial Republican control of Congress will limit the damage either side can do in the next four years. No matter how big Mr. Clinton's landslide may turn out to be, he has few true believers, and therefore has no coattails with which to drag in a Democratic Congress.
However, never underestimate the genius of the Republicans. They, and only they have the ability to deliver a Democratic sweep of both houses of Congress, and they may just pull it off.
Mr. Dole doesn't have coattails, either; however, he has a coatanchor, and his submergence alone may be enough to sink the Republican Congress. For example, at this moment Mr. Dole is trailing Mr. Clinton by 27 points in California. Mr. Clinton might not do as well if he ran unopposed.
A Democratic sweep would not entirely be Mr. Dole's fault: the Contract Revolutionaries are doing their part. Hard right social policy has alienated most of the political center, and the Revolutionaries have now found a way to drive away the remainder.
For the last twenty years there has been a large block of centrist votes going Republican solely because the Republicans were the only hope for budget balance. Kiss 'em good-bye: the "supply side" nitwits are loose again, demanding a $600 billion, "pro-growth" tax cut.
How to pay for the tax cut? Why, all good Republican Revolutionaries know that if you cut taxes, the economy will grow so much faster that total revenue will increase. Sure, just like the 1981 tax cuts, $4 trillion in hock ago.
The prospect of a Democratic sweep is simply terrifying to most financial people. Mr. Clinton would no longer have any need to pander to the center, and could return to his liberal heart of hearts. Forget entitlement reform, hello income redistribution. The era of big government is back!
If you see a Republican about to jump, try to talk him down easy. Not all of 'em; just enough.
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