The Dow Jones Industrial Average set an all-time record during the trading week of September 15, but fell 104 points along with NASDAQ and the S&P 500 Average on September 22. The hot new Chinese internet IPO also fell 4% after its 38% pop on day one of trading. The sell-off was foretold even before the market opened by futures prices that were dropping on word that the Chinese Finance Minister said the country was not looking to change policy to provide additional stimulus to its slowing economy, beyond actions already taken. The unasked question: was the Minister's statement really a disguised way to have same effect on European bond markets, while the Chinese clip the wings of the uber-capitalist Jack Ma given his inordinate (by Chinese standards) success in building a US dollar fortune on the backs of Chinese consumers? If so, then the markets may be misreading the macro-economic impact of the statement itself. Indeed, one can imagine the Chinese taking further near-terms stimulus actions if growth continues to fall and simply characterize them as not representing any "change in policy."
When European Central Bank (ECB) head Mario Draghi spoke on the last day of summer with a particularly downbeat take on the European economy, he had much the same depressing effect on values in the European bond markets as the Chinese Minister's overnight speech had on the US stock market. While the ECB head promised that the Bank would take further stimulus actions, if needed, to try to halt the rot, is it possible that Draghi was really trying to light a fire under European governments (particularly Germany) to take stimulus actions of their own to expand economic growth, particularly if the Germans - despite Draghi's assurances his Bank's principals were "unanimous" in their commitment to further monetary stimulus - don't really want the Bank to engage in American-style Quantitative Easing (i.e., German bond buying)? Was Super-Mario in fact making a speech that might sounded defeatist to European bond traders but nevertheless was heard as an "offer they can't refuse" threat to his political opponents who have resisted expansionary economic policies? He must be truly frustrated by Germany's preference for preserving its relatively large slice of Europe's shrinking economic pie at the expense of helping to bake a larger pie that might help other European nations trade their way out of recession.
Obama's Disapproval Ratings: A Three-Way Street?
As we head full-tilt into the 2014 election season, much is being made of President Obama's unpopularity in the polls, particularly as drag on any Democratic chances to capture additional seats in the House of Representatives or prevent a new Republican majority in the Senate. On almost every major issue, the polls show, for both domestic economy and foreign policy issues, that Obama's approval ratings have trended to the low 40% range, with disapproval moving well into the 50th percentile. But the question left unanswered by the polls is whether or not these figures mean that those "majorities" that disapprove of Obama's handling of ISIS, or Russia's attack on Ukraine, immigration, or unemployment, have coalesced around policy options opposite to those chosen by Obama. For example, do those who disagree with Obama's decision to attack ISIS in Iraq and Syria largely through US (with some Arab) air power, a coalition of neighboring states and Syrian volunteer armies, and no US "boots on the ground" except special forces, all agree with John McCain and Lindsay Graham that the US should commit combat troops to defeat ISIS? Or do they side with those like Representative Barbara Lee who have expressed their strong reservations about any bombing campaign, let alone any troop commitments?
Although that precise question has not been polled, one could well strongly suspect that neither of those positions would command anything close to a majority of American public support. Could it be that, on the question of confronting ISIS, Obama's announced policy actually commands a quite respectable 40% of American support, while those urging clearly alternative policies, have yet to persuade more than about 25% of the populace?
Similar "grains of salt" might season the polls that suggest that American are united behind a rejection of Obama's policies on immigration. They have led to a fairly significant majority vote in the Senate approving comprehensive immigration reform along the lines of the President's proposal to enhance border security while providing both penalties and a path to citizenship for undocumented immigrants who have not committed crimes and additional "Dream Act" style benefits for any children they brought to this country. While politicians decrying "amnesty" (which by definition does not apply to a program involving mandatory penalties) and urge "enforcing existing laws" might seem in the reported polling data to have the upper hand versus Obama's approach, there is, in fact, no polling that supports mass deportation (which is of course what "enforce existing laws" means). Likewise, apparent disapproval of Obama's plans to act by executive order if Congress fails again in its forthcoming "lame duck" session to consider comprehensive reform almost certainly consists of those who believe Congress should act, those who believe it would be an overreach of Presidential power, and those who believe Obama should have acted already. Again, Obama's policy on the immigration issue is most probably consistent with approximately a 40% plurality of American opinion.
Finally, while a majority are recorded as disapproving of Obama's handling of Russia in the context of President Putin's actions in seizing parts of Ukraine, there is utterly no polling data to support the proposition that we should be attacking Russia militarily rather than only by the economic sanctions Obama has led a coalition to impose. The unanswered question, on this issue also, is: exactly what is the majority opinion on how Russia should be handled? The hard truth is, there isn't one. In this age where public policy discourse in unfortunately dominated by cable TV and talk radio networks that exclusively present one-sided and biased views of virtually all important events to suit their audience "base," it is any wonder that the President or Congress can espouse and command majority support for any policy whatsoever?
In the American democracy we have collectively (or by passive default) chosen to have at the moment, to serve and assuage our divergent biases, the question is whether a governing plurality, as Jack Nicholson said, is "as good as it gets."
By Terry Connelly, Dean Emeritus, Ageno School of Business, Golden Gate University
Terry Connelly is an economic expert and dean emeritus of the Ageno School of Business at Golden Gate University in San Francisco. Terry holds a law degree from NYU School of Law and his professional history includes positions with Ernst & Young Australia, the Queensland University of Technology Graduate School of Business, New York law firm Cravath, Swaine & Moore, global chief of staff at Salomon Brothers investment banking firm and global head of investment banking at Cowen & Company. In conjunction with Golden Gate University President Dan Angel, Terry co-authored Riptide: The New Normal In Higher Education.