So what’s going to happen in the 2016 election? Will the economy help or hurt the incumbent party? Will this campaign be about the economy or national security?

They said they believed that unemployment would be the lowest it has been during an election since George W. Bush and Al Gore faced off in 2000, when it stood at 3.9 percent. The median forecast for the unemployment rate when voters go to the polls in November 2016 was 4.8 percent (which would be down from 5.3 percent last month). They saw only a 15 percent chance of a recession starting by next Election Day. Interest rates, inflation and gasoline prices should all be a bit higher than they are now, they said, while staying quite low by historical standards…
On its face, all of that points to an election with dynamics similar to 1988 or 2000, when the nominee of the incumbent party (George H. W. Bush in 1988 and Mr. Gore in 2000) could promise continued prosperity. That bodes well for the Democratic nominee, though as Mr. Gore’s loss despite winning the popular vote shows, even a favorable economy doesn’t assure victory, given the workings of the Electoral College.

But here’s one key caveat:

Their consensus was 2.8 percent growth in average hourly wages in the 12 months before the election, slightly higher than the 2 percent rise in prices. That implies that the weak spot of the Obama economy, in compensation for ordinary workers, will remain that way heading into 2016.

Thus, even if unemployment is low, wages could continue to stagnate. Yet this, too, could favor Clinton — though that’s anything but assured — and this gets at why this projection has direct relevance to the present political moment.

We now know that both major party nominees will agree that stagnant wages and stalled economic mobility are among the major problems facing the country. But we also know that the two parties will differ dramatically on what to do in response. Hillary Clinton has already telegraphed an ambitious agenda premised on the idea that these problems are defining challenges, and that we have the choice of doing something about them, via a robust, interventionist governmental response. As Paul Krugman has noted, Clinton’s public statements signal that “there’s now an effective consensus among Democrats” that “workers need more help, in the form of guaranteed health insurance, higher minimum wages, enhanced bargaining power, and more.”

By contrast, all signs are that the GOP nominee will remain generally wedded to the idea that the solution to those problems is generating more growth, and that the way to do that, and to ensure wider distribution of the fruits of that growth, is by getting government out of the way and cutting taxes for everyone, including top earners.

This may not prove a winning contrast for Republicans. And so, if the economic argument in 2016 is fought around a general public sense that the economy is improving but that the gains of the recovery are not achieving widespread enough distribution, I’d say that probably favors Clinton. But that’s hardly guaranteed — after all, Republicans might succeed in blaming stagnant wages on Dem policies while campaigning for “change.” And, of course, even if this argument does end up favoring Clinton, it still might not be enough for her to win.

**************************************************************

* CLINTON TO ROLL OUT NEW TAX PROPOSAL: Here’s an example of the above, courtesy of the Wall Street Journal:

Clinton will propose a revamp of capital-gains taxes that would hit some short-term investors with higher rates, part of a package of measures designed to prod companies to put more emphasis on long-term growth, a campaign official said. The proposal, to be laid out in a speech later this week, is one of a number of ideas designed to tackle what Mrs. Clinton, some economists and some on Wall Street consider the overly short-term focus of corporate strategy.

It’s still unlikely that Clinton will embrace inequality proposals as ambitious as Elizabeth Warren and/or Bernie Sanders, but this signals a robust agenda that includes combating the impact of “short-termism” on the economy.

* NATIONAL SECURITY OFFICIALS GIVE IRAN DEAL A BOOST: Dozens of former national security officials from previous administrations have signed a joint statement, coordinated by the Iran Project, that endorses the Iran deal. One key bit:

We acknowledge that the JCPOA does not achieve all of the goals its current detractors have set for it. But it does meet all of the key objectives. Most importantly, should Iran violate the agreement and move toward building nuclear weapons, it will be discovered early and in sufficient time for strong countermeasures to be taken to stop Iran. No agreement between multiple parties can be a perfect agreement without risks. We believe without this agreement, the risks to the security of the U.S. and its friends would be far greater.

Meanwhile, Secretary of State John Kerry went on all the Sunday shows to make the point that if Congress blocks the deal, that, too, will have all kinds of unpleasant consequences.

 * INTRA-GOP WAR LOOMS IN CONGRESS: Politico reports that conservatives in Congress are preparing for war over an expected push by GOP leaders to link re-authorization of the Ex-Im Bank (which conservatives opposes as “crony capitalism”) and a short-term replenishment of the Highway Trust Fund:

The majority of these hard-line members are opposed to any highway deal that would reauthorize the bank’s charter and have indicated to GOP leadership not to count on their votes — which could force Speaker John Boehner, who has praised the bank as essential to job growth, to turn to House Democrats for votes on a final highway package.

Sound familiar? It’s another reminder that things will get very contentious in Congress again, particularly with spending bills and the votes on the Iran deal looming.

Only about a fifth of the 1,000 or so fund-raisers and their spouses who rallied around Mitt Romney, the Republican nominee in 2012, have given money to any of the 2016 candidates….Some of the bundlers and donors said they had held back, in part, because the field was the strongest they had seen in years, with several viable contenders representing the party’s different generational and ideological segments.

This boosts the stakes for coming GOP debates, where donors will get to see candidates perform under pressure, and is a reminder that we may not get a GOP frontrunner for many months.

“If I am elected president, I will use all of my influence to enact into law an immediate, unequivocal six-year ban on lobbying — a full Senate term — for ex-members of the House and Senate.”

Bush will likely root this proposal in a broader critique of government-as-the-problem, but the “revolving door” between the Capitol and K-Street is often attacked by liberals, too. Hillary Clinton will also probably offer a set of reforms designed to make Washington work better.

The GOP presidential candidates will likely condemn what they are seeing, making this another area in which 2016 will be fought around the proper extent of U.S. international engagement under the next president, along with Iran and climate change.

* AND KASICH-MENTUM RAGES ACROSS THE LAND: John Kasich will announce his presidential candidacy this week, and E.J. Dionne takes stock of the Ohio governor, noting that he is very conservative on a range of issues, from the estate tax to his failed effort to roll back public employee bargaining rights.

But as Dionne also notes, Kasich expanded Medicaid, outrageously suggesting he has a moral obligation to help poor people. This could prove just as problematic among conservative voters as has Jeb Bush’s suggestion that the plight of undocumented immigrants is a morally complex one. How Kasich explains this will be worth watching.