This research was published on October 12, 2020

​U.S. elections are typically billed as “pivotal” or “existential” and 2020 particularly so. In the economic realm, common notions include that the economy decides the election and, in turn, that the election outcome shapes the economy. To assess these notions, we look at the numbers, historical precedent, and institutional dynamics of the U.S. political system.

​While recessions are classically an electoral headwind for incumbents, it is worth noting the idiosyncrasies of the current one, including that Q3 GDP growth will likely be the fastest growth ever recorded and that the Covid recession is set to the be the shortest on record.  Still, the state of the economy is so diminished as to potentially deliver a broader sweep of Washington – a critical scenario in a political system designed to prevent abrupt change.

​Conversely, the impact of electoral change on the economy is typically overstated. The depth of power required to effect policy change varies significantly by policy area, which makes ‘existential’ or ‘pivotal’ discontinuities difficult to engineer. Even in areas that are malleable with only executive power, such as trade, change would likely be more stylistic than substantive. Meanwhile, the broad constellation of macroeconomic regimes – the prevailing institutional, financial and real economy conditions – cannot be easily changed over the course of a presidency or even two.