2020 US Election: August is for calculating, September for campaigning

The opposing campaigns have a few more weeks to decide on their themes for the fall season.  Biden will certainly say the President is unduly divisive and responsible for the economy. Trump will claim Biden is unfit for office and a front for Democratic leftist ideology.

For a generation, the economy has been the deciding factor in US Presidential elections.  This year may be different. Join FXStreet analysts Yohay Elam and Joseph Trevisani for a thorough examination of the ideological and political underpinnings of this unusual contest.

Yohay Elam: The US gained 1.763 million jobs in July, better than 1.5 million estimated but lower than 4.8 million in June

Joseph Trevisani: This puts to labor recovery at 42% of March and April losses.

Yohay Elam: Yep, up 9.3 million jobs from the bottom, still a long way to go

Joseph Trevisani: There are three months to the election.  Can President Trump win with such numbers?

Yohay Elam: The nature of the contagious virus means we will probably have many ups and downs until the vote. So the cautious answer is "too early to say," but a less cautious answer is that the economy matters less than perceived. Obama won in 2012 despite a still struggling economy. Gore lost despite a booming economy in 2000. "It's the economy, stupid" sounds good, but not that accurate.

Joseph Trevisani: That old saw, dating back to the sharp-tongued James Carville, Its the economy stupid...was always a bit of a misnomer.  It is used to explain Clinton's first election, that George H.W. Bush was out of touch, but in reality, Clinton won largely because of Perot's candidacy. My guess is that the passions this time will override the economy as an issue.

Yohay Elam: That saying was probably relevant than when unemployment was rising, but that was 1992. According to a Fox News poll in late July, Trump had a negligible lead of one point over Biden on the economy. A Quinnipiac poll showed Biden leading.

Joseph Trevisani: Once we leave the relatively straight forward economic issues, the election becomes far less clear.

Yohay Elam: I think that the economic reaction to the crisis is more significant to the election. Democrats presented their recent stimulus plan two months ago, Republicans only last week. Leading on supporting the economy may support Biden and his party. Do you think the current battle in Washington will have implications for the elections?

Joseph Trevisani: Over the stimulus and such?  No, I think the arguments and accusations will be viewed as normal DC politics.

Yohay Elam: In financial markets, we are following the news, and perhaps the broader public is not tuned in yet.

Joseph Trevisani: The COVID closures and economy seem at the moment to be neutral territory, in that is will be difficult for one side or the other to convincingly blame the opponent.

Yohay Elam: However, with over 10 million people losing their jobs recently – the absence of that $600/week top-up could make them tune in, and with Dems supporting more funds and the GOP hesitant, it could have political implications

Joseph Trevisani: In the aggregate, it may help overall spending but I doubt it will be a vote changer for most. Both sides have tried mightily to blame COVID inadequacy on the other but in the end, it was and is a natural event, essentially non-political.

Yohay Elam: That $600/week is worth 5.2% of disposable income according to economists at Indeed

Joseph Trevisani: That said, if the economy continues to worsen from here to November, I think it will be very difficult for Trump to win.

Yohay Elam: COVID is a natural event, but the response is political everywhere. There is always a path taken and a path not taken. I think we will see ups and downs, but mostly downs, as the second wave causes a loss of confidence, business that managed to survive may throw the towel

Joseph Trevisani: Perhaps, but we also have the drop in initial claims and the ebbing of the virus in Texas, Florida, Georgia, and elsewhere.

Yohay Elam: Indeed, the curves are beginning to bend down, especially cases, good news!

Joseph Trevisani: The future is undetermined but a good deal of the determination will depend on the virus, as Chairman Powell has observed several times.

Yohay Elam: Indeed, the virus is the boss

Joseph Trevisani: Exactly that is good news. Though with cynicism one might observe that politically it is better news for one side than the other.

Yohay Elam: I think the situation could improve in the autumn when the weather is nice outside in most of the US. Less use of AC – better health outcomes. While "It's the economy, stupid" is outdated, the "call at 3:00 AM" is still relevant. Better said, leadership on the virus could be more important than the state of the economy

Joseph Trevisani: I think we have two main scenarios heading into the fall,  One the virus recedes and does not return in any substantial way in the fall, given that I think the economy continues to improve and perhaps fades as an issue. The second  is the virus becomes chronic, crippling the recovery. 

Yohay Elam: I think the economy continues limping up, but at a frustrating pace and with more long-term unemployed.

Joseph Trevisani: True but leadership and judgment is a highly partisan issue,  unlikely to convince many wavering voters.

Yohay Elam: Fewer undecideds this time in comparison to 2016

Joseph Trevisani: It is also a two-edged blade, (as most blades are), and yes, but as we learned in 2016, polls involving Trump are less reliable than normal. Economy aside, what other issues might engage voters' decisions in November?

Yohay Elam: On the national level, the outcome was within the margin of error in 2016. Some state polls missed. And now, pollsters have adjusted for education. Those 2016 state polls missed non-educated whites' intentions. There is a risk that pollsters have gone too far in adjustments

Joseph Trevisani: True but the decisive states were badly wrong, except for Pennsylvania.

Yohay Elam: I believe the outcome will be somewhere between 2016 and 2018, and only a small shift toward Dems in Pennsylvania, Michigan, Wisconsin, and Florida is sufficient for Biden

Joseph Trevisani: Can Biden win if he remains essentially unengaged?

Yohay Elam: He's speaking every day, but I think he'll step up his game from the convention onwards

Joseph Trevisani: Trump's win was by the narrowest of margins, so a small shift would be decisive.

Yohay Elam: Politically it would be better for him to let Trump be Trump. Biden has his gaffes.

Joseph Trevisani: That is true in the political textbook sense, but I don't think voters will accept it as proof of governing ability.   Biden will have to take to the campaign trail and he will have to debate. The concern over his mental acuity may be overblown, he did reasonably in the primary debates

Yohay Elam: According to that Fox News poll, Biden beats Trump on mental soundness. I'm sure he will debate, and he'll be under the spotlight once he picks his VP, maybe even today...

Joseph Trevisani: On the other hand, every recent appearance, even though highly scripted, seems to produce an odd moment.

Yohay Elam: I think both candidates will produce plenty of odd moments

Joseph Trevisani: I wonder if this may become the dominant issue of the campaign?  Certainly, the Trump campaign would hope.

Yohay Elam: Biden has an advantage in judgment, 12 points, and on compassion, 20 points. The ability to connect to people who are suffering is one of Biden's strongest characteristics, and it is relevant in coronavirus times. The Trump campaign's talk about Biden's cognitive abilities didn't seem to stick so far, but persistence could change that

Joseph Trevisani: True but those polls are based on old history. On this, the future may be different than the past.

Yohay Elam: The polls become more relevant closer to the vote. This year, I think conventions are somewhat irrelevant. Debates are of top importance, as always

Joseph Trevisani: I think this will depend on facts.  Biden must appear in a very strenuous campaign, if people see or sense disability it will be difficult to overcome.  I don't think Trump campaign attacks will determine, people will judge for themselves. I agree I think the conventions are unimportant, made more so by COVID. It is interesting that Biden's mental state was not an issue in the primaries. Biden's polling is essentially where Clinton's was in 2016.

Yohay Elam: I believe Trump's mental state, which recently came into the spotlight by his niece, will be used in counterattacks. And no, Biden's lead is more significant than Clinton's at this point. And critical for surprises, fewer undecideds. 2020 is not 2016 and everything can flip. Three months is an eternity in politics and eternity x 10 in coronavirus times...

Joseph Trevisani: True, RCP has Biden us 6.4% nationally on Aug 7, Clinton was ahead 6.7% in 2016 on the same date in 2016. But I agree, three months is a lifetime. Biden's lead has diminished in the past two weeks,  but then it was even lower in May.

Yohay Elam: Nice, different aggregators-models, show different outcomes, adding to uncertainty

Joseph Trevisani: Exactly, and gives us more room to speculate.

Yohay Elam: Does RCP show overall support for Biden and Clinton? To understand the number of undecideds. Indeed, the gap has narrowed

Joseph Trevisani: Not in these polls.

Yohay Elam: The narrowing gap could be a minor correction or a reversal, but it's too soon

Joseph Trevisani: Meaning not in the aggregation. I agree all is positioning now until the campaign really starts in September. My guess is the election is a toss-up right now.  Both candidates have unusually large liabilities open for exploitation by their opponents. Trump has an advantage in that he has been in the spotlight for five years, there is not much new that can be used against him.  Biden is untouched, but I think that actually makes him more vulnerable.

Yohay Elam: I think Biden's lead is significant, and that he has substantially higher chances of winning. Opinion polls are showing him leading in all battleground states. Everything can change, from Trump winning the electoral college without the popular vote again, to a 10% landslide for Biden

Joseph Trevisani: True. One possibility that does not seem possible is Trump winning the popular vote.

Yohay Elam: Indeed, 2% according to The Economist

Joseph Trevisani: Clinton was leading in all the battleground states at this point in 2016 also. One huge difference between 2016 and this year is no one will be surprised if Trump wins, disappointed yes but not surprised.  That means the Democrats know what is possible and what is necessary. In this instance, I will agree with The Economist.

Yohay Elam: As in national polls, there are fewer undecideds, strengthening Biden's chances, and I agree, Dems will be more prepared. Poll skepticism is high.

Joseph Trevisani: If Trump wins do you think the Democrats will accept the victory? There are also likely more shy Trump voters as well this year.

Yohay Elam: So far, Trump refused to say if he'll accept the election results. He said he won the popular vote, and that coronavirus will disappear, so maybe we should ignore those comments about the election results

Joseph Trevisani: He said the same thing in 2016 but it was the Democrats who refused to accept their loss.

Yohay Elam: Clinton conceded. I think McConnell, Pence, and co. will concede instead of Trump

Joseph Trevisani: In the end whoever wins I think he assumes office as has been the case for almost 250 years.

Yohay Elam: He also wants to stay beyond 2024 is reelected. If the results are contested, there is one scenario in which Pelosi enters the Oval Office

Joseph Trevisani: Well, perhaps he is trolling the media on that. He has been known to do so.

Yohay Elam: He's very good at making himself the center of the universe. An entertainer

Joseph Trevisani: I see three key areas for the election. First, the economy, if it tanks it makes Trumps reelection very difficult.  If it continues to improve, even fitfully it is to his advantage.   Second Biden's fitness. If he can dispel this in the debates his chances rise.  His personality is more genial than Trump's.  Third policy vs personality.  Biden's Democratic Party is far more leftist than the electorate but Trump's public personality is distasteful to a large portion of the electorate.  In this Trump may have a small advantage, that of the known over the unknown. I think we are headed for a very close election if none of these areas break decisively for one candidate or the other.

Yohay Elam: I think Biden is in the lead due to the leadership question, especially around the pandemic. He is seen as more capable and willing to listen, while Trump's style, is lacking compassion