Decision 2020: Your Vote & Your Money Part One: The Race for the White House
Welcome to Decision 2020: Your Vote and Your Money. This special series will examine the outlook for November’s elections, the potential impacts on markets and taxes, and steps you can take now to election-proof your finances. Make sure to check back often so that you don’t miss any of this special series, in which we’ll cover topics including:
· Who Will Win the Race for the White House?
· Will the Next Congress be Red or Blue?
· Do Elections Even Matter for Markets?
· Would Joe Biden Raise Your Taxes?
· Should You Defuse Your Tax Time Bomb?
· Can You Build an Election-Proof Portfolio?
Part One: Who Will Win the Race for the White House?
Well, in case you haven’t heard yet, there’s an election coming up. Democratic challenger Joe Biden will be running against incumbent President Donald Trump, and the two opponents have fiercely differing ideologies as well as opposing viewpoints on a variety of topics.
Concurrently, a large portion of Congress will be turning over, with all 435 House Districts up for grabs, as well as 35 Senate seats. The outcome of those Congressional elections, as well as the Presidential race, could have important economic and political ramifications, both in 2020 and beyond.
With that in mind, this article will examine the outlook for the 2020 Presidential race. Future installments will then discuss the race to control Congress, some of the potential impacts the election might have on the economy, markets, and taxes, and potential strategies you can put in place now to insulate yourself from any adverse election outcomes.
But before we get to all that, we’ll start with the question everyone is asking: Who Will Win the Race for the White House?
The most important election of our lifetimes….again?
It seems like every four years a host of people tell me that “this is the most important election of our lifetime.” I’ll leave that ranking to political analysts and historians, and for our purposes I will simply note that for whoever wins the White House, and whatever party holds power in Congress, the rather daunting “to do” list includes:
· Identifying an effective COVID-19 vaccine and then efficiently distributing that vaccine as quickly as possible to as many people as possible to establish herd immunity against the disease.
· Dealing with the fallout from the sharpest economic decline in many generations, guiding the economy through the pandemic, and facilitating an economic recovery.
· Assisting individuals and families most effected by COVID, including those that have lost their businesses or their jobs and who might be sliding towards long-term unemployment at a time when the official count of the unemployed is more than 13 million1 people.
· Dealing with a $27 trillion national debt2.That’s trillion with a capital “T.” That number has exploded recently on the basis of the government’s efforts to moderate the economic fallout from COVID, but the debt has been increasing for years. Eventually it will need to be brought under control.
· Addressing economic and racial inequality in ways that help those disadvantaged without alienating others or disincentivizing high earners from working.
· Establishing and maintaining a working relationship with China on economic, trade, and foreign policy matters. The historical track record shows that when a dominant country (the USA) and a rising power (China) compete for global hegemony, the result is usually war, but this can’t be the outcome in an era of weapons of mass destruction (WMDs.)
· Finding ways to coexist and cooperate with other nations, whether allies (India, Europe, Japan) or adversaries (Iran, North Korea.) Again, the need for international cooperation has never been greater than in the era of WMDs. Additionally, many of the challenges we face are global in nature and cannot be solved by a single nation (climate change for one example, or COVID-19 for a more immediate concern.)
I could go on with this list, but the point is clear: America, and the world, faces a host of formidable challenges. If politicians and leaders can solve those challenges and take advantage of the opportunities inherent within every challenge, the country, and the world, will be a better place. So, let’s turn our attention now to exactly who might be tasked with meeting those challenges as the Leader of the Free World.
The next President of the United States…
In August, the Republican and Democratic Conventions met and nominated their candidates for President. While there are a host of other hopefuls running for smaller parties or on an independent ticket, in the U.S. the two-party system more or less guarantees that the eventual winner will be from one of the two main parties, at least for now. Let’s look at the two candidates, as well as their odds of winning in November.
The Challenger: Former Vice President Joe Biden is running for the Democratic Party. Biden is a long-time politician, having served in the Unites States Senate for the State of Delaware from 1973-2009. He then went on to serve as Vice President under Barrack Obama for two terms. He did not run for office in 2016, when Hillary Clinton secured the Democratic nomination, but entered the 2020 race as one of the front runners. Despite some early struggles and an initial surge of strength form populist candidate Bernie Sanders, Biden eventually pulled away, becoming the Party’s presumptive nominee in the Spring of 2020. He was officially nominated as the Democratic candidate for President on August 18, 2020.
Here, from the Joe Biden website, are what he describes as his “Vision for America:”
We've got to rebuild the backbone of the country: The Middle Class.
The middle class isn’t a number — it’s a set of values. Owning your home. Sending your kids to college. Being able to save and get ahead. Across the country, too many families are being left behind. The next president needs to understand what the current one doesn’t: In America, no matter where you start in life, there should be no limit to what you can achieve.
We need to rebuild the middle class, and this time make sure everybody comes along — regardless of race, gender, religion, sexual orientation, or disability.
We’ve got to demonstrate respected leadership on the world stage.
The world is facing inescapable challenges: a rapidly changing climate, the risk of nuclear conflict, trade wars, a rising China and an aggressive Russia, millions of refugees seeking shelter and security, and attacks on universal human rights and fundamental freedoms. The next president must repair our relationships with our allies and stand up to strongmen and thugs on the global stage to rally the world to meet these challenges. We can reclaim our longstanding position as the moral and economic leader of the world.
We've got to make sure our democracy includes everyone.
Our politics is broken and excludes too many Americans. Until we fix campaign finance, voting rights, and gerrymandering, it will continue to get more polarized, more ugly, and more mean.
The Incumbent: President Donald Trump spent decades as one of the world’s most well-known businessmen before running for office. With his penchant for self-promotion, Trump was close to a household name thanks to his eponymous buildings and hotels, not to mention his best-selling books. He then became a reality tv star with The Apprentice, and his trademark line “You’re Fired.” The 2016 campaign was his first, and despite widespread doubts about his viability as a candidate, as well as his alienation from much of the Republican Party’s establishment, Trump eventually secured the nomination. He faced further doubts in the general election, and the consensus was that Hillary Clinton would be elected President. But in November 2016, Trump pulled a shocker when he was elected as the 45th President of the United States of America. From the official White House website:
Donald J. Trump is the 45th President of the United States. He believes the United States has incredible potential and will go on to exceed even its remarkable achievements of the past. His campaign slogan for President was, “Make America Great Again,” and that is exactly what he is doing.
The Race as It Stands Now
In addition to hailing from different parties and having many opposing views, President Trump and Candidate Biden differ in one other, important way. As a long-tenured U.S. Senator and former Vice President, Biden is very much part of the Democratic Party establishment. President Trump on the other hand, came to Republican politics as an outsider. And while the party has moved more in his direction the past four years, Trump remains something of a wildcard. His populist streak, as well as his off-the-cuff communication style, mean that in some ways he is more of an unknown than Biden, even though Mr. Trump is the incumbent.
In 2016, Trump’s victory, while unexpected, was convincing. Again, from the White House website:
“On November 8, 2016, Mr. Trump was elected President in the largest Electoral College landslide for a Republican in 28 years. Mr. Trump won more than 2,600 counties nationwide, the most since President Ronald Reagan in 1984. And he received the votes of more than 62 million Americans, the most ever for a Republican candidate. These voters, in delivering a truly national victory and historic moment, rallied behind Mr. Trump’s commitment to rebuilding our country and disrupting the political status quo that had failed to deliver results.”
Given the political divisiveness gripping the country, as well as the uncertainty around COVID-19 and its accompanying economic slowdown, the outcome in 2020 is far from certain.
Here is an electoral vote map produced by CNN3. As a reminder, it takes 270 votes to win the election. As you can see, based on CNN’s current projections, Biden has more electoral votes in the “Solid Democrat” and “Leans Democrat” column than Trump does in the “Solid Republican” or “Leans Republican” columns. There are also approximately 100 electoral votes in “battleground” states. These states include:
· Pennsylvania
· Ohio
· North Carolina
· Georgia
· Florida
https://www.cnn.com/election/2020/electoral-college-interactive-maps
A quick look at the electoral math indicates that Trump needs to win all the battleground states to be reelected. Alternatively, he would need to win over one of the “Leans Democrat” states. In other words, the path to victory is clearer for the Democratic candidate. It’s important to note though that this electoral math has been relatively consistent in recent years, which has not prevented Republican victories.
Here is another look at the electoral map, this time from The Economist4. This map shows each state, its electoral vote count, and the probability of each candidate winning that state.
https://projects.economist.com/us-2020-forecast/president
According to The Economist, Biden is very likely to be elected as the next President of the United States. In fact, as of the late September, they gave him greater than an 85% chance of victory.
https://projects.economist.com/us-2020-forecast/president
In fact, Biden’s outlook has been steadily improving since spring, whereas Trumps fortunes have fallen.
This is true when the outcome is measured in projected electoral votes:
https://projects.economist.com/us-2020-forecast/president
As well as when the forecast centers upon probability of victory:
https://projects.economist.com/us-2020-forecast/president
So, the bottom line is that as of early September, Biden is in the lead, and currently projected to win the election. But as 2016 demonstrated, anything is possible, and either candidate may be capable of pulling an election night surprise.
Here, according to Reuters5, are where the two candidates stand on some high-profile issues. Please note that I have restricted the focus here to issues most directly impacting the economy, financial markets, and financial planning. As such, a host of important topics have been excluded.
Blue = Biden
Red = Trump
Reopening the economy
Cautious
Cautioned against reopening without ramping up testing.
Yes
Pushed states to reopen as quickly as possible, even as infections spiked.
Putting the economy back on track
Trillions more
Has proposed spending trillions to create new jobs in clean energy, manufacturing and caregiving, and to ease racial economic inequality.
Wants Washington to offer states more support in paying for unemployment benefits and says households - as well as local governments - need more support to get through the shutdown.
Onetime stimulus
Since the COVID-19 outbreak, Trump has signed legislation to flush the economy with trillions of dollars in onetime aid to businesses, individuals and local governments.
Supports further stimulus measures, including payroll tax cut.
Taxes and wages
Raise minimum wage
Has criticized the Trump administration’s 2017 tax cuts as giving too many benefits to the wealthy and corporations. Pledges to reverse some of Trump’s 2017 tax cuts by raising the marginal tax rate on the highest income earners back to 39.6% from 37%.
Supports raising the national minimum wage to $15 an hour from $7.25 and expanding some tax credits for lower-income workers.
No to raising taxes
Touts his 2017 tax cuts as an example of his approach to stimulating economic growth. Cutting payroll taxes would boost paychecks of most working Americans.
The Trump campaign is attacking the policy of raising taxes while the economy struggles to recover.
Trade
Boost domestic manufacturing
Proposed his own made-in-America manufacturing plan in July. He pledged to spend $700 billion on American-made products and industrial research, which he said would give at least 5 million more people a paycheck during a job-killing pandemic.
Criticizes Trump’s tariff war with China as bad for US consumers and farmers.
Voted for NAFTA as a senator.
Boost domestic manufacturing
In a return to a core issue of his 2016 presidential campaign, Trump is telling voters he wants to boost domestic manufacturing.
Says America’s difficulties in procuring medical supplies internationally during the pandemic are another reason to encourage U.S. companies to avoid offshoring.
U.S.-China relations
Global pressure on China
Has called Trump’s handling of the coronavirus pandemic was a historic blunder.
Argues that China relishes a chaotic Trump administration, his alienation of American allies, and his abdication of U.S. leadership roles in global institutions, such as the World Health Organization.
Says he will correct this by bringing multilateral pressure to bear on China through renewed relations with U.S. allies.
Stand up to Beijing
Entered into a high-stakes trade war with China before reaching a partial Phase 1 trade deal in January. Trump has since shut the door on Phase 2 negotiations, saying he was unhappy with Beijing’s handling of the pandemic.
In July, Trump issued an executive order to end the United States’ special commercial treatment of Hong Kong after Beijing imposed national security legislation on the former British colony, and his administration abruptly told China to close its Houston consulate amid accusations of spying.
Obamacare
Yes
Has vowed to bolster the ACA. Biden’s proposed healthcare plan would cost $750 billion over 10 years and would be financed by increasing taxes on the wealthy, according to his campaign.
Does not support a single-payer system like Medicare for All. Instead calls for a Medicare-like public option that would serve as an alternative, not a replacement, for private insurance.
No
Has used executive power and the courts to undermine the Affordable Care Act (ACA), popularly known as Obamacare, after years of failed attempts by Republican lawmakers to repeal it.
Has not proposed a comprehensive replacement, despite Trump’s vow to deliver a better, less-costly healthcare system.
Medicare/Medicaid expansion
Yes
Proposes lowering the Medicare eligibility age from 65 to 60. Such a change would potentially extend Medicare to some 20 million more Americans.
No
Supports imposing work requirements and other limitations on Medicaid eligibility, as well as placing caps on Medicaid spending growth and converting Medicaid to block grants — all moves that experts say would result in fewer people covered.
Breaking up Big Tech
Maybe
Biden, who was vice president during the Silicon Valley-friendly Obama administration, has criticized Facebook and other tech giants during his campaign and proposed a minimum federal tax aimed at companies like Amazon.com Inc.
Biden has said dismantling companies like Facebook was “something we should take a really hard look at.”
Maybe
Trump, who has mixed relationships with tech companies, regularly bashing Amazon and its Chief Executive Jeff Bezos but meeting with Apple Inc’s Tim Cook, has said “there is something going on in terms of monopoly” when asked about big tech firms.
The Trump administration is conducting a wide-ranging antitrust probe into major tech companies, but both he and Biden have stopped short of calling for the firms to be broken up.
https://graphics.reuters.com/USA-ELECTION/POLICY/ygdpzwarjvw/
As you can see, the candidates have widely divergent views on a host of important issues. But of course, it is important to keep in mind that there is a long track record of politicians taking a position during a campaign only to soften their stance once elected. Furthermore, control of Congress will also go a long way towards determining how much of their agenda President Trump or President Biden is able to enact. So as is often the case, even once we know the outcome of the election, the only certainty will still be more uncertainty!
Conclusion
Although this article has explored the current outlook for November’s election, things can certainly change. In fact, this year’s election might be more uncertain that most, given that the COVID-19 pandemic and accompanying economic recovery are the two most important factors in determining the outcome – and both of those situations are evolving by the day!
In future installments of this special Decision 2020 Series, we’ll look at:
· Will the Next Congress Be Red or Blue?
· Do Elections Even Matter for Markets?
· Would Joe Biden Raise Your Taxes?
· Should You Defuse Your Tax Time Bomb?
· Can You Build an Election-Proof Portfolio?
Following those topics, we’ll lead into the election with a final question and answer segment. Then, once the outcome has been decided, this Series will conclude with a recap and summary of steps to take post-election.
That’s all for now, and remember to check back soon for Part Two of this special Decision 2020 Series, where we’ll attempt to answer the question:
Will the Next Congress be Red or Blue?
Notes:
1: (https://www.usdebtclock.org/)
2: (https://www.usdebtclock.org/)
3: https://www.cnn.com/election/2020/electoral-college-interactive-maps
4: https://projects.economist.com/us-2020-forecast/president
5: (https://graphics.reuters.com/USA-ELECTION/POLICY/ygdpzwarjvw/
*All projections and figures in this article are as of September 22, 2020 and are subject to change at any time