Despite the claims of candidates, activists and pundits, I will argue that this is not the most important election of our lives.
This is not to say it isn’t important. Elections, including this one, have real consequences. Given the candidates’ positions, the election will have major impacts in certain areas, from public health initiatives to energy policy to immigration. Even so, it is worth taking a moment to put the election in perspective. I am writing this commentary as a financial planner, and for investors, the outcome is likely to be less monumental than the relentless wall of coverage would have you think.
First, as Ezra Klein recently observed for Vox, “By definition, we don’t know which elections are unusually important when they occur.” Only some of the very youngest voters have never before heard the argument that the current election will be the most important. Similar claims flew in 2016, and 2012, and 2008, and 2004. While the 1868 election wasn’t the most important of anyone reading this post’s lifetime, the Atlantic Monthly described it that way when it happened. With the benefit of historical hindsight, it is clear not every election has equal consequences, but we usually can’t know which ones will matter more in advance.
For now, investors should take a deep breath and remember the reasons why the election’s outcome may have less of a financial impact than they expect.
First, regardless of who wins, the most important factor in economic recovery will be a vaccine – or, possibly, an effective treatment – for COVID-19. Without one, it may not matter who wins the election, because we’ll face some major nonpartisan challenges. The economy in the U.S., and in many other countries, will not begin true long-term recovery until people feel comfortable going out again. A particular administration can make policies that facilitate or hinder vaccine research. But that research will remain a top priority no matter who occupies the White House.
Second, while Donald Trump and Joe Biden have different economic proposals, both plans would provide their own benefits. Trump supports the idea of further tax cuts, though he has not offered any estimated figures. Biden is promising major stimulus, focusing largely but not exclusively on American-made goods and technological research. The Penn Wharton Budget Model estimated that Biden’s economic plan would raise $3.375 trillion in extra tax revenue and decrease the federal debt by 6.1% as of 2030. (The organization did not create an analysis of Trump’s plan because his proposals were not specific enough to effectively do so.)
Reasonable people can disagree on which approach is better, but neither plan has economists ringing alarm bells. As I have written in this space before, the prospect of a Biden victory does not seem to have businesses particularly worried, despite the prospect of losing the corporate tax cuts passed in 2017. Goldman Sachs issued a note earlier this month predicting that a Biden victory, in conjunction with Democrats retaking control of the Senate, could lead to a surge in economic growth. Continued low corporate income tax, which Trump supports, would create its own set of benefits.
Finally, investors should remember that whoever is president, the country will face surprises over the next four years. No one voting in 2000 could have imagined the ways that 9/11 would reshape George W. Bush’s first term in office, just as no one voting in 2016 could know that the world would face a pandemic in 2020. Sometimes the unexpected represents opportunity rather than disaster. Under President Barack Obama, the rise of hydraulic fracturing changed the energy landscape; to the disappointment of some of his supporters, Obama not only largely remained quiet as the industry grew, but identified the growth of natural gas as a key step toward lowering carbon emissions. Trump has been less than glowing in discussing American technology companies, taking rhetorical swipes at tech giants regularly. Even so, the sector has thrived under his watch. History suggests that, regardless of ideology, presidents won’t shut down an unexpected economic boon.
Voting is important, and elections matter. But whatever happens on Nov. 3 (and the days following), a variety of factors outside voters’ control will also shape the next four years. For now, everyone should take a deep breath, make their choice, and remember that the most important election of their life is likely to arrive again in four years.