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View from the US: The Rise of American Progressives

Erin Caddell of GK Strategy’s American partner Anchor Advisors examines the ideological battle reshaping the Democratic Party and what it could mean for investors, corporates and the future direction of US policy

Sir Isaac Newton’s Third Law of Motion, published in 1687, states that for every action there is an equal and opposite reaction. This centuries-old theorem may go some way toward explaining the ideological split currently occurring in the U.S. Democratic party – one that could carry significant importance for the congressional midterm elections in November 2026 and for U.S. policy for many years to come.

Republican President Donald Trump faces a difficult political backdrop approaching the midterms, often thought of as a referendum on the incumbent U.S. president’s first two years in office. Trump faces sagging approval ratings in his second term, with notable weakness on his handling of the economy due to rising inflation, as well as a Middle East war with no easy way out. As this column has noted before, Republicans are already defending one of the narrowest House majorities in American history (218-212, with four vacancies and one independent).

Given these dynamics, many Democratic leaders and pundits have suggested the party employ a midterm campaign version of Napoleon’s military adage to never interrupt your enemy when he is making a mistake: focus voters’ attention on Trump policies that many voters view unfavorably rather than on promoting a robust alternative agenda. To these strategists, the poster child for the ideal Democratic candidate in 2026 is Roy Cooper, a two-time former governor of North Carolina running for U.S. Senate in that state with the simple slogan “Make Stuff Cost Less”. Cooper focuses fairly narrowly on criticizing Trump actions that he argues have resulted in “farmers… getting crushed by tariffs” and “families… seeing prices rise at grocery stores and restaurants.” In response, Cooper proposes a modest set of reforms such as tougher anti-trust enforcement and making data centers pay more for the power they draw from public utilities.

Cooper may well reach the Senate – he has run ahead of his Republican opponent in every poll published since the race began. But the middle-of-the-road approach of Cooper and other moderates is not capturing the hearts of Democratic voters writ large. The hard-edged governing style of Trump and his Republican congressional allies, in areas ranging from immigration enforcement to foreign policy to social spending, has, to use a scientific term, made Democrats mad as hell. And – returning to Newton’s Third Law – Democrats want their leaders to push back hard at Trump with policies equal and opposite to those promulgated by the GOP-led Administration and Congress.

Evidence of Democrat voters’ more confrontational impulse is ample in recent party primaries to select candidates to run in the November congressional elections. In June, two progressive U.S. House candidates running to represent district in New York City – Brad Lander and Darializa Avila Chevalier – ousted incumbents, while a third (Claire Valdez, a member of the state Assembly) defeated the Brooklyn borough president in a race for another U.S. House seat. All three candidates support increased government support for public housing, universal federal health insurance, abolishing the U.S. Immigration and Customs Enforcement (ICE) agency, cutting defense spending, shifting energy production from fossil fuels to renewables to address climate change, and reducing American military involvement abroad, among other progressive policies. All are vocal in their criticism of Trump. It is not just in deep-blue New York where the left is gaining momentum: earlier this month, Melat Kiros, a 29-year-old Democratic U.S. House candidate in Colorado, backing an agenda similar to her New York counterparts, unseated U.S. Rep. Diana DeGette, who had represented the district in D.C. for nearly 30 years. Progressive candidates have tallied recent election wins in states from Maryland to Oregon.

A number of the candidates cited above, and others squaring off against more-moderate Democrats, are members of the Democratic Socialists of America (DSA), a left-leaning political organization founded in 1982. DSA’s importance in the U.S. political ecosystem can be easily exaggerated by both critics and supporters – the organization reports about 120,000 members, compared to 45 million Democrats and 39 million Republicans. Yet the DSA has clearly touched a nerve within a Democratic party still trying to figure out how best to oppose Trump and his MAGA movement – and position itself for a post-Trump future. The party’s goal to create “a system where ordinary people have a real voice in our workplaces, neighborhoods, and society” (see below) echoes in the campaign speeches and placards of progressive candidates on the stump today. The most famous DSA member is New York City Mayor Zohran Mamdani, the 34-year-old political wunderkind who rode his own anti-Establishment, anti-incumbent wave to power in January, defeating Andrew Cuomo, former New York governor and scion of a well-known political family.

What is Democratic Socialism? “Capitalism is a system designed by the owning class to exploit the rest of us for their own profit. We must replace it with democratic socialism, a system where ordinary people have a real voice in our workplaces, neighborhoods, and society… We want a democracy that creates space for us all to flourish not just survive and answers the fundamental questions of our lives with the input of all. We want to collectively own the key economic drivers that dominate our lives, such as energy production and transportation. We want the multiracial working class united in solidarity instead of divided by fear. We want to win “radical” reforms like single-payer Medicare for All, defunding the police/refunding communities, the Green New Deal, and more as a transition to a freer, more just life.” (Source: Democratic Socialist of America)

The recent success of DSA members and similarly inclined progressives has led to an equal and opposite (Newton again!) reaction from moderates who argue that moving too far to the left will cost Democrats in the midterm elections in November as well as the presidential election in 2028. In a July 20th note, Third Way, a center-left think tank, warned: “If [Democrats] follow the siren song of the left, they will steer their ships into the rocks. If they remain in the mainstream, they will have a fighting chance of winning not only the primary, but also most crucially, the general election.” Third Way and other naysayers of the progressive wave cite the example of Kamala Harris, who ran on a progressive agenda as the Democratic party’s presidential nominee in 2024 after then-President Joe Biden opted not to run for re-election. In the 2024 campaign, Harris proposed ambitious spending to combat climate change, an increase in the corporate tax rate and anti-price gouging laws for groceries, among other policies popular with many progressives. Trump, of course, comfortably defeated Harris in the presidential election (though the hurried mid-campaign handoff from Biden to Harris certainly didn’t help).

What does this mean for US-focused investors and corporates?

The moderate, middle-of-the-road approach of some Democratic candidates doesn’t seem to meet the political moment. Thus, we do think the progressive movement will move the Democratic Party to the ideological left in the years to come, even if “socialist” candidates remain a small portion of the electorate and the Congress. This could benefit sectors that have been out of favor thus far in Trump’s second term. For instance, health insurance companies that provide insurance under Medicaid and other healthcare programs for disadvantaged Americans could benefit from reversal of recent cuts to such programs under a Democrat-controlled Congress and/or White House. Similarly, apartment-focused real estate investment trusts (REITs) would benefit from expanded public spending on housing in a more progressive political climate. Child-care providers could see the same from federal programs to provide more support for working families. In sum, Democrats’ intense anger at Trump’s policies and persona are likely to be quelled only by a similarly forceful agenda on the other side of the spectrum – the equal and opposite reaction crystallized by Newton so long ago.

View from the US: the Republican congressional agenda

Erin Caddell of GK Strategy’s American partner Anchor Advisors unpacks the Republican congressional agenda ahead of the midterm elections taking place in November

Over the decades, American conservative political thought has often manifested itself in treatises that have called for sweeping policy changes, often employed as rallying cries heading into elections. The Mandate for Leadership, published in 1979 by the right-wing think tank Heritage Foundation, laid the groundwork in part for Ronald Reagan’s presidency starting in 1981, detailing proposals for lowering regulations on industry, reining in the influence of the federal bureaucracy and cutting taxes to spur economic growth that continue in conservative orthodoxy to this day. The 1994 Contract with America served as the blueprint for then-U.S. Rep. Newt Gingrich and his GOP colleagues to seize control of the House of Representatives later that year for the first time in 40 years, proposing a series of reforms to social programs, tax and spending cuts and changes in the workings of government itself. And Project 2025, chaired by Heritage with support from numerous U.S. conservative groups, provided a detailed plan for a conservative presidency, from domestic to trade to foreign policy, many elements of which have been enacted or attempted in Trump’s second presidential term.

With the U.S. midterm elections now less than six months away, what is the conservative manifesto of 2026? It is notable that across a number of conservative groups aligned with the Trump Administration and current GOP leadership in Congress – Heritage, America First Policy Institute, Conservative Partnership Institute, American Compass – there exists no recent document summarizing an overarching conservative policy vision. Yet with all 435 members of the House of Representatives and one-third of the Senate up for election in November, it is valid to ask what more the GOP hopes to do should it defy history – as we have pointed out in prior editions of this column, the president’s party has lost House seats in 18 of 20 midterm elections held since 1946 – and maintain control of both houses of Congress for the final two years of Trump’s second term. Even if Republicans lose control of the House and/or the Senate, the policy proposals they put forth today will guide their actions as a minority party in Congress; the ways in which they support Trump’s executive actions in 2027 and 2028; and even, yes, how the party moves beyond the Trump presidential era with a new Republican candidate for president in November 2028.

To address this question, we focus on a January 2026 report, “Restoring America’s Golden Age”, released by the Republican Study Committee (RSC), a group of 188 conservative House members (87% of the total 217 current House Republicans). The RSC report is structured as a high-level annual federal budget proposal. Continuing the spirit of the Department of Government Efficiency (DOGE) initiative early in Trump’s second term, the RSC identifies numerous federal programs for funding reduction or elimination it views as wasteful or unnecessarily driven by progressive ideology (see below).

Select programs targeted for reduced or zero funding by the Republican Study Committee

Program	Agency
National Institute of Food and Agriculture	Agriculture
Office of the Under Secretary of Farm Production and Conservation	Agriculture
Climate Hubs	Agriculture
Manufacturing Extension Partnership	Commerce
National Institute of Standards and Technology	Commerce
National Science Foundation	NM
Environmental and Natural Resources Division	Justice
Equal Employment Opportunity Commission	NM
Office of Clean Energy Demonstrations	Energy
Advanced Research Projects Agency – Energy (ARPA-E)	Energy
State and Community Energy Programs	Energy
Federal Insurance Office	Treasury
Entrepreneurial Development Program	Small Business
EPA Research and Development	Environment
Diesel Emissions Reduction Act Grants	Environment

Source: Republican Study Committee, Restoring America’s Golden Age, 07.01.2026

We detail two of the policy themes outlined in the report we view as especially relevant for US-focused investor and corporate clients of Anchor and GK: tax and defense policy:

1. Tax – don’t get too comfortable. The RSC report makes clear that Republicans continue to view the tax system as an activist policy tool even following last year’s passage of the One Big Beautiful Bill (OBBB), which expanded and made permanent a number of the corporate and individual tax cuts enacted during Trump’s first year as president. The report speaks glowingly of Trump’s decision on his first day in office in his second term to withdraw from a deal negotiated by the international Organisation of Economic Co-operation and Development (OECD) during the Biden Administration to impose a global minimum tax rate and other restrictions on multi-national corporations. RSC members and other critics argued the OECD deal was unfair to U.S.-based international corporations. In response, RSC member Rep. Jason Smith (R-MO), chairman of the tax-writing House Ways & Means Committee, introduced a bill in 2025 to impose retaliatory taxes on U.S.-active companies and investors whose countries levy selective taxes on U.S. firms, targeting in particular the digital services taxes (DSTs) that have been imposed on multinational tech firms by the UK and some EU Member states. Nicknamed the “revenge tax” or the Section 899 tax for the new title of the U.S. code it would have created, global investors breathed a sigh of relief when the provision was removed from the OBBB following opposition from a number of foreign entities active in U.S. markets. However, the RSC whitepaper is one reminder that the protectionist Republican sentiment that led the Section 899 bill to be proposed is still very much alive within the conservative Republican caucus, and could return under a future GOP-controlled Congress or White House. The RSC budget also supports other tax policies that reflect the populist, anti-corporate sentiment prevalent in today’s GOP, including ending the tax-exempt status of bonds sold to finance professional sports stadiums.

2. Defense – Hawks unbowed. Even before the start of the U.S. and Israeli military action against Iran in late February, a number of Republicans had joined Democrats in criticizing President Trump’s January 2026 proposal to increase U.S. defense spending in the coming fiscal year to US$1.5 trillion, some 44% higher than current levels. The RSC proposal is a good reminder that while some in the GOP argued Trump’s number was too high, support for the U.S. defense sector runs deep among conservative Republicans. The RSC whitepaper is supportive of numerous new defense spending initiatives, from expanded missile production to accelerated shipbuilding, enhanced cyber-security defenses to increased support for domestic rare-earths production to reduce dependence on China as a source of critical minerals needed for military equipment. Interestingly, the RSC report endorses “sustained American support for our NATO allies,” including funding for “frontline NATO states through defense cooperation and deterrent capabilities – one area of potential daylight between the House GOP conservatives and their president. But “Restoring America’s Golden Age” highlights that support for the U.S. military – and higher defense spending – remains a core tenet of both the Trump Administration and congressional conservatives (the RSC has released several statements supporting Trump’s Iran strategy since the war’s start). Should Republicans maintain control of Congress into 2027, Trump and his allies would likely take another run at securing a big jump in defense spending during his last two years as president, regardless of the Iran conflict’s outcome.

Understanding the government’s growth story

The government is facing a low-growth challenge that is constraining its ambition and capacity to improve living standards in the UK. GDP per capita, the average level of economic output per person and a metric key to understanding changes in living standards, has plateaued since the Covid-19 pandemic. Poor levels of economic growth have plagued the UK since the 2008 financial crash. GDP per capita rose by 0.9% year-on-year in Q3 2025, weaker than the 2010s average of 1.3% and a significant shortfall of the pre-financial crash average of 2.5% (1993-2008). High levels of immigration in recent years have also disguised the economy’s malaise and masks an underlying weakness in the UK’s per-capita economic performance. Weak growth directly limits the amount of revenue that can be collected through taxation to meet rising demand for public services and fund the government’s programme of reforms.

Improving the UK’s economic growth trajectory has emerged as a key objective of policymaking. It is vital that ministers create the regulatory and economic environment to stimulate growth in the economy that bridges the gap between policy ambition and fiscal sustainability. The Chancellor Rachel Reeves has called on regulatory bodies to rebalance their statutory duties and reduce the regulatory burden on business to stimulate competition and growth. This includes, for example, the Competition and Markets Authority’s reforms to the merger remedies guidance. At the same time, Reeves has increased public spending by almost £70 billion a year and tweaked her fiscal rules to offset capital expenditure to further increase spending. These decisions have help fund policies such as the energy secretary Ed Miliband’s £15 billion Warm Homes Plan to kick-start the domestic retrofit and energy upgrade sector over the next five years.

Mixed and unspoken signals

Despite some positive moves in the right direction, the absence of a clear, coherent political narrative from the centre of government has left investors and businesses grappling with mixed and often conflicting signals from different parts of the government machine. While Ed Miliband passionately talks about the Warm Homes Plan creating thousands of jobs, the cost of employment has significantly increased with changes to employer National Insurance Contributions and the introduction of the Employment Rights Act which is estimated to cost businesses £1 billion a year.

The cumulative impact of policy decisions has meant inflation in the economy has remained stubbornly high. The UK was an outlier amongst G7 economies in reducing levels of inflation in 2025. Numerous flagship government policies have also directly increased the cost of doing business in the UK which has translated into higher prices for consumers, reinforcing inflationary pressures. This is despite treasury ministers inheriting the sharpest fall in the headline rate of inflation from the previous Conservative government. Inflation was 2.8% in June 2024 (the Conservatives’ last month in office) and now stands at 3.4%, having peaked at 4.2% in July 2025.

The unspoken message to investors and businesses is thus: bear the brunt of higher business costs now before any economic gains begin to materialise from wider de-regulatory reforms, such as changes to streamline the planning system being introduced through the government’s Planning and Infrastructure Act. It is a sizeable political and economic wager and 2026 will be critical in determining whether this strategy begins to pay off. Ministers will be keeping a close eye over the coming year for early signs of economic improvements.

The strategy’s political risk is timing. The economic dividend of the government’s supply-slide reforms, such as overhauling the planning system or the new growth imperative on regulatory bodies, risks arriving too late in the parliamentary term for the government to get any meaningful credit. If the economy is not firing on all cylinders or living standards do not meaningfully improve for voters, the state of the economy will be a key battleground issue at the next election.

For businesses, 2026 will be a critical year for engaging with government as ministers will be eager to expediate regulatory barriers that are currently holding back growth plans and economic activity. For investors, understanding where ministers are politically committed and where a possible course correction is most likely to take place will be critical to navigating the rest of the parliamentary term.