If Trump Had Been Focused Solely On the Ballroom, the GOP Is Still In Control

“The president should be focusing on the economy” is one of the more illiterate notions in economics. Why does a narrative so abjectly foolish persist?

The question rates asking in the aftermath of the Republicans’ thrashing in last week’s elections. Since then, all manner of commentary has come out about President Trump, and how voters wanted him to focus on the economy over surface things like the White House ballroom. Reporters and opinion writers can always be counted on to completely misunderstand matters economic, and their electoral impact.

To see why, stop and contemplate the economic impact of the White House ballroom having become Trump’s all-consuming obsession during his second term. To say that the Republicans wouldn’t have been beaten so soundly if so, insults obvious so obvious is it.

That’s because economies are people, not policy. To which some will no doubt say that some policies associate more with prosperity than others do. Which is a true assertion in a sense, but also one that arguably glosses over the importance of people over policy. See U.S. stock market indices for evidence.

About the stock markets, Warren Buffett has long said that he buys stocks no matter the president in office. Market returns under different presidents support his approach.

Stocks, for instance, did very well during Ronald Reagan’s presidency (the DJIA up 147%). Tax cuts, deregulation, a stronger dollar. Notable, however, is that stocks did even better during Bill Clinton’s presidency with the DJIA up 228%. Yet Clinton signed into law tax increases, plus tried to pass a national health care bill.

About Clinton’s presidency, some will say it was Reagan’s third term as Clinton proclaimed the end of big government, not to mention that Clinton benefited from the gridlock born of Republicans taking over the House of Representatives beginning in 1994. Yes, both true. But that’s also the point.

Investors like the relative absence of policy care of gridlock more than they like policymaking. It’s about certainty, or better yet, a reduction of uncertainty.

With uncertainty removed, investors are more prone to matching the people of the United States with the capital necessary to thrive. Which supports Buffett’s investment strategy. He’s looking for brilliant people to back, and almost certainly isn’t looking at tax rates.

Are taxes important? Yes, they are. They’re a price or penalty placed on work. But it’s also not unrealistic to point out that when tax rates go up, they do so as ways to mitigate higher rates increase too.

Pivoting to Barack Obama, he wasn’t President Reagan’s third term. Far more “Democrat” than Clinton, Obama got a national healthcare program passed. The legislation was unfortunate, but subsequent to the passage of the mis-named Affordable Care Act, voters reprimanded Obama. The Democrats lost 63 seats in the midterm elections of Obama’s first term in office. Translated, the legislative portion of Obama’s presidency in many ways ended halfway through his first term in office. Stocks liked this, with the DJIA up 148% during Obama’s time in the White House.

Back to Trump and his ballroom, too bad he didn’t have a Democratic congress blocking his every move during his second term, opposite the spectator role Republicans played. If so, Trump arguably has less ability to “invest” in varying ways in 41 different U.S. companies, can’t impose unconstitutional tariffs, can’t foist armed ICE agents on private businesses and the workers inside those businesses, not to mention a reduced ability to go to war.

Consider all this vis-à-vis the commentary about Trump’s alleged excess of focus on the ballroom. If only.

Originally published on Real Clear Markets.