Power Sheet – May 26, 2016

The Fed reported yesterday that nearly half of Americans would have trouble meeting an unexpected $400 expense. In addition, about one-fifth of Americans were working two or more jobs simultaneously last year, and about one-third have no retirement savings or pension. Not a bright picture. Nonetheless, Americans’ overall financial well-being has improved slightly during the past two years, the Fed says. So if the picture is at least improving, why is there so much anger? The answer is that the averages mask differences, and the picture actually hasn’t been improving for significant numbers of people. Trump and Sanders haven’t been attracting, and have not needed, majority support. The minority support they’ve been attracting has been big enough to shift the entire race.

More Americans age 18 to 34 are living with their parents than with a spouse or partner, the first time that has happened in the 136 years such data has been collected, says the Pew Research Center. Little wonder that in a January poll for CNNMoney and E*Trade, 56% of Americans said they believe the next generation will be worse off than they are. That expectation may be wrong on average, as Warren Buffett explained in his most recent letter to shareholders. But again, the average masks differences. Buffett acknowledged that the gloomy expectation may be correct for some, and if it’s true for some, and – just as important – if a majority believe it to be true, then it feeds the anger fueling Trump and Sanders.

It’s clear that a substantial number of voters think they’ve been cut out of America’s implicit economic deal without their consent and without their having broken the rules. They got at least a basic education and worked hard, but their living standard has stopped improving as it’s supposed to. They’re so angry that their strongest political impulse is to stick a finger in the eye of established authority; if they think government is the villain they vote for Trump, and if they think business is the villain they vote for Sanders. To the extent they care about a candidate’s policy positions, they just want policies that punish established authority.

The causes of their economic distress are deep; they can be changed, but not immediately. And while the anger vote may not be a majority, it doesn’t have to be. A sizable minority can easily swing election outcomes. That’s why Trump and Sanders voters will be every candidate’s quarry in November and for years to come.

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