In 2020, the economy suffered an unexpected shock. The pandemic has killed 225,000 Americans, forced millions into unemployment, and closed many businesses. Now, the nation faces a new threat to the economy, one that is preventable.
Holding a stable national election and maintaining global confidence in American democracy will support the economic recovery. But a bitterly contested election will have immediate and long-term consequences for the economy.
With just one week left, financial markets show that the November election remains a source of major risk. In early September, the U.S. election was priced as the most expensive risk event in history, according to CBOE volatility index (VIX) futures contracts. As of last week, VIX futures contracts were priced higher for November than December, which is an unusual pattern and suggests that traders continue to expect a turbulent month.
For months, national security leaders have warned about potential threats to the election. The intelligence community continues to publicly warn that foreign adversaries plan to interfere with the election, including exploiting potential uncertainty after election day, by spreading disinformation.
National leaders representing both major parties have questioned the legitimacy of the electoral process and signaled that the campaigns may not accept the results of the election.
President Trump has repeatedly criticized absentee balloting and the U.S. Postal Service, raising questions about how he will respond if he loses the election. He recently refused to commit to a peaceful transfer of power. Former Secretary of State Hillary Clinton has urged Vice President Biden not to concede on election night.
We already know how economies and financial markets respond to prolonged uncertainty following an election.
In 2000, the stock market declined during the weeks of recounts and court cases that led to President George W. Bush’s election. While the United States was on the brink of a recession, the American economy entered that election in relative strength compared to today.
In 2000, the federal government reported a $230 billion surplus for the fiscal year. The unemployment rate was below 4 percent. Interest rates hovered around 6 percent. The national debt was less than 6 trillion.
Today, the unemployment rate is 8 percent. The Congressional Budget Office projects a federal deficit of 3.3 trillion for the fiscal year and warns that federal debt will eclipse 100 percent of GDP next year. The Federal Reserve has already reduced interest rates to zero and announced it plans to maintain these levels through 2023.
In short, the Federal Reserve, Congress, and the Treasury have fewer tools to rescue the economy today.
But the American economy continues to have strong advantages--including global confidence in our governance and rule of law. The United States remains a preferred destination for global capital seeking stability in an uncertain world.
We simply cannot afford to jeopardize that confidence in November. To be sure, the upcoming election will involve real challenges--including the dramatic increases in absentee balloting. So far, nearly 87 millon mail ballots have been requested. In 2016, one-in-five Americans cast an absentee ballot. This year, 75 percent of voters can vote by mail during the pandemic.
Higher volumes of absentee ballots will result in longer than usual periods of vote counting. This uncertainty will create an opportunity for confusion about the election results.
Americans must resist the temptation to spread disinformation and make unfounded claims that undermine the integrity of the democratic process. There is an orderly process to resolve questions about a given election’s legitimacy--including recounts and legal challenges. We should all agree that potential disputes about specific election outcomes must be resolved in courtrooms, not the public square or state legislatures.
Where can we find the necessary leadership to maintain confidence in the democratic process? Unfortunately not in Washington, DC, where partisan fever continues to run high.
A key source of nonpartisan leadership is in the states. The national community of state Secretaries of State and election directors are entrusted to ensure a fair election. Washington Secretary of State Kim Wyman, Michigan Secretary of State Jocelyn Benson and so many others are doing a terrific job navigating this difficult election.
Business and civil society leaders also have a critical role to play. After all, it’s our communities that have the most to lose from a disputed election outcome.
All of us should do our part. Trusted organizations are providing valuable resources of factual information. For example, the Chamber of Commerce prepared a timeline of what to expect from November 3rd until Inauguration Day. Civic Alliance published a guide for business messaging and what to expect on election day and after. The Department of Homeland Security is hosting a website with tools to identify disinformation and encouraging voters to be patient.
Business and community leaders can set an example for our employees, colleagues, and neighbors. We can call on our elected officials to stop attacking and politicizing the process. And we can urge people to vote safely and to have patience after November 3rd while all the votes are counted.
The COVID-19 pandemic has already created a historic challenge for the American economy. We cannot afford another in November.
John Allison is the Retired President and CEO of the Cato Institute and Retired Chairman and CEO of BB&T. Lisa Blau is a Partner at Able Partners and the Investor Group Chair of the Leadership Now Project. Garrett Johnson is the co-founder and Executive Director of the Lincoln Network. J.B. Lyon is the Founder of Mount Independence Investments and a founding board member of Issue One. Vin Ryan is the Founder and Chairman of Schooner Capital.