2020 Election: Eight Potential Outcomes
By Leslie Sack, Head of Government Relations of SFA, and Ben Parish, Vice President of Government Relations of SFA
The Republican and Democratic National Conventions are now in the rear-view mirror. With President Trump, Vice President Mike Pence, former Vice President Joe Biden, and Senator Kamala Harris having officially accepted their parties’ nominations, the upcoming 2020 elections are shaping up to be unprecedented in terms of the diversity of the candidates, the outrage over continued racial and ethnic inequality, and the impact of the COVID-19 pandemic on voters’ personal and professional lives – the economy, unemployment, healthcare and the expectation of increased voting by mail. While the outcome of the presidential election will impact the financial services industry, it is equally important, particularly in this election where so much attention is put on presidential candidates at the top of the ticket, to remember that the overall impact on financial markets will be determined by which party, if either, retains control of both the executive and the legislative branches. Races in the U.S. Senate and U.S. House of Representatives are heating up as the country continues to grapple with the pandemic, race relations, and social justice issues.
Below is an analysis of the eight possible scenarios for the 2020 election that could result in divided or unified governments. Please note, given the likely correlation of the outcome of the presidential election and down ballot races, the scenarios listed below as “very unlikely” reflect the long odds facing those end results.
Trump Victory
Status Quo (GOP Senate; Dem House)
National Journal Likelihood: High
Macro Outcomes: The presidential race tightens up as election day approaches, and the congressional races become are a toss-up, making it difficult for Democrats to win four seats in the Senate. COVID-19-related programs and regulatory leniency are likely extended, and a continued focus on deregulation to increase economic growth is expected.
GOP Sweep (GOP Senate; GOP House)
National Journal Likelihood: Low
Macro Outcomes: In the Republican’s best-case scenario, the GOP retains the Senate but will require a stellar night to regain the House seats they lost in 2018. Expect a heavy focus on deregulation with more Dodd-Frank rollbacks and a reorganization of the CFPB likely.
Democratic Legislature (DEM Senate; DEM House)
National Journal Likelihood: Very Low
Macro Outcomes: Democrats would have a strong negotiating position but would likely not be able to enact significant reforms. Expect increased oversight over CARES Act lending, the potential repeal of some executive rulemakings through the Congressional Review Act, and possible bankruptcy reform.
Win One, Lose One (DEM Senate; GOP House)
National Journal Likelihood: Very Low
Macro Outcomes: Republicans in the House would be able to pass many pieces of legislation that would stall in the Senate, producing little legislative reform but increasing Senate scrutiny of the administration’s nominees’ ties to industry.
Biden Victory
New Executive (GOP Senate; Dem House)
National Journal Likelihood: High
Macro Outcomes: The presidential race is a toss-up, and the Congressional compositions likely remain the same. Expect increased Dodd-Frank regulation, a re-empowered CFPB, minimal legislative reform, and extended vacancies due to unconfirmed nominees.
Democratic Sweep (Dem Senate; Dem House)
National Journal Likelihood: Medium
Macro Outcomes: In this Democratic best-case outcome, it will be more difficult for Democrats to win the Senate than the presidency, but not impossible. Increased regulation, likely via legislation, capital gains, and corporate tax reform, and anti-trust actions for systemically important financial institutions (“SIFIs”) are both possible.
GOP Legislature (GOP Senate; GOP House)
National Journal Likelihood: Very Low
Macro Outcomes: Expect a struggle between the executive rule-makers and Congress over the use of the Congressional Review Act, increased oversight by FSOC, and long-term, extended vacancies due to unconfirmed Executive nominees.
Win One, Lose One (DEM Senate; GOP House)
National Journal Likelihood: Very Low
Macro Outcomes: Increased Dodd-Frank regulation and a re-empowered CFPB with little legislative reform except potentially bankruptcy/student debt financing.
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