Washington Overview


The main focus of BocaWatch is to keep our readers informed on the items and issues going on in our community. However, with all eyes on the national political scene, we will be sharing the Washington Overview from one of our contributing writers John Gore, who internationally covers the ‘big picture’ beyond Boca Raton regarding national politics and the November election.

Donald Trump selected Indiana Governor Mike Pence to be his Vice Presidential running mate, Hillary Clinton chose Virginia Senator Tim Kaine, and the latest polls show them locked in a close race.   Do not attach much importance to any of this.

Both Pence and Kaine are solid, safe picks. Pence might help convince some wayward Republicans and evangelicals to return to the fold and Kaine might help Clinton carry the key battleground state of Virginia, but the strengths of both men lie in their ability to govern, rather than to arouse the electorate. As is often the case in US politics, one could argue that each would be a better President than the person who chose them.

As far as the polls are concerned, it is way too early in the process to attach real significance to them. Despite the chaotic nature of both conventions, both Clinton and Trump received the customary “bump” in the polls. By almost every measure, they are locked in a close contest that will be decided by voters in 7 or 8 swing states.

Rather than look to the polls at this stage of the election cycle, look at the fundamentals. As far as Trump is concerned, I said in May that in order to win in November he must get at least 30% of the Hispanic vote, over 40% of women voters and at least 90% of registered Republicans. Since then, he has done almost nothing to improve his position with Hispanics. His “law and order” and national security positions have some appeal to women, but not much. He has made the most progress in winning over rank-and-file Republicans, but even there one strongly suspects he is falling short of the numbers he needs. I also questioned whether a more “Presidential” sounding Trump would be able to reduce his negative ratings below 50%. While he has managed to tone down his act slightly, his negatives are still sky high. Not looking good.

But things are not looking that much better for Secretary Clinton. The key questions about her back in May were 1) will the FBI recommend prosecution for the e-mail scandal, and 2) will Hispanics, African-Americans and young voters be lukewarm in their support for her? The FBI did not recommend prosecution, but the Director accused her of being “extremely careless” and of not telling the truth, a.k.a. lying, on numerous occasions regarding her e-mail use. It was not a recommendation for indictment, but it was a stinging personal indictment that did nothing to improve her “trustworthy” image. As far as blacks are concerned, the key is whether they will turn out in record numbers in key swing states such as Georgia.  The same is true for Hispanics in key states such as Colorado and Florida. That will be a heavy lift, but Clinton is talking up race issues in the hopes of generating turnout.   And she has a formidable get-out-the-vote apparatus.

The final question—what will young voters do?—was illuminated by the dynamics of the Democrat convention. Despite Sanders’ plea to support Clinton, many of his young backers were unmoved. Could it be that they cared more about the positions Sanders’ took than for the man himself? If young voters in America have taken a decided turn to the left, will historically-centrist Clinton be able to convince them to join her for a third term of “more of the same”? Or will they just stay home in November?

In short, both Trump and Clinton face the same problem: they need to broaden the base of their appeal. Clinton’s advantage is demographic. Trump’s advantage is that almost 70% of voters believe that America is on the “wrong track.” That is a level of popular dissatisfaction not seen in modern US elections, and is the true wild card in 2016. A final question is this: Mrs. Clinton is trying to build on Obama’s record and to paint an optimistic future; Trump says America is in trouble. Are events between now and November 8th likely to reinforce her position or his?

Turning from politics to policy, although Congress is in recess until the fall, there are two issues worth discussing: trade and taxes. After successfully winning a “fast track” approval process from Congress, the President’s Pacific trade deal is in serious trouble. Both Presidential candidates have come out against it. Mrs. Clinton’s conversion was politically driven rather than based on her historical positions on trade. Whatever her motivations, the fact that she has publicly called for rejection of the TPP by Congress makes it highly unlikely that President Obama will be able to win approval for the deal in a post-election lame duck session. So it is likely that the TPP will have to be renegotiated once a new President takes office in 2017.

The European trade pact faces similar headwinds, but negotiators have time to adjust to the new political reality regarding trade. That reality is that “free trade” is no longer considered a global economic panacea. The world may not be facing a return to beggar thy neighbor, but trade policy will increasingly be seen and used as a weapon rather than as an incentive.  In such a climate, big multilateral trade deals may be impossible to achieve. Trade negotiators will instead seek advantage in country-by-country negotiations. “Free trade” will be replaced by “fair trade” with all the risks and rewards that entails.

On taxes, pressure for tax “reform” has been building for years. Given the amount of special interest involvement—not to mention the ideological divide between Republicans and Democrats— reaching a consensus on rewriting the tax code is a long and tedious process. The last major reform bill was in 1986, but the groundwork was laid years before President Reagan and Speaker O’Neill reached their historic bargain. In similar fashion, House Republicans this month finally produced a blueprint for tax reform that could underpin negotiations with the next Administration.

For that reason, the key elements of their plan are worth noting. Their blueprint would generally lower tax rates and broaden the tax base (eliminate preference items). Corporations would pay a flat tax rate of 20%. The top individual rate would be 33%, but all itemized deductions except the mortgage interest and charitable contributions would be eliminated. Debt and equity would receive more equal tax treatment than under the current system. The current business deduction for interest expense on a net basis would be eliminated. The key international provision of their plan would move to a territorial tax system with a 100% exemption for dividends paid from the future earnings of foreign subsidiaries. It would impose an 8.75% tax on previously untaxed accumulated foreign earnings and a 3.5% tax on all other accumulated foreign earnings, payable over eight years.

The House Republicans’ plan hits all of the current tax hot button issues. The major difference between their proposal and various Democrat alternatives is the level of taxation on high-income earners and the variety of “special interest loopholes” to be eliminated. But given the comprehensive nature of their blueprint and the effort they expended to produce it, one could see such a document serving as a starting point for tax reform negotiations with the next President.

Tax reform and future trade deals (if any) will be the focus of 2017 and beyond. In the meantime, the 2016 U.S. Presidential election campaign is in full flight. The good news is that it will all be over in about 100 days.

John C. Gore, Washington DC, August 1, 2016









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