Christopher P Casey

Christopher P Casey

Thursday, 17 December 2020 15:40

The Long and Short of It: "Unfiltered Tobacco"

Thursday, 29 October 2020 19:18

Mises Institute Publishes WindRock Article

Monday, 26 October 2020 18:08

U.S. Election Trends

October 2020

No, the general election on November 3rd will not be postponed, but the future President of the United States may be elected by a different group of voters on a much later date – and it may happen after the new Congress convenes on or around January 3rd.  This election may be as close as it is disputed, and given the complexities and vagaries of election laws, the House of Representatives could very well elect the next President.

Several scenarios provide for this possibility.  Since 538 Electoral College votes exist, the winner must secure 270 of them – a majority – to win the election.  The 2000 Bush-Gore election illustrates just how close this election may be: Bush won with only 271 votes (to Gore’s 266).

For those adding together that election’s votes, one will notice only 537 Electoral College votes were submitted.  One elector (from a state won by Gore) abstained.  It is the first time an elector abstained, but not the first time one has refused to vote for the candidate for whom they pledged their vote (an action known as being a “faithless elector”).  Absent a third-party candidate, the existence and actions of faithless electors represent one of two possible scenarios by which an election could fail to produce a majority winner.1

The other possibility would be the failure of a state’s votes to be counted since they lack certification.  To understand either scenario requires a review of the Electoral College process as governed by the Constitution and state and federal law.1 2

Before the general election, electors for the Electoral College are chosen by each state for each candidate.  Under a typical, two-party election, at least two “slates” of electors exist – each one consisting of electors pledged to vote for a particular party’s candidate.  After the election, each state mandates its own processes to verify the integrity and completeness of the election.  For example, certain canvassing (similar to auditing) procedures take place.  Each state has its own procedures and timelines.3

The problem arises in the fairly short timeline between the general election and the Constitutionally mandated new terms for President and Vice President beginning at noon on January 20th.  According to federal law, the electors must meet and cast their ballots (in their respective states) 41 days after the general election (or December 14th for this year).  It is these ballots which are sent to Congress for the official tally taking place on January 5th.  In order to avoid any controversy about the legitimacy of the votes, a “safe harbor” period exists under federal law: if the slate of electors is certified by the state six days before the electors meet (or December 8th for this year), the slate is considered “conclusive” and will not be disputed in Congress.

If the “safe harbor” timeline is not met, both houses of Congress determine which slate of electors will be recognized from a state.  This almost happened in the 2000 election.  Many misremember the Supreme Court as “deciding the election” in favor of George Bush.  In reality, Florida’s slate of electors pledged to Bush was to be selected (certified by its Secretary of State) when various lawsuits culminated in a Florida Supreme Court ruling to recount the ballots in four counties and all ballots throughout the state which did not select a Presidential candidate (under the assumption this was done in error).  Such measures would have been physically impossible before the expiration of the “safe harbor” period, and Congress would have decided the issue (for which the only precedent, the 1876 Tilden-Hayes election, offers little guidance).  The U.S. Supreme Court ruled the recount as unconstitutional for various reasons, and thus allowed Florida to certify its results in time to meet the “safe harbor” provision (actually, on the last possible day).  Presumably, if Congress cannot resolve the matter, the electoral votes may simply not be counted (thus preventing a majority winner).

In another scenario, all of the states’ electoral results may be certified, but a faithless elector may not honor the majority vote from their state.  There are 33 states (as well as the District of Columbia) which have laws compelling (e.g., via the threat of fines, removal from office, etc.) electors to honor their pledge.  These laws were recently upheld as constitutional by the unanimous Supreme Court decision in Chiafolo v. Washington (concerning the 2016 election).4  Therefore, 17 states, including the swing states of Pennsylvania, grant electors the ability to vote their conscience.  Other states, including swing states like Ohio, Florida, and Wisconsin, have laws against faithless electors, but still allow the vote to be counted as cast.  While a faithless elector has never impacted an election, a Republican’s discomfort with an “outsider” like Trump or a Democrat’s concern about Biden’s cognitive ability probably heightens the likelihood of wayward votes (or abstentions).5

What happens on January 6th if, according to the official reading of the electors’ votes, neither candidate secures a majority?  According to the 20th Amendment to the Constitution, the House of Representatives “immediately” elects the President and the Senate elects the Vice President.  Such a scenario seems to suggest a President Biden and a Vice President Pence (assuming the political control of Congress remains the same).  But two nuances imply a different, or at least uncertain, outcome.

First, the House does not vote in the same manner as it does with matters of law or procedure (with each Representative casting one vote).  Rather, each state casts one vote as determined by a majority of their Representatives.  If such a vote was taken today and cast along party lines, Republicans would control the outcome by a vote of 26 to 23 (as Pennsylvania’s Representatives are equally split and Michigan, assuming Libertarian party member Justin Amash does not squash his disdain for President Trump, would vote Democrat – otherwise the vote would be 26 to 22).6

Second, the circumstances dictating this scenario’s result may not exist since the new Congress based upon November’s general election is sworn in on January 3rd.  A change to a mere two states could swing the election in the House to Democratic control.

And what if the House of Representatives is deadlocked in a tie?  Who becomes President on inauguration day?  Vice President Pence would assume the Presidency.  As the Senate can only vote for the two Vice Presidential candidates receiving the most votes (Pence and Harris) and since one cannot hold both offices, Kamala Harris would become Vice President by default.

President Pence and Vice President Harris.  The acrimonious political landscape of the next four years may supersede that of 2020.  Just another risk the financial markets have yet to consider.

 

 

 

1.  Maskell, Jack and Rybicki, Elizabeth.  “Counting Elector Votes: An Overview of Procedures at the Joint Session, Including Objections by Members of Congress”  Congressional Research Service.  https://crsreports.congress.gov/product/pdf/RL/RL32717/12 

2.  Tokaji, Daniel.  “An Unsafe Harbor: Recounts, Contest, and the Electoral College”  Michigan Law Review First Impressions.  Vol. 106, Article 14.  https://repository.law.umich.edu/mlr_fi/vol106/iss1/14/ 

3.  Ballotpedia.  “Election Results Certification Dates, 2020” https://ballotpedia.org/Election_results_certification_dates,_2020

4.  Peter B. Chiafalo, Levi Jennet Guerra, and Esther Virginia John, Petitioners v. Washington.  Supreme Court of United States. 140 S.Ct. 2316 (2020) https://scholar.google.com/scholar_case?case=12842404716922482514&q=Chiafalo+v.+Washington&hl=en&as_sdt=400006&as_vis=1

5.  FairVote.  Faithless Elector State Laws.  7 July 2020.  https://www.fairvote.org/faithless_elector_state_laws  

6.   Electoral Ventures LLC.  2020 House Election: Party Composition by State https://www.270towin.com/2020-house-election/state-by-state/consensus-2020-house-forecast 

 

 

Saturday, 22 August 2020 15:50

Who Wins? Jeff Deist on the Election

This election arrives during a unique period of social unrest, political division, and economic deterioration.  Its results will generate dramatic implications for the political landscape for years to come. 

Jeff Deist, former chief of staff for Congressman and presidential candidate Ron Paul, joins WindRock to discuss:

  • Why today’s polling may not accurately reflect the likelihood of election results;
  • What each candidate should do to win the election;
  • Which scenarios may generate a contested election;
  • How a Democratic victory could result in a “New Reconstruction” against “red” states; and
  • Why Trump could be the last Republican president.

August, 2020

 




Saturday, 22 August 2020 15:50

What Stops the Stock Market Rally?

August, 2020

In terms of magnitude and shortness of time, the stock market rally since its March lows has been unparalleled.  Yet it is especially notable given negative economic reality (an annualized second quarter GDP plunge of 32.9%) and diminished company earnings (S&P500 earnings down 50%).1  Will this rally continue?  If not, what stops the stock market rally? 

Numerous threats exist: continued economic deterioration (a case can be made a recession hit before the lockdowns) and bankruptcies, trade and geopolitical strife with China, civil unrest and mass unemployment, renewed lockdowns due to a Covid resurgence, the loss of hope for a timely vaccine, and a negative economic viewpoint of a very possible Biden presidency.

Either mitigating or masking these risks stands the Federal Reserve’s unprecedented actions since March.  Although it intervened with numerous programs and purchased a multitude of assets, its actions can be neatly summarized as having massively increased the money supply.  Measured in M2 (a commonly cited definition of money) year-over-year growth since the end of the last recession, the money supply has exploded.
Monetary expansion is singularly responsible for the stock market rally.  As such, to ask what stops the stock market rally is to question what stops the Federal Reserve.

Chairman Powell is unlikely to voluntarily withdraw monetary stimuli.  He learned that lesson (it is no coincidence that the late 2018 stock market decline occurred after a long-term slowdown in monetary growth).

So short of this development, what external factors may prevent the Federal Reserve from pursuing its current monetary course?  Theoretically, why is it that central banks cannot forever increasingly print money to ensure ever higher equity prices?

Murray Rothbard, the Austrian school economist and monetary expert, addressed this issue:3

. . . the boom is kept on its way and ahead of its inevitable comeuppance, by repeated doses of the stimulant of bank credit.  It is only when the bank credit expansion must finally stop, either because the banks are getting into a shaky condition or because the public begins to balk at the continuing inflation, that retribution finally catches up with the boom.  As soon as the credit expansion stops, then the piper must be paid . . .

The “shaky condition” of banks may derive from low absolute interest rate spreads and unsustainable financial leverage alongside increasing bad loans.  It will develop with sustained negative real rates (as it has in other parts of the world).

Assuming a banking crisis is averted, what about inflation?  Few under 50-years old can remember, let alone experienced, an inflationary environment as a consumer, but could one be starting now?  According to the August 14th issue of Barron’s magazine:4

A trifecta of inflation numbers came in hotter than expected this past week, with consumer prices, producer prices, and import prices for July all rising at faster paces than economists anticipated.  Notably, consumer prices – excluding the more volatile food and energy categories – rose at the quickest clip since 1991.

It may not be starting now, but it could be.  And unlike the 1970’s, the Federal Reserve will be unable to deflect blame at greedy business owners or higher oil prices.  What they once could play off as coincidence will now reek of causality.  And if they stop inflating, then any rally could turn to rout.

 

1.  S&P500 Down Jones (95% of companies reporting)

2.  Federal Reserve Bank of St. Louis

3.  Rothbard, Murray N.  Economic Depressions: Their Cause & Cure.  Ludwig von Mises Institute.  2009.

4.  ‘Stagflation’ Looms Over This Market.  Why Some Analysts are Worried.  Bellfuss, Lisa.  Barron’s.  14 August 2020

 

 

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