the Age of Disruption

Bruce Mehlman [email protected] UPDATED Aug. 1, 2017

America in the Age of Disruption

What’s Next in Washington?

Contents AMERICA IN THE AGE OF DISRUPTION o Welcome to the Age of Disruption (slides 3-6) o How’d We Get Here? (slides 7-14) o How’s It Going for the Disruptor-in-Chief? o Winning (slides 16-22) o Losing (slides 23-28)

o What’s Next in Washington (slides 29-39)

2

Welcome to the Age of Disruption Explaining the Rise of the Disruptors

Entrenched System

Direct to Consumer

Upended Establishment

Dissatisfied Public

Promise of Better Service

Incumbents Fight Back

Minimal Innovation

Aggressive Insurgents

Broken Rules & Norms

3

It’s Not An Accident U.S. Voters Not Satisfied… 5 of Last 6 Elections Sought Change

100 90

WRONG TRACK

80 70 60 50 40 30

Which candidate quality mattered most?

2000

2001

Can bring change

39%

Right Experience

22%

Good judgment

20%

Cares about me

15%

2002

2003

2004

2005

20

RIGHT TRACK 2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

10 2016

2017 0 4

It’s Not Unique to America Change Elections Becoming the Global Norm

6/11/2016

10/19/2015

10/25/2015

6/8/2017 5/7/2017

11/8/2016

4/16/2017 4/29/2016

5/9/2017

5/9/2016 5/11/2017

4/10/2016

7/17/2017

Next Up

8/4/2017 9/24/2017 5

It’s Not New With Trump Partisan Approval Gap Growing for Decades Diff. Between Own Party & Other Party Job Approval After ~191 Days in Office

80

75

70

67 59

60

54

50 42 40 30

35 28

26

24

31 24

24

20

6

HOW’D WE GET HERE?

7 Trends Driving Disruption

7

How’d We Get Here?

#1. Substantial Social Makeover Big Changes Over 2 Generations

1967 12% 4.9% 75% 22% 8.5% 41% 27%

WOMEN IN THE WORKFORCE

2017 38% 14% 39% 32% 40.3% 57%

TOP 1% SHARE OF WEALTH

42%

DIVERSE (NON-WHITE) FOREIGN-BORN WHITE NO COLLEGE 18-34 LIVING w/ PARENTS KIDS OUT OF WEDLOCK

8


#2. Accelerating Technological Change Disrupting How We Work, Live, Play & Learn

U.S. Workers to Manufacture $1B Goods

1967

2017

387,923

26,785

9


#3. Weakened Anchor Institutions Where Do We Belong? 1967 70%

2017

68% 65% 50%

53%

28% 20% 11%

Married

Religion "Very Important"

Union Member

Trust Government to Do Right Thing

10


#4. Loss of “Honest Brokers” Media No Longer Trusted

INFORMS

AFFIRMS

1972 Most Trusted Man in America

Great Deal / Fair Amount of Trust in Media 70 60

64

61

59 53

53

52

50 41

52

53

52

53 46

40

59

59

55

53

66

65

44

44

10 Source: Gallup

60

59

58

41

41

39

39

60

58

56

31

Republicans

31

39

38

36

33

30 20

66 55

54

51

49

49

47

70

32

38

31

27

Independents

38

37

26

Democrats

33

33 27

30 32

14

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 11


#5. Leaders Over-Promised & Under-Delivered

“…greeted as liberators...”

I did not have…

Read My Lips…

12


#6. Politicians Deferred Hard Choices Entitlement Spending Crowding Out Future Investments Federal Spending, as a Share of the Total Budget

1956

1976

15%

1996

53%

66%

2016

69%

2036

79%

MANDATORY (Health, Social Security, Net Interest on Debt) DEFENSE NON-DEFENSE (e.g. Infrastructure, Education, R&D)

Sources: PwC based on OMB & CBO

13


#7. Parties Lost Primacy

$2,300

Party Money Top 1%Increasingly Gave 76.5% in Less 2016 Critical $1,800

DONORS

DOLLARS

Millions Per Election Cycle

$1,300

Political Party Spending $800

Outside Group Spending

$300

2000

2002

$(200) Source: Center for Responsive Politics, 2017 Source: Center for Responsive Politics, 2017

2004

2006

2008

2010

2012

2014

2016 14

HOW’S IT GOING?

For the Disruptor-in-Chief

15

WINNING

96%

of Trump voters would vote for him again vs. 85% for Hillary

1612

WINNING: Base Support Remains Solid Presidential Approval by Own Party, ~Day 191 100 95 35 90

Did each of the following give you a more or less favorable view of Donald Trump? All Voters (Net Change)

31 87

87

25 85

86

86 16

15

80 15 5 70

60 -15 55 -25 50

96% 85

84 21

83

82

of Trump voters would vote for him again vs. 85% for Hillary

75

65 -5

Trump Voters (Net Change)

Fight Over Resignation of Inaugural Crowd Michael Flynn Size

Claim Obama Wiretapped Trump Tower

-15 -20 OBAMA REAGAN KENNEDY NIXON

-20

10

73

Calling Media "Enemy of the American People" -15

70 Firing Comey 60

-24

BUSH-43 JOHNSON BUSH-41 TRUMP CLINTON CARTER

FORD

12 17

WINNING: “True Believers” Still Enthusiastic No Erosion in Support Among Trump Voters Who Voted FOR Trump Voted FOR Trump 100%

95%

Voted AGAINST Clinton

Trump Job Approval

Who’s to blame for Trump problems?

95%

95% 90%

FOR TRUMP

87% 81%

85%

AGAINST CLINTON

Washington Establishment

Inexperience / Incompetence

93% 71%

3% 20%

80% 75% 70% 65% 60% 55% 50%

Feb-17

Mar-17

Source: WSJ/NBC Feb & June polls per Public Opinion Strategies

Apr-17

May-17

Jun-17

18

WINNING: Deregulatory Agenda Moving Apace Fewer New Big Regulations, Rapidly Undoing Obama Era Regs

 Undoing ACA  Exited Paris Climate Accord  Ended Gun Exec. Order  Reversing EPA Climate Regs  Amending Labor Regs  Reversing Telecom Regs  Undoing Dodd-Frank Elements  Amending Treasury Regs (385)

19

WINNING: Markets Reflecting Optimism Stock Markets Surging

Trump

Presidents 1953-2016

Since Election

13.4%

0.50%

Since Inauguration

6.8%

0.60%

Gains/Losses in S&P500 thru July 7 of 1st year

Consumers Confident

Unemployment Rate Falling

Small Businesses Optimistic

NFIB Small Business Optimism Index

20

WINNING: Adding Conservative Judges to the Courts Trump Will Significantly Impact the Federal Judiciary

Gorsuch restored 5-4 conservative majority at the Supreme Court

Inherited Fed'l Court Vacancies OBAMA

54

BUSH-43

84

TRUMP

107

CLINTON

111 0

20

40

60

80

100

120

21

WINNING: 4-for-4 in Special Elections Notwithstanding Historic Spending Against

OVER FOUR SPECIAL ELECTIONS Dem Candidates Raised: >$30.6M Outside Supporters Spent: >$3.5M DCCC Spent: >$6M

22

LOSING

Clinton

Trump

23

LOSING: Not Expanding Support Beyond the Base Where are Trump’s “Reagan Democrats”? Presidential Job Approval ~Day 191 Other Party Independents

80 70 60

70

63

70

67

66

66 57

60

58

60

50

52

59

47

51 38

40

46

45

37 32

30

31

29

20

20

10

14 7

0 DDE

JFK

LBJ

RMN

GRF

JEC

RWR GHWB WJC

GWB BHO

DJT 24

LOSING: Historically Slow Staffing Government Strategic Starvation or In-fighting & Incompetence? Confirmed

228

OBAMA

CLINTON

214

BUSH -43

208

51

Source: Partnership for Public Policy in Wash. Post as of 7/27/17

No Nominee Yet

154

72

182

120

198

217

282

315

Avg. # days to confirm

38 29

278

139

162

BUSH-41

TRUMP

Nominated

34 32 46

25

LOSING: Too Many Unfilled Positions Over Half Cabinet Agencies Have Only 1 Confirmed Leader AGRICULTURE 1

COMMERCE 1

2 12

HHS 3

27

HOMELAND

3

1

19

HUD

LABOR 1

STATE

12 Source: Partnership for Public Policy thru 7/27/17

JUSTICE

11

9

16

TREASURY

VETERANS 1

3 5

16

4

3 4

2 33

87

INTERIOR

11

TRANSPORTATION

10

1

17

2

7

11

1

2

4

7

ENERGY

12

1

3

6

EDUCATION

7 8

10

DEFENSE

9

3 7

EPA= 1 confirmed, 2 nominated, 11 not yet named

26

LOSING: Insufficient Message Discipline Off-Message Tweeting Undermines Policy Pushes INFRASTRUCTURE WEEK

WORKFORCE DEVELOPMENT WEEK

TECHNOLOGY WEEK

ENERGY WEEK

June 5-9

June 12-16

June 19-23

June 26-30

81% tweets off-message




121 @RealDonaldTrump tweets in June 3 on policy topics

Sources: Off-Message % (P. Bump, Wash. Post); Policy % S. Savitsky (Axios)

27

LOSING: Midterm Wave Conditions Building for Dems? Low POTUS Approval

Surge of New Candidates

POTUS Approval

39%

45%

46%

63%

68%

‘09- ‘15 avg. filing

179

Seats Won / Lost

+30

+53

+63

+8

+5

2017 filed to run

489

Year

2006

2010

1994

1998

2002

40% job approval Source: WSJ/NBC poll via POS.

Source: Ben Kamisar, The Hill, 6/22/17)

Over-Performing in Specials Seat

Nov. 2016 Margin

Special Margin

Dem Gain

KS-4

R+24.6

R+6.8

D+17.8

MT

R+8.8

R+6.1

D+2.7

GA-6

R+16.2

R+3.7

D+12.5

SC-5

R+13.3

R+3.2

D+10.1

Generic Ballot Promising

D+9 Generic Poll Avg. 7/31/17 RCP

Republican Ballot Margin (Generic)

Predicted Republican Seat Loss

+4

-9

+2

-12

0

-16

-2

-19

-4

-23

-6

-27

-8

-30

-10

-34 28

WHAT’S NEXT?

Washington in 2H 2017

29

The Disruption Will Continue We’re Only 13% Into Trump’s First Term

194

1267 Days Remaining

30

Trump Team Will Grow As More Leaders Are Confirmed Pace of Nominations Is Accelerating

31

Parties Will Battle for Issue Advantage Neither Party Enjoying “Wave-Levels” Issue Lead Yet

‘06 Dem Wave

ISIS

R+18

CHANGE WASHINGTON

D+13

ECONOMY

D+9

TAXES

D+9

D+1 D+6

D+3 D+13 D+31

R+2 R+9

R+7

R+4

R+4

FOREIGN POLICY

R+18

IMMIGRATION

R+7

HEALTH CARE -15

Source: WSJ/NBC June poll per Public Opinion Strategies

R+22

MIDDLE CLASS

D+17 -20

R+9

‘14 GOP Wave

-10

-5

R -7 0

5

10

15

20 32

Congress Will Do What it MUST Expiring Programs & Deadlines Drive Action Before August Recess

By September 30

15 legislative days

17 legislative days

         

FDA User Fees Nat’l Defense Authorization FY ‘18 Appropriations Flood Insurance CHIP (children’s health insurance) FAA Reauthorization Community Health Centers TANF (food stamps) Coast Guard Reauthorization AFG & SAFER grant programs

Q4 2017

By Dec. 31

 Raise debt ceiling

 FISA §702 (surveillance)  Medicare extenders  Other tax extenders

33

“Big Ticket” Bills Remain Challenging Tax Reform Health Care Reform •

Polling poorly & facing procedural risks in Senate.

•

•

Can’t lose more than 2 GOP Senators: • Conservatives demand more flexibility & lower cost options… risking moderate votes. • Moderates want to lessen impact on elderly & poor… risking conservative votes.

Procedural barriers significant: • Need 60 Sen. votes or new budget reconciliation • Need health reform to “pay for” 1st ~trillion in cuts

•

Business opposition to deficit neutral reform (where cuts are offset by tax increases). Key questions are (1) will Dems in red states “play ball” with WH on cuts and (2) will GOP back cuts or raise deficit concerns.

•

Expect tax cuts rather than paid-for permanent reforms by 1H18.

•

Expect shorter-term steps to shore up insurance markets if larger bill fails.

Funding 2018 & Debt Ceiling

$1T Infrastructure Plan

•

60 votes needed unless legislative filibuster ended

•

60 votes required.

•

Significant political challenges: • Conservatives want cuts to non-defense spending • Dems object to increases in defense spending without corresponding increases in non-defense. • WH may see political value in show-down, perhaps over funding Border wall.

•

Political dynamics: • Opportunity: Most likely pivot if White House wants to deal with Democrats (along with trade sanctions) AND Dems willing to give Trump win. • Challenges: How to pay for? When to advance given busy-ness with other issues.

•

Short-term (2 week) shutdown possible. Expect bipart. deal to raise debt ceiling & fund FY18 near FY17 levels once WH gets on board.

•

Expect little movement in 2017.

34

How Did the Clinton White House Bounce Back? Bill Clinton’s 1st 6 Months Approval

Disapproval

60 55 50 45 40 35 30 25 20 15 10

Jan

Feb

Mar

Apr

May

June

The Clinton Rebound

Retooled White House Operations

Successful Leadership Moment

Pivoted to the Center on Policy

Enjoyed Strong Bull Run (‘95: S&P up 32%)

Leveraged Less Popular Foil

35

Three Possible Roads Forward for Trump Administration How to Put Points on the Board & Broaden Support UNIFY THE GOP

 Lower rates  Broader base  Simpler system

PLAY TO POPULIST BASE

    

DEAL WITH DEMOCRATS

Drop out of TPP Renegotiate NAFTA Steel & Aluminum tariffs Stronger “Buy American” CFIUS reforms (esp. tech)

Judges & Deregulation

Immigration Enforcement

Infrastructure Investment

Raise big $$ to protect House majority

Anti-Washington reforms (end filibuster, Balanced Budget Amendment)

Ivanka Trump’s paid family leave initiative

Core Challenge: Diversity of GOP opinion may exceed size of GOP majority.

Core Challenge: Restrictions on trade spook markets & undermine growth.

Core Challenge: Will #Resistance let Dems cooperate with the Administration? 36

The Litigious #Resistance Will Persist Opponents Likely to Challenge Everything in Court TOTAL LAWSUITS FILED 7

15

26

George W. Bush

Bill Clinton

Barack Obama

134

51

Donald Trump

2017 LAWSUITS AGAINST PRESIDENT TRUMP

30

26

8 1

1

1

1

The Environment

Personal Injury

Regulations EO

Personal Property damage

4

8

4

Obama EO on Ethics / Monuments Emoluments Clause

Other

Immigration / Civil Rights Sanctuary Orders

Prisoner Petitions

Muslim Ban

37

War With the Media Will Continue Trump Team Sees As Positive

Great for Media

Useful Foil with Base Voters Impact of National News Media on U.S. (Republican voters)

+33%

85%

Viewing thru 1st week in June as compared to same period last year

10%

Positive

Negative

Inoculates from Hostile Coverage

+19%

Whom Do You Trust More? (GOP)

9%

89%

Q1 subscriptions

38

What If Mueller Goes the Distance or the House Flips? GOP Senators told Nixon it was time to go…

…Dem Senators protected Clinton

Will These Guys Have Trump’s Back?

“Lyin Ted”

“Little Marco”

“Not a Hero” John

“Weak & Ineffective” Jeff

“Gym Rat” Ben

“Nut Job… Disgrace” Lindsey

“Truly Weird… Spoiled Brat” Rand

39

To be added to future distribution:

[email protected]

is one of the nation’s most innovative government relations firms, offering strategic solutions to companies, trade associations, non-profits, and entrepreneurs that help them succeed in Washington.

http://www.mehlmancastagnetti.com/