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Post Election Economics

Written by Paul Ashworth

President Donald Trump’s failure to concede defeat more than a week after the election is unlikely to trigger a constitutional crisis. What matters more over the final months of his administration is the policy actions Trump might take. That could include vetoing additional fiscal stimulus passed in the lame-duck session or triggering a Federal government shutdown in mid-December.

Trump’s legal challenges, claiming large-scale electoral fraud, appear to be going nowhere and Joe Biden’s leads in most of the key swing states are big enough that they will survive those challenges or any mandatory recounts. Of the 27 recounts in state-wide elections over the past 20 years, only three have been successful. Moreover, the biggest shift in votes was just over 1,000, with the average closer to 200.

Ahead of the election, we had argued that if Trump failed to accept the election results, then a lot would depend on whether other senior Republicans supported his claims. As it turns out, leaders like Mitch McConnell have ridden a fine line – offering Trump limited support but, despite some of the hysterical CNN coverage of a potential coup, still reassuring that a peaceful transition of power will take place. For McConnell, claims of fraud are just a useful way of firing up Republican voters for the Senate election run-offs in Georgia.

Unless Trump can prevent the states certifying their election results in the coming weeks, which we doubt, the Electoral College will vote as scheduled on 14th December, confirming that Biden will be the next President from noon on 20th January. Republican-controlled state legislatures are not going to try to select their own electors, at least not enough states to over-turn what ended up being a convincing Electoral College victory for Biden.

What will Trump do in final weeks?

The bigger question is what policy action will Trump take in the final weeks of his administration? The early attention has focused on the possibility of more executive orders tightening up the rules on immigration and deregulation or imposing tougher sanctions on Iran or China. Those actions would have little impact on the economic outlook, not least because Biden could reverse most of them once he has his feet under the Resolute desk.

For us, the key uncertainties surround whether the out-going President would use his veto power on congressional bills to provide more stimulus or to keep the government funded beyond 11th December. Right now the chances of any additional fiscal stimulus being agreed before in the dying days of the 116th Congress are relatively low, not least because both sides believe the Georgia run-offs could swing the balance of power in the Senate their way. But if a bill did pass, we wonder whether Trump would block it, if it didn’t have the required two-thirds majority in both houses that would make it veto-proof.

While a new stimulus bill is unlikely to be agreed by Congress that soon anyway, a new continuing resolution bill does have to be passed before mid-December, to avoid the Federal government being shut down.

We think one under-appreciated near-term risk is that Trump could insist any spending bill includes more funding for the border wall or some other administration priority that House Democrats would flat-out reject. McConnell has no reason to shut the government down, because it could damage Republican chances in the Georgia run-offs, but Trump’s desire to cement his own legacy means he might come to a different conclusion.

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