On this episode of Street Cred, Chris Kreuger, Macro, Trade, Fiscal and Tax Policy Analyst level sets the U.S. 2024 election six months ahead of the first U.S. primary ballots being cast. He also discusses its impact on the upcoming $3.5T tax cliff.
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Good morning. Welcome back to TD Cowen Street Cred. I am Chris Krueger with TD Cowen’s Washington Research Group and will attempt to translate K Street to Wall Street faster than a speeding Acela and even faster if you juice up the playback. This month, we will attempt a level set where we are and aren’t with the 2024 election in four parts.
All right, part one. With a little less than 500 days until the election ends, the three different main elections are beginning to come into scope. And when we say the three main elections, we’re talking about the White House, the House, and the Senate. Scope is most usefully viewed through the lens of both math and geography. The historically tight margins within the Congress, which is a 51-49 Democratic-controlled Senate and a Republican House that is 222 to 212 currently, those historically tight margins are really indicative of how closely divided the past two elections have been.
The 2020 presidential election was decided by fewer than 43,000 combined votes in three states; Arizona, Georgia, and Wisconsin. The margin was even closer in the 2022 midterms. Less than 12,000 votes among five districts flipped the House in those districts included Arizona, California, Colorado, and New York. So, while the candidates remain somewhat in flux for both the House and the Senate, the geography is pretty clear in both. The Senate is going to be fought in the key electoral college states, along with three states that have really trended towards the Republicans, those being Ohio, Montana, and West Virginia.
The House ironically going to have completely, really separate geography, largely going to be fought in California, New York, and in the suburbs. Finally, the White House is going to come down to eight key states. Shouldn’t be a big surprise. The big five are the five states that Biden flipped from Trump in 2016. Those are Arizona, Georgia, and then the so-called blue wall of Wisconsin, Pennsylvania, and Michigan. Those five states then add the three ends, New Hampshire, North Carolina, and Nevada.
Okay, part two. Basically, this is 1600 Pennsylvania Avenue. Despite breaking the record every day for being the oldest president ever, Biden is very likely, in our opinion, to be the nominee. Two bigger questions. Number one, who is the Republican nominee at this point? Likely former President Trump, but a long way to go. The second big issue on the White House is the potential for a third party challenger, either a centrist or a progressive or both could well be in the general election this fall. We believe either of those would help Trump. Both Senator Joe Manchin, Democrat from West Virginia, and former Utah Republican Governor, John Huntsman, are speaking at a no-labels town hall in New Hampshire next week.
The other known-unknown in all of this is Trump’s legal situation. Right now, his trial in Florida is scheduled to begin in August. That will probably get postponed until year-end, but we would expect clarity on two other indictments, those both the Fulton County District Attorney that’s dealing with the Georgia election certification from 2020, as well as the special counsel’s other investigation on January 6th. We would expect clarity on both of those by the end of August. Important to note on the Georgia case, presidential pardons only extend to federal crime, not state. I think that’s a big reason why there’s been a lot of heartburn, particularly around that Georgia case within the Trump circle.
Okay, shifting to part three, we’re just going to do a six-point lightning round here. So number one, what’s our base case? First presidential rematch since 1956. That would be the 80-year-old Joe Biden versus the 77-year-old Donald Trump. Point two on the lightning round, presidents are tough to defeat. Since World War II, it’s generally either a significant primary challenge or a pandemic is the path to defeat for a sitting president. It is worth noting that Joe Biden’s current polling is the second worst in the post-war era, second only to Jimmy Carter. Point three on the lightning round, House and the Senate are almost asymmetrical here. Due to those main issues of math and geography, the House favors a Democratic majority while the Senate favors the Republicans. Again, this is just math and geography.
Point four, something to keep in mind, since Roe v. Wade was overturned by the Supreme Court last summer, Democrats have had a big electoral tailwind and have won most of the key battleground elections. The big one that a lot will point to is that Wisconsin Supreme Court race with Wisconsin probably being along with Arizona and Georgia, the big three, the most competitive states, certainly in the electoral college. Point five, touched on this a little bit, but Trump’s path starts to really open up if you do have a third party who either fractures that never-Trump block with a centrist challenger and/or you get a progressive candidate. There is already Cornel West running on the Green Party. This was a big reason for Trump’s win in 2016, you had both the Green Party as well as the Libertarian candidate at the time. So keep an eye on that third party or fourth party.
And then finally, the sixth point, what does all this mean for policy if you take a quick step back? If this year in Washington, the big narrative, was the debt ceiling and the upcoming budget fights this September, fast-forward next year, 2024, really about the election, 2025 is going to be dominated by two issues. Both of those issues are the $3.5 trillion tax cliff when all of the 2017 individual tax rates snapped back, as well as the Obamacare subsidy cliff that was extended most recently in the Inflation Reduction Act. But both those cliffs, both the health insurance cliff and the tax cliff, both hit on January 1st, 2026.
Okay, just to close this out, part four, what’s next? Two key events in August, touched on one of them, but that’s clarity around Trump’s legal situation with both the Fulton County District Attorney in Georgia as well as the special counsel. We also have the first Republican debate at the end of the month. Something else to keep an eye on will be fundraising totals. Should be interesting to watch. They’re always indicative of popularity or not with candidates. And then in approximately six months, the first ballots will be cast in the Iowa Republican caucuses. That’ll be on January 15th. So yes, we’re a little less than 500 days out, but that’s when the election ends. Those first ballots start in about six months. Thanks again for listening to the 2024 election in four parts. Look forward to being back with you very soon. Have a great day.
Thanks for joining us. Stay tuned for the next episode of TD Cowen Insights.
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