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Global Interdependence Center

Round Table

U.S. Elections – 2016

Anger > Catharsis > More Polarization ?

Comments byJ. Paul Horne

Independent International Market Economist

22 March 2016

Cercle de l’Union Interalliée

Paris


2/26

Voter Anger – many reasons … few solutions

+ Wall Street = TBTF & TBTF & loses savings

+ Income inequality+ One man = one vote -- skewed by « Citizens United »

+ GOP obstructionism against Obama

+ Immigrants & Muslims

+ Political correctness

+ Climbing the ladder more difficult

+ Tough job market in « gig economy »

+ Trade deals = jobs go overseas

+ Globalization = everybody else cheats

+ « Browning of America » = the « others » are gaining+ « World going to hell » & The U.S. can’t stop it

+ « Shining city on the hill … »?

• See « The Great Unsettling » at: wapo.st/lookingforamerica

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3/26

A leading cause of American anger

• Source: The Brookings Institution – 15mar16

3

‘90s productivity

surge = job growth BRICs-a-breaking =new US jobs ?


4/26

• Source: BCA Research – « U.S. Election: The Great White Hype » - 9mar16

4

Either profits decline

or effective tax rises ?


5/26

5


6/26

6

Latinos = 16% of ElectoralCollege votes; 17.2% of

population.


7/26


7

Could myopic policies

be the reason ?


8/26


8

Independents = 39%


9/26

Delegate scores to 21 March

Republicans – to win = 1237:

Trump – 673; Cruz – 411; Rubio – 169; Kasich – 143

Convention: Cleveland (Quicken Loans Arena) - July 18-21

Democrats – to win = 2382:

Clinton – 1614 (467 super delegates)

Sanders – 856 (26 super delegates)Convention: Philadelphia (Wells Fargo Center) – July 25-28

9

Ex-candidates’ delegates

may be unbound dependingon state rules.


10/26

Needs no comment….

• Source: Toles in Washington Post – 9mar16

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11/26

“Brokered” convention rules after 1st ballot

•Republican Party. Under Rule 40b of the Republican NationalConvention rules, a candidate must have the support of a majority of the

delegates of at least eight states in order to get the nomination. Rule 40e

then states that if no candidate has received the majority of votes, "the

chairman of the convention shall direct the roll of the states be called again

and shall repeat the calling of the roll until a candidate shall have received a

majority of the votes."[8]

• Democratic Party. Under the Democratic National Convention rules, "A

majority vote of the Convention's delegates shall be required to nominate

the presidential candidate" and "Balloting will continue until a nominee is

selected".

[6]

The role of the superdelegates was established in-part to limitsuch conflicts and multi-rounds of voting on the convention floor, and

instead allow the candidates to woo these delegates before the

convention.[7]

• Source: https://en.wikipedia.org/wiki/Brokered_convention

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https://en.wikipedia.org/wiki/Republican_National_Conventionhttps://en.wikipedia.org/wiki/Republican_National_Conventionhttps://en.wikipedia.org/wiki/Brokered_convention#cite_note-8https://en.wikipedia.org/wiki/Democratic_National_Conventionhttps://en.wikipedia.org/wiki/Brokered_convention#cite_note-6https://en.wikipedia.org/wiki/Brokered_convention#cite_note-7https://en.wikipedia.org/wiki/Brokered_conventionhttps://en.wikipedia.org/wiki/Brokered_conventionhttps://en.wikipedia.org/wiki/Brokered_convention#cite_note-7https://en.wikipedia.org/wiki/Brokered_convention#cite_note-6https://en.wikipedia.org/wiki/Democratic_National_Conventionhttps://en.wikipedia.org/wiki/Brokered_convention#cite_note-8https://en.wikipedia.org/wiki/Republican_National_Conventionhttps://en.wikipedia.org/wiki/Republican_National_Convention


12/26

Trump plans costly & depend on magical GDP

• Source: CRFB assessment based on CBO current 10-year baseline scenario. 29feb16

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13/26

Trump plans impact on revenues

10-Year Cost ($ tn) *

+ Reform U.S. – China relationship N/A

+ « Protect Second Amendment Rights » N/A

+ « Reform the Immigration System » N/A

+ Reform the Veterans Affairs (VA) System » + $ 0.5 – $1.0

+ Reform Individual & Business Taxes + $ 9.5 - $11.9

Sub-Total of tax & spending proposals : + $ 10 – 12.9

Net interest costs + $ 1.7 – 2.2

Total 10-year cost of Trump’s proposals (as of 29feb16): + $ 11.7 to 15.1

Footnote: U.S. GDP = $18.15 tn in 4Q15

• * Note: Committee for a Responsible Federal Budget - 10-yr. cost ($ tn) estimate

relative to CBO’s ten-year baseline scenario – 29feb16

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14/26

Trump plan would be unhealthy for many

• Source: CRFB « The Bottom Line » - Based on Trump’s announced plans. 18mar16

14


15/26

Cruz plans’ impact on revenues

10-Year Cost ($ tn) *

+ « Rein in Washington » thru « Five for Freedom » plan – - $ 0.5

+ « Defend our Nation » & « Rebuild America’s military » - + $ 2.4

+ « Secure the Border » N/A

+ « Stand with Israel » N/A

+ « Repeal Obamacare » + $ 0.4

+ « Promote growth w/ Regulatory Reform, Energy Renaissance etc N/A+ « Simple Flat Tax » + $ 8.3

Sub-Total of tax & spending proposals : + $ 10.5

Net interest costs + $ 1.7

Total 10-year cost of Cruz’ proposals : + $ 12.3



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16/26

Cruz = GDP miracle to offset fiscal drag

GDP growth must soar Spending cuts = big fiscal drag


17/26

Clinton’s plans impact on revenue

10-Year Tax Revenue Chgs. ($ bn) *

+ « Buffett rule » - minimum 30% tax on incomes >$1mn - $ 65 bn

+ Surcharge of 4% on incomes > $5 mn - $ 150 bn

+ Estate tax restored to 2009 parameters - $ 140 bn

+ Derivatives taxed on all transactions by value - $ 15 bn

+ Close « carried interest » - $ 15 bn

+ Close estate tax loopholes - $ 10 bn

+ Close « Bermuda reinsurance loophole » - $ 10 bn

+ Retirement accounts – tax benefits limted to $3.4 mn - $ 5 bn

+ Mis-classifying earned income as capital gains, etc. - $ up to 90 bnTotal additional tax revenues: $ 410 – 500 bn



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18/26

• Source: CRFBM: 10-yr. cost ($ tn) estimate relative to CBO’s 10-year baseline

scenario; before interest & economic impact – 29feb16

18

Negative numbers = extra costs.


19/26

• Source: CRFB – estimated cumulative top tax rates on earned income based on

Sanders’ announced plans plus existing rates. Top Federal rate, including Social

Security & Medicare, would rise to 77% from 43.8% before « interactions ».

19

Top rate in 1980 = 72%.


20/26

Candidates’ impact on top tax rates

• Source: CRFB estimates based on CBO 10-yr. Baseline scenario – 29feb16

20

Hillary stays close to

current total.


21/26

Candidates’ impact on revenues

• Source: CRFB estimates based on CBO 10-yr. Baseline scenario ) 29feb16

21

Hillary stays close

to CBO baseline.


22/26

GOP - House FY17 budget targets safety net

Policy Changes in the House FY 2017 Budget

Budget Category 2017-2026 Savings

Affordable Care Act $2,013 billion

Medicaid and Other Health $1,028 billion

Medicare (net) $449 billion

Social Security $14 billion

Other Mandatory $1,471 billion

Discretionary and Highway $690 billion

Revenue $0 billion

Interest $818 billion

Subtotal, Policy Savings $6,482 billion

Economic Effect of Deficit

Reduction $241 billion

Economic Effect of ACA Repeal $254 billion

Subtotal, Claimed Savings with

Economic Effects $6,977 billion

Baseline Adjustments* $900 billion Total, Claimed Savings Compared

to CBO January Baseline $7,877 billion

• Source: CRFB assessment of House FY2017 budget based on CBO baseline scenario

to 2026. 15mar16

22

GOP policies target huge

cuts in government.


23/26

House budget aims to slash forecast US debt

• Source: CRFB – « The Bottom Line » - Estimates based on CBO baseline. 18mar16

23

Economic effect of reduced govt

spending cud be recessionary.


24/26

GOP cuts in govt spending = Fiscal drag on GDP

24

Federal Govt's net contribution (%) to real GDP

2010 2011 2012 2013 2014 2015

0.02 -0.65 -0.38 -0.58 -0.11 0.13

Source: Bureau of Economic Analysis - Historical data thru 2015


25/26

Memorable pundit points

+ Old lady about the builder of Trump Tower: « Peacock today, feather duster

tomorrow. »

+ Danielle Pletka, Sr. VP American Enterprise Institute, in FT: And so America has come

to a pretty pass, pitting a woman who is anathema to many against a man who

reminds us of Benito Mussolini. Are we not better than this ? »

+ Thomas G. Donlan, Barron’s op-editorialist: « Responsable Republicans should realize

they are being bullied out of their party. They must decide soon whether they will

sit out this presidential election, start a new party, or join the other one. »

+ The Economist: « … it could soon be too late to prevent the party of Abraham Lincoln

from being led into a presidential election by Donald Trump. »

+ Charlie Cook on Cruz: Formidable but wouldn’t want to spend a day with him in asmall boat on a large lake. »

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26/26

Populism + nationalism = “Pitchfork effect”

• Source: Internet – 1mar16

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The FN wants to block allimmigrants & refugees;

and force France to quit

the euro and the EU.

UK votes on Brexit 23

June; Catalonia voted

independence from

Madrid; Greece may still

vote Grexit; Poland,

Slovakia & Hungary defyEU rules & values.

gic paris us election 22 mar 16

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