insights-us-earnings

From salamanders to social media - the unpredictable and unprecedented race for the White House.

 

Gideon Rachman ran a competition in the Financial Times over the last month, in which he set an "exam paper from the future". He asked readers to imagine living in 2066 and to write a 900 word essay in response to a list of questions. The most popular topic was "Donald Trump was not an accident, but the logical culmination of long-term trends in politics and society".

We don't have the luxury of fifty years' of reflection when considering the rise of Trump and the outcome of the US presidential election. But at Adam & Company we have had access to some remarkable insight into the process, the potential outcome and the germination of this epic presidential battle.

Last night we hosted:

Douglas Alexander (former Minister for Europe and Trade & Investment, former Shadow Foreign Secretary, now on the faculty of Harvard's Kennedy School of Government); Professor Chris Carman (Leading political scientist at Glasgow University); in conversation with Sarah Smith (BBC Scotland Editor and former Washington correspondent for Channel 4) in front of an audience at Adam & Company's Edinburgh offices.

Professor Chris Carman ran through what we should expect from the electoral process next week.

The national polls – which have Trump polling 40-45% and Clinton at 45-49% - have stayed relatively steady, but with regular pulses of tightening and widening often driven by who was in the news. In this out-of-the-ordinary race coverage has not been good for ratings. But Professor Carman suggested that to concentrate on the national polls is to oversimplify the issue.

The path to the White House is best understood as a State-by-State vote. Each State has Electoral College votes, ranging from 3 in the least populated states like Nebraska to 55 in California, which has the largest population. It takes 270 votes in the Elector College to win. There are key ‘swing states’ (so called because they can swing the election in favour of either candidate) that are still hard to predict, and which Chris Carman believes Trump must win if he is to be within spitting distance of the Presidency. Some of these States are polling within the margin of error for each candidate.

Image of graph showing Swing States, how they seem to be leaning

"Trump shakes things up. And it's easy to see why some want things shaken up"

Congress: The Senate and House of Representatives - Congress

'There are over half a million elected positions in the US'

When voters go to the polls on Tuesday, they will not just consider whether they will elect Clinton or Trump for President, but also select candidates ‘down the ticket’ – including 34 Senate seats and the entire House of Representatives as well as state level elections and local referendums on individual propositions.

What happens in the Senate and House of Representatives is crucial. Chris explained that there is a strong possibility that the Senate race could end in a 50/50 split of the 100 Senate seats. In this case the Vice President – either Tim Kaine or Mike Pence – will have a casting vote. The Senate has important powers – including approving appointments to key federal offices, and confirming (or blocking) the President’s appointment of Supreme Court Justices.

The House of Representatives controls budget and spending, yet unless the Democrats “win big” it is very likely that they are unlikely to have a majority. Gerrymandering means that constituency boundaries have been manipulated so effectively that it is hard to overturn many seats in the house without a radical shift in voting intentions.

“Gerrymander” comes from a combination of words. Governor Elbridge Gerry of Massachusetts redrew a new voting district when he was in power, in the shape of a salamander.

"There is no longer right or left, there is nationalism or globalism" (Marine le Pen)

The Outcome

The outcome of the presidential race is made harder to predict by several unprecedented factors:

  • This isn’t just an election that divides the vote on gender or racial grounds, but for the first time, there is a gulf between the voting intentions of college and non-college educated voters, who are backing the Democrats and the Republicans respectively
  • Trump is not playing a traditional ‘get out the vote’ game – he does not have a groundswell of supporters knocking on doors, campaigning locally – he is out-gunned here 6:1 by the Clinton campaign
  • Trump and Clinton are both among the least-popular candidates in history. Pollsters may not be able to gain accurate results from their surveys – there may be ‘shy’ Republicans or Democrats not willing to declare their intentions. Two thirds of Trump voters are not his grass root supporters but rather ‘Hillary-haters’ – and the reverse is true for Clinton

 

Gridlock

Chris’ base prediction is that Clinton is still most likely to win, but that the House of Representatives will stay Republican. This means that legislative progress will be slow and stymied at many turns. While a Clinton win should provide some continuity from Obama’s work, she will find it difficult pushing vaunted spending programmes, such as increased infrastructure spend, through an openly hostile House. Republicans have already promised rounds of congressional hearings on Hillary’s speeches to Wall Street banks, the ongoing email scandal and the financial propriety of the Clinton Foundation.

Trump’s issues are manifold. His unconventional approach, lack of political experience and alienation of many senior Republicans and campaign managers means that creating a strong cabinet and coterie of close advisers will be challenging.

Douglas Alexander arrived fresh from a week at Harvard’s Kennedy School of Government where he is a Senior Fellow. The key question he addressed is perhaps simply encapsulated – how did we get here?

 

Image of chart showing voters opinion

We are facing a time when ‘democratic norms’ are being turned on their head. As Douglas put it, in conventional politics, ‘we could share facts but disagree on opinions’. But now we are living in an era of post-factual politics – such as we witnessed during the Brexit campaign – where facts didn’t seem to matter and Michael Gove famously declared that the electorate “had had enough of experts”.

Instead voters took to family and friends for guidance. Social media has an important impact. Facebook friends and Twitter followers tend to share similar views and simply reinforce beliefs and prejudices.

Douglas expressed his belief that voters for Trump (and, to some extent, Brexit) felt a deep sense of economic anger that they were falling behind, their wages had stagnated and living standards had fallen, while others were succeeding.

 

Voters feel a cultural anxiety about their place in the world, and a sense of alienation from government. In this sense Hillary Clinton is not the Democrat that could win their vote, as she is seen as an elitist insider, whereas Trump shakes things up. And it’s easy to see why some want things shaken up.

  • One in six US prime-age blue collar males are out of the labour force – the highest in any wealthy nation bar Italy
  • Half of these are on prescription painkillers and two thirds are on opioids
  • Mortality gap between low income and high income men has risen from five years in 1970 to fifteen years now

(Edward Luce, FT, 9 October 2016) 

Image of Real Household Income graph

In this context, it is easier to understand the reactionary nostalgia that Trump invokes. In some sense it doesn’t matter whether Trump can make America great again – people voting for him sense nothing to lose, because, as Douglas says, “they don’t feel like they have any equity in the status quo”. If you have nothing to lose, traditional Republican tax cuts and small government means little – the white working class voting for Trump want change, and want a government that works for them. Trump has vowed to leave entitlement spending alone.

Image of ethnic and racial diversity graph

And what happens next?

If Trump loses, markets would hope for an orderly concession. The chances of this in a tight result are low, which would cause volatility and uncertainty. However in the longer term, it’s not obvious who Trump voters may turn to identify with. Another candidate could emerge, or perhaps Republicans and Democrats may reappraise their approach. A lot of younger Democrats identified much more strongly with Bernie Sanders in the selection of the Democrat nominee. Trump’s next iteration may appeal to a broader base.

Douglas and Chris highlighted that the nostalgia felt by Trump voters speaks to a broader theme, and something that might be considered a paradigm shift to those essay-writers in 2066. Marine le Pen said that “there is no longer right or left, there is nationalism or globalism” – and Trump is tapping into a sense of a search for cultural identity that surpasses economic interests.

It will be hard to reverse the sense of toxic distrusts in institutions, the mainstream media and “political elites”, now the facts don’t get in the way anymore. How sustainable that is might also take until 2066 to figure out.

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