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Macroeconomics of Split US Election

OMFIF  | Fri, Nov 6, 2020

by Mark Sobel


Monetary policy to bear much greater burden

As of Friday morning, despite Joe Biden being up a convincing 4m votes in the presidential election, America – and the world – incredibly is anxiously awaiting the declaration of a winner, due to the inimitable electoral college. Undoubtedly, there will be court challenges galore in the coming weeks. That said, in this nanosecond, it appears Biden will become president, the Senate will remain in Republican hands, and the House in the Democrats’ column.

At first blush, what could this mean for economic activity and macroeconomic policy amid soaring Covid cases?

The near-term fiscal outlook is key. Many analysts expected a ‘blue wave’, with Democrats controlling the White House and Congress. In this scenario, Democrats purportedly would push for an up to $3bn stimulus, building on prior work by House Speaker Nancy Pelosi, including more support for unemployment insurance, health, an economic impact ‘stimulus’ payment of $1,200, and state and local government support.

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