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My view on what's going on in the financial markets and the global economy, and a few other things that might interest me from time to time.

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The Sixth Democratic Debate, Dec 19th 2019

Updated: Jul 19, 2020

Last night I watched the sixth Democratic debate, the first I have seen in real time. The first half of debate was not very interesting or insightful because the candidates didn’t try to distinguish themselves from one other. However, the second half of the debate brought more fireworks, and the exchanges among candidates were much more insightful and interesting as they finally “emerged from their shells” to emphatically articulate their agendas and highlight their differences with the other candidates. The debate provided much more clarity with respect to each candidate’s platform, as well as the major agenda items on which they would base their respective run for the presidency should they be nominated.  I wanted to share my views in this post and briefly cover three areas: my thoughts on the candidates (although I am not particularly informed on their platforms aside from the debate last night); my thoughts on the Democrats overall as far as competing for and potentially winning the 2020 election; and the two areas that most trouble me with the general Democratic agenda for the United States.

As far as the debate, I was least impressed with Elizabeth Warren, Bernie Sanders, and Tom Steyer (who I know very little about), and most impressed with Pete Buttigieg, Andrew Yang and Amy Klobuchar.  As far as the frontrunner - Joe Biden – I thought he held his own and stated his major agenda items with vigour, although if I were a Democrat, I would probably find myself drifting towards the more energetic Buttigieg, Yang or Klobuchar.  And as a reminder, Michael Bloomberg, a centrist who announced his candidacy for the Democratic nomination on November 24th, did not participate in the debate, but will certainly prove to be a force to be reckoned with in due course. In case you are not familiar with Bloomberg, he is the former mayor of New York City, and a well-known and successful “billionaire” businessman (founder of Bloomberg).

The major question that Democrats need to consider is: “which candidate (or ticket) would be most likely to give Trump a run for his money?” As I wrote in this blog during the recent election in the U.K., I believe that those candidates with economic and social agendas too far to the left make news, but they do not invigorate the majority of the electorate that will be going to the polls in several months to vote for the next president. Why? Because as much as the Democrats wish to point to the failures of the Trump Administration as far as the economy, these claims ring false to many people. As we just witnessed in the U.K., the Labour Party agenda was “tax and spend”, not dis-similar to the likes of Warren and Saunders. And at the end of the day, this proved to be a massive failure that gained little traction with the electorate. Similarly in the States, I don’t think this sort of far-left social and fiscal agenda will stand a chance against the Republicans given the economic backdrop. Instead, a ticket consisting of a socially and fiscally “centralist” and ideally a “politically-experienced” presidential nominee (Joe Biden or perhaps Amy Klobuchar, for example) - alongside a vice presidential candidate that brings an “outside of Washington” perspective, youth and vigour to the party – would give the Democrats the best chance to unseat President Trump in November 2020.

I have two final observations regarding the debate. Let me first return to the economy. One of the candidates – Tom Steyer – referred to the Trump economy as a “fake” and a “fraud”, and several other candidates suggested the same, basically for two reasons: the middle class has been “left behind” and unfair wealth distribution (or in other words, the rich are getting richer in the Trump economy). However, I think these views, whilst they might carry some truth (especially the wealth distribution issue), seem to be out-of-line with what might in fact be the most redeeming quality of the current administration. Try as they might, the Democrats will find it difficult to dismiss the reality of the Trump economy: 3.5% unemployment, low inflation, productivity gains as the economy gradually shifts from a manufacturing to a service economy, and respectable (low but seemingly sustainable) economic growth. Yes, there is growing inequitable wealth distribution in the U.S., but this is not dis-similar to the issue in other developed economies in the world (which - as an aside - has been caused principally by super-accommodative central bank policies for over 10 years now). Perhaps there is also some truth to the fact that some people in the U.S. might feel “left behind” because they do not directly benefit from the positive effects of record highs in the stock market or consistent quarterly GDP growth in the States. But to suggest that this is the entire U.S. middle class is a real stretch, and in fact the polls seem fairly mixed on this at best (meaning it is far from definitive). In summary, the Democratic candidates are being too cavalier with respect to the genuine strength of the Trump economy, and this will undoubtedly be one of the biggest obstacles that the Democratic Party – regardless of the ticket - will need to overcome (or deflect by campaigning on other more legitimate issues, of which there are plenty).  

The second issue I personally didn’t care for were some of the comments on corporate taxes and corporate profitability, specifically if I recall with respect to pharma companies (in the context of healthcare) and more specifically, Amazon.  Regarding the latter, Sanders banged the table on Amazon because they are paying no US federal income taxes and are controlled by a billionaire (which happens to also be the founder).  And the fact that Amazon is paying no U.S. tax is true, but I have a hard time blaming companies which adhere to the U.S. corporate tax code and seek to minimise taxes (just like individuals). It is a combination of the Executive Branch and Congress (of which Saunders is a member) that need to attack the various loopholes in the corporate tax code. In my opinion, the inability to address this issue is 100% bipartisan. In fact, President Trump actually agrees with Saunders on this issue, but no one in Washington seems to have the interest or will to fix it in spite of a lot of moaning on both sides of the aisle. On the issue of pharma companies charging too much for drugs and making huge profits as a result, I personally believe that we need to look closely at this industry, which might be in need of reform and perhaps some light regulation. However, this should be tabled only as a component of a broader look at healthcare in the U.S., including tort liability reform for doctors (to limit liability), patent reform for medicines, and healthcare insurance reform. The main thing to recognise – and it is a soft issue – is that pharma companies need to earn enough to enable them to invest in research & development, which is the foundation of developing new treatments and medicines to address illnesses and diseases, like - for example - cancer. So bashing pharma companies on their profitability creates plenty of emotion, but it is far from a clear-cut issue. And as a closing note on this point (and to express my view in this respect), I do believe it is a shame that there is not some form of universal healthcare coverage in the U.S. It is more and more difficult for me to accept the fact that nearly all of the developed world provides healthcare for its citizens, but the most powerful country in the world remains an outlier with an estimated 27.4 million people uninsured in 2018 according to The Kaiser Family Foundation (and perhaps 15-20 million more under-insured). This isn’t right in my opinion, and I welcome a solution from either party. But for the Democrats to blame this on huge pharma profits is only a small sliver of the issue.

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Dec 31, 2019

Could not agree more!


Dec 31, 2019

True, Amazon did not pay taxes but they also made massive investments which created work in all sectors. This helped the economy even though Bezos and Trump are not on friendly terms.

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