Why the U.S. Is Not Going Socialist
Author: Greg Valliere
March 29, 2019
WE’RE USED TO ABSURD HYPE — we live in Washington, after all — but the recent fear-mongering over the U.S. going socialist strikes us as ridiculous. The bottom line is clear: there aren’t enough votes in Congress for the foreseeable future to pass ANY element of the socialist agenda.
TELEGENIC RADICAL Alexandria Ocasio-Cortez is hot copy; she has given socialism a fresh face, and the press can’t get enough of her. But AOC’s polls have slipped, even in her Bronx district, probably a result of her role in killing a jobs-creating Amazon facility in New York.
MOST DEMOCRATS WE TALK WITH IN WASHINGTON roll their eyes when asked about AOC’s boundless ambition — and her agenda. “It’s got absolutely, positively no chance of enactment,” a moderate Democrat told us this week.
A CONVENIENT FOIL: Donald Trump, the great spin-meister, claims the Democrats want to turn the U.S. into Venezuela (and the Democrats, he asserts, are insufficiently critical of anti-Semitism). This is cynical politics at its best — Trump is appealing to the 500,000 Jewish voters in South Florida and Hispanic voters who appreciate the Cuban connection in Venezuela. Trump is now the favorite, in our opinion, to win Florida’s 29 electoral votes.
MOST DEMOCRATS ARE RUNNING AWAY from the socialist label. Of the three leading contenders for the 2020 presidential nomination, two — Joe Biden and Beto O’Rourke — have proclaimed they are capitalists (Bernie Sanders, the other frontrunner, is the exception, of course).
POPULISM IS A DIFFERENT STORY: While socialist legislation will go nowhere, populist legislation is another story. Even Trump is a populist on many issues, including his bashing of drug industry pricing. Still influenced by right wing populist Steve Bannon, Trump sounded like an unabashed trade protectionist at his rally last night in Michigan.
WHAT DOES ALL OF THIS MEAN FOR INVESTORS? We’re stunned by the anxiety expressed by high net worth clients we meet in the U.S. who are fearful that massive tax increases are coming to pay for the socialist agenda. In truth, no tax changes are remotely imminent.
KILL THE TRUMP TAX CUTS? That’s the mantra from virtually all of the Democrats, but first let’s look at the timetable: even if a liberal Democrat captures the presidency in 2020, a tax hike wouldn’t win enactment until mid-2021 or later. The effective date might not come until Jan. 1, 2022.
MORE IMPORTANTLY, WE DON’T SEE THE VOTES for a socialist agenda. First of all, if Trump wins re-election (he’s the shaky favorite), he would veto tax hikes, Medicare for all, free tuition, the Green New Deal, etc.
THE SOCIALISTS’ BIG ROADBLOCK would come in the Senate. We think the Republicans have a reasonable chance of maintaining their narrow Senate majority in 2020 — but even if they lose the Senate, the socialist agenda would require 60 votes for passage, and Democrats would be lucky to get to 52 seats after the next election.
WE DON’T RULE OUT TAX HIKES that could take effect well into the next decade — perhaps taking back some of the corporate tax cut and raising rates on the very wealthy. But there’s nothing to worry about anytime soon on taxes. As for the U.S. going socialist, that’s just laughable hype.
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