Government’s Election Surprise

As we move into 2015, the presidential race in the U.S. is starting to look a bit clearer… but is that an illusion? Hillary Clinton is once again seen as the clear front-runner for the Democrats.

But how did that work out last time?

Elizabeth Warren is the up-and-coming feisty reformist option, but she has shown no stated interest thus far. Jeb Bush looks like he’ll enter, especially since the Republican Party has no other centrist candidate to compete with Clinton.

Rand Paul would certainly lose, just like Barry Goldwater did against LBJ in the 1964 election. Chris Christy is next on the tier after Jeb, but has come off looking more like Tony Soprano after the bridge scandal (even though he wasn’t found guilty).

Middle of the Aisle

I’m not Republican or Democrat, and we’re not partisan at Dent Research. I can favor each party on different issues over time, but I’m more swayed by the economic cycles we study that greatly affect those same issues.

If one party was just dead wrong (as the parties usually think of each other), they wouldn’t still exist after decades, centuries and millennia of political evolution.

In a bubble period, like the one we have now, where the rich are getting richer, history would clearly say that the Democrats will do better in the future, possibly for decades. In a period of high inflation and lagging innovation, like during the 1970s, the Republicans will do better in the future (there were 12 years of Republicans from 1980 – 1992 alone).

Looking at the broader aspect of our research, Republicans clearly tend to do better in the inflationary summer and the bubble boom fall seasons of our 80-Year Four-Season Economic Cycle; as you can see with 26 years of Republicans from 1969 to 2008, as opposed to only 14 years for the Democrats during those same seasons. That’s 65% for Republicans over a span of 40 years — or half the 80-year economic cycle.

You can probably guess what happens in the other half.

From 1933 to 1969, we had 28 out of 36 years of Democrats in the winter and spring seasons. Democrats seemed to dominate even more when major financial bubbles finally burst. It’s then that the everyday person begins to prosper once again due to the trickle-down impact from massive innovations that sprout in the summer and fall seasons, as well as the natural political backlash when the rich get so stinking rich.

The wild card for me is simply the economy and that is precisely my area of expertise.

More broadly, since 2008 the economy has favored the Democrats and should continue to do so at least into 2036 through the continued winter and upcoming spring season. But other historical factors could disfavor the Democrats in the coming election of 2016.

In the short term, if the economy continues to stabilize and improve as it has in recent years, the establishment candidates would be favored, Bush and Clinton… and more so Clinton in the incumbent party.

But what if we’re right and we see an even greater crash and global financial crisis between early 2015 to early 2017 than the one we experienced back in 2008? Don’t you think that would change things a bit?

I think it would change things entirely.

The more passionate, change-oriented candidates would become much more attractive: Elizabeth Warren and Jim Webb on the left, Chris Christy and Rand Paul on the right — like Obama in 2008 running in a bad and crashing economy. Remember… he came out of nowhere and beat the clear establishment Democratic presidential candidate and favorite, Hillary Clinton!

Looking Back at History

But did you know that no Democrat has ever been elected directly to follow a Democrat since the Civil War?

There have only been Democratic vice presidents that have succeeded after the death of their presidents, like Truman and LBJ (even though both got re-elected at the end of the term).

The only Republican president to be elected after a Republican was George H. W. Bush, and Gerald Ford succeeded Richard Nixon when he was impeached, so it’s not that different on the Republican side. The Bush election occurred in a very good economy with no recent recessions.

Bad presidents only get one term and are usually followed by the opposite party and the more popular two-term presidents are in long enough for the economy to tend to change for the worse and to naturally tip the scales to the other side.

But as soon as there was a recession in the early 1990s, the Democrats took back over in 1994 with Bill Clinton voted in for two terms in another great economy that you couldn’t have screwed up if you tried. But he was followed by George W. Bush just after the tech wreck began and he was also voted in for two terms… the economy crashed and Obama came in after the 2008 financial crisis had begun.

History, other than the broad leaning toward Democrats in the winter and spring seasons which is a powerful concept in and of itself, would argue that the Democrats won’t be favored with or without a bad economy… even if there is another financial crisis.

So, it’s kind of a toss-up at this point.

Again, I am not a political expert or a pundit, but if I had to guess… I think it could come down to Warren vs. Christy in the bad economy I forecast.

Warren has the clearest “we need to reform the corrupt financial system to favor the everyday person” that FDR brought in the winter season of the 1930s. She is more than passionate and very communicative. Hillary has the intelligence and ideals, but she lacks the personality and charisma that her husband has.

Christy has that “roll up your sleeves and tackle the problem head on” approach that could work in a financial and debt crisis that the Republicans have continually warned about. And I always thought Romney should have taken that “turnaround manager” approach from his Bain experience but unfortunately, he didn’t.

If 6 years of unprecedented stimulus under Obama’s reign fails, then this has to favor the Republicans, and it’ll likely favor Christy more than it will Bush.

But when the average person sees another financial crisis out of their control, especially after the stimulus that favored the rich more than ever… they’re going to be very angry and Warren would be the best advocate for them.

My summary insights are that the passionate for change outliers will have the best chances in another financial meltdown. But put a gun to my head and I think that a candidate like Warren could beat a candidate like Christy due to the larger cycle showing the rich falling and the middle class rising, yet again.

If someone like Christy wins (or even Bush), he is likely to be a one-term president as the economy is likely to get worse into 2019 – 2020 judging by all of our key cycles. If the Republicans can’t turn the economy around and they created the bubble from 2000 – 2007 in the first place under Bush, then they look bad.

If someone like Warren (or even Clinton) wins, it’s harder to predict the 2020 election since a consistently bad economy always disfavors the incumbent. But given that 2008 to approximately 2036 is a Democratic and middle class-favored era, a Democrat could get re-elected if there is only a marginally worse economy as I expect there to be after late 2016 or early 2017… but only if the worst part of the next crisis hits by then.

And I do expect it.

We’ll see and comment ahead, but don’t expect the 2016 election to shape up anything like the political pundits are expecting… it’s likely to be an outlier!

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Harry

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Harry Dent, a Harvard-educated business strategist and best-selling author, reveals why and when gold prices will plummet. Subscribe for free right now to read his latest report, Gold Will Fall to $700/oz.


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About Author

Harry studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of the profession that he turned his back on it. Instead, he threw himself into the burgeoning New Science of Finance, which married economic research and market research and encompassed identifying and studying demographic trends, business cycles, consumers’ purchasing power and many, many other trends that empowered him to forecast economic and market changes.