KEY DATA: Starts (Over-Month): +3.2%; 1-Family: -4.6%; Year-to-Date: +5.1%; Permits (Over-Month): +5.0%; Year-to-Date: +4.2%

IN A NUTSHELL: “It’s hard to say that home construction is rebounding when the gain was mostly in the volatile multi-family segment.”

WHAT IT MEANS: The data on housing has been mostly negative for months now, so you would think a sharp rise in construction activity would be taken as good news. Well, not so fast. Yes, housing starts jumped in November, but all of the increase was in the wildly volatile multi-family portion. Single-family construction was down sharply and over the year, it was off by double-digits. For the first eleven months of the year, construction is up, but it looks like the pace peaked in the spring. Natural disasters are playing a role in the volatility. Activity surged in the South, which was likely due to make up from the hurricanes. Meanwhile, construction faltered in the West, possibly due to the fires. Look for rebuilding in California to create an artificial rebound in the months ahead. Multi-family construction is taking on a more important role. That likely mirrors the preferences of Millennials, who are renting, and boomers, who are downsizing. Since multi-family construction starts are random and can change dramatically over the month, the monthly changes will likely be even more unpredictable. As for the future, permits continue to run ahead of starts. That usually means construction activity should pick up going forward as builders don’t spend money on permits unless they are pretty certain they will be constructing the unit.

Another indicator, released yesterday, reinforces the belief that the housing market continues to decline. The National Association of Home Builders Housing Market Index tanked once again in December. The level was the lowest since May 2015. Traffic is slowing and while sales expectations are decent, they are way off their highs. Whatever confidence housing developers may have had is disappearing rapidly.

MARKETS AND FED POLICY IMPLICATIONS: The FOMC is starting its two-day meeting today and I still expect a rate hike to be announced tomorrow afternoon. There are a number of reasons why I stick to that belief. The first is that while growth is moderating, it is not faltering. Fourth quarter GDP growth is expected to come in somewhere between 2.5% and 3%, which would be very good if we hadn’t had the artificially-sweetened spring and fall growth rates. Inflation remains at or above the Fed’s target and except for the trade war battered equity markets, there is every reason the FOMC should keep the normalization process going. What may be different is that the Committee may indicate it is willing to take a more wait and see attitude going forward. This buys the members time to see how the battles take shape. If a likely more puff than pastry agreement occurs, the Fed can continue on the path outlined this fall – three to four hikes in 2019. But if war breaks out, then the members know that all economic bets (and forecasts) are off and they can slow down. The earliest the next hike would occur is at the March 19-20 meeting. That should be far enough into the future that the shape of any trade agreement would be clearer. I have reduced my forecast to three hikes for next year, as I have no idea what the administration will do about a trade agreement with China. I don’t think there will be just two increases. If the situation is clarified and the economy continues to expand decently, we will get at least three increases. If there is a trade war, we might not get even one as economies and markets around the world would be in trouble.

KEY DATA: CPI: 0.0%; Over-Year: +2.2%; Ex-Food and Energy: +0.2; Over-Year: 2.2%/ Real Hourly Wages: +0.3%; Over-Year: +0.8%

IN A NUTSHELL: “Inflation remains in the Fed’s sweet spot.”

WHAT IT MEANS: If the Fed is worried about inflation, it shouldn’t be – either on the upside or the downside. That is, inflation is neither too hot nor too cold. Bring on the porridge. Consumer prices went nowhere in November, which hardly surprised anyone given that gasoline prices cratered. There was also a sharp drop in apparel expenses. Prices did rise a bit more than expected for a variety of goods and services, including utilities, medical costs, new vehicles and at restaurants. Since November 2017, consumer costs are up 2.2%, a pace that the Fed could live with for a long time. Even excluding the volatile food and energy categories, inflation rose at the exact same rate. In other words, inflation is right where it should be.

With hourly wages rising moderately and inflation flat, real, or inflation-adjusted wages rose solidly in November. However, over the year, the increase remains below one percent, which is hardly enough to generate much additional spending on the part of most workers. I suspect wage gains will accelerate, but so could inflation. Thus, household spending power is not likely to rise significantly in 2019.

MARKETS AND FED POLICY IMPLICATIONS: While some may blame the Fed for the wild ride in the markets, the real culprit is trade fears. I think we see that clearly as anytime concerns that the U.S./China trade battles will turn into a full-blown war, the markets crash, but when hopes reemerge that there will be some kind of agreement, the markets soar. Meanwhile, the Fed plods along and it should. Inflation is right where the members want it and the economy is still growing solidly. After ten years, doesn’t it make sense that interest rates should be back to normal levels? Yes, and that is why the Fed is raising rates and should continue raising rates. Maximizing equity returns is not a Fed mandate and in any event, the risk is trade not rates. Meanwhile, the important questions are not being asked of Chair Powell: What is a neutral funds rate and how do you determine what that rate should be? Without that knowledge, how can we determine if any given funds rate is well below, near or above normal? The Fed Chair must be a little bit more forthcoming about “neutral” if that term is to have real meaning. Right now, it doesn’t. Indeed, given the Chair’s recent inconsistent comments about the distance we are from neutral, it is not clear he knows what neutral is. So, if the Fed is creating any issues, it isn’t because they are raising rates to levels that are too high. It is that they have a failure to communicate effectively.

KEY DATA: Payrolls: +155,000; 3-Month Average: 170,000; Private: +161,000; Revisions: -12,000; Hourly Wages: +0.2% Over-Year: +3.1%

IN A NUTSHELL: “Sustainable is good and that may be the level toward which job growth is finally be trending.”

WHAT IT MEANS: Job gains in November were well below expectations – Yippee! The idea we could sustain hiring at or above 200,000 a month ranked up there with the idea that we could sustain 3% growth for a decade. You have to be living in a state where recreational use of drugs is legal to hold those views. Simply put, the November increase was a welcome sight. The three-month average is still a bit high but a lot closer to sustainable. Job increases were spread across much of the economy with only one major sector, information services, posting a decline. Why motion picture employment cratered is anyone’s guess, so let’s not make too much of that. Health care, food services, transportation and manufacturing all added workers at a solid pace. Even retail trade payrolls expanded.

On the unemployment front, the rate remained the same. A solid gain in the labor force offset a jump in the number employed. Still, the rate is extremely low and that is causing wages to rise. The increase over the year was over three percent for the second consecutive month and that should continue. With some major companies starting to implement $15.00 per hour minimum wages, other firms will have to follow if they are to retain or attract workers. I would be surprised if the wage rise is less than 3.5% by mid-2019.

MARKETS AND FED POLICY IMPLICATIONS: Too much of a good thing is too often not a good thing. Everyone wants strong economic, job and wage growth. But the implications of an extended period of above trend growth in any, let alone all those factors, is an economy filled with bubbles. And we know what happens when bubbles burst. So, while those politicians, businesses leaders and business commentators who have been touting the likelihood of robust growth for as far as the eye can see may be unhappy with more moderate gains, economists are overjoyed. Steady, sustainable growth – you know, like we had until about a year ago – means we can stay out of a recession for a longer period of time. It may not lead to a surge in equity prices, but it would also restrain consumer prices. For the Fed, this report allows them to do what they want. A rate hike on December 19^th is highly likely, but if the Fed indicates it wants to see what happens to the economy, they can say that. Of course, even if the Fed were to move four times next year, the first move would not come until March, so the members have plenty of time to see if the markets calm down and the trade wars subside. In other words, the Fed really doesn’t have to make any changes other than say that the growth is moderating. Keep in mind, unless growth moves below trend, the unemployment rate will continue to slowly decline and wage gains will accelerate. Even moderate growth could create wage pressures at a level that the worries Fed. Rooting for a halt in Fed rate hikes is either rooting for a sluggish economy or saying that rising wage gains are nothing to be concerned about. I don’t think the Fed members believe either is a realistic way of looking at the economy.

KEY DATA: ISM (Manufacturing): +1.6 points; Orders: +4.7 points/ Construction: -0.1%; Private: -0.4%; Residential: -0.5%

IN A NUTSHELL: “The strong (manufacturing) keep getting stronger while the weak (construction) keep getting weaker.”

WHAT IT MEANS: The first readings on November activity are starting to come out, led by a solid rise in manufacturing activity. The Institute for Supply Management’s index rose more than forecast as orders surged. Hiring and production also accelerated. Still, more workers and more output didn’t keep order books from fattening at an increased pace, which is good news for future production. Maybe the best news was that the pressure on input prices, though still rising sharply, are not nearly as great as they had been.

Once again, the construction data came in soft. Overall construction spending fell slightly in October and the entire decline was in the private sector. The government continues to spend on all sorts of things but businesses have become quite conservative. Private residential activity was off moderately. That is hardly a surprise as the other housing numbers have been fading. There were some sectors in the private sector that did improve. Spending on offices, commercial buildings and educational facilities rose solidly.

MARKETS AND FED POLICY IMPLICATIONS: There was nothing surprising or even new in today’s reports. Manufacturing is strong while construction is weak. Investors know all that so there should be little reaction to these data. The focus of attention is back on trade. The 90-day “truce” between China and the U.S. was good news, but hardly a surprise. It was in the best interests of both nations to put off a full-fledged shooting war until it was clear nothing else could be done. And the Chinese are notorious for pushing into the future any decision they don’t want to make. The Chinese need time to restructure their supply chain. While there may be some short-term gains for the U.S. from any agreement, they come on top of short-term losses. Net-net, there may not be much improvement in the situation. It is the long run that is most concerning. If you run a business (or government) and your main supplier becomes undependable, you have not choice but to start looking at expanding your suppliers. To do anything else would be irresponsible. It may take a little while for the Chinese to get other countries to shift agricultural production to meet the Chinese needs, but they are starting that process. And buying more soy products at the bottom of the market is hardly a bad thing either. But once the alternative suppliers are in place, the U.S. farmer is likely to suffer as both sales and prices could decline. So, look past the deals headlines and think about the details and the implications for the future. I would be surprised if any U.S.-China trade deal has significant long-term benefits for either county. Let’s face it; the new U.S.-Mexico-Canada trade deal was hardly a major breakthrough. Indeed, when many analysts indicate the dairy industry will be the biggest winner, it looks like it is more puff than pastry. But we can always hope that is not the case with any new U.S.- China deal. Indeed, we have to hope there is at least some agreement as the alternative would be a disaster.

KEY DATA: Consumption: +0.6%; Disposable Income: +0.5%; Prices: +0.2%/ Pending Sales: -2.6%; Over-Year: -6.7%/Jobless Claims: +10,000

IN A NUTSHELL: “The strong spending and income numbers don’t hold up to careful scrutiny, so don’t assume the economy is surging again.”

WHAT IT MEANS: There is one warning I repeat consistently and that is: “the devil is in the details”. That saying is quite accurate when it comes to the October spending and income report. On the surface, it looks like consumers went wild. Spending surged and the increases were across the board and that is the good news. While this is a good report, there are lots of holes in it. The biggest consumption gain came from a massive jump in services demand. The major factor there was spending on utilities and gas – weather? Expect that to unwind in the next couple of reports. Durable goods purchases were up sharply, but there was a jump in vehicle sales that looks to have been driven by flood-related replacements. That too will wind down going forward. On the income side, you would think that workers are finally getting paid more money. Wrong again. Wage and salary gains were modest, which is another way of saying disappointing. Instead, farm income surged because the government bailout of farmers hurt by the trade war was in the data. Nonfarm proprietors’ income also soared, though it isn’t a clear why that happened. With spending exceeding income, the savings rate declined again. One unambiguous number was inflation, which is showing no signs of accelerating.

Another housing number, another indication that the residential real estate sector is fading. The National Association of Realtors reported that pending home sales fell for the tenth consecutive month.   The only region that reported a rise was the Northeast, which was up modestly. Over the year, the index has fallen sharply and given the sudden despondence in the homebuilders’ ranks, it is not clear that trend will change anytime soon.

New claims for unemployment insurance jumped last week. November is always a very choppy month; so don’t read too much into the rise.

MARKETS AND FED POLICY IMPLICATIONS: The income and spending report was a good one, but it was hardly great. With special factors at work, the best we can conclude is that the consumer is still spending but households are not flush. High levels of confidence, though, do imply a solid holiday shopping season. But unless wage gains accelerate, the early part of next year could be ugly as households cut back to pay for their holiday excesses.

Fed Commentary: Yesterday, Fed Chair Jerome Powell delivered a speech that has been interpreted to mean the Fed will be slowing its rate hike pattern. The conclusion came from a change in the description of how close the Fed is to “neutral”, the point where rates are neither adding to nor subtracting from growth. Yesterday, he noted that the Fed was “just below the broad range of estimates of the level that would be neutral for the economy”. Just below is the operative phrase here since in October, he noted that the Fed was “a long way from neutral”. This appears to be a huge change in emphasis and it brings up the question, what has changed over the past month to merit a significant recalibration of the stance of monetary policy. The answer is, very simply, little. The stock market has declined, but the Fed is not tasked with keeping up equity prices. Economic growth has moderated, but anyone who doesn’t work in the White House has been saying that would happen and in any event, growth remains above trend. Uncertainties about the world economy have increased, but no one is forecasting a worldwide recession. The president has stepped up his attack on Chair Powell, but it is hard to believe he caved because of political pressure. Unfortunately, it looks that way. That is very disturbing since protecting the Fed’s independence may be the Fed Chair’s most important job. Without it, policy could not be trusted.

In defense of Mr. Powell, it has been suggested he was referring to the “range of forecasts” for a neutral Fed funds rate. He did say range in in his comment. But if he changed his reference to the range rather than the level, he was terribly unclear in his presentation. If that is indeed the case, he set back the attempts at making the Fed more transparent more than any Alan Greenspan talk ever did – and Greenspan’s intentions were always to keep Fed intentions opaque.

Basically, Chair Powell has muddied a lot of waters. He needs another speech soon to clarify his thinking and where he believes monetary policy is going. Right now, the best we can say is that he whiffed badly. While that happens to everyone, it should not happen to a Fed Chair.

KEY DATA: Sales: -8.9%; Over-Year: -12.0%; Prices (Over-Year): -3.1%/GDP: +3.5% (Unchanged);

IN A NUTSHELL: “The housing fade continues.”

WHAT IT MEANS: The housing market, a key component of the economy, is continuing to deteriorate. New home sales dropped sharply in October with every region posting a decline. The level is the lowest since March 2016. There were double-digit decreases in the Northeast and Midwest, while the South posted a nearly 8% fall off. The West nearly held its own, but it was still down over 3%. In comparison to October 2017, only in the West did sales hold up, with the other three regions posting double-digit declines. With sales slowing, pricing power has disappeared. Over the year, the median home price fell for the second consecutive month.

The second reading of GDP showed no change in the initial estimate of the overall growth pace. There was a downward revision to consumer spending, though it remained quite strong. Business investment, while revised upward a little, remained disappointing. The surge in business inventories added over two percentage points to growth and that is not likely to be matched this quarter.

MARKETS AND FED POLICY IMPLICATIONS: Home sales are faltering and that trend is likely to continue. The National Association of Home Builders’ Housing Market Index cratered in November, dropping a huge eight points. Traffic was down sharply and if people are not looking, they are not buying. To blame rates for the slowdown makes little to no sense, given that mortgage rates are still relatively low. The 30-year mortgage rate is still over one percentage points below the levels buyers faced during most of the housing boom in the 2000s. Remember, affordability has a number of components, including rates, prices and income. Prices did surge and that should be more of the focus of attention. The declining costs of new homes may make units more affordable and I suspect builders are already adjusting to that necessity. As for the economy, it is in good shape. If there are worries, it may be on the business credit side. As the Fed noted in a report on financial stability, debt levels at companies with weak balance sheets pose a growing risk. Also noted was that leverage in the corporate sector is high, asset prices were high and geopolitical and trade risks were growing, any of which could lead to a large drop in asset values. So look at what the government and the private sector are doing, don’t just focus on the Fed.  

KEY DATA: Conference Board Consumer Confidence: -2.2 points/ Case-Shiller (September, Over-Year): +5.5%/FHFA (Over-Year): +6.3%

IN A NUTSHELL: “The softening in consumer confidence and housing prices portends a similar moderation in economic growth.”

WHAT IT MEANS: The economy boomed in the spring, was strong over the summer and now it looks like it is growing solidly in the winter. That slow, but steady moderation in activity reflects the same pattern in consumer attitudes and the housing market. Households remain confident, but their irrational exuberance is wearing off. Today, the Conference Board reported that confidence fell in November, though the decline was not large. Indeed, respondents believe the labor market is strong and getting better, which led to an increase in the current conditions index. It was the future that is starting to trouble people. A fairly similar pattern was seen in last week’s University of Michigan Consumer Sentiment Index, which also eased. The current conditions measure fell less than the future conditions measure, though again, neither was down significantly. But a slow and steady drop in hopes about the future could signal a softening in consumer spending.

As for the housing market, it too is on a softening trend. The S&P CoreLogic Case Shiller national home price index posted a limited gain in September and the rise over the year continued its steady deceleration from the peak reached in the spring. Similarly, the Federal Housing Finance Agency’s Home Price Index rose more moderately in the third quarter and the rise over the year also was off from the early year peak. The results were consistent with other indicators, such as housing starts and sales, which point to a market that may be close to its peak.

MARKETS AND FED POLICY IMPLICATIONS: The economy is in good shape, but given how great things were, we are into the “what have you done for me lately” approach to economic growth. And lately, things are not as strong as they had been, which should surprise no one, or at least no one that doesn’t have a political axe to grind. The rate of expansion during the spring and summer was unsustainable. Just about every economist has said that and will continue to say that. The issue was not whether we could keep up the strong pace, but how fast we would get back to a sustainable, roughly 2¼% growth rate. We could exceed that in the fourth quarter, but we should see the return of a 2-handle on the number.   As we go through next year, growth should settle into the 2% to 2.5% range. Politically, that would be viewed as a disaster. But that is what most economists expected to see once the tax cut sugar-high wore off. Housing is leading the way slower and I expect business investment growth to decelerate next. If the trade war heats up further, don’t expect exports to bail us out. That leaves government spending, which at the federal level is once again out of control. The U.S. budget deficit could approach one trillion dollars this fiscal year and maybe even exceed it if growth decelerates faster than expected. So much for the tax cuts paying for themselves.   So, let’s hope we can settle into a reasonable growth range because the risks, especially if the trade situation deteriorates, is for a lot slower not faster growth by the end of next year or first half of 2020.

KEY DATA: IP: +0.1%; Manufacturing: +0.3%; Business Equipment: +0.8%

IN A NUTSHELL: “The manufacturing sector is hanging in there, helped by improved business spending.”

WHAT IT MEANS: Were reports of the manufacturing sector’s demise a bit premature? Maybe. Manufacturing production was up solidly in October and that marks five straight months of good gains. The details tell a generally favorable story as most of the different industrial sectors and commodity groupings posted gains. But the data still were somewhat mixed, especially when you look at critical sectors. A variety of sectors posted strong increases in output, led by machinery, metals, aerospace, oil and gas drilling, furniture and textiles. A major fall off in vehicle assembly rates, a flat high tech and a drop in equipment and appliances offset some of the gains in the other portions of the sector.

Supporting the view that conditions remained solid as we moved into November was the report by the Kansas City Fed. After faltering in October, it rebounded sharply in November. This was in contrast to the moderation in activity that the latest Philadelphia Fed showed. However, the KC Fed’s index had declined for five consecutive months, so it isn’t clear if the November number was the start of a new, upward trend or just a usual periodic bounce in a longer-run downward trend.

MARKETS AND FED POLICY IMPLICATIONS: Manufacturing appears to be neither accelerating nor faltering. That is good news as the current level of activity is quite high. Maybe the best piece of data was the large rise in machinery spending. We have been waiting for firms to put the tax cuts to use to expand productivity and capacity and maybe that is finally happening. But I have expressed that hope before, only to find that capital spending didn’t pick up very much. So let’s wait and see. As for investors, the earnings reports have been strange as there have been a number of high profile misses. Firms are also becoming more conservative in their expectations, which should be taken as a sign they are seeing growth moderate. One thing we are not seeing are any indications that there was any acceleration in growth from the summer and that points to a slower GDP growth rate in the final quarter of the year. Growth should be good enough, though, to sustain rate hikes.

KEY DATA: Sales: +0.8%; Ex-Vehicles: +0.7%/ Imports: 0.5%; Nonfuel: +0.2%/ Philly Fed BOS: -9.3 points; Orders: -10.2 points

IN A NUTSHELL: “Despite October’s strong consumer spending, there are some signs that the economy may be slowing.”

WHAT IT MEANS: The consumer has to keep spending if growth is to remain anywhere near 3% and households did just that in October. Retails sales rose more than expected, but before we start expecting another quarter of great growth, it should be recognized that rebuilding from the hurricanes and replacement of lost vehicles might have played a major role in the strong increase. We saw a surprising pick up in vehicle sales and that showed up in the retail sales data. In addition, there was a surge in spending on building materials. Finally, the gain was hyped by a surge in gasoline purchases that was likely price related. The measure that closely aligns with GDP consumption, which is retail sales excluding the above listed components, as well as food, rose more modestly. Still, sales of electronics and appliances were strong, so there is some underlying strength in the data.

As long as the Fed continues its march to neutral, inflation will remain a key issue. If it stays moderate, the FOMC may not have to go above neutral, as the Committee indicated is possible. Well, import prices rose solidly in October but much of that came from a jump in energy costs. Removing fuel, the rise was moderate. And since oil costs have cratered, much of the gain in the overall index will be backed out in November. For consumers, though, there is a warning as food prices jumped for the second consecutive month. That should show up in retail prices soon.

 While the focus has been on the consumer and inflation, a possible softening in the manufacturing sector may be seen in the below the radar data. The Philadelphia Fed’s manufacturing index dropped sharply in early November. Order growth decelerated significantly as well. The sector is still expanding, but more moderately. And expectations are starting to falter as well.

Jobless claims edged upward, but remain low. There are no signs that the labor market is cooling.

MARKETS AND FED POLICY IMPLICATIONS: Economists always warn that after the initial slowdown created by disasters, there is usually a sharp rebound. It looks like that happened in October. Hurricanes come, hurricanes go but it is the fundamentals of growth matter the most in the long run. Right now, consumer spending looks good but wage gains are still barely outpacing inflation, while the savings rate is declining. In addition, while solid, the manufacturing sector may be throttling back as well. And finally, we are still waiting for the surge in capital expenditure that was supposed to be triggered by the tax cuts. Early this year I suggested we wait until the fall to make any determinations on the success or failure of the tax bill to induce businesses to invest. It’s almost winter (actually, it’s snowing outside, so maybe it is winter) and the stronger investment is not yet here. Thus, the comments I made about the second quarter likely being the high water mark seem to be coming true. Will the slower growth restrain the Fed? Not for a while, as the economy is moderating not faltering. But with investors soon having to deal with earnings comparisons that are already tax hyped and with uncertainties about trade, tariffs and rising interest rates having an impact on corporate spending decisions, volatility in the markets is likely to be with us for quite some time.

KEY DATA: Openings: -284,000; Hires: -162,000; Quits: -47,000

IN A NUTSHELL: “Despite some weakness in the labor market numbers, there is really no indication that conditions are softening.”

WHAT IT MEANS: It’s Election Day so get out there and vote. I did and the turnout was heavy, despite rainy conditions.

Meanwhile, out of the political world and back into the real world, the so-called JOLTS report, which stands for job openings, layoffs and terminations, came in a little soft. Of course, this is the September release and we know that the hurricane didn’t help job gains. That said, while the number of openings fell sharply, it remained near record high levels. Don’t be surprised if there is a rebound in October that sets a new record. But the section of the report I watch most closely is the quits data. A truly robust market would have people freely moving from job to another. The number of quits is close to record levels and the rate of quits, which is the number of quits as a percent of total employment, is almost at a record high. The only time it was higher was at the end of the dot.com era. I would like to see the rate rise even further, and expect that it would, but I suspect with labor being in such massive shortage, firms are doing all they can to keep workers from walking away.

MARKETS AND FED POLICY IMPLICATIONS: While the JOLTS report usually is watched carefully, it will likely be the tree falling in the forest. Few will pay any attention to it. What we will be spending most of our time thinking about is the impact of the election. There are differing views all around. Unless the Republicans retain the House and the Senate, not much change will likely happen. Even if the Democrats take control of both, it is unlikely they will be able to override a Trump veto. And it just may not be bad to have gridlock for a couple of years. The partisan anger created by jamming through bills supported by mostly one party needs to be quieted. But a Democratic victory in even one house will create a dynamic that will likely lead to all politics all the time. The Republicans created the playbook when they voted several million times to repeal the ACA without any alternative, knowing that either the Democrats in the Senate would kill it or Obama would veto it. Similarly, the Democrats will likely vote several million times to repeal some of the upper income and business tax breaks. It is highly unlikely any bill will become law. Just as the Republicans were playing to their faithful and trying to broaden their support, so will the Democrats be trying to build good will with the voting public. Will they be successful in persuading the electorate that the tax cuts were bad? That is to be seen. But we need to see the outcome of the election first.