Shutdown #5

Author: David R. Kotok, Post Date: January 31, 2019

My colleague Norm Dempsey reminded me to thank all the readers of our shutdown series for their emails and messages. He also noted we should do the same for those who supported the climate change series. We concur with Norm.

Cumberland Advisors Market Commentary by David Kotok

In his reminder Norm mentioned that when former Illinois governor Rod Blagojevich was sentenced by Judge James B. Zagel to 14 years in prison for extortion and soliciting bribes, the judge pointedly addressed Blagojevich as “governor.”

Zagel explained why: “It serves as a reminder to those of us who vote and those of us who don’t. It reminds the voters of the maxim, ‘The American people always get precisely the government that they deserve.’ Your case is another lesson for us.”

Many readers responded with messages about the phone calls they made to their elected representatives in the House and the Senate during the shutdown period. The country thanks each and every citizen who took a few minutes to raise a voice loudly. We also thank the many folks who worked without pay during the longest shutdown in history. You will be made whole in your paycheck if you are a directly paid federal employee. If your paycheck is earned in an indirect way, your recompense may be problematic.

For the nation the shutdown has a permanent cost. We cannot restore the lost GDP. Example: The worker who went without pay and didn’t take his shirts to a cleaner during those 35 days will now take the shirts to be cleaned and pay the cleaner. But he won’t have taken them twice. The GDP loss in the first quarter of this year will only partially be made up. And that assumes there is not going to be another shutdown.

We also cannot undo the sentiment shift that has further injured Americans’ view of their political leaders. Neither can we expect to restore America’s tarnished image in the geopolitical realm. As the preeminent world power, we acted poorly, and nearly all on the global scene know it. As for our domestic politics, the damage control will be intensive.

John Harwood used his CNBC blog to recite some post-shutdown polling numbers for President Trump. (See “Americans fault Trump for chaotic government shutdown, as more believe US is ‘on the wrong track’: NBC-WSJ poll,” Here are some excerpts that demonstrate the damage.

“The poll’s results showed that by 63 percent to 28 percent , a margin greater than two to one, Americans believe the country is ‘off on the wrong track’ rather than ‘headed in the right direction….

“And by 50 percent to 37 percent, Americans blame Trump, rather than Democrats in Congress, for the debacle. That result reflects their disagreement with his stance on the issue that caused it….

“Pluralities disapprove the president’s handling of border security and immigration issues, and say would-be immigrants across the southern border with Mexico would strengthen rather than weaken America. A 52 percent majority opposes construction of a wall or fence along the U.S.-Mexico border, while 45 percent favor it….

“Underneath that unimpressive showing lies sharply negative assessments of the president. Just one-third of Americans express confidence that Trump has the right goals and policies; an even lower proportion, 28 percent, express confidence that he has the right personal characteristics to be president….

“By 47 percent to 36 percent, Americans rate Trump negatively rather than positively for ‘being a good negotiator,’ the characteristic he has long claimed as his signature quality. He fares even worse on ‘being steady and reliable’ (53 percent negative, 32 percent positive), ‘being knowledgeable and experienced enough’ (54 percent negative, 32 percent positive), ‘being honest and trustworthy’ (58 percent negative, 28 percent positive) and ‘having high personal and ethical standards’ (58 percent negative, 24 percent positive).”

In our view the breaking point was reached when the transportation system failed and particularly when LaGuardia Airport briefly closed to inbound aircraft because of security worries. (See “Flights are not halted at LaGuardia, but the shutdown is now causing flight delays,”

We close with a reminder that the phone is powerful for messaging a Senator or House Member. All Senators and all House Members own the results of the shutdown, along with the President. This is a multidimensional, bipartisan political failure. The names of the failed leaders include but are not limited to Trump, Pence, McConnell, Pelosi, Hoyer, Schumer, and Durbin.

“Those who are too smart to engage in politics are punished by being governed by those who are dumber,” is an oft-quoted paraphrase of a line penned by Plato in Book I of The Republic. We tip our hat to John Loewenberg for sharing that insight. The thought, which Plato attributes to his teacher, Socrates, can be alternately translated, “One of the penalties for refusing to participate in politics, is that you end up being governed by your inferiors.” (See for a deeper discussion of the quote and its context.) The lesson applies today: We must diligently speak up.

David R. Kotok
Chairman and Chief Investment Officer
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U.S. House of Representatives

U.S. Senate

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