We are pleased to introduce Dr. Robert Wescott, President of Keybridge Research, former economic advisor to President Bill Clinton, and a long-time adviser to Pioneer Investments, as a guest contributor to our blog. Over the coming weeks, he will guide us through four main trends shaping the investment landscape.
In the first of these posts, Dr. Wescott discusses the political risks stemming from the US Presidential Election.
Dr. Wescott compared the tactics of Donald Trump and Ted Cruz, the Republican rivals to be the party’s presidential candidate, to the business model of companies such as Airbnb and Uber. He said they have simply cut out the middleman and communicated directly with the public, with both Trump and Cruz appealing to voters’ fear of change and concerns about national security. The Tea Party helped create Trump’s popularity by providing a channel for popular anger towards government. Trump gets much of his support from anti-government sentiment and white male, blue-collar workers who worry about demographic changes and low wages, said Dr. Wescott. Cruz gets more support among the Christian Evangelical right.
In the race for the Democratic candidacy, Hillary Clinton is the centrist contender but now faces a real battle with Senator Bernie Sanders, who describes himself as a socialist. Sanders advocates breaking up the banks, higher taxes on the rich and ending trade pacts. Dr. Wescott said Clinton has recently shown more competitive campaigning skills, and with a few more primary election victories, could be on her way to capturing the Democratic nomination for president.
While she occupies middle ground politically, the voices from Sanders, Trump, and Cruz have been very shrill from the far left and far right ends of the political spectrum – where there is great excitement so far in the election cycle. The importance of large urban areas in US presidential elections was shown in the 2012 result when President Obama defeated the Republican Mitt Romney, said Dr. Wescott. Of the 50 largest counties in the US with more than one million inhabitants, 44 voted for Obama in 2012. Cities that the Democrat, Obama, won include New York, Boston, Washington, Chicago, Philadelphia, Detroit, Miami, Seattle, Portland, San Francisco and Los Angeles.
In terms of what the different result scenarios would mean for the economy, he said Clinton would probably follow Obama’s path on most things, including the environment, and has already unveiled a major infrastructure plan. While she may use some anti-bank language during the campaign, Dr. Wescott does not believe she would re-impose the Glass-Steagall Act if elected and sees her as a pro-business Democrat who would not block trade deals like the Trans-Pacific Partnership(TPP).
Dr. Wescott said Trump is likely to be extreme in some respects but that it is hard to know what his policy stances are likely to be because he mainly speaks in generalities on the campaign trail. He talks of “making American great again”, and “building a wall between the US and Mexico (and forcing Mexico to pay for it!), “renegotiating trade deals to be more favorable to the US”, and “deporting all 11 million illegal immigrants in the US”. He also has said he would impose a 45% tariff on all Chinese imports into the US. However, in Dr. Wescott’s view Cruz would pose even bigger concerns from a business and investment point of view. He said Cruz would close the Environmental Protection Agency, close the Export-Import Bank, end the space program, NASA, cut government spending sharply, and also seek to deport all 11 million illegal immigrants in the US.
Next week, Dr.Wescott discusses China, and the impact of a slowdown on the US and European economies.