Panel: Bitter presidential election unlikely to have major economic impact

DALLAS – Moderator Jamie Branyan of CANNEX had a simple ask Thursday morning during a panel discussion on the upcoming election and its impact on economic trends:

"If you could just tell us who you're voting for and why the other side is wrong," he said to sporadic chuckles.

"I'll go first," said Chris Ratkovsky, vice president and senior research analyst for Franklin Templeton. "I'm Canadian, so..."

Hosted by the National Association for Fixed Annuities, the panel is part of the annual Annuity Distribution Summit.

Jokes aside, panelists agreed that the presidential election between Democrat Kamala Harris and Republican Donald Trump is probably overrated in terms of potential impact on the economy or the markets.

While the presidential race is on track to be the costliest in history and one of the most negative and bitterly contested, the candidates actually agree on many important issues, panelists said.

There's a "philosophical alignment" on general tax policy, such as not taxing tips and extending the child tax credit, noted Pete Miller, head of insurance solutions at Invesco.

"You hear so much about the political discourse and how difficult and negative it is, but there actually is some agreement on some of these things," he said. "Bigger picture, Democrats are more likely to raise taxes and look at increased spending versus Republicans looking at tax cuts."

The tariff increases proposed by Trump are a significant area of disagreement. As president from 2016 to 2020, Trump imposed tariffs on steel, solar panels and pretty much everything imported from China. This time, he is going much further, calling for an 80% tariff on goods from China and 20% on everything else the United States imports.

"One thing that I think most, if not all, economists would agree, [tariffs] might help certain industries, but it's going to raise prices for consumers," Miller said. "I mean, that's almost certainly going to be the case."

Pratik Pareek, managing director for Goldman Sachs, agreed that the 2016 and 2020 presidential campaigns had more economic differences.

The focus is on the race for the White House, but control of Congress is at least equally important when it comes to potential policy changes. The betting markets anticipate a divided Congress, Pareek noted.

No Liz Truss problem

With the U.S. deficit hitting $1.9 trillion recently, there is some talk of whether the country is heading for a "Liz Truss problem" of fiscal instability.

Elected prime minister of the United Kingdom in September 2022, Truss sought to spur economic growth with tax cuts and deregulation. But a budget containing 45 billion pounds [$54 billion] in unfunded tax cuts rocked the financial markets, drove up the cost of government borrowing and sent the pound to its lowest-ever level against the dollar.

Truss lasted 49 days and the ignominy of having the shortest reign of any British prime minister.

The United States is probably fine, Ratkovsky said. Reliable buyers of U.S. public debt remain in the market, he noted.

"Without an unforeseeable shock happening, the fiscal debt is sustainable for the time being," Ratkovsky said. "But there are a lot of reasons why that could change."

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