By David Nelson, CFA
Tuesday night Fox Business & the Wall Street Journal play host to the GOP and their 4th debate being held in Milwaukee, Wisconsin. The focus of the debate is the economy which of course can lead anywhere. In the end almost everything comes down to money, how to make it, how to spend it and today given the nation’s debt load how to pay it back. The following is just a short primer on what to look for Tuesday and the set up just 3 months in front of the Iowa Caucus.
Fireworks – Despite best efforts to hold them back expect outbursts from the candidates eager to get out soundbites that will energize their base. Given events in the last couple of days it will be impossible to get through the evening without the controversy surrounding the authenticity of Ben Carson’s history taking center stage.
I expect tough questions from the moderators. Here’s just a few of the economic topics we’ll see covered Tuesday evening.
Entitlements – New house speaker Paul Ryan has said he is ready to roll out an aggressive legislative agenda that would take on entitlements.
Long thought of as the third rail in politics the candidates seem willing to tackle this subject. Expect to see some real fireworks as they look to square off backing up their proposals.
Already Trump has come out hard defending Medicare. He’s pointed a finger at his top rival Ben Carson saying “he wants to get rid of Medicare.” Dr. Carson’s plan seems to have changed over the last few weeks. He’s proposed a Health Savings Account but seems to have backed away from the government $2000 subsidy.
The line in the sand on Social Security is means testing and whether or not wealthy retirees should receive reduced benefits. Most of the candidates support some sort of change that would provide more benefits at the low end but reduce them for those with higher incomes. On the other side is Mike Huckabee saying Social Security should remain just as it is. Mr. Huckabee along with Chris Christie has slipped to the undercard program not making the Fox Business cut based on polling.
Taxes – The biggest contrast between the end Democrat and Republican nominees will likely be taxes. If the last debate was any guide it looks like many of the GOP candidates are centering on some sort of flat tax. Trump has laid out his tax plan where he points out that individuals making less than $25,000 ($50,000 for married couples) will pay no federal income tax. Of course many of these families already don’t pay.
I expect the moderators to ask tough questions especially on any potential deficit created by a candidate’s tax plan. The election is still a year away but soon candidates will have to lay out specific details and not just rely on broad general statements. This is true of both parties.
Carly Florina is on record saying we should dump the current tax code of 73,000 pages replacing it with just 3. Three may be a little short but I kind of like this one. Every so often congress adds another couple of hundred pages hoping to fix the problem.
Chris Christie was on air this morning talking about his tax proposals that have a focus on eliminating loop holes.
Trade – Trump will come out of the gates hard on Trade saying he’s the only one with the experience to cut good deals with China, Mexico etc. It’s no secret he was against the TPP (Trans Pacific Partnership) calling it an “attack on business.”
The other candidates seem to fall on either side of the topic. Bush, Rubio and Kasich at some point all voiced support for the deal. All the others have had varying degrees of skepticism with Trump and Huckabee perhaps the most vocal.
Jobs – Most American’s will tell you the economy and jobs are their biggest concern when throwing their support to a candidate. We haven’t heard a lot from Republicans or Democrats regarding specific proposals. The focus at least from the candidates’ perspective seems to have switched to income inequality.
Friday’s jobs numbers were strong with non-farm payrolls coming in at 271k well above estimates along with the unemployment rate falling to 5%. Wages have been stagnant but even here we saw some progress with hourly earnings ticking up 0.4%. Of course, lost in the reports is the labor participation rate, sitting at a generational low of 62.4%.
These are just a few of the potential topics and as I said earlier in the end everything comes down to money. For candidates, post the debate the most important numbers will be who gets the campaign funding and who doesn’t?
It’s important for all the candidates to make a good showing but probably more so for Jeb Bush whose campaign stumbled badly in the last debate. The media will focus on the front runners Trump, Carson and lately Marco Rubio but I expect all the candidates will have an opportunity to be heard. The biggest problem you have when you are behind in the polls is the feeling that time is running out and you tend to over reach with your answers desperate to make an impression.
