The “Deal of the Century”?

Jan 31, 2020

The Weekly Brief - January 31, 2020

Containing coronavirus

Coronavirus continued its exponential expansion in China this last as the number of cases and deaths connected to the illness continued to climb. Large portions of China are now under essential quarantine and foreign governments and businesses have been pulling personnel out of the area around Wuhan, the epicenter of the outbreak.

Fears of a growing epidemic, and the possibility of a pandemic, have global markets jittery, and this week the WHO met and declared coronavirus a global health emergency, which serves to kickstart crisis management mechanisms aimed at containing the virus.

So far, the virus hasn’t spread too fast or far outside China, but here in the US the first instance of person to person transmission occurred this last week as well. The CDC still rates the danger of coronavirus in the US as low. For now.

Underlying the immediate discussion of this virus and its effect on markets is a deeper discussion on public health in China and its growth-driven political-economic model. The American Enterprise Institute argues that the Chinese system makes coronavirus worse than it needs to be, a point that Project Syndicate largely concurs with, laying the blame for the public health crisis at the feet of the Chinese Communist Party.

Impeachment trial wrap up

The Senate impeachment trial of President Trump wraps up today with closing arguments and a possible vote on whether to call additional witnesses or not. If you’ve been following this saga, then you’re probably aware that a leaked section of a forthcoming John Bolton book suggests that Bolton may be a material witness to proving the alleged quid pro quo with Ukraine.

All of the sudden, Bolton is the Democrats (and Never Trumpers) indispensable man (never thought I’d write a sentence like that one). Trump’s defense team, however, seems to be carrying the argument that such late addition of witnesses is inadmissible. Indeed, many believe that we should be seeing an acquittal of the President fairly soon.

Democrats dig in

So next week is going to look a little crazy. We could see the end of the impeachment trial, the Iowa caucus on Monday, and the State of the Union on Tuesday. What does that mean? It means you only thought you knew how crazy the news cycle could get.

As Democrats hit the home stretch before polls open, Warren seems to be fading (but is still in it) and it looks like it's shaping up into another battle between the Party’s person and the Bernie person. Pew finds that Democratic voters are fairly bullish on their options this year, though divided on their preferred candidates, which indicates there could still be some surprises in store, unless you’re John Delaney who dropped out of the field this week. What you can expect is that the expanding intra party civil war is going to get worse before the convention, if it even gets resolved before that.

A quick note on media sources: I’ve been noting an interesting trend on left-leaning websites as we’ve moved towards a Trump acquittal and the Democratic primaries: there are a growing number of stories critiquing the electoral college and American democracy at large. Vox is a case in point here having run such stories this last week, but I’ve seen it in other places as well. It’s an interesting dichotomy worth paying attention to as the election ramps up. It indicates to me that progressives are not at all as confident of their candidate choices or chances against Trump as they like to sound, even as they go all in on the presidential race at the expense of Congressional races.

State of the Union

Speaking of the State of the Union, just what kind of state is the American union in? As with everything, it depends on who you ask. And as with all things Weekly Brief, I “asked” a lot of people.

Conservative commentators over at National Review are pretty bullish about how America is doing. They cite reductions in illegal border crossings, energy independence, and improving metrics on race relations as evidence of a pretty darn good first term for Trump.

That might be a bit too rosy a picture, though, as Axios reports on reemerging recession fears, slightly slower GDP growth and unchanged interest rates indicating caution among economic leaders.

Among ordinary Americans, however, Gallup reports on high economic confidence and an uptick in general satisfaction for the first time in over a decade (though still below 50%).

What does this all add up to?

There have been some substantial gains made and a lot of Americans are feeling the positive effects of those gains.
Those gains can still be set back by an economic downturn.
American confidence is running high on policy issues linked to the economy and national security, but less so on social/cultural issues.
The coming election is going to be run and possibly determined by those three realities. The incumbency advantage favors Trump, but a significant economic downturn or foreign policy disaster could quickly change that depending on who the opposing candidate is.

Brexit begins ... kind of

It is January 31, which means Brexit is officially happening Earlier this week, the EU Parliament debated the Brexit bill passed last year by Boris Johnson’s government and passed it, which now means that Britain and Brussels are on to the next step of negotiations over a final settlement. These negotiations are scheduled to take the remainder of 2020, lending credence to Brooking’s analysis that today marks merely the “end of the beginning” of Brexit (although I’d argue this is the end of Act 2, not Act 1. Act 1 having ended with Boris Johnson’s election as PM).

Anticipating events in Brussels, the US was Johnny-on-the-spot this last week with Secretary of State Mike Pompeo in London to begin talks on a US-Britain free trade deal once Brexit is completed. Negotiations over that trade deal will probably be happening in parallel to the exit negotiations with the EU.