Five Takeaways from the US Presidential Campaign (February 15th, 2016)

Published 10 June 2016 by Nordeq Management A/S

The US presidential campaign is now well and truly underway with the results of the Iowa caucuses and the New Hampshire primaries announced. Here are five talking points following the first two results.


The Trump Campaign is Real

The big talking point from Iowa was whether Donald J Trump’s unconventional campaign was all it was cracked up to be, following his disappointing second place. Mr Trump was uncharacteristically muted in the days that followed, and psephologists asked whether you could win a nomination without investing in electoral data and with plentiful workers on the ground.

The New Hampshire result dispelled those doubts. Mr Trump posted over 35% of the vote, comfortably beating all others. Ted Cruz, the winner in Iowa finished in third place, 25% back. The Trump campaign is therefore very much back on course heading into more diverse states. With powerful name recognition, a clear position as an anti-establishment candidate, and huge financial resources, Mr Trump is in a strong position going forward.

What is unclear is how far he is ahead of Mr Cruz, the alternative insurgent. Although Mr Cruz, as a Texan senator, is nominally a political insider the reality is vastly different: hated by almost everyone in Washington, particularly his own party, his pugnacious style and uncompromising policies are popular amongst Tea Party activists on the party right.

Mr Cruz’s favourable result in Iowa can be put down to that state’s huge evangelical movement; Mr Trump, on the other hand, seems to go down well with non-ideological pragmatists who are, nonetheless, disillusioned with the Republican establishment and warm to Mr Trump’s straight talking tendencies. In the long-term there will likely only be space for one insurgent in the final run-in, so the two campaigns are effectively direct competitors. Whether Mr Trump’s campaign succeeds will come partly down to whether he can chip away at Mr Cruz’s appeal to Tea Party activists.


Who Will be the Establishment Candidate?

The Republican establishment saw Ted Cruz’s campaign coming years ago. He openly claimed President Obama was seeking to “destroy the Constitution”; he complained that his Republican stable mates were a “surrender caucus”; and he gloried in his own unpopularity claiming that he was taking on a cartel. It was clear that Mr Cruz was building strong links with grass roots activists and was popular amongst reactionary voters. His Presidential campaign was always going to be strong, but the establishment felt they could manage it.

Then came something they didn’t see. Donald Trump came in from left field (or is that right field?) making one outlandish comment after the other. After each comment, it was expected that his rating would fall; they never did. Instead, party apparatchiks are now coming to terms with the fact that Mr Trump’s campaign could win. And this means they absolutely have to do something; they loathe Mr Cruz but they feel that Mr Trump’s insensitive, and often bizarre, comments will create irreparable damage to the Republican party’s brand.

The establishment have two facts to give them solace: firstly, although both Messrs Cruz and Trump are generally popular amongst Republicans, they are incredibly divisive. Even within their own party many openly dislike (even hate) them. Polling shows that they have little chance of swaying the centrist independents American elections are decided upon. Put simply a more moderate, less divisive candidate gives the Republicans a far better chance of reclaiming the White House and that is a critical consideration for many primary voters.

Secondly, although both insurgents are off to a flying start, there are clearly many voters who want the party to move in another direction. The problem has been that this moderate, establishment vote has been split between diffuse candidates. If the moderates could consolidate behind one head candidate they still have a strong chance of winning.

The problem with this is there is no clear consensus on the identity of this person. New Jersey Governor Chris Christie dropped out of the race after a disappointing showing in New Hampshire, and so there are now three realistic contenders for this role. Marco Rubio, a Florida senator has many things going for him: youngish, handsome, and, as the son of a Cuban bartender, the embodiment of the American Dream. Many Democrats privately fear that in an eventual run-off with Hillary Clinton, he could successfully present himself as the fresh face of a more diverse America as opposed to the same staid, old white power-brokers. However, Mr Rubio is inexperienced and can appear robotic – indeed, he came across terribly in a New Hampshire debate by repeating a worn soundbite, and the pugnacious Chris Christie delighted in bringing “the memorized 25-second speech” to the audience’s attention.

The second contender is the Ohio Governor, John Kasich, who came a surprisingly strong second in New Hampshire. Mr Kasich is an experienced operator and his unrelentingly positive message contrasts favourably with a lot of the other doom-mongers in the race. However, he has little name recognition nationally and will need to perform strongly in the next couple of primaries in order to prove his credibility to major donors.

The final contender is establishment through and through, namely former Florida Governor Jeb Bush, son and brother of former Presidents. The favourite in the autumn, Mr Bush never found an answer to Donald Trump’s aggressive attacks and has seen his campaign fade. His fourth place in New Hampshire was just enough to justify him limping on. Whilst his first two results have been unimpressive, candidates have won before from difficult position (John McCain won the eventual nomination in 2008 after winning only one of the first four states). When you add the unprecedentedly volatile nature of this race, there is still plenty to play for.

Mr Bush enjoys certain clear advantages: for a start he has name recognition and his brother, whilst derided internationally, remains popular with the classic middle-America independents that presidential races hinge upon. He has plenty experience and deep connections inside the party, which means that he has already amassed a huge war chest. Despite his establishment background, Mr Bush may appeal to Hispanics (his wife is Mexican and he speaks fluent Spanish). All these advantages will come to naught though unless he starts being more aggressive in his approach and matches up better against Mr Trump.

Mr Bush now appears to going all in for South Carolina, enlisting the help of his brother in a state where the military features significantly. If he has a strong finish here then he is very much back in the race; if he doesn’t, expect pressure behind the scenes from his financial backers to step aside to allow Mr Rubio a clearer run.


The Race is on for the Democrats

Not long ago, the idea that a self-styled “democratic socialist” who commends the Scandinavian model, wants free higher education for all and seeks to curb Wall Street power, would win New Hampshire and come within a whisker of victory in Iowa, would be unthinkable. The situation is, though, very real now as Bernie Sanders followed his “virtual tie” in the Hawkeye State with a stunning 20 point plus win in New England.

Mr Sanders’ campaign has built up impressive momentum thanks to a perfect storm of stagnating wages for manual workers over several decades; a backlash against the finance industry following the 2008 crisis; and lingering concerns over Hillary Clinton. What first looked like an autumn fling has now mutated into full-blown movement.

That said, very few analysts expect Mr Sanders to win the presidency. Although he is raising money quickly from online donors, Mrs Clinton’s campaign still has a clear edge in structure, money and name recognition. These advantages matter less in the small, one-off states we have seen so far, but will be a major advantage going forward, particularly in the so-called SEC primaries on 1 March where nine diverse states vote. Added to this, Mrs Clinton is polling far more strongly with Hispanics and African-Americans than Mr Sanders, whose appeal is strongest amongst the traditional white working and middle classes. The demographics of New Hampshire (which neighbours his home state of Vermont) and Iowa, being almost entirely white, favoured Mr Sanders; realistically, to be ahead at this stage he needed to win Iowa as comfortably as he won New Hampshire.

What is clear though is that we have a proper race on our hands. Mr Sanders may still be the massive underdog but he has proven his message has significant traction and has built serious momentum. Mrs Clinton needs to stop this as soon as possible; otherwise she risks having a long and attritional fight on her hands.


Life Imitates Art

Super Bowl 50, held in the Bay Area on February 6 between the Denver Broncos and the Carolina Panthers, was rich in storylines. The Broncos’ win was a historic shock; MVP (man of the match) Von Miller put up one of the most dominant defensive displays of all time; and quarterback Peyton Manning won that elusive second Super Bowl in what was probably the last game of his illustrious career.

However, if you scratch beneath the sensational veneer there was one problem with the game; the standard of play was often horrible with huge passages more akin to a high school game than the highest level on the planet. The Panthers, robust defense apart, were shockingly bad with a shaky kicker, a quarterback who overthrew regularly, receivers who couldn’t catch the ball, and a line which made sundry mental errors. And although the Broncos’ swarming defense was outstanding, even the Peyton Manning narrative loses luster upon closer examination; he has struggled through the season and his Super Bowl performance was one of the worst of any winning quarterback in recent history.

The presidential race echoes this status. On paper it is hugely invigorating and exciting with all types of groundbreaking stories, from the continued success of Donald Trump, to the ups and downs of the other Republican hopefuls and the unprecedented traction of a self-styled socialist.

However, examine a little more deeply and you get the real truth; a lot of the debate has been poor. Donald Trump’s success, for example, seems to be based on little other than making increasingly provocative (and headline grabbing) comments and appearing as the polar opposite to the Republican establishment. The same establishment has not done itself any favours; from Marco Rubio’s implosion at the hands of Chris Christie to Jeb Bush’s inability to land any blows on Mr Trump. In short, one of the reasons Mr Trump has been so successful is that the establishment candidates have produced neither the rhetoric nor the policies to repudiate his outlandish claims.

Whilst the tone on the Democrats side has been more sobre, the ascent of Bernie Sanders is as much an illustration of Mrs Clinton’s limitations than his own popularity. Most Democrats are aware that Mr Sanders’ big government patch has limited appeal beyond core Democrats, yet they vote for him anyway. Mrs Clinton has given them little to believe in; if she had taken stock of some of the disconnect there is with voters, with sensible, moderate policies to tackle inequality and limit some of the excesses of the finance industry, then it is likely that Mr Sanders’ campaign would never have picked up the same momentum. Instead, she offered little other than a safe pair of hands, which lead ideologically driven voters into the waiting, grateful hands of Mr Sanders.


The Middle Ground is Shrinking

The one striking result from both parties so far has been the success of the insurgents – on the Democrat side “democratic socialist” Bernie Sanders, and on the Republican side, evangelical fighter Ted Cruz and a billionaire reality show star who wants to ban non-American Muslims from the country. The traditional, pragmatic, centrist ground seems to be under serious pressure.

The US is not the only country where this has happened. In the United Kingdom, the anti-immigration, anti-EU, UK Independence Party have pushed the terms of the Conservative’s debate to the right, whilst far-left Jeremy Corbyn is now the leader of the Labour Party. In the Nordic countries, anti-immigration parties on the right have had increasing success at the expense of centrists, whilst far-left parties hold their own.

These countries show variants of the same thing: there is considerable disenchantment with the political system, which is pushing people away from the centre ground. How this will impact the eventual vote for president in November is difficult to say. If the final vote is Hillary Clinton against a moderate Republican (say Jeb Bush or Marco Rubio) expect the classic race to the middle upon being nominated as both candidates will be keen to appeal to independents.

If Ted Cruz were to be nominated then the dynamic would be different, particularly in the unlikely event that he was up against Bernie Sanders. Mr Cruz’ could not credibly tack to the middle in the way moderates could which would mean that he would have little option than ramping up his traditional rhetoric in the race. Any presidential race would then turn into a quasi-referendum on his evangelical values.

Either way, the move to the political wings has been caused by a real disconnect between the political establishment and those at grass roots. Even if two moderates end up squaring off, they need to remember to address those very real underlying issues. A traditional race to the middle could win an election but would simply brush the existing disconnect under the carpet, storing up problems in the linger term.

Neil Smith