US presidential elections always come with a certain amount of risk since the potential for the transfer of power from one party to another introduces a degree of uncertainty on a range of economic and geopolitical issues. But this year’s Nov. 3 contest promises (threatens) to be unusual for all the wrong reasons.

The bedrock of US political stability, and all the economic advantages that flow from that durability, appear threatened in the upcoming election. The Capital Spectator’s baseline assumption is that the institutional framework that guides and controls election outcomes, which confers legitimacy on results, will likely prevail. But for the first time in living memory, perhaps the first time ever in US history, the possibility is rising that an election train wreck is brewing. If so, there are wide-ranging implications for a range of macro and geopolitical subjects.

At the core of this risk is what appears to be a rising inclination on both sides of the political spectrum to dig in and prepare to not concede, no matter the results. This is a dangerous scenario for many reasons and so the case for thinking through the implications has moved beyond an academic exercise to a real-world necessity.

Let’s start with President Trump, who has long hinted that he might not accept election results that show he lost to Joe Biden, his Democratic opponent. At a White House press conference yesterday, when asked if he would commit to a transfer of power if lost the election, the president responded: “We’re going to have to see what happens.” He complained of a “rigged” election process due to mail-in ballots, claiming (without evidence) that “the ballots are a disaster.”

Trump also said: “(G)et rid of the ballots and you’ll have a very … there won’t be a transfer, frankly. There’ll be a continuation.”

Senator Mitt Romney, a rare Republican critic of the president, tweeted: “Fundamental to democracy is the peaceful transition of power; without that, there is Belarus. Any suggestion that a president might not respect this Constitutional guarantee is both unthinkable and unacceptable.”

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A contested election at any point in time would bring new risk factors into the mix, but the potential for destabilization is unusually high this year. As The Atlantic observes:

“The danger is not merely that the 2020 election will bring discord. Those who fear something worse take turbulence and controversy for granted. The coronavirus pandemic, a reckless incumbent, a deluge of mail-in ballots, a vandalized Postal Service, a resurgent effort to suppress votes, and a trainload of lawsuits are bearing down on the nation’s creaky electoral machinery.”

Last week’s death of Supreme Court Justice Ruth Bader Ginsburg only adds to the complication. Trump revealed on Wednesday that he’s thinking about the possibility of a 4-4 split on the Court (now that there are 8 justices), which could bring a deadlock if the election result is ultimately decided through the judiciary a la the controversial 2000 election.

 “I think this will end up in the Supreme Court,” the president predicted. “And I think having a four-four situation is not a good situation, if you get that. I don’t know that you’d get that. I think it should be eight-nothing or nine-nothing. But just in case it would be more political than it should be, I think it’s very important to have a ninth justice.”

Nominating and confirming the ninth justice before the election has become highly controversial and is a new factor that’s fueling political polarization. Nonetheless, Trump and the Republican party are moving ahead with plans to confirm a new Supreme Court nominee. The decision provokes intense pushback from the Democrats, in part because of the double standard: Republicans in 2016 refused to consider President Obama’s Supreme Court nominee, arguing that the process should wait until after the election to allow the public to weigh in via choosing a president.  

The result is that the Supreme Court factor is another factor that’s driving up the risks of a contested election. Trump’s comments aren’t helping defuse this risk, but the Democrats also appear inclined to push back if Biden loses.

Last month, Hillary Clinton, who lost the 2016 to Trump, recommended that “Joe Biden should not concede under any circumstances, because I think this is going to drag out, and eventually I do believe he will win if we don’t give an inch, and if we are as focused and relentless as the other side is.”

The risk of deadlock is heightened because there’s a distinct possibility that the election results will be inconclusive on election night. The likelihood that mail-in ballots will be unusually high this year suggests that a large portion of the votes won’t be tabulated until days (weeks?) after Nov. 3–votes that could be decisive. In that case, the potential is high for competing narratives and backroom machinations as the nation awaits a final verdict.

The Atlantic’s Barton Gellman considers one possibility: “Trump’s instinct as a spectator in 2018—to stop the count—looks more like strategy this year. ‘There are results that come in Election Night,’ a legal adviser to Trump’s national campaign, who would not agree to be quoted by name, told me. ‘There’s an expectation in the country that there will be winners and losers called. If the Election Night results get changed because of the ballots counted after Election Day, you have the basic ingredients for a shitstorm.’”

All of this uncertainty is focusing minds on what will happen to markets if a “shitstorm” risk is realized. “Recently, I have been getting a number of questions from people who are scared about what might happen to the financial markets at election time,” writes Brad McMillan, chief investment officer at Commonwealth Financial Network. “The fear is that if we get a disputed election, it could lead to disruption and possibly even violence. If so, we could well see markets take a significant hit.”

At the moment, RealClearPolitics.com’ aggregated general election polls (as of Sep. 23) continue to show Biden with a sizable lead over Trump.

Parsing the outlook through the Electoral College, which decides presidential elections, paints a more nuanced picture. Although Biden has an estimated 222 votes (270 are needed to win), there are 191 so-called toss-up votes hanging in the balance and so there’s more than a trivial chance that Trump could still win.

If there’s an Electoral College tie, the process moves to the House of Representatives, which hasn’t happened since 1824. The Washington lobbying firm Mehlman Castagnetti Rosen & Thomas outlines the various ways that an Electoral College deadlock could unfold. By some accounts, this outcome is higher than usual. If so, if the House choose the next president — a process raises a whole other set of complications, controversy, risk factors and opportunity for political mischief.

To be fair, there is a possibility that the election will unfold seamlessly and the loser will accept the results gracefully. Maybe, but it’s getting easier to imagine that this year will be different.

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