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- To get Democrats and Republicans back to the stimulus negotiating table, there needs to be an early agreement on the election outcome. An agreement is more likely if the winning side secures a big margin of victory. Based on current polls, the most likely scenario is a blue wave.
- Here are five possible US election outcomes and what that would mean for stimulus, according to Dominique Dwor-Frecaut, a macro strategist at Macro Hive.
- A blue White House and a blue Senate is the most likely scenario with a high margin of victory. A blue wave early agreement scenario (60% probability) could see a small stimulus in the fourth-quarter. The reason is that Republicans would rationalize their loss by signing off on the $500 billion offered in September. Democrats would also sign the bill, with the idea of providing a heftier stimulus in February after the inauguration.
- A blue White House and a red Senate is the second most likely scenario. That would mean the $500 billion stimulus plan would pass before the end of the year. Democrats would have to swallow the defeat of their strategy and sign off on the “skinny” GOP plan. The White House would push for more stimulus in February, but the Senate may not agree to anything over $500 billion.
- A status quo outcome, where Trump retains both the White House and the Senate, is likely by a short margin. Stimulus can only be expected next year in this case. But Trump, who likes to spend, would be able to push Senate Republicans to raise their offer, so $1 trillion in stimulus is possible next year.
- A gridlock outcome, where Biden wins the White House but fails to win Senate majority, could see only a $500 billion stimulus next year. This would be a repeat of the 2010 mid-term elections, in which Republicans won control of the House.
- If polls are wrong and prediction markets right, results would be tight. In that case, there could be a contentious post-election period where the US would see state-by-state disputes over the results. Discussions on a new package are highly unlikely.
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