Political Calculations for Trump Election Drama with Fiscal Commentary

  Political calculations in the next 30 days

·         Timetable of events leading to the electoral college vote on December 14

·         But perhaps instead of flipping 6 states, it’s time for the ‘faithless electors’

·         Is a Fiscal Stimulus Deal Possible by Year-End?

·         US investors barred from shares in China military-linked companies

Political calculations in the next 30 days



And the big What If is whether Trump flips Arizona into his column.

Trump Timetable – Updated

·         Arizona tentative results next 3-5 days – Arizona will likely show a slight Biden victory but be so close as to force an identical situation that has now occurred in Georgia

·         Georgia – Georgia has started a recount by hand and recanvassing, which means that each and every ballot will be scrutinized by bipartisan observers

·         Pennsylvania tentative results next 3-5 days – n/a

Latest news out yesterday involves a state judge ordering that segregated ballots should NOT be counted. The judgement rules that the Pennsylvania Secretary of State “lacked statutory authority” to override the election law. Critically, the state has a Republican legislature. Now, this is a decision that may be appealed to the US Supreme Court but will likely be applied to Michigan and Wisconsin.

·         Recounts in all 5 contested states 10-14 days

·         Hearings and court procedures next 14 days, Michigan and Pennsylvania started

·         Public to be made fully aware of fraudulent ballots before December 2-14 when Electors vote

The reality is that Trump must have political events fall into place aside from court proceedings. This will include Arizona and Georgia being flipped to his column making the Electoral College vote threshold attainable with court challenges and recounts in Michigan, Wisconsin and/or Pennsylvania. The minimum threshold Trump needs is to prevent Biden from gathering 270, as that will send the election to the House of Representatives with STATE delegations choosing the victor. The Democrats hold the seat advantage, but the GOP hold the state advantage.

Current timeline of key events to come:

Between now and the Jan. 20 inauguration, states, electors and newly-elected members of Congress will follow a timeline of events.

·          Nov. 4 – Dec. 14: States certify election results.

·          Dec. 8: The “safe harbor” deadline to resolve disputes.

·          Dec. 14: Electors vote.

·          Jan. 6: Congress meeting in a joint session to count electoral votes and declare election results. Each state determines its deadline for certifying election results. In some states, results have to be finalized within days of the election but in most states, it’s completed within three weeks after the election.

Pennsylvania and Michigan’s deadline to certify votes is Nov. 23. Arizona must certify by Nov. 30 and Nevada’s deadline is Dec. 1. Georgia has a Nov. 20 certification date, but the recount will reportedly take two weeks longer, pushing the certification date into early December.

Timetable of events leading to the electoral college vote on December 14

This is the long-shot scenario, and we would not in any way suggest that this is a path being followed by the Trump administration. Nonetheless, we need to be aware thereof. In this long-shot scenario, Trump and his team could try to block secretaries of state in contested states from certifying results. That could allow legislatures in those states to try to appoint new electors who favor Trump over Biden. If President Trump were to pursue this course, it likely would become apparent the week leading up to Thanksgiving, as states face deadlines to finalize election results.

Trump has not directly said he would pursue this strategy. However, Senate Majority Leader Mitch McConnell and Secretary of State Mike Pompeo each noted yesterday that the election results don’t become official until electors cast their votes next month.

·         To date, Biden’s status as president-elect is rooted in media projections based on raw vote totals reported by individual states.

·         Those totals don’t become official, though, until states certify them. The Constitution prescribes that those official results will be used to apportion electors who officially pick the president. 

·         “At some point here, we’ll find out finally who was certified (the winner) in each of these states, and the Electoral College will determine the winner and that person will be sworn in on January 20,” McConnell said. “No reason for alarm.” 

·         One Senate leadership aide apparently said McConnell was not signaling an elector strategy and was simply noting that it’s not uncommon for there to be litigation before the Electoral College results are complete. 

·         Pompeo, who raised eyebrows with a line about how there would be a “smooth transition to a second Trump administration,” independently raised the Electoral College during a State Department news conference. “When the process is complete, there’s going to be electors selected,” he said. “There’s a process; the Constitution lays it out pretty clearly.”

·         The Trump campaign have remained silent  – no comments on the above whatsoever.

Now, what are the actual procedural mechanics involved here with the above map? Well, if a lawsuit successfully stops certification of results in a state, legislators there could step into the void and pick a pro-Trump slate of electors.

·         A constitutional expert lawyer friend of mine speculated Trump’s team could try and throw enough dirt at the process for counting late ballots to argue that accurate results can’t be ascertained. If so, and this is only speculation…

·         The next step could be to try to get federal or state courts to enjoin secretaries of state from certifying results.

·         Any such move to provide an alternative slate of electors could force the first real test of the Electoral Count Act of 1887 and could land before the Supreme Court.

·         Among the key swing states, Arizona and Georgia have GOP governors and legislatures. Michigan,Pennsylvania and Wisconsin have Democratic governors but GOP legislatures

Mainstream media outlets are beginning to cover this now. Below, we have two articles today from the Wall Street Journal and Politico:

Now, in this Politico article, Elissa Slotkin highlights Trump’s nuclear strategy for the election. Bear this in mind, Slotkin describes herself as a good CIA analyst, a former career which also took her to the Pentagon.

To highlight what we have been talking about, here you go:

But perhaps instead of flipping 6 states, it’s time for the ‘faithless electors’

We believe that flipping 6 states on recount or via litigation is going to prove very hard. However, something seems to be going on, especially when you consider how quiet the President’s twitter account has been – he hardly strikes us as a man to sit around and mope!!! On the contrary, he is known as a very litigious person.

As such, we are looking at the following, constitutionally legal events as the potential pathway to retaining the White House. Whether this all falls into place, we do not know, but you should be aware just in case there are headlines, to which the markets may or may not react. We will keep the following list updated, as we do the list above, so that you can follow developments, one of which has just happened.

Elector Attack:

·         Faithless electors

·         Pennsylvania and Georgia have no binding elector laws

·         Sub 270 elector college vote means the House of Representatives votes for the President, and the Senate for the Vice-President

·         The maths has to work

·         There were 7 faithless electors in 2016

·         Faithless elector strategy versus the Democrats long-standing ‘national popular vote’ strategy

·         There is absolutely no federal law preventing faithless electors

·         This is the path of least resistance for a Trump re-election, and you should be aware

·         It is not as difficult as people think it is

And now for an in-depth analysis of the above points.

·         Faithless Electors

When a presidential candidate wins a state in the presidential election, it means that electors chosen by their political party will vote for president and vice president. Overwhelmingly, these electors have faithfully voted for their party’s presidential nominee. However, occasionally they do not. Electors who cast a vote for someone other than their party’s nominee are often called “faithless electors.”

Faithless electors have never changed the outcome of a presidential election. To date, only one elector has cast a vote for the opposite party’s nominee instead of his own in a close contest. In the 1796 election – the very first contested presidential election – Samuel Miles, a Federalist elector from Pennsylvania, voted for Democratic-Republican candidate Thomas Jefferson instead of Federalist candidate John Adams.

Altogether, there have been 23,507 electoral votes counted across 58 presidential elections. Only 90 electors have cast “deviant” votes, not ordinary votes for the presidential nominee of the elector’s political party. Only one elector has ever voted for their nominee’s opponent. More than two-thirds of deviant votes (63) were votes cast for another candidate due to the death of the nominee. Of the remaining 27 deviant votes, 24 were cast for another candidate, 3 of which were cancelled or retracted due to the operation of state law; and only one cast for the opposite party’s nominee in a close election. The final three deviant votes consist of one abstention, one abnormal vote (switching the presidential and vice presidential nominees) and one apparent accident.

·         Pennsylvania and Georgia have no binding elector laws

Pennsylvania has 20 presidential electors.

Georgia has 16 presidential electors.

There is no federal law that requires electors to vote as they have pledged, but 29 states and the District of Columbia have legal control over how their electors vote in the Electoral College. This means their electors are bound by state law and/or by state or party pledge to cast their vote for the candidate that wins the statewide popular vote. At the same time, this also means that there are 21 states in the union that have no requirements of, or legal control over, their electors. Therefore, despite the outcome of a state’s popular vote, the state’s electors are ultimately free to vote in whatever manner they please, including an abstention, with no legal repercussions. The states with legal control over their electors are the following 29 and D.C.:

Alabama (Code of Ala. §17-19-2)

Alaska (Alaska Stat. §15.30.090)

California (Election Code §6906)

Colorado (CRS §1-4-304) Connecticut (Conn. Gen. Stat. §9-176)

Delaware (15 Del C §4303)

District of Columbia (§1-1312(g))

Florida (Fla. Stat. §103.021(1))

Hawaii (HRS §14-28)

Maine (21-A MRS §805)

Maryland (Md Ann Code art 33, §8-505)

Massachusetts (MGL, ch. 53, §8)

Michigan (MCL §168.47)

Mississippi (Miss Code Ann §23-15-785)

Montana (MCA §13-25-104)

Nebraska (§32-714)

Nevada (NRS §298.050)

New Mexico (NM Stat Ann §1-15-9)

North Carolina (NC Gen Stat §163-212)

Ohio (ORC Ann §3505.40)

Oklahoma (26 Okl St §10-102)

Oregon (ORS §248.355)

South Carolina (SC Code Ann §7-19-80)

Tennessee (Tenn Code Ann §2-15-104(c))

Utah (Utah Code Ann §20A-13-304)

Vermont (17 VSA §2732)

Virginia (§24.2-203)

Washington (RCW §29.71.020)

Wisconsin (Wis Stat §7.75)

Wyoming (Wyo Stat §22-19-108)

Most of these state laws generally assert that an elector shall cast his or her vote for the candidates who won a majority of the state’s popular vote, or for the candidate of the party that nominated the elector.

Over the years, however, despite legal oversight, a number of electors have violated their state’s law binding them to their pledged vote. However, these violators often only face being charged with a misdemeanor or a small fine, usually $1,000. Many constitutional scholars agree that electors remain free agents despite state laws and that, if challenged, such laws would be ruled unconstitutional. Therefore, electors can decline to cast their vote for a specific candidate (the one that wins the popular vote of their state), either voting for an alternative candidate, or abstaining completely. In fact, in the 2000 election, Barbara Lett-Simmons, an elector for the District of Columbia, cast a blank ballot for president and vice president in protest of the District’s unfair voting rights. Indeed, when it comes down to it, electors are ultimately free to vote for whom they personally prefer, despite the general public’s desire

·         Less than 270 electoral college votes would mean the House of Representative votes

In each presidential election, there are 538 electoral votes up for grabs. A candidate must get a simple majority – 270 votes – in order to win the presidency. Electors, the predesignated people in each state who cast these votes, are allotted to states based on the total population and amount of congressional districts.

A candidate must receive an absolute majority of electoral votes (currently 270) to win the presidency or the vice presidency. If no candidate receives a majority in the election for president or vice president, that election is determined via a contingency procedure established by the 12th Amendment.

In the event that neither President Donald Trump nor Joe Biden wins an absolute majority of votes in the Electoral College this November, the race will be handled with a constitutional procedure called a contingent election, which will send the contest to the House of Representatives for a final decision. The process for a contingent election was initially established in Article II of the Constitution and later modified by the Twelfth Amendment. As it stands, the Constitution requires the House of Representatives to go into session to settle the election if neither candidate has attained a majority. Under this procedure, the House then must choose among the three presidential candidates who received the most electoral votes.

What’s most important to note is that in a contingent election, the House doesn’t cast its votes in the same way that it would decide on legislation. Instead, each state delegation must cast its vote en bloc, with each state receiving just a single vote, allotted to the candidate who receives majority support in the delegation. In order to be elected, then, a candidate must receive an absolute majority of statedelegation votes, which, given the 50 U.S. states, means he must receive the votes of 26 state delegations. (Despite having a delegate and three votes in the Electoral College, the District of Columbia does not get a vote.)

This is where things get really interesting: Although the Democratic Party currently holds a majority in the House, with 232 representatives to the Republican Party’s 198, the Republicans hold a majority of state delegations. In the current makeup of the House, there is a Republican majority in the delegations from 27 states. Of course, the composition of those delegations is subject to change in the coming election, and the newly elected House would be the one to settle the presidential election in the event of a tie.

A contingent election for vice president, meanwhile, in which no vice-presidential candidate achieves a majority in the Electoral College, would be settled by the Senate.

·         The maths has to work

Here is the electoral college map of today, if you were to take out Pennsylvania and Georgia – as such, all you would need is one more faithless elector!!! Or Arizona count flips into Trump’s column.

·         There were 7 faithless electors in 2016

What may be more surprising, given the level of protests against Donald Trump and the pressure exerted on Republican electors, is that a greater number were untrue to Hillary Clinton than to Mr. Trump. Among the 538 electors chosen to represent their states in the Electoral College, five were faithless to the Democratic nominee and two to the Republican. Prior to this year, there hasn’t been more than one faithless elector in any presidential election since 1948.

Among the Democratic faithless electors was David Mulinix, of Hawaii, who cast his vote for Bernie Sanders instead of Hillary Clinton. He said he believes the Electoral College is “outdated,” according to Hawaii News Now, which also pointed out that though Hawaii forbids faithless electors, Mulinix’s vote still counted and he would face no punishment because Hawaii has never bothered to come up with a penalty for breaking the law.

Four of the “faithless” electors came from Washington, a state won by Clinton. Three of them- -Bret Chiafalo, 19-year-old Levi Guerra, and Esther John– cast their votes for former Secretary of State Colin Powell, according to the Seattle Times. They also participated in a movement started by Chiafalo. The so-called “Hamilton Electors” base their ideology on Alexander Hamilton–one of the Founding Fathers who wrote about the Electoral College in the Federalist Papers.

The fourth “faithless” elector, Robert Satiacum, voted for Faith Spotted Eagle–a woman who is a member of the Yankton Sioux Nation, according to a local NBC affiliate. She played a public role in opposing the Keystone XL and Dakota Access pipelines.

The then President-elect Trump lost Texas elector Christopher Suprun to John Kasich. Another Texas elector, Bill Greene, voted for Libertarian Ron Paul, according to the Texas Monthly. You will hear this particular vote on minute 26 of the following video of the joint session of Congress confirming the 2016 electoral college results.

·         Faithless elector strategy versus the Democrats long-standing ‘national popular vote’ strategy

The faithless elector strategy is exactly why the Democrats have for so long been fighting to end the electoral college system. The National Popular Vote (NPV) plan guarantees election of the presidential candidate who receives the most popular votes in all 50 states and the District of Columbia.

On the other hand, as it stands currently, the Electoral College allows a President to be elected when finishing second or even third in the national popular vote. So-called “wrong winners” became president in 2000 (George W. Bush), 1888 (Benjamin Harrison), 1876 (Rutherford B. Hayes) and 1824 (John Quincy Adams). Of course, to this list, we should add Donald Trump in 2016!

·         There is absolutely no federal law preventing faithless electors, and indeed the Supreme Court upheld the existing laws on July 6th of this year.

On July 6th of this year, the Supreme Court unanimously rejected two challenges to the constitutionality of so-called “faithless elector” laws, which penalize or remove presidential electors who fail to vote for the candidate they have pledged to support. The rulings came with just under four months remaining before the 2020 election.

The Supreme Court heard arguments in May in two different disputes involving states’ efforts to enforce their faithless elector laws during the 2016 presidential election process. One challenge arose in Washington state, where Bret Chiafalo, Levi Guerra and Esther John pledged to support the candidate who won the popular vote when they were chosen to serve as electors for the state’s Democratic Party. But although Hillary Clinton won the popular vote in Washington, the three electors wrote in votes for someone else – former general and Secretary of State Colin Powell – in the hope that their votes might prompt other electors to follow suit and eventually deprive Donald Trump of a majority in the Electoral College. The trio’s protest votes led nowhere, other than to a fine of $1,000 each. The electors argued that under the Constitution, they could cast a ballot in the Electoral College for whomever they wanted, but the Washington Supreme Court upheld the fines.

The second challenge hailed from Colorado, where Clinton also won the popular vote. Micheal Baca was removed from his position as an elector when he tried to vote for Republican John Kasich, then the governor of Ohio, instead. Two other would-be faithless electors in Colorado, Polly Baca and Robert Nemanich, eventually cast their ballots for Clinton. They took their case to federal court, where the U.S. Court of Appeals for the 10th Circuit agreed with them that Colorado’s faithless elector law violates the Constitution.

In an 18-page opinion that was joined by seven of her colleagues, Justice Elena Kagan began with a brief discussion of the Electoral College. When Americans cast their votes for a presidential candidate, Kagan reminded us, they are not actually voting for president. Instead, they are choosing members of the Electoral College, who are appointed by each state based on the outcome of the vote there and then choose the president when the Electoral College meets in December. Kagan then moved on to recount the history of presidential voting, with a discussion that included references to the TV show “Veep” and the Broadway hit “Hamilton.” “In the 20th century,” she continued, “many States enacted statutes meant” to ensure that electors voted for the proper candidate by requiring them to pledge to support the party’s winning nominee. “As of now, 32 States and the District of Columbia have such statutes on their books.” And about 60 years ago, some states – currently 15 in total – enacted laws to give their “pledge laws” some teeth by removing faithless electors from their position, “substituting an alternate whose vote the State reports instead.” Like Washington, some of those states also fine electors who break their pledge.

The Constitution, Kagan pointed out, “is barebones about electors.” It provides only that states will appoint electors, who meet and cast ballots for the president, which are then sent to Washington. “Those sparse instructions,” she continued, “took no position on how independent from—or how faithful to—party and popular preferences the electors’ votes should be.” Nothing in the Constitution “expressly prohibits States from taking away presidential electors’ voting discretion as Washington does.”

With little in the Constitution itself to answer the question, Kagan then turned to history, as the Supreme Court has long done when interpreting a provision in the Constitution. And for Kagan, historical practice seemed to fill in the blanks quite nicely. “Electors,” she explained, “have only rarely exercised discretion in casting their ballots for President.” Instead, she explained, from almost the very beginning of our country’s history, states did not intend to choose electors who would be “free agents” and make their own decisions about the best candidate. Rather, she stressed, states wanted the electors to cast ballots for their party’s candidate, reflecting the will of the people.

Kagan dismissed the history supporting the electors as “one of anomalies only.” There have been only 180 “faithless” votes out of over 23,000 cast, she observed, and more than a third of those can be attributed to one election, in which the Democratic Party’s nominee died shortly after Election Day in 1872. “Putting those aside,” she concluded, “faithless votes represent just one-half of one percent of the total.”

Justice Clarence Thomas filed a separate opinion (joined in part by Justice Neil Gorsuch) in which he agreed with the rest of his colleagues that the faithless elector laws are constitutional, even if he did not agree with the majority’s reasoning. Because Thomas believes that the Constitution does not say anything about whether the states have the power to require electors to vote for the candidates they pledged to support, he would uphold the laws on the ground that any powers that the Constitution does not specifically either give to the federal government or take away from the states belong to the states.

The Supreme Court heard oral argument separately in the Colorado challenge after Justice Sonia Sotomayor recused herself from the case because of a personal relationship with one of the electors, Polly Baca. In a one-sentence, unsigned opinion issued today, the justices also reversed the ruling by the 10th Circuit and upheld Colorado’s faithless elector law “for the reasons stated in” Kagan’s opinion in the Washington case.

These rulings left the current system in place. States like Washington and Colorado that have faithless elector laws will be able to continue to enforce them. At the oral arguments in May, several justices had worried aloud about the possibility that voters could be disenfranchised, and chaos could ensue, if electors could vote for whomever they wanted – a particularly undesirable prospect in a close election. In recent weeks, election law experts have cautioned that we may not know the winner of the 2020 presidential election until after Election Day on November 3, because it will take some time for absentee ballots to be processed. But as a result of today’s decisions, there is likely to be significantly less suspense when the Electoral College meets in December to formally elect the president.

·         This is the path of least resistance for a Trump re-election, and you should be aware…

Consider the events of yesterday. It involves a state judge ordering that segregated ballots should NOT be counted. The judgement rules that the Pennsylvania Secretary of State “lacked statutory authority” to override the election law. Critically, the state has a Republican legislature. Now, this is a decision that may be appealed to the US Supreme Court.

·         It is not as difficult as people think it is

This map is the consensus media call right now, which includes Arizona for Biden, as well as Pennsylvania (see above). We know that the other states being challenged by the Trump campaign are Georgia, Michigan, and Wisconsin. If you remove Pennsylvania, that equates to 20 electoral college votes off Biden. Then, you need just one elector from the rest of the country, who could simply want to be in the history books.

Is a Fiscal Stimulus Deal Possible by Year-End?

In trying to handicap prospects for a post-election deal before year-end, there are a lot of moving parts to consider.  Among them:

·         The mixed election outcome arguably gives the Democrats less reason to wait until the next Congress takes office.   If Democrats had won not only the Presidency, but also secured a clear Senate majority, we could have envisioned a scenario where they would wait to try to pass a larger stimulus plan in the new Congress once Biden was in office.

·         However, Democrats performed worse than they expected in the Senate elections and the most likely scenario is that Republicans will retain their Senate majority.  Also, while Democrats retained their majority in the House, the overall size of that majority next year will be smaller, which means Democrats will have to go to greater lengths to maintain party discipline.  Meanwhile, the election outcome will fortify the resistance of Senate Republicans to accepting a package as large as Democrats have been seeking.  Consequently, the Democrats have less bargaining leverage than they did before the election.

·         It is possible Democrats could gain effective control of the Senate if they win two runoff elections for Senate seats in Georgia.  However, this is a decidedly uphill battle; at this time, wherein the most likely outcome is that Republicans will win both races, although this is not a foregone conclusion. 

·         Meanwhile, Congressional Democrats will likely want to take into account the interests of President-elect Biden in how they approach the negotiations.

·         To be sure, Democrats could try to defer action until Biden becomes President in the hope that the two Democratic Senate candidates in Georgia prevail in the runoffs, which would mean a 50-50 Senate.  That would effectively give Democrats Senate control since Vice President-elect Harris could break a tie.  

·         That is a high-risk tactic.  If Republicans win the Georgia Senate races and retain control of Senate, that means Biden would risk having to wrangle with a Republican Senate over the terms of any new stimulus legislation, creating the potential that the new President would get bogged down early in his tenure.

·         Some Democrats on Capitol Hill think it would be better for Biden if Democrats reached an agreement in the lame-duck session, even if the size is smaller than Democrats would prefer.  This is preferable, as such an approach would allow Biden to focus more directly on dealing with the pandemic early in his tenure.  He could always come back to Congress to seek further relief should circumstances warrant.

·         Overall, however, if Democrats are going to strike a deal with Senate Republicans in the lame-duck session, they will have to settle for a considerably smaller package than the $2 tn figure they have been advocating, probably below $1 tn.

What is in the interests of Senate Republican Leader McConnell and Senate Republicans in general and in any negotiations:

·         With Republicans having performed better than most expected in the Senate races, McConnell will feel emboldened in resisting attempts by House Speaker Pelosi to pass a stimulus package as large as $2 tn.  

·         Since the election, McConnell has explicitly voiced interest in passing a scaled-down version of economic relief package.  He has said further relief is needed.

·         Before the election, McConnell refrained from being seen to be involved in the negotiations with House Speaker Pelosi and Treasury Secretary Mnuchin.  However, with the election over, McConnell will become more directly involved in any negotiations that do take place.

·         McConnell may want to pass some limited stimulus legislation while Trump is still President in order to resolve the issue before Biden takes office. 

·         More importantly for McConnell is the question of retaining his majority.  He will be highly attentive to the need to ensure that the two Republican Senate candidates in the Georgia runoff elections are victorious in early January and thus, he will try to craft any legislation in a way that will aid their chances.  They can tout their support for an economic relief bill and assert that it couldn’t pass without Republican efforts.

While this backdrop does weigh on the side for a deal in the lame-duck session, there are still some important hurdles and countervailing pressures to consider.  

·         One is the attitude of President Trump.  Since major media have called the election for Biden, Trump has not only refused to concede, but he is pursuing a combative, scorched-earth strategy to contest the outcome. In our view, his behavior is becoming increasingly volatile and that makes us cautious in trying to handicap his responses to any fiscal legislation.

·         In addition, Republicans may be reluctant to oppose Trump in order to ensure there is a strong turnout of Republican voters (still loyal to the President) in the Georgia runoff elections in January.  (Talk that Trump may try for a political comeback in the 2024 election will make some Congressional Republicans fearful of crossing him.) This goes against the argument we noted just above, that passing a stimulus bill might help the Republican candidates in the Georgia runoffs.  But the issue here is whether to follow Trump, which for some Republicans will be more compelling than the Georgia runoffs if those two issues are in conflict.

·         Moreover, some Senate Republicans could reason that it may be in their longer-term political interests to refrain from reaching any agreement this year, with the idea that they could force Biden to become bogged down in prolonged negotiations next year, thereby hurting his Presidency and the economy early in his tenure. It is after all politics!

·         The other fundamental challenge will be whether both sides can work out details on what to include in a stimulus plan that will allow each party to claim some form of victory.  The differences between the two sides over how much further relief is needed, and in what form, remain considerable.

·         Republicans likely will be pushing to include additional funds to aid businesses through the since-expired Paycheck Protection Program and some money to encourage schools to re-open.  

·         But Republicans also have been pushing to include measures to provide legal protection to businesses who could face COVID-related lawsuits   That is likely to be a nettlesome issue for Democrats who have fretted that such a measure will let businesses  off the hook too easily  for safety violations.

·         Conversely, Democrats will continue pushing for reviving an expired program that provided for an additional $600 per week in unemployment benefits, as well as providing hundreds of billions of dollars in aid to state and local governments.  Republicans have proposed scaling back the size of the supplemental unemployment benefits and have resisted Democratic demands on state/local funding. 

·         Congress also must consider whether to renew another program due to expire at year-end that provides extended unemployment benefits for those who exhaust their standard benefits.  

·         McConnell did indicate a willingness to consider some additional aid to state and local governments, albeit on a smaller scale than Democrats favor.

·         Less clear is whether any new package will include a new round of direct payments to households, similar to the $1,200 per adult plan included in the CARES Act approved in March.  House Democrats included such a provision in the bill they passed in the fall, but Senate Republicans omitted that from their plan they tried to pass in October.

Do note that Congress also has to pass a bill (in the lame-duck session) to authorize government spending for various federal agencies through the remainder of FY 21.  The current spending authorization runs through December 11.  (In theory, Congress could pass another short-term spending bill while negotiators reach agreement on the details of a longer-term bill.  So the December 11 deadline could be extended.)

·         In all likelihood, the chances for passing fiscal stimulus legislation would be enhanced if Congress decides to attach some stimulus measures to the spending bill, rather than trying to pass stimulus legislation as a stand-alone measure.

·         The spending authorization is a must-pass piece of legislation.  Attaching some stimulus measures to that bill would make it harder for legislators in either party to vote against the entire package.  In particular, we can imagine a scenario where Senate Republicans will try to attach some of their preferred economic relief proposals to the spending bill and then dare Democrats to oppose it.

·         However, we are also mindful that there could be some melodrama on whether President Trump would sign a spending authorization bill given the current political climate.  While he has sometimes threatened to veto spending bills, only to relent, he did essentially provoke a government shutdown for several weeks in late 2018 and early 2019.

US investors barred from shares in China military-linked companies

Yesterday, President Trump issued an executive order against US investments in certain Chinese companies. This was clearly market negative for Chinese equities. The EO means that investors cannot add to positions starting on Jan 11, 2021, but have a year to sell positions.  We expect that many investors will probably wait for any clarification from the new Biden Administration.

This EO only applies to U.S. investors, including U.S. incorporated asset managers/owners, and U.S. based affiliates of foreign asset managers.  It appears to exclude foreign assets managers.  We are not certain yet, but it also probably excludes foreign incorporated subsidiaries of U.S. companies. The EO obviously does not affect Chinese asset managers/owners or Chinese banks, which is where most of the financing for these companies comes from.




China Railway Construction Corp

China State Construction


China Communications Construction

China Shipbuilding Industry Corp


Dawning Information Industry



China National Chemical Engineering

China National Nuclear Power

China Spacesat

China State Construction

China Telecom

China United Network Communications

There is also significant foreign equity investment in China Mobile.