Election Fought On Championing "Les
Deplorables"
SPECIAL NOTE: This is a news analysis by R. “Ray” Wang
who is the Principal Analyst, Founder at Constellation Research, Inc that is intended
to help their international clients understand the true nature of the historic
US election and objectively understand the impact to clients.
A populist revolt
erupted in the United States throughout the 2016 presidential election. In
one of the most heated, combative, and unpredictable elections in American
history, Donald Trump emerged victorious early November 9th, 2016.
The
pillars of discontent stem from lack of middle class opportunity, unfair trade
deals, illegal immigration, and the selling out of the country in the name of
globalism.
Amidst a barrage of global and personal attacks by the
mainstream media to suppress the key issues of discontent, Donald Trump emerged
as the champion to not only give a populist voice to the revolt, but also
bridge the economic and digital divide between educated urban elites and the
average American.
Election results confirmed that the silent majority of
America had spoken up against the political correctness culture and
globalism. This appears to be the second incarnation of the Tea Party.
Despite the day after
media perception that the race was lost due to sexism, voting data proved that
women did not back Hillary as she only garnered 54% of the female vote compared
to Trump's 42%.
In fact the perpetuated fallacies by the mainstream
media have been debunked by exit polling data.
For example, Trump
(29%) garnered slightly more Hispanic votes than Romney (27%) despite the
calls against illegal immigration.
Clinton actually took 52% of voters
earning less than $50k while Trump only received (41%) of their votes.
The
big gap, as with BREXIT, was in the rural vote where Trump dominated with 62%
of voters versus Clinton's 34%.
POLITICAL: Call For
Unity Is Real
Former Secretary of
State and Presidential candidate, Hillary Clinton, called for unity and the
acceptance of the results on November 9th, 2016.
Immediately after Mrs.
Clinton conceded the election, President Obama publicly addressed the country
and committed to rooting for the President-Elect's Success.
On November
10th, 2016, President Obama met with President-Elect Trump at the White House
for 90 minutes as the First Ladies, Vice-Presidents, and staffers all got a
chance to meet each other.
While the election was
bitterly fought, the powers that be understand that peaceful transition of
power remains a bedrock of American democracy.
Left wing groups, fueled by
the media backlash and upset with the election, will continue to protest the
election for weeks to come.
However, the main impact will come with
Republican domination of:
- Presidency
- Senate
- House
- State governors
- State legistlatures
- Selection of the Supreme Court justices
Clients can expect a
more fiscally and socially conservative wave to come across America for the
next two to four years.
With full control of Congress and potentially the
Supreme Court, the onus is on the Donald Trump and the Republican Party to
deliver on the campaign promises or face the wrath of the populace.
ECONOMIC: Expect An
America-First Approach
Overall the outlook for
the economy appears to be optimistically positive.
While after market
trading was down as much as 3.5% post-election results, the Dow recovered with
at 275 point gain by the end of November 9th and the S&P 500 rose 1.11%.
Trump's clear stance on
economic policy provide a decisive and positive road map for
clients.
Expect the following actions to be set in motion in the first
year:
- Repatriation of $2.4 trillion of US overseas
profits. Policies will
be put in motion to bring back overseas profits at a lower more acceptable
tax rate while directing the reinvestment towards domestic
investment. This one-time windfall will open the door to new
domestic investments and job creation.
- Renewal in domestic infrastructure investment. While there is low expectation that the wall between
the US and Mexican border will be built, preliminary discussion with
Congress on both sides of the aisle call for significant investment in
highways, airports, schools, military, and veteran's healthcare. Keep
in mind Mexico has already built a wall on their southern border to keep
the Central Americans out. This outlook will mostly likely prove to
be the first bi-partisan act to pass congress in the first 100 days of a
Trump presidency. Trump is also expected to improve investment
conditions in the inner cities in order to improve opportunities to renew
the urban cores through education and job training.
- Renegotiation of bad trade deals. Trump clearly stated he wanted an America First
trade policy. Expect the Trump administration to put the top trade
negotiators on deals to move from lose-win to win-win deals. The goal
is to represent the average American and not negotiate one sided deals
that negatively handicap US competitiveness. The Transpacific Pacific
Partnership (TPP) will most likely be renegotiated or dead on arrival in
current form. NAFTA will be updated to address the China
loophole. The US will most likely lend assistance and leverage with
Britain in EU Brexit negotiations. The US will be aggressive in
enforcing trade imbalances and currency manipulations.
- Reduction in outsourcing but increase in near
sourcing. Expect
the America first approach to impact services as well as
manufacturing. While overall outsourcing is flat or down,
near-sourcing and the growth of local presence in US operations by Indian
IT services firms has grown. Given many Indian IT companies have a
significant US presence and employment in the US, this should not have as
severe impact as originally feared. Overseas firms can increase their
US presence in order to hedge their risks.
- Revaluation of the H-1B process delinked from
immigration policy. There
will probably be a relook at comprehensive immigration but the reform
needed in H1-B comes from a shortage in more visas. Unfortunately,
there is a common perception that US technology companies have abused the
process in order to find labor arbitrage for talent, so this portion may
receive more scrutiny.
- Return to lower tax rates. Corporate tax rates will drop to 15 to 20%. Personal income tax rates will collapse into 3 brackets of 12%, 25%, and 33%. Itemized deductions would be capped at $200,000. Dropping tax rates should encourage more direct foreign investment and stem the move of factories and corporate inversions. Moreover, simplification of the personal income tax and removal of the AHCA provision should free up consumer spending.
SOCIETAL: Prepare For A
More Conservative And Different Socially Tolerant America
Trump's movement did not
take the traditional GOP path of evangelical Christian pandering. However
he did make clear whom his potential Supreme Court nominees would
be. The Christian Coalition begrudgingly voted for Trump as he was seen as the better alternative for selecting supreme court nominees.
While this has social groups such as the LBGTQ community up in arms,
the Trump administration appears to be focused on job creation and not creating
social warfare.
Other members of Congress hopefully have not misread the mandate
as a push to a conservative social movement, as this is not the main root cause
of the Trump rise.
Economic disparity and opportunity is the fundamental
issue.
Trump's team has not
been focused on battling on social issues but the strong conservative influence
may affect other issues:
- Shift from activist judges to strict
constitutionists.
The key trait is a shift from appointing liberal activist judges who
failed to uphold the Constitution to appointing more Constitutional
traditionalists who take strict interpretations of the
Constitution. The correct solution is to update the Constitution
however, both sides benefit from a war rather than a solution.
- Enforce the rule of law. Recent attacks on law enforcement and the failure of
mayors and other executive branch leaders to enforce the law as written
have created a dangerous climate as race relations have
deteriorated. Expect a swift move to eliminate funding to Mayors who
support sanctuary cities, greater support for law enforcement at the
expense of some personal freedoms, and a championing of those in
blue. Expect cities such as Chicago with an increasing murder rate to
receive more attention to bring back law and order and respect for police
authority while involving the community in policing itself. Cop
killing is not acceptable by anyone. And yes, all lives must be
addressed fairly. Police corruption will also be addressed in a
similar manner of how the NYPD transformed itself.
- Battle on Illegal versus legal immigration. The media misconception of immigrant bashing by the
Republicans is far from the truth. The battle is against illegal
immigration. Both parties are in favor of legal
immigration. Illegal immigration is the equivalent of cutting in front
of a very long line and set of requirements that legal immigrants
follow. For those seeking to flee the US for Canada, a close look at
Canada's requirements shows a very exhaustive set of requirements that are
both demand and economically based along with the usual asylum
provisions. Trump is not against immigration. He wants to
improve the value of immigration by uprooting illegal
immigration. Should moderate forces influence him, a path to
citizenship and guest worker visa expansion will most likely emerge as
proposals.
- Repeal and replacement of ObamaCare. ObamaCare or the Affordable Healthcare Act has led to a very expensive expansion of coverage at an unsustainable cost. Replacement for Obamacare will most likely address provisions such as coverage of pre-conditions, under 26 dependent care, and competition across state lines.
The Bottom Line. A
Trump Presidency Will Focus First On Economic Issues While Swinging The Social
Pendulum Back To The Center
Early indications from
the stock market and from business leaders show hope in how Donald Trump
has transitioned from candidate to President-Elect.
Congressional
leaders across the aisle have all hinted a spirit of
cooperation.
The next 77 days until inauguration will require an
intense focus from the transition teams.
The good news - President
Obama's team has pledged to provide a seamless and classy transition as
President Bush did during their handover.
As with all presidencies,
the honeymoon typically lasts for the first 100 days and Trump has raised expectations
that he will have to quickly fulfill.
The sequence of his actions over the
next 180 days will dictate whether he will make America great again or have
provided another false hope as with the previous President.
Unlike European center
right parties which would still be seen as liberal in the United States, the
key shifts in the political environment, economic, and societal show a swing
back to a traditional American values center (circa 1980).
The Democrats
have enjoyed eight years of media backing and a dictatorial approach to
government while the Republicans actively blocked any movement they
could.
Any rapid movement by Trump to the right will be seen as a
loss to the left's progress.
Too slow of a movement to the center by
Trump will be seen as a failure to govern.
However, should President-Elect
Trump grow the economy, the social issues will fall aside.
Based on
Trump's playbook, this appears to be the plan. Grow the pie, increase
opportunities, and not hamper America in her efforts to come back.
