This is Part 3 of a five-part series on trends to consider as we enter 2015. Today, we focus on political trends influencing the U.S and our world.

Entering 2015, global geopolitics has taken center stage. Americans view China as an opportunity and a threat, and its rise as an economic power is omnipresent. Cross-border insurgents such as ISIS have reshaped the political landscape, making conventional diplomacy and warfare ineffective. [i] Europe has a hangover, as a result of severe austerity measures that are now hampering growth in Germany and elsewhere (including Japan).

Many of the world’s institutions and alliances are weakened. Our leader’s inability to work with other world leaders only magnifies America’s inability to manage itself. As a result of the mid-term elections, Republicans in congress and President Obama appear to be embroiled in a bitter stalemate.

Many within Washington see the President’s recent executive order on immigration as a reflection of his unwillingness to come to the table with a new Congress, a sign of things to come in the next two years. In his final two years in office, the President is seeking to make good on national security, domestic policy and economic objectives such as the closing of Guantanamo Bay, gun control and the banning of waterboarding.

Meanwhile, the U.S. will enjoy a re-energized economy in 2015, buoyed by falling oil prices, a strong U.S. dollar, falling unemployment and low inflation. While the U.S. economy is expected to grow 3%, the Eurozone is stagnating (1%).

Entering 2015, emerging topics of debate include:

Here comes Hillary
The Presidential campaign season looms large and will cast a shadow over American politics (if Chris Christie runs, it will be a larger shadow). Rand Paul, viewed by many as an activist has a strong fundraising base and has shown to be savvy in his ability to reach out to the establishment.[ii] Jeb Bush may be a more traditional choice, and will take on Mark Rubio, who has the ear of Hispanic voters (amongst many others).

A similar battle for identity will take place for Democrats. Far more centrist than President Obama, Hillary Clinton will face opposition from the party’s extreme left.

The political theatre may influence how President Obama governs. He appears bent on unilateral executive orders and regulatory actions early in his second term and may soften as we get closer to the election.

More Sabre Rattling with Russia
Vladimir Putin cancelled vacations for government officials last week, reflective of the crisis brewing in the Kremlin. The Russian economy, already clouded by sanctions from the West (as a result of Putin’s action in the Ukraine) is in deep trouble as a result of low oil prices and the sliding Ruble. Look for the U.S. to turn up the heat on a weakened Putin. U.S. companies, already under restrictions on how they can trade with Russia should be very careful about working with partners in this part of the world.

World War III-Immigration Reform
A recent survey conducted by USA Today showed that 70% of Americans approve of undocumented residents staying in the U.S. but 56% disapprove of the President’s immigration policy. [iii]As Senator Lindsey Gram of South Carolina was quoted in the National Journal as saying, “our chances of winning the White House are zero” (if the party did not find unity on immigration reform). Looking forward, Republicans will need to strike a balance between national security, economics and fairness. A constitutional showdown is likely.

A Renewed Battle over The Affordable Care Act
With many of its elements already implemented, it will be difficult for Republicans to unwind health care reforms. As a practical matter, 37 states have no exchanges. In 2016, 13 million Americans will lose their subsidy if the law is not amended. [iv] It is likely Congress will push for business-friendly interpretations of the law (such as defining full-time work as 40 hours, instead of 30) or repeal of the medical device tax. Another Supreme Court challenge is possible, but it is unlikely the court will act. [v]

Inequality of Wages
During the era (1995-2000), median wages in the U.S. grew 7.7%. Since 2007, they have not risen at all. A recent rise in payrolls in November suggests there could finally be upward pressure on wages. Republicans will not pass a higher federal minimum wage, but there is a lot of energy in state houses to do so.

Guantanamo Bay
President Obama is preparing to move dozens of prisoners from Guantanamo Bay, but it is hard to imagine that he will succeed in transferring the remaining 132 prisoners. The administration is pulling out all of the stops including negotiating with foreign governments who may be willing to take them. 

Eurozone in Chaos
Recent protests in Greece and Spain are illustrative of poor economic conditions in Europe (especially Southern Europe). Even after the severe austerity measures of the last five years, the European Union tries to balance budget deficits and growth. In the U.K. and through much of Europe, wages (inflation adjusted) are in decline. There will be continued discontent in Europe as real wages fall further.

Ethnic Tensions
It is tragic that America’s racial divide has seemingly exploded once again. As of this writing, ethnic tensions are a powder keg, and we are one shooting away from national protests similar to the Occupy Wall Street movement.

Foreign Policy & China
President Xi Lingping has established himself as one of China’s more powerful leaders in recent memory. China has engaged in maritime standoffs with Japan and entered into recent disputes (about land rights and the like) with South Korea, the Philippines and Vietnam. [vi]

The lack of true electoral reform has caused significant unrest in Hong Kong, and more protests are likely. The recent air climate deal reflects China’s muscle, with Xi only agreeing to voluntary changes, showing disregard to pressure from the West.

China’s ambition will test President Obama on many fronts. However, the slowdown in China’s economy and a potential bubble in real estate, and wage inflation may require that its leaders spend more time and political capital facing inward.

The President is trading chips with European leaders in climate change, the Ukraine, and the embargo on Russia.

The World of Terror
It is terrorism and the threat of terrorism that continues to consume us and drive our foreign policy. The President is trying to combat a global perception that we are militaristic and nationalist. 9/11 is so permanently etched in our memory that we fall victim to the press that finds every opportunity to sensationalize threats on our soil from ISIS to Ebola. The data suggests that the number of “terrorist attacks in the U.S. has been in steady decline since 1970[vii]. Yet, it is terrorism that is the most unpredictable of threats which is exactly what captures our attention.

2015 will be the year that President Obama tries to shape his legacy, before the words lame duck are used daily on the evening news. He will lead with the stroke of a pen, and there will be little movement on economic issues such as tax reform or deficit spending. Corporate tax rates may be in play. An improved economy will provide politicians cover as higher tax revenue will push out the need for real change. Republicans who lack the muscle to override the President will need to deal on immigration reform and healthcare.

Our best prediction is that American politics will be unpredictable in 2015.


[i] World Economic Forum Top 10 Trends

[ii] Who’s most likely to end up as Republican’s nominee -The Washington Post

[iii] Pew Research Center for People and The Press

[iv] The Kiplinger Letter December 5, 2014

[v] The Kiplinger Letter December 5, 2014

[vi] Showing off to the world –The Economist

[vii] Eight facts about terrorism in the United States –The Washington Post