U.S. Overview: Political and Economic Currents After the Midterm Elections

Economic Outlook and Risks

• Current Growth: The U.S. economy is projected to grow between 2.5% and 3% through 2019 with low inflation.
• Household Strength: Real wage growth has doubled to 3% over the past two years, and overall household balance sheets remain robust.
• Future Risks: Significant downside risks are anticipated post-2019 regarding trade policy, housing sector volatility, and monetary policy normalization.
• Long-Term Fiscal Health: The federal budget outlook is described as "horrible," characterized by an increasing divergence between revenues and spending.
• Infrastructure Challenges: The U.S. lacks an asset-recycling model (like Australia's) for infrastructure funding, with most budget funds pre-committed to pensions and health programs.
• Productivity: Long-term growth is constrained by stagnant U.S. productivity growth.
• Recession Probability: Panelists generally reject near-term recession risks, noting that the household sector drives two-thirds of the economy and remains in good shape.
• Regulatory Impact: The Trump administration reportedly finalized zero costly new regulations during its first term, contrasting with an average of 1.1 per day under the Obama administration.
• Tax Legislation: Tax reform is viewed as providing runway for growth, though the legislation contained significant implementation gaps requiring bipartisan fixes.

Political Dynamics and the 2020 Election

• Democratic Nominees: Potential candidates include a "first tier" of Joe Biden, Bernie Sanders, Elizabeth Warren, Kamala Harris, and Cory Booker; a "second tier" includes Terry McAuliffe, Mitch Landrieu, and Steve Bullock.
• 2020 Campaign Nature: The Democratic primary is expected to be intellectually driven and policy-focused, contrasting with the personal attacks seen in the Republican primary.
• Republican Base: Donald Trump remains highly popular among the GOP base, with over 90% of his endorsed primary candidates winning; he is seen as the dominant figure within the party.
• Impeachment Feasibility: Panelists agree impeachment is unlikely to succeed in the House due to insufficient votes, and even if passed, it would likely fail in the Senate.
• Congressional Focus: Democrats are expected to balance oversight of the Trump administration with a forward-looking agenda focusing on infrastructure and healthcare costs to retain leadership positions.
• Legislative Outlook: The Trump administration is expected to have no major legislative agenda, relying instead on executive actions regarding trade and immigration.
• Civility Concerns: Panelists warn that increasing political incivility, where opponents are labeled "stupid or evil," threatens to destroy the societal fabric and focus of governance.

Trade Policy and Geopolitics

• Tariffs: Steel tariffs implemented by the Trump administration were deemed harmful to consumers and economically damaging, inviting WTO rulings of illegality.
• China Strategy: While the administration identified legitimate grievances regarding China (IP theft, currency manipulation), panelists argue the President lacks a coherent strategy and engages in unnecessary conflicts with allies.
• Trade Agreements: The renegotiated trade deal (USMCA) reportedly contains higher tariffs and barriers than the original NAFTA, contradicting the administration's stated goals.
• Public Sentiment: Trade ranked 16th out of 16 issues for voters in the 2018 midterms, though specific groups like Iowa soybean farmers feel immediate economic pain from retaliatory tariffs.
• Global Shift: There is a consensus that economic power is shifting toward Asia, driven by superior educational rigor and focus in China and other Eastern nations compared to the U.S.

Education and Social Issues

• Education Gap: U.S. K-12 education is failing relative to international competitors; American students are prioritized on happiness over academic rigor compared to Chinese peers.
• Impact on Competitiveness: Panelists argue that without addressing the education gap, the U.S. will lose in the 21st-century global economy regardless of trade policy.
• Family Structure: Frank Luntz emphasizes that societal reconciliation requires healing the family unit through specific actions: weekly family dinners, homework checks, vacations without phones, religious participation, and team sports.
• Civility Solutions: Suggestions for restoring civility include appointing veterans to office, who bring institutional dignity, and engaging in bipartisan dialogue at the state and local levels rather than solely at Congress.

Key Quotes and Forward-Looking Statements

• Frank Luntz: "We are taxed from the moment we wake up in the morning to the moment we go to sleep at night... we are taxed from our cradle to our grave."
• Frank Luntz: "To the average person... 'growth rate' sounds like it's Oxford or Cambridge language... we have to humanize it, personalize and individualize our discussion."
• Adrienne Elrod: "President Trump will have a very difficult time getting reelected if Congress and the Trump administration does not do something about wage growth."
• Douglas Holtz-Eakin: "The federal government is the most systemically important and dysfunctional financial institution in the United States."
• Frank Luntz: "If our kids aren't better educated right now, America's going to lose... I'm so pessimistic."
• Steve Krouskos: "The U.S. is still the most popular destination for capital placement, and I don't think that's going to change."
• Sarah Latham: "We don't want to see government function again... they actually want to see government function again."
• Frank Luntz: "The American Dream is not alive if you cannot read... we are producing hundreds of thousands of kids... who cannot do [read/write]."