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Road to the White House 2020 begins to take shape

Graham Smith

Graham Smith - Market Commentator

If a week is a long time in politics, then a year might seem a virtual lifetime. However, that hasn’t stopped the race to the White House in 2020 from reaching an early fever pitch. While the sitting president wrestles with the wrong end of an impeachment inquiry, polls show an energetic septuagenarian senator from Massachusetts – Elizabeth Warren – emerging as the new Democratic frontrunner1.


At this stage, the Trump campaign may feel relatively untroubled. The sitting president’s particular brand of brash politics retains strong support across crucial battlegrounds in the Midwest and North East. From Pittsburgh steelworkers securing the biggest pay rise in years to the military benefiting from a level of spending not seen since the Iraq war, there are many who still applaud Trump’s “America first” mantra as the effects trickle down to workers2.

That’s just as well though, because the storm clouds gather. The threat of impeachment, lagged effects of trade tariffs on jobs and prices, and a slowing economy look set to dominate the final year of this president’s term in office.

Impeachment moves divide the American public and risk a backlash for Democrats, but they’re probably still having an impact on the president’s overall popularity. Trump’s approval rating among registered voters currently sits at around 41% while 54% disapprove of their president3.

From here, Trump will more than likely have to depend on incumbency and keeping the economy moving along to claim another term. The temptation will be to call upon strategies used before – tax cuts and more public spending – albeit that they will arrive this time as the budget deficit soars past the trillion dollar mark4.

Against that may be pitted Elizabeth Warren, currently vying with Bernie Sanders and former Vice President Joe Biden to win the Democratic nomination and change the political narrative. What Senator Warren currently lacks in official Democratic endorsements can already be made up for in popular support for a moderately radical policy agenda.

While a lot can change between now and next November, the early signs are Warren has been gathering support from disenchanted voters wishing for change, reminiscent of what happened during the campaign that lifted Democrat Bernie Sanders to prominence about a year before the last presidential election in 2016.

Like Donald Trump in 2015, Warren proposes tackling corruption in Washington and delivering economic and political power back to the people; bringing home troops deployed abroad; and using tariffs to crack down on certain countries. There, though, the similarities largely end.

The senator’s heavy agenda includes: Medicare for all; using $500 billion in federal funds to build affordable homes; separating commercial and investment banking activities; raising taxes on the very wealthy to help address income inequality; raising taxes on corporations earning more than $100 million per annum; increasing the minimum wage to $15 per hour; breaking up big technology companies; cutting military spending; and banning fracking5.

Each of these has the potential to affect US companies in differing, though largely negative ways, although Warren’s intended outcomes, like those of her would-be predecessors, would likely end up getting bogged down or diluted. For example, while it might be possible to ban fracking on federal land, imposing the same ban on private land would be considerably more difficult to achieve without broad congressional support.

Even so, plans to raise taxes on large US companies and wealthy individuals could make it through. Raising taxes in America requires only a simple majority in the Senate under so-called reconciliation rules. Higher taxes would have a budgetary impact, so would satisfy the general requirement of a reconciliation bill6.

Equally, plans to break up America’s largest digital companies like Amazon, Facebook and Google –apparently to promote greater competition – ought to be possible.

Whether many more contentious issues could make it to the statute book upon a Warren win would depend on congressional elections that determine the eventual makeup of the government. Without a shift in the balance of power in favour of the Democrats – probably in both the Senate and the House of Representatives – it’s hard to see how, for instance, policies such as Medicare for all or a new green deal could become a reality.

Warren’s stated policy of intervening to weaken the dollar in order to boost jobs and growth might also be difficult to implement, especially if slowing growth elsewhere in the world coincides with a continuing reticence on the part of the Federal Reserve to cut interest rates7.

Even so, Elizabeth Warren’s general direction of travel is clear enough. American voters in 2020 may end up facing a considerably starker choice in policy terms than ever they did four years ago, with distinct and divergent consequences for the US economy and large sections of corporate America.


1,3 Quinnipiac University Poll, 14.10.19
CNBC, 17.10.19, and Washington Post, 18.04.19
4 Congressional Budget Office, 21.08.19
5, 15.10.19
6 House Committee on the Budget, 06.09.18
7 CNBC, 04.06.19

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