US politics can depress the best of us but two words can help; Gavin Williamson. Alas, comic relief can only be temporary. The bullying knight-without-portfolio could be gone by the end of the week but the US midterm elections are set to have a more lasting impact. And, there’s nothing comical about a potential death blow to US democracy. That might sound a bit hyperbolic but let’s see what damage real bullies can inflict. If the Republican party takes back the House of Representatives and/or the Senate this evening, here are ten developments and their real world impacts to watch carefully…
- Lame Duck Presidency: The weight of money in the betting/predictions markets and the pollster mathematics indicate the Republicans(GOP) have an approximate 80% chance of taking over the House of Representatives and a slightly better than 50/50 chance of winning back the Senate. Financial markets tend to be relaxed enough about a White House/Presidency having its power reined in by the legislative arm of government – see the Trump years. However, the real prize is the 2024 Presidential election so the temptation for the GOP leadership to do more than just hobble the Biden administration might prove too strong. Financial markets will be less relaxed about a wrecking-ball strategy and the GOP leadership have not exactly been shy about their party-over-country priorities. Financial analysts will be quick to downgrade US GDP growth forecasts as GOP wrecking-rhetoric rises…
- Dicing With Debt: In some cases, the wrecking-rhetoric has been very specific.The GOP leadership have suddenly discovered “virtue” on the levels of US national debt. After raising the debt ceiling three times, cutting taxes and growing the national debt by 33% (or just the $7.8 trillion)during the Trump presidency, GOP House leaders like Kevin McCarthy are threatening to prevent the lifting of the debt “ceiling” as leverage to force spending cuts, possibly to Social Security and Medicare. In this game of “debt chicken” the real risk is that the US Treasury defaults on its obligations and pulls the rug from under the foundation plumbing of the global financial system, US Treasury bills and bonds. In a global scenario of potential recession and falling corporate confidence this type of financial brinkmanship is extremely reckless and belies any claims of governance “virtue”. However, it wouldn’t be the only area of hypocritical virtue-signalling by the GOP…
- Kidding The Kids: The Supreme Court overturning of the Roe vs Wade abortion case undoubtedly impacts the healthcare options for women but the virtuous counter-argument has been the protection of an unborn child. That is until you check the data and see global US leadership for school shootings, a ranking of 33 out of 36 OECD nations for infant mortality, a tripling of childhood obesity rates since 1990 and a UNICEF 2nd place ranking for child poverty(after Romania) among 35 developed nations. Clearly, the living outside the womb bit for children needs a bit of work. But hey, different folks see different wokes…
- Climate Cop Out: The UN’s Secretary General, Antonio Gutteres, has warned the COP 27 Climate Summit hosted by Egypt that the planet is on a “highway to climate hell with our foot on the accelerator”. Curiously, the mention of hell and a threat to our children’s futures has failed to unite US evangelicals in a similar protective manner to their campaign to overturn Roe v Wade. However, their GOP representatives can be expected to launch an assault on the Biden climate agenda and his signature $370 billion clean energy initiative in the Inflation Reduction Act. Indeed, the share prices of energy giants like Exxon and Chevron will likely respond positively to the prospect of GOP moves to ease approvals for oil and gas production/infrastructure. And…the energy sector won’t be the only one with happy US companies.
- Inflation Information: It has been a puzzle to this writer how US inflation could be tracking that of Germany. The US is entirely self-sufficient on energy and is far less dependent on trade than the German economy. In truth, the US economy is incredibly self contained(up to 90% of GDP). So, what’s with an annual inflation rate of more than 8%? Don’t ask the GOP . They’re staying shtum and the Democrats are unforgivably missing a trick here. Democracy and abortion are important issues but Clinton did say, “It’s the economy, stupid”. Here are the numbers the Democrat comms team should be ramming down the throats of voters – US corporate profit margins are at 70-year highs of 46%, rental car profits are up 597%, the four largest meat processing companies’ profits are up 134% and the 5 largest shipping companies clocked a more than 29,000% increase in income. Yip, 29,000%. Anybody for price gouging? Clearly, the inflation story needs more scrutiny. The data referenced above features in a report by the US House Committee on Oversight and Reform and covers profit growth between 2019 and 2021. The conclusion of the report is damning and explicitly calls out how “certain corporations are using the cover of inflation to raise prices excessively”. So much for those “do good” sustainability/ESG statements….. and that’s only the “S” in ESG. But there’s even more ESG denial.
- Diversity Denial: The more significant aspect of the Dobbs case to overturn Roe vs Wade is about to become more relevant. The Supreme Court ruling in the Dobbs case, in effect, gives individual states the power to curtail individual freedoms previously protected at a Federal level. At last count, there are more than 370 Republican candidates seeking election but are already in various stages of “election denial” when it comes to rationalising Donald Trump’s delusional take on the 2020 elections. More worryingly, many of these cult-like followers have promised voters they will, at a state level, move to remove many of the protections previously provided by Supreme Court/Federal law for same-sex marriage, contraception and gender rights. If conservatives are successful in removing these protections, do not presume the next opportunity to vote for a concerned ‘majority’ can reverse these attempts to visit the Middle Ages.
- Democracy Denial: These midterm elections are not just for national representation in Washington. There are multiple state governorships, attorneys-general, secretaries of state positions etc all up for grabs. Many candidates, as well as embracing the Trump “Big Lie”, have committed to re-drawing election maps, stricter voter ID, one-day elections and elimination of mail-in ballots. Yep, democracy is about to become significantly less democratic. And that means the removal or voting out of incumbents is going to be made very difficult. It’s almost like only one result is acceptable, or as Kari Lake, in the running for Governor of Arizona, put it: “I’m going to win the election and I’m going to accept that result”.
- Donald Denial: Agent Orange would appear to be able to offer up national defence secrets to the highest foreign bidder, but in some quarters his incarceration would be considered to present an even greater threat to national safety. Many NATO allies plus the CIA (missing quite a few operatives) would beg to differ, but if the GOP gains control of the House and/or Senate then Donald Trump’s chances of avoiding the clutches of the law increase significantly. However, the hope that civil unrest can be avoided in the case of Trump keeping his liberty seems a little optimistic in light of the attack on Nancy Pelosi’s 82 year old husband, Paul. Indeed, the appallingly ugly responses to the attack by certain sections of the MAGA media and Republican party can only have helped to raise the tension temperature in US society.
- Defending Defence: Arguably, in times of economic challenge one might take a more forensic look at a US defence budget which amounts to a whopping $3 trillion through a 4-year presidential term. With the GOP keeping watch for their weaponry buddies expect any political discussion to be drowned out by the usual fans of fear. However, it won’t have escaped most people’s attention that the traditional focus of fear, Russia, has just seen its best military forces and equipment suffer generational-level losses in Ukraine. Today’s wars, yesterday’s generals should not be a phrase exclusive to the Russian armed forces. Even with the downgrading of Russia as a conventional threat, one can expect the share prices of defence contractors to benefit from increased Republican influence in Washington.
- Defending Despots: Putin might be off most people’s cocktail party invite list, even those at Mar-a-Mango. However, the Biden administration have been clearly unimpressed by Saudi Arabia’s recent moves in cutting OPEC oil production. The suspected motive is Saudi Arabia’s desire to help Republican chances in this week’s election and ensure a morality-free zone in Washington to dove-tail with a Handmaid’s Tale of zealotry at state level. The uncomfortable truth is that the Republican party has become very comfortable in the company of low quality characters, from Marjorie Taylor Green to Matt Gaetz to Lauren Boebert. The moral gymnastics required to stay close to these charlatans can only be good news for the likes of Orban, Erdogan, Mohammed bin Salman etc.
None of the above is particularly uplifting but the interesting thing is that most of this has already been factored into share prices, GDP models, ESG scores and inflation forecasts. Bluntly, the darker ambitions of a GOP take-back of the House or Senate are known, and therefore removes much of the drama of the vote this evening. However, I’m not convinced the vote will pan out as expected. Forgive me for clicking my heels and wishing I was in Kansas but that’s exactly where I hope this election goes. Back to Kansas, and back to that state’s August 2nd primary ballot which also included a referendum on a constitutional amendment to remove Roe v Wade protections. Know that this state was a Trump win by a chunky 15 percentage points in 2020 and was expected to ram through the abortion amendment easily. The amendment suffered a stunning knock back by voters. The pollsters and forecasters were shocked in Kansas but tonight could have similar shock drivers. Watch closely the following:
- Total turnout
- Youth turnout
- Women turnout
Ray Charles brought “Georgia on My Mind” to number 1 in the charts in 1960 but I have Georgia on my mind now. This key battleground state allows early voting. At close of early voting on Friday November 4th, turnout was amazingly within striking distance of the 2020 presidential vote with 2.5 million ballots already cast. I can’t help feeling there’s a few twists to come tonight. There might even be some red faces and a thwarted red wave. But only one sure fire certainty…… GOP denial in all its corrosive guises.
