Poll: 68% Say Washington on Wrong Track

click for ginormous graphic

Source: Bloomberg

Most Americans say the country is on the wrong track:

“Americans also are pessimistic about the course of the country, with 68 percent saying it’s headed in the wrong direction, the most in two years, according to the poll of 1,000 adults conducted Sept. 20-23.”

Note this is not a general malaise:

“Americans’ negative feelings about Washington contrast with more optimistic views about their own prospects. Thirty-five percent of respondents expect their financial security to improve during the next year, up from 25 percent in December 2012.”

There are a variety of factors leading to this, one that is worthy of a deeper dive into the subject. For now, lets look at a few details related to investing.

I have been watching the political situation in D.C. with a sort of bemused detachment. My primary focus is trying to determine what sort of economic damage, if any, a government shut down will bring. What this might mean for US corporate profits is my primary professional concern.

The economic damage looks likely to be transitory and modest, with the most likely probability slicing some 25-50 basis points off of FY 2014 GDP. Its possible that the shut down gets averted, or lasts only a few days, and therefore the impact would be almost zero. The high end of the range is the possibility that the shut down goes on for a long while, and that leads to a significant slowdown, or even a recession (Note this is a low probability outcome).

For now, the markets have one watchful eye on DC. They do seem to be a bit tired, and the trade feels heavy. We are overdue for a modest correction anyway. But there does not seem to be an overwhelming concern about a major shut down occurring, or other market related issues. Lots of heat, not much light seems to be the market consensus.

As a socially progressive, fiscally conservative individual, I have never really identified completely with either party. The Jacob Javitz wing of the GOP is now extinct, and so I am without party. As a rational pragmatist, I don’t have any use for ideologies that drive the extreme wings of either. But the key difference between the Right and the Left is that the Left’s extreme wing seems to have been contained by moderate Democrats. The extreme right wing of the GOP, on the other hand, has taken over. That has enormous ramifications for the future of the GOP.

Click thru the graphic above — it shows that President Obama’s approval ratings are at two year lows, 47% net approval versus 49% disapproval. The Democratic Party is even worse off, with 44% approval rating (versus 47% disapproval). But the Republicans are getting the brunt of the public’s ire, with a net favorable rating of just 34%, and a disapproval rating of 56%. Those are astonishing, implosive numbers.

The more fascinating aspect of this is watching one of the two major political parties implode in real time (almost in HD/slow motion). Any two party system requires, well, two parties, and if the GOP internal rifts tears itself asunder, it can have very real and likely unforeseen consequences.

My best guess is that the public wants the government to try to solve major (not minor) problems. That includes issues like financial risk, Iranian nukes, persistently high unemployment, and expensive medical care costs. But the far Right’s ideology is fervently opposed to those sorts of large and interventionist government policies, despite a plurality of the public supporting them. Hence, the schism within the GOP itself and why the broader public disapproves of the Republicans more than the Democrats. This is not an endorsement of either side, but it is incumbent on us to acknowledge this simple reality.

I haven’t the slightest idea how this plays out. Stay tuned . . .