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TRANSCRIPT
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THE ROARING 2020’s
The Coming Decade of Disruption & Reform
Bruce MehlmanApril 29, [email protected]
follow @bpmehlman Q2 2019
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CONTENTS
THE ROARING 2020’sCapitalism & Its Discontents The Best of Times & Worst of Times (slides 4-9) Systemic Criticism Reflects New Era (10-13)
The Decade Ahead Globalization, Tech Policy & Demographics in the 2020s (14-16) Reform Accelerants (17-19) Reform Challenges (20-22) Reform Agenda, Then & Now (23-24)
Prelude to the New Decade Congress in 2019 (26) Changing Parties (27-29) 2020 Elections (30-33)
2
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Capitalism & Its DiscontentsThe Best & Worst of Times
3
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THE TIDE IS RISING… BUT NOT LIFTING ALL BOATS
4Sources: Nominal GDP (BEA); Median income (FRED of St. Louis)
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
$18.00
$20.00
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$180,000
$200,000 Real U.S. GDP (trillions) Real Median Family Income (US)Up 112.1% Up 18.5%
Real
Medi
an F
amily
Inco
me (
US$)
Real US GDP (trillions)
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MARKETS SURGING… BUT MOST PEOPLE MISSING OUT
5Sources: S&P 500; Family Net Worth (Deloitte)
$340.0 $435.2
$614.4
$1,248.8 $1,140.2 $1,181.4
$1,378.8 $1,282.6
$1,822.4
$2,275.1
$-
$500.0
$1,000.0
$1,500.0
$2,000.0
$2,500.0
$-
$0.500
$1.000
$1.500
$2.000
$2.500
1989 1992 1995 1998 2001 2004 2007 2010 2013 2016
S&P 500 Family Net Worth (Bottom 80% by Income)Up 29.1%Up 569%
Net W
orth
of L
ower
80%
of A
mer
ican
Fam
ilies b
y Inc
ome (
Millio
ns)
S&P 500 Average (U
S$)
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TECH ENABLING GREATER WEALTH… BUT FEWER JOBS
6
Employees per $1 Billion Market Cap(20 Most Valuable Global Companies)
Source: PwC analysis of public data for MCR&T
1790
1374 13421297
1252
11311040
1121
625706
656
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
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TAX BURDEN MORE PROGRESSIVE… BUT DEFICITS RISING
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
Annual Deficit (Billion) Bottom 90% Share of Total Income Taxes Paid
Botto
m 90
% o
f Inc
ome E
arne
rs’ S
hare
of T
otal
Inco
me T
axes
Paid
Annual USG Budget Deficit (Billions)
7Sources: CBO (deficits); Tax Foundation (share of income taxes to ‘16; TPC to ‘18)
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GLOBALIZATION GREAT FOR POOREST… AND RICHEST
8Sources: World Bank (World Poverty Clock); Forbes
0
500
1000
1500
2000
2500
0%
5%
10%
15%
20%
25%
30%
35%
40% % of World Population Living in Poverty
# of Billionaires in the World
Perc
enta
ge o
f Glo
bal P
opul
atio
n Li
ving
in P
over
tyNum
ber of Global Billionaires
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SOME BLAME THE SYSTEM
9
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BUT CAPITALISM IS ALWAYS BEING CRITICIZED
10
1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
“Corporations, which should be the carefully
constrained creatures of law and the servants of
the people, are fast becoming the people’s
masters”–Grover Cleveland
“To permit every lawless capitalist, every law-defying corporation, to take any action,
no matter how iniquitous, in the effort to secure profit and to build up privilege,
would be ruinous to the Republic…”– Teddy Roosevelt
“Capitalism does not permit an even flow of economic resources. With this system, a small privileged few are rich beyond conscience, and
almost all others are doomed to be poor at some level.”
-- MLK
“The main enemy of the open society, I believe, is no longer the communist
but the capitalist threat.”--George Soros
“Capitalism has shortfalls. It doesn’t necessarily take care of the poor, and
it underfunds innovation.”--Bill Gates
“The inherent vice of capitalism is the unequal sharing of blessings.”
– Winston Churchill
”We had to struggle with the old enemies of peace – business &
financial monopoly, speculation, reckless banking, class antagonism,
sectionalism, war profiteering.”– FDR
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NEW ERAS BRING DISRUPTION & DISSATISFACTION
11
The New Gilded Age Resembles The Last Gilded Age
AGRARIAN MERCANTILISM
INDUSTRIAL CORPORATISM
INTERNET GLOBALISM
Rising income inequality
Insufficient consumer protection
Growing market concentration
Accelerating automation of work
Hyper-partisan politics
Calls for systemic reform
1790’s – 1890’s 1890’s – 1990’s 1990’s –
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Sources: Trade (Global Merchandise Exports as % GDP); Immigrants & Race (Census);
GLO
BAL
IZAT
ION
TEC
HN
OLO
GY
U.S
. DEM
OG
RAP
HY
Geopolitics
Trade
U.S. Foreign Policy
Pax Britannia World at War Pax Americana
Imperialist Isolationist Cold Warrior
Increased 32% Fell 64% Increased 366%
1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030
China Rising
Down 10%
Globalist America First
14.4% 13.2% 14.8% 13.6% 14.7% 13.2% 11.6%
8.8% 6.9%5.4% 4.7% 6.2%
7.9%11.1%
12.9% 14.0% 15.2%
12.9% 13.5% 12.5% 12.7% 11.9% 11.5% 10.2%
11.7% 12.5%14.6% 16.5%
20.4% 24.4%
30.9%
36.3%40.3%
44.2%
0.4%5.4%
10.4%15.4%20.4%25.4%30.4%35.4%40.4%
1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030
Foreign Born Non-White
12
WE’VE ENTERED A NEW ERA
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The Decade AheadDisruption & Reform in the
Roaring 2020’s
13
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2020’s (DE)GLOBALIZATION: THE GREAT REBALANCE
14
Re-emergence of Eastern vs Western Bloc… or U.S. Alone?
Shrinking market access
Remaking supply chains
Splintering internet
Increasing security fears
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2020’s TECH: END OF THE PERMISSIONLESS ERAAccelerating Global Policy Challenges focusing on:
MARKET POWER
CONSUMER PROTECTION
PLATFORM LIABILITY
SECURITY & NATIONALISM
SOCIAL COMPACT
Antitrust Privacy Hate Speech Trade Taxation
Data Portability
Digital Addictions
Censorship & Bias
Supply Chain Integrity
Automation & Inequality
IP Data Security Contraband Encryption Diversity
15
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2020’s DEMOGRAPHY: NEW AMERICA RISING
16Source: US Census Bureau
85.4%
79.6%76.4%
66.7%
59.5%
14.6%
20.4%23.6%
33.3%
40.5%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
1960 1980 2000 2020 2032
Share of Eligible VotersWhiteNon-White
Roaring 2020’s Electorate Increasingly Diverse
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X
WOMEN
5457
12 10
More willing to buyproducts if a companyaligned with my values
Stop buying products ifa company at odds
with my values
MILLENNIALSAgree Disagree
Increasing Engagement as Voters, Workers & Consumers
REFORM ACCELERANT #1: ACTIVISM RISING
MINORITIES
Sources: Fox News (2011/2015/2019); Pew (gender); HKS IOP (Millennial LV’s); AP (images).
34%
25%
48%
2011(Sept)
2015(July)
2019(Apr)
"Extremely Interested" in next year's election (Non-white voters)
17
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REFORM ACCELERANT #2: #NEWPOWER
18
Days Between First Election & First Time Magazine Cover
Source: Time Magazine
3,987 5,788 7,242 778 11,431 89
Anyone Can Be a Witness, Publisher, Activist… or Leader
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REFORM ACCELERANT #3: NEW LEADERS EMERGING
19
Friedman vs. Fink: Social Compact Being Reconsidered
“[E]very company must not only deliver financial performance, but also show how it makes a positive contribution to society…
Companies must benefit all of their stakeholders, including shareholders,
employees, customers, and the communities in which they operate.”
-- Larry Fink, 2018
“The only social responsibility of business is to use its resources
and engage in activities designed to increase its profits so long as
it stays within the rules of the game.”
-- Milton Friedman, 1970
Sources: Friedman; Fink
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20Sources: Pew (losing; threat; stick to positions)
We think our “side” is losing…
…and prefer pols who stick to positions not
compromise
64%25%
On issues that matter to you in politics today, has your side been winning or
losing more often?
Losing Winning Don't Know
53%44%
Like elected officials who…
Stick to their positionsMake compromises
…see the other side as a threat to the nation…
REFORM CHALLENGE #1: NO MOOD TO COMPROMISE
45%
41%
Republicans Democrats
See the other party as a threat to the Nation's well-being…
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CHALLENGE #2: FEWER FISCAL / MONETARY TOOLS
21Sources: Discretionary (Heritage 2016); Rates; Central Banks
Fewer Discretionary Dollars
Interest Rates Already Low…
Fewer Workers Per Retiree
…and Central Banks Hold Too Much
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REFORM CHALLENGE #3: NO RELIGION
X
Americans’ Religious Identification by % of Population
Source: Analysis of General Social Survey by Ryan P. Burge, E. IL. U in CNN
Critical Catalyst for 20th Century Reforms Weaker in 21st
22
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23
ProtectingConsumers
Fixing Safety Net /Social Compact
Tillman Act of 1907…
…bans corporate political contributions
EXPECT SOUND & FURY… SIGNIFYING REFORM
AddressingInequality
ReformingPolitics
High School Movement
Capitalism Thrived In 20th Century as Systems Evolved
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AGENDA FOR THE ROARING 2020’s
24
TAXES & SPENDING(TAXES: income, estate, wealth, carried interest, carbon, nonprofits,
business share; SPENDING: unfunded entitlements, rural infrastructure)
MODERNIZING THE SAFETY NET(health care; retirement security; education affordability/relevance;
automation adjustment assistance)
REGULATING MARKET EXCESS(antitrust; environment; data privacy; rules for emerging tech)
REINVENTING THE SOCIAL COMPACT (stakeholders vs shareholders; political reforms; broadening opportunity)
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Prelude to a New DecadeThe Politics of 2019-2020
25
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2019: DEALS OR DISTRACTIONS?
26
LEGISLATING FIGHTING REGULATINGDebt ceiling Oversight & Subpoenas Judicial nominations
Sequester relief & FY21 Approps (or shutdown 10/1)
Mueller Report fallout… Impeachment?
TRADE: China tariffs & “cease fire” deal
Disaster relief Border security & wall funding
TRADE: New export controls on tech
Nat’l Flood insurance (expires 5/31/19)
Green New Deal & climate regulations
TRADE: Autos, steel, aluminum, uranium
National Defense Authorization Act
HEALTH: MFA & ACA improvements
TRADE: EU, UK, Japan deals
Data Privacy 2020 Dem Presidential debates start in June ‘19
TRADE: Sanctions (Iran, Venezuela, Russia)
Trump team turnover & fights vs Media
HEALTH: Prescription Drug prices, ‘surprise bills’ & health care affordability
HEALTH: Rx pricing & annual Medicare
payment regulations
USMCA (new NAFTA) TAX: Implementing TCJATax Extenders/Fixes (expired) FTC privacy cases
USA Freedom (expiring) FCC 5G spectrumHigher Education Act
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THE PARTIES IN 2019: UNITED BY TRUMP
27Source: Gallup
95 9489 87
8480 78 77
7369
59
52
BUSH43 HW BUSH TRUMP IKE KENNEDY OBAMA REAGAN NIXON CLINTON TRUMAN LBJ CARTER
Own Party Approval after 27 Months (Gallup)Gulf Wars
68
50 50
41 4134
2823 22
18 18
8
HW BUSH BUSH43 IKE KENNEDY TRUMAN NIXON LBJ REAGAN CARTER CLINTON OBAMA TRUMP
Other Party Approval after 27 Months (Gallup)
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% of Democrats Who Call Themselves “Liberal”
1994 2018
25% 51%
Sources: Quote = Y. Lelkes, U. Penn; Gallup per Five Thirty-Eight
DEMOCRATS TRENDING LEFTWARD: 2020 WOKEATHON
Primary-voting “partisans react most favorably toward ideological extremists”
28
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FUTURE AGENDA OF GOP?... TURNS ON 2020
TRUMP WINS IN 2020 TRUMP LOSES IN 2020
Defend capitalism, fight “socialism” ECONOMIC Reformicons return?
Deficits don’t matter FISCAL Born-again deficit hawks
America First, con’t. FOREIGN POLICY Rebuild Western alliance
Tariff Man/ US vs China TRADE US & Allies vs China
Continued hard line IMMIGRATION Modest moderation
Pro-Gun, Pro-Life, anti-PC SOCIAL Pro-Gun, Pro-Life, softer tone
100% deregulatory ENERGY Growing climate interest
29
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CHANGE ELECTIONS ARE THE NEW NORMAL
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Change in Control of House, Senate and/or White House
ELECTIONS AHEAD: BET ON CHANGE?
30
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2020 CONGRESSIONAL BATTLEFIELD
31Source: D. Wasserman (House); Photos licensed from AP
GOP NEEDS 18 TO WIN HOUSE2016 Presidential Margin in District
D SEATS 235
R SEATS 199
Clinton 5+ 187 0Clinton 0-5 17 3Trump 0-5 18 2Trump 5+ 13 194
DEMS NEED 4 TO WIN SENATE2016 Presidential Margin in District
D STATES 12
R STATES 22
Clinton 5+ 8 0Clinton 0-5 2 2Trump 0-5 1 2Trump 5+ 1 18
At RiskAt Risk
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2020 PRESIDENTIAL CAMPAIGN
32
TRUMP TAILWINDS TRUMP HEADWINDS
1. JOB APPROVAL: stuck, only POTUS never > 50%
2. BASE: Historic #resistance3. CHOICE: 53% of voters will
“definitely not” vote Trump†
4. Trump approval under water*
in MI -12, WI -12, PA -7, OH -55. BET: on “Change” 6. OPPONENTS: Hurt… intense
media scrutiny & oversight7. ECONOMY: Recession risks
growing, esp. globally
1. JOB APPROVAL: (45) > Reagan (41) & Clinton (44) at same time
2. BASE: Historic approval3. CHOICE: Elections are a choice,
not referendum4. ELECTORAL COLLEGE: all that
counts, not national popular vote5. BET: on “Anti-Establishment”6. OPPONENTS: Help… many Foils
on Left / “Socialism”7. ECONOMY: Still hot… 3.8%
unemployment, confidence high
Sources: †Quinnipiac, Mar. 2019 (53%); * Morning Consult, Apr. 2019 (states)
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IS IT ALWAYS “THE ECONOMY, STUPID”?
33Sources: Recessions (Wikipedia); Observation (Adrian Gray)
RECESSION? President (Year) REELECTION?NO Obama (2012) YESNO Bush43 (2004) YESNO Clinton (1996) YESNO Reagan (1984) YESNO Nixon (1972) YESNO LBJ (1964) YESNO IKE (1956) YESNO Truman (1948) YESNO FDR (1944) YESNO FDR (1940) YESNO FDR (1936) YESNO Wilson (1916) YES
No Recession in 2 Years Before Election
RECESSION? President (Year) REELECTION?YES Bush41 (1992) NOYES Carter (1980) NOYES Ford (1976) NOYES Hoover (1932) NOYES Coolidge (1924) YESYES Taft (1912) NO
Recession in 2 Years Before Election
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OTHER RECENT MCR&T ANALYSES:Q1 ’19: Permissionless: http://bit.ly/Permissonless
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