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HOME NRI JOURNAL Takahide Kiuchi's View - Insight into World Economic Trends : The Risk of Unprecedented Chaos Following the US Presidential Election

NRI JOURNAL

Innovation magazine that generates hints for the future

クラウドの潮流――進化するクラウド・サービスと変化する企業の意識

Takahide Kiuchi's View - Insight into World Economic Trends : The Risk of Unprecedented Chaos Following the US Presidential Election

Takahide Kiuchi, Executive Economist, Financial Technology Solution Division

#Market Analysis

#Takahide Kiuchi

Oct. 08, 2020

The US Presidential Election on November 3 is around the corner. Although Democratic candidate Joe Biden continues to be favored to win in the election campaign, the fact that incumbent President Trump contracted Covid-19 could perhaps have a complicating influence on the outcome of the election. And there is a possibility that the results of the presidential race may take very long to be decided, turning this into a historic election that plunges US politics, society, and financial markets into serious chaos.

An October surprise—the president’s Covid-19 infection

There is something known as the “October surprise” in US political jargon. This refers to the likelihood of some unexpected news event occurring in October—one month prior to the presidential election—that could significantly affect the outcome of the race.
For instance, in the last presidential election in 2016, then-FBI director James Comey suddenly announced on October 28 that new evidence had come to light concerning Democratic candidate Hillary Clinton’s use of her private email for official business during her tenure as Secretary of State, and that he would therefore be reopening the investigation. This led to a drop in Clinton’s approval rating, and some even believe that it caused her to lose the presidential election.
it might well be the case that President Trump’s Covid-19 infection, which became apparent on October 2, has provided the biggest October surprise in the current race for the White House.
President Trump was discharged from the hospital on October 5, and appears to have avoided a serious case of the disease. However, several staff and other persons in the White House including the First Lady were revealed one after another to have contracted the virus.

President Trump’s infection an adverse factor in the race

With President Trump’s Covid-19 infection, there is a sense that the response to the pandemic has once again emerged as a major point of contention in the election. In many ways, I believe the president’s testing positive could end up adversely affecting his chances in the race.
Firstly, the fact that President Trump contracted the virus—after having downplayed the seriousness of efforts to control its spread—invites the criticism that he has personally demonstrated the failure of the government’s measures to prevent Covid-19 from spreading.
Secondly, the president’s own infection calls into question his crisis management capabilities.
Thirdly, if concerns about President Trump’s health grow going forward, it could lead people to consider him unfit to remain in office.
And fourthly, the president’s infection means his campaign activities will be restricted. The style of campaigning for which the president is known, namely appealing to his constituency directly at public rallies, will be difficult to do at least for a little while.
As President Trump flies around the entire country on the re-election trail, he has been casting doubt on the effectiveness of mask wearing, and has also made light of the risk that holding large-scale campaign rallies will lead to further viral spread. Despite having been warned by state and local authorities along the campaign trail that these events could elevate such risk, the president has maintained his busy schedule of holding these gatherings.
President Trump even said at the first televised presidential debate on September 29 that “When needed, I wear masks. I don’t wear masks like him (Biden),” making remarks disparaging Democratic candidate Joe Biden for always wearing a mask in public.

Some uncertainties still linger

After his condition rapidly improved and he was discharged from the hospital, President Trump expressed a strong desire to quickly resume his campaigning, while also posting a comment on Twitter saying “Don't be afraid of Covid. Don't let it dominate your life.” This was part of a strategy to capitalize as much as possible on his own rapid recovery as evidence that the risk of infection has been exaggerated, and to appeal to voters once again that his measures against the pandemic were appropriate. It would also seem that his aim was to burnish his own image as a strong president who had overcome Covid-19.
There is a precedent for this behavior in Brazil. Brazilian President Bolsonaro also contracted the virus this past summer after having made statements downplaying the risk of infection, but his illness was only a mild case. Citing his own fast recovery, the president contended that the infection risk had been overestimated, and forcefully asserted that the Brazilian people should not stop living their daily lives to combat the virus. It remains possible that President Trump will follow a similar strategy, seeking to rebuild popular support for his own Covid-19 countermeasures.
Thus, although there is a strong chance that President Trump’s infection could hurt his chances in the election, there are still many uncertainties at play, and his defeat is not certain.

The election results might not be known on November 3

Incidentally, President Trump has strongly hinted that if he were to lose the election, he might not accept the outcome and could even dispute the results in court. The president has also repeatedly asserted that a rise in voting by mail amid the pandemic could lead to rampant voter fraud that would likely skew the election results in favor of the Democratic party. However, he has given no evidence for that claim.
It is believed that the use of mail-in ballots, which President Trump has suggested is a hotbed for fraud, will quite likely see a considerable increase in this election. Compared to regular voting in-person, the handling of mail-in ballots is more laborious as they need to be unsealed. Plus, larges number of mail-in ballots could mean delays in delivery.
One thing that could be leading President Trump to suggest that mail-in voting will breed fraud is the phenomenon of so-called “double voting”, where a person who has already voted by mail then goes to a polling place on election day and casts another vote. In actuality, the US voting system is set up to be able to uncover double voting at tabulation time, but this verification is also time-consuming.
Thus, there is a chance that given the higher proportion of mail-in ballots in this election, the ballot counting will not be finished on election day, meaning that no victor can be decided.

A premature declaration of victory could also lead to major chaos

According to an opinion poll by the Pew Research Center, 80% of Trump supporters said they planned to vote at a polling place on election day or prior. Only 17% of the president’s supporters said that they would be voting by mail. By contrast, in fact 58% of Biden supporters replied that they would be voting by mail. This is because supporters of the Democratic party tend to be more wary of the risk of infection.
Given this point, one can foresee a scenario wherein if the two candidates were to receive nearly the same number of votes, President Trump might appear to be the victor from the preliminary data on the first day of ballot counting, without the mail-in portion being fully reflected yet, but then as the mail-in vote tabulation proceeds, the number of votes for Biden could encroach on or even overtake the number cast for the president.
It has also been pointed out that once the initial data is in on the first day of counting, President Trump might declare victory in order to establish his win as a fait accompli. Facebook has indicated a new policy that it will be banning political ads until the election results have been determined, a notion that would prevent President Trump from issuing a premature declaration of victory on the platform.
As Biden presumably would not accept such a premature declaration by President Trump, the winner would likely not be decided at that time. That said, it is possible that the president’s self-declared victory and the Biden campaign’s strong criticism of it could spark serious chaos within the US.
The FBI has strongly cautioned that agitators both foreign and domestic could take advantage of the chaos caused by the lack of clear election results, by spreading fake news about election fraud as part of a scheme to undermine the legitimacy of the election.

Could the election results be left for the courts to decide?

Further, if Biden’s victory were to be decided while mail-in ballots are being counted, President Trump might very well reject the election results as being distorted by fraud and take his case to the Supreme Court. It would take time for a decision to be handed down, and thus the major turmoil would likely only continue.
In the 2000 presidential election as well, the matter of deciding the election was brought to the Supreme Court, and the results were not decided for another month. In that case, what happened was that Democratic candidate Al Gore ultimately acknowledged his own defeat, in order to bring an end to the confusion.
With the 2000 election, the fact that the numbers of votes cast for the two candidates had been so closely tied was a factor behind why it took so long to certify the election results. This time around, if the incumbent president refuses to concede victory on the grounds of fraud despite a clear difference in the numbers of votes cast, trust in the election system which forms the bedrock of democracy would likely be dramatically harmed compared to the 2000 election.
In addition to plunging US politics and society into unprecedented chaos, that could also cause a great disturbance in the financial markets, such as a major devaluation of US stocks or a rapid depreciation of the dollar. And the effects likely would not be limited to the US, disrupting financial markets on a global scale.
Thus, we should probably be aware that the current US presidential election could end up being an historical event that brings about chaos the likes of which we have never seen before.

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