A Backlash Against Socialism — But Not Spending; Justin Trudeau, Suddenly Vulnerable?
Author: Greg Valliere
February 19, 2019
THE DEMOCRATS’ INFATUATION WITH SOCIALISM has hit the proverbial wall. It was all the rage in January — free tuition, massive tax hikes, health care for everyone — but Republicans, thankful for an issue, hit back by pointing out how things are going in Venezuela.
THE AVERSION TO SOCIALISM BY MAINSTREAM DEMOCRATS was on full display yesterday when Sen. Kamala Harris assured audiences in New Hampshire that she’s not a “democratic socialist,” a clear dig at Bernie Sanders and, perhaps, Elizabeth Warren. Other Democrats, like Amy Klobuchar, quickly fell into line — as will Joe Biden, Michael Bloomberg and others in the mainstream.
THE DEMOCRATS HAVE TO DIAL IT BACK, as Donald Trump tees up a perfect foil. He ranted yesterday against ruinous socialist policies that have devastated Venezuela — and while similarities between that and, say, Elizabeth Warren are a stretch, Trump has his re-election mantra: the Democrats have been taken over by socialists.
THE LEFT’S ISSUES: What really counts in this town is who has the votes in Congress. Even if a Democrat captures the White House, massive tax hikes are unlikely in 2021, free tuition for everyone has little chance, a Green New Deal is “aspirational,” and health care for all is not imminent. Some incremental moves on these issue is the most that advocates could hope for. The Democrats won’t have close to 60 votes in the Senate, so these issues will stall.
THERE IS ONE ISSUE, HOWEVER, where the politicians seem to agree: spending much more money. Everyone suddenly thinks huge deficits, surging well past $1 trillion annually, aren’t a big deal. If you didn’t see the piece in the weekend Wall Street Journal on deficits, it’s worth reading — more and more economists are unconcerned about red ink, thanks to insatiable demand for Treasury paper, which is keeping interest rates low.
MUCH MORE SPENDING IS COMING in the next few years, even if socialism loses its allure. In our opinion, this doesn’t necessarily mean that interest rates will surge — rather, the crushing burden of servicing the debt will squeeze out spending on everything else — infrastructure, health care, education, etc. And that points to modest economic growth, not high interest rates.
* * * * *
SCANDAL IN CANADA: Political dysfunction is not confined to the U.S., as a deepening scandal in Canada threatens Justin Trudeau’s re-election prospects later this year. Trudeau’s closest aide resigned yesterday amid charges that he pressured the country’s then-attorney general — who resigned recently after a demotion — to back off prosecuting a Montreal-based company accused of corruption in dealings with Libya.
TRUDEAU NOW FACES AN ETHICS PROBE and the absence of his close friend and de facto chief of staff — just as planning ramps up for the next election, scheduled for Oct. 21. Our many friends at AGF in Toronto had anticipated a close race in the fall but if this scandal continues to percolate, the Conservatives under Andrew Scheer will have a legitimate chance of ousting Trudeau. Scheer, 39, was the youngest House of Commons speaker ever at age 32.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), Highstreet Asset Management Inc. (Highstreet), AGF Investments America Inc. (AGFA), AGF Asset Management (Asia) Limited (AGF AM Asia) and AGF International Advisors Company Limited (AGFIA). AGFA is a registered advisor in the U.S. AGFI and Highstreet are registered as portfolio managers across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. AGF AM Asia is registered as a portfolio manager in Singapore. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.
About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.
For further information, please visit AGF.com.
© 2019 AGF Management Limited. All rights reserved.