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Will Politics in 2015 Catch Up with the Economy?

The mood is shifting from pessimistic to positive, even if the rhetoric hasn’t.

In the waning moments of 2014, something happened that had been a long-time coming but seemed it might never arrive: the public mood in America shifted, ever so slightly yet significantly, from negativity and pessimism about the arc of the economy to something approximately hope about the future. If that holds, 2015 is going to look and feel rather different, and rather better, than things have in years.

That shift in the public winds can’t really be proven of course, but consumer confidence readings have been climbing to levels not seen since 2007. Unemployment has statistically dropped; wages are still basically flat, but the plunge in gasoline prices along with natural gas means substantial savings for consumers lie ahead at the pumps and for winter heating bills. As Michael Grunwald and Steven Pinker recently noted, these are only a few of the many positives that have been under-emphasized and are now beginning to penetrate the collective gloom.

These trends have been building for months, even years, and barring some massive global crisis —Israel attacking Iran, Russia invading central Ukraine, a substantial sovereign debt collapse—there isn’t a strong reason to suppose that 2015 won’t hold more of the same. Markets might have bouts of volatility based on uncertainty about the Fed, interest rates, deflation in Europe and signs of it in the United States, about stagnant wages, slowing Chinese growth, the tenuousness of Japanese economic reforms. Those moments of volatility will, of course, seem more alarming when they are happening. After all, no one really knows how a passing moment morphs into a new reality.

And maybe, of course, this way of thinking is just the haze that accompaniesholiday good cheer. Maybe January 2015 will puncture any bubbly thoughts and bring those of us inclined to half-full cups back to the cold reality of a harsh world. Given the plethora of data about a steadying and strengthening U.S. economy, however, it seems that those who would make the argument that we are poised for severe problems bear the burden of proof more than those suggesting continual modest improvement. Yes, the structural problems of the labor market are not resolved, and nor will they will in the next year or two. A multi-decade low labor force participation rate of barely 60 percent and a chronic long-term unemployment population of nearly 3 million, along with millions more on disability payments, underscores that. Throw in an inexcusably high-incarceration rate, especially for young African-American males (but not just) and many for non-violent crimes such as drug possession, and you have another recipe for permanent underemployment of far too many.

Many of us, myself included, have struggled for years to balance a view that sees our strengths but does not whitewash our problems. The public dialogue, however, suffers from the exact opposite malady: a view that emphasizes our problems and insufficiently integrates what is working.

Washington and the nature of electoral and partisan politics makes that tendency even worse. Few people are driven to vote because they feel that things are OK but could be better; they are driven to vote by hot emotions of fear and anger, whether at Obamacare or in the face of possible terrorism or Ebola-like epidemics. The way contemporary politics work, challengers have to make the case that incumbents have utterly failed rather than an argument for why they would do better. Those who disagree with the narrative are just as likely to stay away from the polls, leaving an angry electorate polarized and not prone to acknowledge what is going right. The press, meanwhile, report on that narrative, thereby magnifying and seeming to validate it.

There are periods, however, where the sheer weight of positive news and trends inundates the public discussion and politics. The mid-1990s were the last such moment, but that did not save President Clinton from being pursued by Republican adversaries and impeached; nor did it prevent the GOP from railing against economic policies that were routinely derided as government handouts, hence the dismantling of welfare.

Yet the 1990s were hardly a period of unmitigated prosperity. California, for instance, was hit hard by the 1991 recession that left millions unemployed in the wake of the budget cuts to the defense industry. And while it was a common sly joke that the internet bubble of the time meant that your cab driver was trading Yahoo and arguing with passengers about hot-dots, half the population didn’t own stocks and still had paltry savings.

Nor were the 1950s and early 1960s, widely mythologized as a time of American greatness, so great for everybody. Yes, the gap between rich and the rest was far narrower, and yes, living standards for all were on the rise, at least as measured statistically and on average. But statistics and averages then and now mask wide variation and leave out much. The average American family and worker thrived in the 1950s, but millions were so mired in an unbroken cycle of poverty that Lyndon Johnson unleashed his War on Poverty in 1965. We can argue, as liberals and conservatives have ever since, about whether government programs meant to address poverty did any good; we cannot argue that the problems they were designed to address didn’t exist.

In short, there has never been a halcyon moment when all was well and past issues did not prevent a clear articulation and acknowledgment of what was working and what wasn’t.

With rising consumer confidence (not a good proxy for behavior but not a bad snapshot of attitudes) and all economic metrics reflecting stability and growth, it may be that the narrative of failure and coming implosion will weaken in 2015. That will change the landscape for the presidential election campaign. If that campaign pits Hillary Clinton versus Jeb Bush, it might mean a more nuanced (nuance in an election year?) debate about what government can or should do to accelerate and smooth the transition away from a manufacturing economy and towards a service and technology economy. But it is still hard to see the Republican primaries revolving around anything other than a litany of Democratic economic and national security failures, along with alleged usurpations of power.

No data, and no trotting out of numbers and anecdotes of people doing just fine can or will serve as a rebuttal to those either convinced that we are living in a proverbial house of cards or are themselves struggling mightily and unfairly. We will not be in a perfect world anytime soon, and 2015 is more likely to see at most a gradual, incremental and largely imperceptible narrowing of the gap between the very very affluent and all the rest. Structural unemployment will remain structural, and the world will be as in flux as ever.

However, a country with a considerable portion of its 320 million people doing adequately and even a tad better care of an unexpected savings on energy and the absence of real inflation is not a country in crisis. If China’s economy implodes (as it will not), no one in the world will be spared the negative effects. If, if, if…bad things can happen. We get it. 2.5 percent percent GDP growth won’t make you any happier than 2 percent growth, nor will 3.5 percent growth really seal our collective ease and contentment. But we are doing just fine, compared to then and certainly juxtaposed to what seems just a moment ago. And it’s more likely than not that just fine will continue.

That is a useless campaign slogan, but it is our economic reality—and perhaps before long our politics will catch up.

This article originally appeared on Politico.com.

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Zachary Karabell
Head of Global Strategies, Envestnet, Inc., Consultant to Investment Committee*

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Author’s disclaimer: The opinions expressed herein reflect our judgment as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities, or investment advice or a recommended course of action in any given situation. Investment decisions should always be made based on the investor’s specific financial needs and objectives, goals, time horizon, and risk tolerance. Information obtained from third party resources are believed to be reliable but not guaranteed. This paper may contain ‘forward-looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this paper is at the sole discretion of the reader.

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