The Index Investor Blog

Where the US Election Could Go Off the Tracks

I listened to an excellent webinar yesterday put on by the Harvard Kennedy School's Applied History Program, discussing a new book by Alexander Keyssar on the history of the Electoral College.

Of particular interest, given the uncertainties in this year's election, were Keyssar's description of the 1820 and 1876 elections, which involved Electoral College controversies, and the precedents they set.

Looking at this year's election, Keyssar identified many (too many, really) ways controversy could arise. These include, in the chronological sequence in which events will likely take place, the following:

  • State legislators legally select electors who will vote the Electoral College, based on the state's vote for presidential candidates. These votes could be challenged in court, as they were in Florida in 2000. In those states where a governor and legislative majority are from different parties, further conflicts could arise over which electors could be sent to the Electoral College. In the election of 1876, these controversies led to some states sending two sets of electors to the Electoral College.

  • At the level of the Electoral College it only gets worse. If multiple slates of electors are sent, more litigation will result. The constitution also provides that electoral votes will be counted "in the presence" of the Vice President, but it is silent on who actually counts the votes and the power they have to choose one set of electors over another.

  • If neither candidate receives the requisite 270 votes in the Electoral College, the selection of the President passes into the House of Representatives, in which each state has one vote (determined by a majority vote of the Representatives from each state). A simple majority is required to choose the President. The same process takes place in the Senate to select the Vice President.

  • In the current House of Representatives, assuming all Democrats and Republicans vote, respectively, for Biden and Trump, the latter would win.

  • However, the new member of the House and Senate, according to the Constitution, are sworn in on January 3rd, 2021. So, in theory, the composition of the House could change before the election of the President by the House of Representatives.

  • Now let's assume that, perhaps because of litigation, the House struggles, and has not reached one by 12 noon on January 20th. That is the time when, per the 20th Amendment to the US Constitution, the President's term ends.

  • While Donald Trump may disagree, the Constitution is clear. If a new President has not been chosen by either the Electoral College or the House of Representatives by 12pm on January 20, 2021, Donald Trump will no longer be President, nor will Mike Pence be Vice President.

  • In the absence of a legally selected President and Vice President, under the line of presidential succession, the Speaker of the House of Representatives becomes President, until at some point the House of Representatives selects a new President, and the Senate selects a new Vice President. Given that, it is theoretically possible that (assuming the Republicans control a majority of state deletions in the House, and the Democrats control the Senate), the United States could end up with a President and Vice President from different parties.

Needless to say, what is about to occur in the United States between November 3rd and January 20th is very likely to be a story for the ages.

I also suspect that the full impact of the coming uncertainty shock is not yet fully reflected in asset prices.