New Hampshire holds primary. Obama sends budget to Congress. NATO Ministers meet. Google execs appear before UK Parliament. South African President releases address. All in the Weekly Risk Outlook.
New Hampshire holds nation’s first primary, following tumultuous Iowa results for both parties
On Tuesday, the New Hampshire will be the second state to cast its vote for the Republican and Democratic nominations for the presidency.
The state, which already receives significant attention given its position as the second state, has received even higher attention following the surprising election results for both parties in Iowa.
Defying nearly all polls heading into last week’s Iowa caucuses, Donald Trump did not emerge victorious. Instead conservative Senator Ted Cruz took first place.
Fellow conservative Senator Marco Rubio ran a surprisingly strong 3rd place (only about a point away from second), adding significant momentum to both camps as they head to New Hampshire, where Donald Trump has maintained a commanding leads in most polls.
On the Democratic side, former Secretary of State Hillary Clinton managed to barely (by a margin of 0.3%) edge ahead of Senator Bernie Sanders. Sanders, like Trump, has maintained a commanding lead in the Granite State.
If either Trump or Sanders fail to win New Hampshire, their campaigns could effectively end as attention, as fundraising and campaigning shifts to other candidates.
For Clinton, Rubio, and Cruz, performing above expectations (either winning or securing a close 2nd) could move momentum to their campaigns, and a poor showing could lead to a fundraising shift or movement to other candidates.
This also effectively represents the last chance for a slew of “establishment” Republican presidential candidates; if Governor Chris Christie, former Governor Jeb Bush and Governor John Kasich are unable to reach either 2nd place or a very strong 3rd, their campaigns may end that day (as was the case following the Iowa caucuses for former Governor Martin O’Malley, Senator Rand Paul, former Senator Rick Santorum, and former Governor Mike Huckabee).
President Obama sends budget proposal to Congress
On Tuesday, President Obama will send the last budget proposal of his presidency to Congress, outlining the Executive’s appropriations proposal for the U.S. government.
Given a Republican majority in both houses of Congress, as well as the upcoming November elections, it is highly unlikely that whatever budget (or quite possibly continuing resolution) emerges will match the Obama administration’s proposal.
That being said, a number of initiatives and proposals will likely emerge with the budget proposition that may gain traction in Congress.
A few important proposals that have already been announced include: an appropriation of nearly $1 billion in aid funding for Syrian refugees and over $7 billion in funding to combat ISIS, at least $14 billion in funding to counter cyberattacks, additional funding for NATO economic and military support, funding to address prescription opioid abuse, a tripling in eligibility of the Child and Development Care Tax Credit, supporting aid for universal preschool across the United States, investing billions in STEM education programs, and a pay raise for Federal employees.
Although it is highly unlikely that all of these measures will be approved (in fact, it’s possible none of them will pass), these measures will help to guide policy discussions both in the respective appropriations committees of both houses, as well as in the foreign relations, financial services, and health and education committees.
Funding to counter ISIS and help address the refugee crisis is likely to draw significant attention, and may help to move the discussion of how to counter the extremist group from the Executive branch to the halls of Congress.
NATO defense ministers meet to discuss Eastern Europe
On Wednesday, the defense ministers of the NATO member states will meet in Brussels for a two-day meeting to discuss funneling resources to bolster Eastern European defenses.
Recent actions by Russia around Japan, though on the other end of the Russian subcontinent from NATO’s eastern flank, has nevertheless raised concerns that Russia’s NATO border states may receive increased attention from the Russian state.
NATO’s Eastern European states, particularly the Baltic states, have grown increasingly concerned that the seemingly frozen conflicts in Ukraine and Georgia (Abkhazia) are part of a larger strategy that will be used with rising frequency to destabilize Russia’s border states and prevent further integration with western military alliances.
One positive development that will likely be addressed has been a rise in military expenditures by several NATO allies (the United States has consistently chided its European NATO allies for failing to adhere to voluntary military spending targets, leading the U.S. to shoulder most of the burden)
Additionally, NATO defense ministers are likely to discuss the situation in Syria, particularly as Turkey (a major NATO member) has both expanded its own actions in Syria and relations have grown increasingly tense with Russia as a result, with a recent tete-a-tete between the Turkish and Russian foreign ministers serving as an indicator of the deteriorating relations between the two countries.
Senior Google executives appear before UK Parliament over tax deal
On Thursday, the head of Google Inc.’s Europe, Middle East and Africa division, Matt Brittin, will speak to the UK House of Commons Public Accounts Committee to review Google’s recent agreement with the UK government to pay approximately $190 million in back taxes to the British Treasury.
Lin Homer, the chief executive of HM Revenue and Customs is also slated to speak.
Although the hearing itself is unlikely to directly produce any major changes (the deal will go through either way and the committee is chiefly acting in an oversight role), several British officials have indicated that the deal signed with Google was too weak and conceded too much to the American company.
This reaction is likely to have two potentially significant ripple effects: firstly, several European countries have looked to the British case as an opportunity for their own countries to “claw back” revenues from Google for unpaid taxes for profits that were funneled to its Irish headquarters.
Italy, France, and Germany have all expressed interest in opening investigations of the company, or have already begun doing so. There is little reason to believe that these investigations will end with Google, as a number of other tech companies have come under increasing scrutiny for similar policies.
The second potential development these policies could have for the European Union is a rising balkanization in the oversight and taxation measures toward digital companies and platforms, which is likely to continue the European Commission’s strong push to establish a European Digital Single Market.
Companies that work across Europe’s internal borders to provide digital services could find it increasingly difficult to do so if taxation and regulatory uncertainty follow it throughout the European Union.
This week’s hearing could be the opening salvo of a long conflict between EU member states, the European Commission, and digital service and content providers, as all grapple with an increasingly complex regulatory regime.
South African President releases State of the Nation Address
On Thursday, South African President Jacob Zuma will deliver his yearly State of the Nation Address.
This address will likely come amid both the most delicate political and economic situations the country has faced since President Zuma’s inauguration in 2009, with much of recent tensions focused on the policies of President Zuma and his administration.
In early December, President Zuma surprised many with his dismissal of market-respected Finance Minister Nhlanhla Nene, which was suspected by South African media to have been due to Finance Minister Nene’s veto of public funds expenditures that were believed to have been suspect, as well as resistance to signing a nuclear accord with the Russian Federation.
This development, in addition to South Africa’s demotion of its bond status to junk (a similar development in Brazil last month led to the resignation of its own finance minister) led to public and market outcry, and led to a significant souring of South Africa’s short term economic prospects.
President Zuma’s address will be followed on Friday with South Africa’s Supreme Court of Appeal hearing the government’s appeal against a High Court decision that the Zuma administration was responsible for failing to arrest Sudanese President Omar al-Bashir for war crimes and genocide when he visited South Africa last June.
A ruling against the government by the court could further hamper President Zuma’s administration.
The GRI Weekly Risk Outlook (WRO) provides analytical foresight on the economic consequences of upcoming political developments. Covering a number of future occurrences across the globe, the WRO presents a series of potential upside/downside risks, shedding light on how political decisions affect economic outcomes.
The Weekly Risk Outlook was written by GRI analyst Brian Daigle.
