The Simple Economics and Math in Mr. Cantor’s Defeat….

The Simple Economics and Math in Mr. Cantor’s Defeat….

By J.M. Hamilton (6-14-14)

House Majority Leader Eric Cantor suffered a stunning upset this week from Republican outsider David Brat.  Mr. Brat ran on opposition to crony/insider capitalism, and against immigration reform.  Is there a lesson here for establishment democrats, who are also acolytes and devotees of the same flow of funds coming from commercial interests and commercial interest lobbyist?  

Here then are some simple economics and math equations to ponder.

Equation A:  Bank Bailouts

Congress supported repeated Bank Bailout(s), plus a

Reinvigorated mortgage securitization market, funded by GSEs and the FED, equals

Failure to refinance homes and failure to provide debt forgiveness, and millions of homes owners still upside down on mortgages, equals

Less discretionary income, less aggregate demand, and the lack of a universal rebound in the housing recovery, equals

Fewer jobs and opportunity, and the inability of labor to relocate.

Equation B:  FED Policy

Congress supported bank-centric FED policy, plus

Interest Rate Suppression and Quantitative Easing, equals

Political Cover for Politicians and a Stagnant Economy (benefiting the financial elite to the exclusion of Main Street), equals

Fewer jobs and opportunity (In short, the lost Japanese Decade(s), visited upon America)

Equation C:  Support for Private Equity, M&A, and Monopolies

Congress’ blind support for PE, M&A, and Cartel and monopolistic mergers, equals

Globalization, highly leveraged firms (teetering on bankruptcy), pink slips, temp labor, stagnant wages and a stagnant economy, and lower top line growth, equals

Fewer jobs and opportunity.

Equation D:  Tax Policy, or the Lack thereof

Congress continues to support tax loopholes/dodges that favor the rich equals,

Higher taxes for the 99%, equals

Less discretionary spending, on top of already stagnant wages, equals

Lower aggregate demand and lower top line growth, equals

You guessed it, Fewer jobs and opportunity.

Equation E:  Rising Xenophobia

Congress’ unyielding support for equations A + B + C + D (the Crony Economy) equals

Fewer jobs and opportunity, equals

Fear, equals

Rising Xenophobia, Racism and Political Extremism, equals

Mr. Cantor – unceremoniously – hitting the streets, and not a moment too soon.

Good bye Mr. Cantor, you aren’t the first, and hopefully, you won’t be the last. 

Populism is here to stay, as Mrs. Clinton is about to learn, if Mrs. Warren decides to run.

In a salute to Mr. James Carville: It’s all about the jobs, stupid! 

That is to say, bring back opportunity, by reversing some of the equations above, and we are likely to see: More jobs, less fear, more racial tolerance, and more polite political discourse.

Don’t forget failure to pass immigration reform will ultimately end the GOP (double-click this link for a picture worth a thousand words).

P.S. 
Missing from the equation above is the deleterious effect “financial engineering” has on jobs and the economy, so that earnings per share and executive compensation can be boosted.  Separately, two failed nation-building exercises did much to enrich the MIC, but left the nation’s finances in poor condition.  These wars were costly, resolved nothing, and as result, the government finances are not where they should be to help offset the reduction in private sector spending, during these troubled economic times.  

Both financial engineering and wars are strongly supported by Congress, and destroy jobs and opportunity.


Copyright JM Hamilton Publishing 2014