In a year in which events in the United States and throughout the world continue to startle and surprise, another occurred on the evening of November 8 when Donald Trump shocked almost everyone by decisively defeating former US Secretary of State Hillary Clinton to become the 45th President of the United States.
Trump will be the first person ever elected to this office who neither held high political, governmental, or military office, and his victory was seen less as a ratification of support for him, but a repudiation of the status quo and global and US elites.
To a certain degree, the election results should not have been entirely surprising even though it was shocking.
Election polls had revealed that it was going to be a close race, and the peculiar features of the US electoral college under which votes are tabulated on the basis of support within each individual state, rather than the aggregate, seemed largely to favor Secretary of State Clinton, but it was close enough that anything could have happened, and it did.
Defying expectations in battleground states
During the long November 8 evening, states which were presumed to have favored Clinton: Pennsylvania, Michigan, and Wisconsin, moved in the other direction and others which were viewed as being more tight: the large states of Florida, Ohio, and North Carolina and the smaller state of Iowa, moved to Trump. Clinton did win the state of Virginia, where 30 percent of the electorate lives in the Washington, D.C. suburbs, but by a much narrower margin than anyone would have predicted. She also won in Colorado, Nevada, and is currently leading in New Hampshire. In each instances, her margin of victory was smaller than expected.
Public polling in the era of mobile phones may not be as accurate as it was a decade ago, but the results are perhaps more skewed in elections in which anger against the status quo, and particularly the elites, is at play. This was evidenced by the Brexit vote in the United Kingdom in June. Pollsters often rely upon traditional voter turnout patterns, but when anger is in play, the polls will lose their meaning.
Over the last two generations, wages and economic security in the US have fallen for middle- and lower-income workers while they have risen for not only the highest-income earners, but also for upper-middle class and college-educated workers who have largely benefited from globalization, and whose attitudes on a host of issues, including immigration, cultural changes, and climate change were consistent with those shared by global and US elites, but divergent from those of people who have felt left behind. These voters often come from the same neighborhoods, universities and families of the media and perhaps the pollsters as well. They create an echo chamber of what has commonly become known as the ACELA corridor, running from Boston to Washington, where we all missed out on what was happening as our opinions and facts reinforced each other’s.
And then there is the US regulatory environment, which has become particularly onerous under the Obama administration. Most notable is the Department of Labor (DOL) fiduciary duty rule, which has the potential to upend the way financial advisors do business. Scheduled to go into effect in April 2017, there is now a real possibility that the regulation, which creates a new fiduciary duty obligation on those who sell or produce retirement products, be rolled back or stopped altogether.
The new President and the Republican Congress could block funding for the regulation or repeal it. The new DOL administrator can seek to rewrite the regulation although this might take time. Perhaps the most likely result could be that the Trump administration will not defend the regulation in several of the US District Court cases filed by several financial service company trade associations. This might facilitate the chance of the regulation being overturned by the courts. Nothing is certain and for those who lament the regulation they are advised to proceed as it will take effect until clarity is provided. It is "hope for the best and prepare for the worst."
A discontented electorate votes for change
Two-thirds of the US electorate wanted change, and while even many of the Trump supporters conceded his personal limitations, they voted for him anyway, or despite him as they wanted to send a message of their discontent. Hillary Clinton, a former First Lady, US Senator, Secretary of State and recipient of millions of dollars of speaking fees from business groups, education institutions and others, had a difficult time connecting with voters, and as the embodiment of the status quo, proved to be a tempting target in a year where the voters wanted to "drain the swamp".
Clinton was hurt by revelations of an improperly used private email server while Secretary of State, and that her staff may have facilitated access to her from people and groups who gave generously to the Clinton Foundation, were not illegal, but for many, unsavory. All of this confirmed in the views of many that she, like the other elites, including the media, Wall Street, big business, and others played by their own rules, that the system was indeed rigged against the ordinary American worker.
There was also anger at the export of US manufacturing jobs and the extent to which both US political and business leaders were seen to have accepted as something which was inevitable, rather than something to fight back against to protect US workers. In a world of Facebook and Twitter, perhaps the best known video of the year was that taken on a mobile phone and seen by tens of millions of people featuring the head of the United Technology Carrier Air Conditioning factory exhorting his 1,400 workers to continue to perform their work even though their jobs were being eliminated and sent sometime within the next year to Monterrey, Mexico. It resonated with just about everyone, not just Trump supporters, but also a lot of other people in the US who felt that might presage someday their own job being outsourced.
As a billionaire from New York City with a storied history of personal and business transgressions, Trump was an unlikely messenger for this unhappiness, but he seemed to connect with voters despite the fact that many of them thought he lacked the qualifications to be President while questioning his judgment and temperament. His boorish behavior and treatment of women was universally expected to be a major factor in votes against him but turned out to be a non-factor altogether.
Repudiating the Obama coalition
To a certain degree the political dividing line has been set for over a generation with Republicans doing well with rural, exurban, culturally conservative white men and women, and lower- and middle-class voters who feel an attachment to an America that existed before the 1980’s and who have some apprehensions about where the country has been moving. This marker became more pronounced with the election of President Obama in 2008 which was predicated upon cobbling together a coalition of progressive urban voters, Millennials, upper middle-class suburban voters, and a host of new emerging Americans including Hispanics, African Americans, Asians, gays, Muslims, and other voters. They were the springboard of Obama capturing more than 50 percent of the vote in each of the last two presidential elections.
President Obama, while not intentionally, may have contributed to the division through the construction of his electoral base, seemed, at least to those who were not part of it, to be shunting them aside. Within the US, the social fissures have been brewing for some time and the core Trump voter felt the US elite viewed them with derision and moral condensation, and in many instances they were right.
Among nonwhite voters, Clinton led Trump by 54 points, a huge advantage, but one that was much smaller than Obama’s 61-point margin among nonwhite voters four years ago, according to preliminary exit poll data. Trump, meanwhile, earned the votes of 60 percent of white men and 52 percent of white women.
Donald Trump was able to mobilize those who felt either left behind or who felt that they were no longer listened to. Particularly among white voters, who comprise about 70 percent of the electorate, the dividing line was whether or not you had a college education. Among the latter, Clinton did fairly well while among those who did not attend college, Trump won in a landslide.
The election was a repudiation of not only the Democratic establishment, but also the Republican as well. The last 15 years have been difficult for the US, starting with the September 11 tragedies, two unconcluded wars in Afghanistan and Iraq, the 2008 financial and housing collapse, a tepid economic recovery, and the Obama Affordable Care Act, which has failed to deliver on its promises, and whose large rate increases in the individual insurance marketplace might have made a difference of turning some people to vote for Trump over Clinton.
Wake-up call to the establishment
There is also frustration about global instability, terrorism, and what is perceived to be a diminished respect for the US in the world. Finally, within many American rural communities and industrial cities, there is a sense of economic abandonment, which has not only brought about the loss of jobs and the sense of respect and social place that comes with it, but also the breakdown of communities. This has manifested itself in family abandonment, opioid addiction, high crime rates, and a host of other social pathologies which hurts everyone. It is thought that those people who are better off have mostly isolated themselves from this by living in safe neighborhoods, which have good schools and a social and religious support system that offers promises that their children have a good future ahead.
In the end, the election results can be summarized as a statement from a significant portion of the American electorate that said to the establishment, "We have tried it your way, you failed, and it is time we try something else. What do we have to lose?" It is a wakeup call to not only political leaders, but to a lot of other people in the establishment that something has to change.
A final reflection is that the 2016 Presidential election was the first election to take place with Twitter and Facebook being a dominant means by which people received information. While democratizing information can be a good thing, it can also be problematic when it is wrong and not corroborated. The traditional media has been pushed off their perch and this makes some happy who have complained about media bias. However, it could also mean that it is harder to get to the truth and it will accelerate an already societal disposition for people to be apart, with not only having their own opinions, but also their own facts, some of which might be false.
About the Author
Peter Lefkin is the senior vice president of governmental and external affairs with Allianz of America Corporation, which he joined in 1988. He leads the firm’s state and federal lobbying efforts in the US. Mr. Lefkin has a B.S.F.S, cum laude, from the Georgetown University School of Foreign Service, and a master’s in public administration and a J.D. from Syracuse University.
This material contains the current opinions of the author, which are subject to change without notice. Statements concerning financial market trends are based on current market conditions, which will fluctuate. References to specific securities and issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Forecasts and estimates have certain inherent limitations, and are not intended to be relied upon as advice or interpreted as a recommendation.
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