The nightmare scenario is now playing out for the US Democratic Party

I watched the Democratic Debate in Las Vegas last night. And after looking at some analysis of the economy and the debate this morning, I came to the conclusion that we are seeing a worst case scenario for the Democrats’ hopes to defeat Donald Trump. Let me tell you why.

The economy

Trump is a polarizing figure. But, the fact that the US economy has been relatively solid under his rein makes it more difficult for a Democrat to dislodge him. A lot of people have been talking about a recession coming to the US in the near term. But, I don’t see it in the data yet. In fact, the Philadelphia Fed numbers that came out this morning strongly suggest that the US economy bottomed in Q4 and is trying to re-accelerate in the face of the coronavirus outbreak. Here’s how they described the numbers:

Manufacturing firms reported an improvement in regional manufacturing activity, according to results from the February Manufacturing Business Outlook Survey. The survey’s current indicators for general activity, new orders, and shipments increased this month, suggesting more widespread growth. The firms reported expansion in employment, although at a moderated pace from January. The survey’s broad future indexes also showed improvement this month, indicating that growth is expected to continue over the next six months.

Firms Report Increases in New Orders

The diffusion index for current general activity rose nearly 20 points this month to 36.7, its highest reading since February 2017 (see Chart). The percentage of firms reporting increases (52 percent) this month exceeded the percentage reporting decreases (15 percent). The index for new orders increased 15 points to 33.6, its highest reading since May 2018. Over 50 percent of the firms reported an increase in new orders, up from 46 percent in January. The current shipments index increased 2 points. Both the unfilled orders and delivery times indexes moved into positive territory this month, suggesting slightly higher unfilled orders and slower delivery times.

None of the rate of change data points I track like 6- and 12-month change in initial or continuing claims, 12-month increase in the unemployment rate or the 12-month change in personal consumption expenditures show signs of recession in the near-term, say the next 6 months. For Q1 2020, the GDPNow tracker is at 2.6%. It is going to take a lot of negative data prints over a sustained six-month period to move that into recession territory. I don’t see it as likely, despite the coronavirus. Moreover, financial conditions are just not tight enough for that to force a downdraft into recession in that time frame.

And so, I believe the US economic backdrop in November is likely to favor Trump.

The Democrats

That gets me to the Democratic Debate. I thought the clear loser of the debate was Bloomberg. Warren and Biden seemed stronger than usual, and they may have received a boost as a result. Overall though, there was nothing on that debate stage which will consolidate the race in any meaningful way. And that’s bad news for the Democrats. As I put it eight days ago:

All of the Democratic candidates have chinks in their armor. None of them is obviously more ‘electable’ versus Donald Trump. And, it’s that fact which keeps the field large. A large Democratic field also means no one candidate is going to be able to amass a majority of the delegates. A lot of people have dropped out already, including Michael Bennet and Andrew Yang last night. But, the field is still incredibly large.

And last night’s New Hampshire results increase the likelihood that the field will remain large. Polls showed people were undecided until the last minute, often picking a candidate based on the last debate performance. This benefitted Amy Klobuchar, who came in a strong third behind Sanders and Buttigieg. But, more importantly, it showed the benefits of ‘hanging around’ and not dropping out of the race…

[…]

My view: this is almost a worst case scenario for the Democrats because it will mean voters will become heavily invested emotionally in their Democratic primary choices, only for many to have that choice lose at the 11th hour. This is a recipe for bad blood that reduces turnout or causes voters to vote for Trump. That’s what we saw with Sanders voters in 2016 when he lost to Clinton, by the way. 

This last debate only entrenches this outcome.

The Delegate Count

Philip Bump at the Washington Post did the maths yesterday. And here’s his analysis:

To clinch the nomination, candidates need to earn a bit more than 50 percent of the delegates awarded after New Hampshire. While Sanders is projected to have a lead, the percentage of the rest of the delegates he needs to win will have gotten bigger. Right now he needs to win 50.3 percent of the remaining delegates. If he does as well as projected on Super Tuesday, he will have won only a bit over 40 percent of the delegates to that point, well off the 50-percent-plus pace. After Super Tuesday, then, he will need to win more than 56 percent of the remaining delegates, in part because there are far fewer delegates remaining.

That’s harder than it sounds, since delegates are awarded proportionately. Even if the field narrows to three candidates after Super Tuesday, those candidates will likely consolidate some support — and, therefore, will be more likely to hit the 15 percent threshold to earn delegates. If Sanders is at 55 percent in national polling after the field narrows and earns that percentage of delegates in each contest moving forward, he will not have enough delegates at the end of voting to clinch the nomination.

To my mind, this makes a contested (or brokered) convention very likely – because I don’t believe Sanders can get to 55%, even in a narrowed field. And the other candidates know this. Hence, they have every incentive to not drop out and narrow the field.

I’ve been doing a bit of reading on contested conventions. And here is the salient point via Wikipedia:

Once the first ballot, or vote, has occurred, and no candidate has a majority of the delegates’ votes… all regular delegates… are “released” and are able to switch their allegiance to a different candidate before the next round of balloting.

Worst-Case Scenario for Democrats

That’s where the free-for-all can begin – to the Democrats’ detriment, given the emotional investment of supporters by that time. I think the Washington Examiner lays it out pretty well today:

A candidate needs a majority of pledged delegates, at least 1,991 of the 3,979 available, allocated based on results in state primaries and conventions, in order to win the presidential nomination on the first ballot at the July convention.

If no candidate wins a majority, around 770 automatic “superdelegates” made up of party leaders, such as DNC members and Democratic members of Congress, are permitted to vote for whomever they wish on the second ballot, creating the possibility that a candidate who did not win the most pledged delegates wins the nomination.

In previous years, superdelegates voted on the first ballot. But the rule was changed in an attempt to make a fairer process after complaints from far-left Sanders supporters in the fallout from the 2016 primary cycle. 

[…]

No convention on either side of the aisle has gone more than one round of balloting since the 1952 Democratic gathering in Chicago, when Illinois Gov. Adlai Stevenson won on the third round. But the fractured nature of this year’s early contests suggests even 2020 Democratic candidates with seemingly little chance of winning can still hold out hope.

Elizabeth Warren’s campaign is already making her pitch for staying in the race despite lackluster placing in the Iowa caucuses and New Hampshire primary. Last week, Warren’s campaign asserted that only she, Sanders, and Biden have delegate-worthy levels of support in upcoming contests.

The five top-polling candidates (Sanders, Biden, Bloomberg, Warren, and Buttigieg) are all in double-digits in RealClearPolitics’s average of primary polls, the first time five candidates have polled above 10% in this primary cycle.

“As long as other candidates have money to compete, they have an incentive to gather as many delegates as possible,” Baer said.

Even if Sanders tumbles in the polls or future primary contests, he could still gobble up delegates and prevent others from getting a majority.

“When you have a candidate, like Sanders, who is not even a member of the party he seeks to lead, he is motivated more by his cause than what is best for the party. Thus, Sanders has almost no incentive to drop out before Milwaukee, no matter the results,” Baer said. 

My View

If you think back to October when Sanders suffered a heart attack, that was the fateful moment in all of this. Had Sanders dropped out, I doubt Bloomberg would have entered. And Biden would have consolidated his lead or blown up — to be replaced, not by another centrist but, by Elizabeth Warren as the frontrunner. There would be no brokered convention. It would be Biden or Warren as the nominee.

But as it stands now, we have multiple moderates and two progressives all hanging around. And last night, they were attacking each other with the ferocity of desperate people. That’s going to leave bitter feelings for supporters and suppress turnout in November. In some respects, this reveals the weakness of Sanders as a general election candidate because it suggests – at a time when the economy is not imploding – his revolutionary appeal has not gathered enough broad momentum yet. The perception of him as being ‘too far left’, too old and unhealthy are his limiting factors (as the NBC News/WSJ poll revealed).

I think of Sanders in the way I think of the Left Party in Eastern Germany, they have a plurality of the vote but cannot muster a majority. Luckily for the Left Party, they operate in a Parliamentary system in which they can form governing coalitions. Sanders doesn’t have that luxury. And so, he would have to go toe to toe with another ‘plurality candidate’ in Trump, hoping his plurality is better than Trump’s.

Would a Sanders-Harris or Sanders-Booker ticket increase the Democrats’ appeal? Maybe. Harris is a centrist who is relatively young Black woman. I don’t think a Sanders-Warren ticket would. The best case outcome for Democrats from here is a convention that the candidate with the most pledged delegates wins. And then, that candidate reaches to the other wing of the party for a Vice President to unify the party a-la Sanders-Harris. Any other outcome is likely to be a disaster.

Feel free to add your thoughts in the comments.