The news that Joe Biden is on course to become the 46th President of the United States has been received with rapture in most countries. ‘We all congratulate Biden on his wonderful victory and look forward to better times ahead!’ Except the Democrats have not been victorious, and the likelihood of major changes in US policy making is far lower than the received wisdom.
The good news for the Democratic party is that Mr Biden beat Mr Trump by 75 million votes to 70 million. The bad news is that the Democrats lost every other important election. They did not gain the Senate as they expected. Betting markets do not suggest they will gain the last two seats in Georgia’s run off next January. The Democrats lost ground in the House of Representatives and face a sizeable threat in 2022. On top of any mid-term swing, there will be aggressive re-districting following the US 2020 census. The Democrats failed to make headway across Governorships and State legislatures, so the Republicans will take charge of redrawing the geography of Congressional seats to their advantage. Put simply, gerrymandering is alive and well in the USA.
It is possible that Donald Trump will slip away into retirement, perhaps spending more time at his Scottish golf courses. More likely he begins to campaign for a re-run at the Presidency in 2024. After all, he managed to win 4 million more votes than in 2016, despite his chaotic administration and disastrous handling of the pandemic. The Democrats have found it difficult to link with important groups such as Hispanics or disgruntled Mid-West voters, as opinion pollsters found out to their cost.
The jubilation of any Biden supporter needs to be set against the challenges of a divided, even embittered, government and electorate. It is true that Mr Biden has made well received statements about healing the country, controlling the pandemic, reviving the economy, rooting out systemic racism, expanding healthcare and building alliances with like-minded countries. The harsh reality is that Biden’s hands are tied, by the Senate’s control of the purse strings. Most of his campaign promises are dead in the water. Businesses around the world might have hoped for a small part of a fiscal package of $2-3 trillion to revitalise the US economy, followed by grandiose plans for spending over $5 trillion in the coming decade on such areas as infrastructure or renewable energy. All will fail; the new unofficial leader of the opposition is Mitch McConnell, the Republican leader of the Senate, whose reputation for being an obstructionist brought despair to Obama. Negotiations have re-started with the Republicans calling for a stimulus as small as $0.5tn this winter.
All in all, it is hard to see where Biden will have much legislative success. This leaves him in a similar place to Trump, relying on executive orders in such areas as trade, migration, foreign policy and regulation. A large part of his first year will be rolling back his predecessor’s executive orders, as well as bolstering the role of agencies such as the Federal Energy Regulatory Commission to press on with his plans for climate change alleviation. Of course, a rapid roll-out of a successful vaccine could transform the outlook for the US and global economy into 2021. Nevertheless, after the initial rush of enthusiasm about the news from Pfizer, it is noteworthy that the harsh practicalities of how to roll out a vaccine across a global population of over 7 billion people, let alone a US population of over 300 million, many of whom are wary of vaccination, are starting to sink in.
Andrew Milligan an independent economist and investment consultant. From 2000-2020 he was the head of global strategy at Standard Life/Aberdeen Standard Investments, analyzing the major financial markets for global clients. He currently assists a range of organizations with reviews of their investment processes, advice on tactical investing and strategic asset allocation, and how to include ESG factors into their decision making
