<Font size=5>Time will tell<Font size=3>
Earlier this past fall, as the deaths of American troops kept escalating, and before there was any perceived increase in jobs from this economy, there was some giddy talk on this thread about GWB being toast. At the time, I warned that perceptions could change on both the economic and Iraqi election determinants. Now, with the Dow over 10,000, and the capture of Saddam, Bush's poll numbers are surging. Is this the beginning of a trend, or is this an ephemeral peak in the Admin’s fortunes? I'm no seer, but I am a contrarian - who's constantly looking for those feet of clay.
Iraq
In this case, one doesn't have to look very far. While the initial flush of joy at Saddam's capture yields benefit to the Admin, longer term it creates problems. Alien to the mindset of Texas conservatives, is an idea prevalent in the rest of the world that the death penalty is barbarous.
theaustralian.news.com.au
Already there are calls for an international court, as well as calls for an Iraqi one. No matter what venue is chosen, many will be unhappy. Then there's the problem of testimony. There's a lot of "dirty linen" that could be aired in any real trial, and some of the "soil" was "Made in the USA". Surely, one could carefully control the trial, but this will leave it with the appearance of a show trial, and Saddam as a martyr. For Bush, the easy thing to do would be to postpone any trial until after the election. But this is likely to be seen as stalling, and if the Iraqi's get sovereignty on June 30th, they will probably demand custody. There are no easy solutions to this problem, and this Admin’s record on difficult problems hasn’t been sterling.
Moreover, there is the problem of what occurs next in Iraq. Psychologically there is a problem for the Admin. Since the carrier strut, the American people, and especially the GWB majority, have been assaulted by a steady stream of bad Iraqi news. An escalating foreign death toll, tales of an over extended military, and stories of war profiteering. This has resulted in the building of a kind of shell to protect themselves from more bad news. Saddam’s capture causes the shell to open. If more bad news keeps coming from Iraq, not only will Bush’s poll numbers plummet back to their previous levels, but are likely to sag even lower. To psychologically destroy someone, first raise their hopes, then dash them.
So what kind of news are we likely to get from Iraq – particularly any change as a result of Saddam’s capture. Those that think that Iraq is suddenly going to become benign, are living in the same fantasy world as those that thought the troops would be welcomed with flowers, and Iraq would pay for itself. Yet, the polls show that about the same percentage as the current Bush bump up, believe there will be a significant diminution in the resistance. The most likely result of Saddam’s capture is an increase in factionalism within Iraq. It is likely to complicate, not simplify any constitutional process. As the US presses on with its “sovereignty” plan, pressure from the Shia is going to build. The Suuni, without Saddam are likely to feel increasingly threatened, and if the Shia demand complete control, so will the Kurds. Moreover, there is a real tug-of-war between the Islamists and the secularists. Although, the US professes to want a more secular government, many of its actions, such as catering to tribal strongmen, have strengthened the Traditionalists. A smooth transition to Iraqi sovereignty is the most unlikely of the possible outcomes. (see theolympian.com )
Economy
For the election, there are two aspects of the economy that are important – turn around perceptions and jobs. For perceptions the market is important. For jobs, more than perceptions (i.e.unemployment numbers) are important. Without real significant increases in jobs, the virtuous cycle of more jobs fueling more spending, fueling more growth, will stall. So far the trickle down stimulus of this regressive Admin has failed to produce jobs in the necessary quantity to sustain the liquidity induced recovery – and time is running out.
Over the weekend, I saw on CNBC a man-in-the-street making the following statement. “Well, like a lot of people, we made money, then we lost money. But we’re in it (the market) for the long haul, and it’s coming back now”. Believing that the typical reader of this thread is more sophisticated than someone who looks at his mutual fund statement once a quarter, I won’t comment on the naïveté of that quote. But there are a lot more of these naïve investors than there are readers of this thread, and their beliefs are what is currently reflected in the polls.
I agree with Ralph Bloch, who I just saw on the tube, that there is a good chance that the market will make a ~ 10% pullback soon. A more interesting question is will this pullback, be merely a temporary setback, or be part of a larger topping process. A process that the Fed is constrained in fighting - both because interest rates are already about as low as possible, and much more liquidity pumping will result in a collapse of the dollar. Such a collapse will only exacerbate the current account deficit (see news.ft.com ). What I’m suggesting is that the attempt to reflate the economy in time for the election, may have gotten ahead of itself, and the Fed may be unable to keep the ball in the air.
Conclusion
Rove was correct to restrain Bush. While currently riding high, the twin determinants of his reelection are still in flux. It is way premature to be reaching any conclusions about what the reelection landscape will look like next fall.
JMO
lurqer |
