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Will Election Outcomes Impact the Economy?

August 14, 2020

Concerns are high surrounding the 2020 election - how might forecasts or the economy be affected? Catch our newest TrendsTalk episode with ITR CEO and Speaker Brian Beaulieu to hear our expectations.


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Transcript by Rev

Hello, thank you for joining us for this edition of TrendsTalk. I'm Brian Beaulieu, CEO and Chief Economist of ITR Economics. I'm going to talk about the presidential election and the general election, really, that's happening this November. Seems to be a point of concern, maybe even contention for a lot of people. And they're asking what it means for the economy? And how it's going to be potentially impacting our forecast, and whether we need to change our forecast? And it's not easy because it always seems like such a momentous event.

In one corner, you have President Trump and that brand of conservatism and, to a certain extent, traditional Republican behavior, but only to a certain extent. And in the other corner, you have the presumptive Democratic nominee, Joe Biden. And they've each got their running mates, now, Pence and Harris respectively, so we pretty much know who those contenders are. What nobody knows is who's going to win the elections, but we can't afford we don't have the luxury of letting that inhibit us from making plans.

We don't know who's going to end up controlling the Senate. Clearly, the Democrats have their eye on gaining control of the Senate, and the Republicans are working very hard to stay in control. And it seems to be a foregone conclusion that the Dems are going to control, or keep control of the House. So, what does all that mean? Well, for you and me in planning our businesses for 2021, it is ITR's opinion, that it means very little. Because let's assume that it becomes a President Biden administration. So what? You think he's going to spend any more money than President Trump has? He's just going to spend probably every bit as much as president Trump has, just in different areas. So, it's not like we have to worry about that.

He's going to spend it on different areas, different aspects. So, if you're tied to the defense industry, perhaps your contracts are going to have a shorter shelf life than they otherwise would have. Get that. But in terms of the overall business cycle, it's not that significant of an impact. So, what about the stock market? Well, the stock market tends to react very well when there's a Democrat elected to the Oval Office, so we don't have to really worry about that.

Do we have to worry about our taxes going up on corporations, or the upper income levels under a Biden administration? Perhaps, but that's not going to happen in 2021. It doesn't happen that quickly. He can pass legislation, I suppose, in 2021, but only if he has a Democratic Senate to facilitate that change. But it really, doesn't begin to show up as a demonstrable impact on the economy in 2022. And while, theoretically, that impact would be negative, we would need to see the size of that potential tax change, and exactly how it was crafted to know whether it's going to have a impact on the economy that we think is going to change our outlook for 2022.

We're already forecasting the economy's going to be slowing down in 2022 after a very good 2021. I don't know that we want to change that one way or the other under this scenario. We're already forecasting that GDP goes down in 1Q '23 for that one quarter. It's not a recession. So, that is not going to change whether it's a President Trump, or a President Biden.

The real issues in our mind are regulatory rather than legislative. A Biden administration can start imposing with the power of the pen and executive orders, a lot of new rules and regulations that we've seen presidents do. But you and I, we've run our businesses through Democratic times and Republican times. We know how did this game is played. We know how to make money. I think that's the major takeaway, we know how to make money. And I think whether it's a President, Trump or a President Biden, you and I are still going to figure out how to make money. The economy's still going to grow in 2021, it's still going to be on the back side of the business cycle in 2022. We'll still have to engage in management objectives contending with slowing growth as we head toward 2022. So, if you have that in your head right now, then it just becomes a question of degree, I suppose, if you're really amped up about the politics.

But I'd encourage you not to be that amped up about the politics. You're giving the politicians too much power, too much credence. You have the power. Your job is to figure out how to deliver it to the consumer, whether that's a B2B situation or a B2C situation. That doesn't change when the political winds change. It can become more difficult, it can become easier, but what we do every day we get up and go into the office, or go to our home office remains the same. We got to figure out how we're going to deliver. Keep that in mind. And it helps keeps the body politic in mind. It's an influential topic, but it's not the driver of our daily lives.

Economy's going to be good in 2021, it's going to slow down in 2022. How much it slows down in '22, right now, we think it's going to be soft. It's going to be a normal slow down. And we see nothing to make us want to change that. We'll let you know if we need to change that. But, for now, take a breath, enjoy the show because I bet you the day before the election we're not going to know who's going to become president. And there's no sense wringing your hands and gnashing your teeth over something you can't control. We'll figure it out afterwards. Between now and then, plan on 2021 being better, plan on 2022 being a year of slowed growth. You do that, we'll be fine, you'll be fine, your employees will be fine. And your customers will be well-served.

Thanks for listening to this edition of TrendsTalk. I'm Brian Beaulieu, and I'm honored to represent ITR Economics, and 53 amazing men and women who comprise this organization. Thank you.


Since 1948, we have provided business leaders with economic information, insight, analysis, and strategy. ITR Economics is the oldest privately held, continuously operating economic research and consulting firm in the US. With a knowledge base that spans six decades, we have an uncommon understanding of long-term economic trends as well as best practices ahead of changing market conditions. Our reputation is built on accurate, independent, and objective analysis.