Economic Commentary

2020 will certainly be reflected on as a very unusual year in modern history. Everyone in the United States was aware that we would be in a presidential election year; however, prior to February of 2020 relatively few knew that the COVID-19 Pandemic would insert itself into the lives of nearly everyone in the world, and certainly into the political and economic fabric of the United States. It was difficult to imagine that the loser of the presidential election would be seeking ballot reversals in both state and federal supreme courts.

With 99% of the vote tabulated, President-elect Biden has received 81,100,000 votes and President Trump has received 74,015,000 votes, giving President-elect Biden a 6,085,000 popular vote margin and 306 Electoral College votes. At this writing nearly all states have certified their elections. Each state must cast their electoral votes by December 14, and on January 6 Congress will officially tabulate the Electoral College votes and on January 20 the Inauguration of the President will occur.

This of course assumes that President Trump is not successful in his attempt to prove his claims of fraud in the electoral process and reverse current election results. To date there have been 27 suits filed in Pennsylvania, Wisconsin, Nevada, Arizona, Michigan and Georgia alleging process and vote total irregularities. 26 of these suits have been dismissed. Each of those states have certified their elections.

While most of the Republican leadership has not recognized (officially) President-elect Biden’s victory, the transition process has begun even while the resistance by President Trump and his legal team continues. Last month we observed that each party took polar opposite paths to their election ground strategies. Democrats positioned themselves as believers in Centers for Disease Control COVID-19 recommendations and urged their party faithful to register electronically or by mail, request absentee ballots and vote by the absentee ballot processes. Republicans chose large gatherings, strong door-to-door registration efforts, and Election Day show up and vote campaigns. Both parties were successful in registering new voters and turning out the vote, as evidenced by the largest vote total in a presidential election ever. One would think, on the surface, that record voter participation would be a victory for democracy and applauded by all.

In September and October President Trump began a campaign of casting doubt on mail in (absentee) voting, suggesting the process was plagued with fraud even though no state or election commission investigation had validated any fraud in the absentee voting process. The President’s strategy to sow doubt in the absentee ballot process worked among his party faithful. If he won, it would not matter and the emphasis on absentee voter fraud would quickly be forgotten. If he lost, his faithful would feel that the fraud he warned about had cheated him (and them) from an election victory. If the President’s strategy did not undermine the very principles of our democratic process of electing our leadership, then his tactical strategy might be viewed as politically brilliant. The current reality is that even though we have just witnessed the largest voter turnout in our history, and the winner received the highest number of ballots cast for a President ever and the total spread between the victor and loser was twice as large than in 2016, we have a large percentage of the losing party feeling that fraud, and not legitimate voter preference, created their loss.

It is not unusual to view the world through a political lens. If your party is in power all is well and if your party is not in power then nothing is right. Elections have consequences and those in the political world will do everything to remain in power. To do that they must sew the seeds of discontent, fear and difference, not commonality, to rally their base of political support. It is clear that our country is divided politically, and the leadership of both parties has been successful in defining and perpetuating our differences. January 20 does not care about differences, but it is a date with meaning for all. It is Inauguration Day, at which time a new President takes office. Historically, the lessons that the United States of America gets to teach the rest of the world is that every four years, on that date, we have a ceremony that marks either the peaceful and orderly continuation of leadership or a peaceful and orderly transfer of leadership and power.

Sometimes interesting and unusual times are stimulating. We have all heard the saying “chaos brings opportunity,” yet it is hard not to feel the difference in the current political context of this transfer of power. It is easy to understand political perspective differences, but it is distinctively different and uncomfortable to know that too many people in the party that lost this election feel it was due to some nefarious deed or fraudulent process and not simply voter preference. It is equally uncomfortable to know that they feel that way because they have been told that and not because they have actually seen the proof of it. It is challenging to know where we go from here.

We are in what may be the fourth quarter of a global pandemic. Dr. Fauci repeats often that “help is on the way” referencing the announced vaccines to prevent the transmission of COVID-19. Between now and September 2021, most Americans will have the opportunity to be vaccinated. This is really great news and will be restorative in many ways. The order of who gets vaccinated first and how the rollout is executed will be worked out and regular progress will be made and felt.

The relief from the threat of infection and the reduction of stress on our health care systems will grow exponentially. With that growth will be the possibility of the return of small business growth that includes travel, restaurants, hospitality, entertainment, art, sports, communal worship and the ordinary but real and important components of our culture that help define who we are. That restoration will also drive our economic growth.

Until that restoration occurs we have substantial work to do. It seems that Congress is waiting for January when the Georgia senate election runoffs will occur. Both parties know that the political control of the Senate hangs in the balance, and with that control is the ability to determine the legislative calendar and enact legislation, particularly legislation that requires budgetary funding.

It is clear that we will need additional stimulus prior to the restorative power of a fully vaccinated workforce and population. Small businesses are in a particularly bad spot currently, and the political limbo land of being between administrations is not helpful to them, their business sustainability and those that they employ. We have, at this writing, between ten and eleven million people who are unemployed and fully 60% of those people were employed in small businesses, with most being food and beverage, hospitality, transportation support and entertainment related. The small business loan programs and payroll protection plans that expired in July were helpful to these businesses, but the reality is they cannot survive until next July without renewed stimulus programs. 74% of small businesses surveyed by the Conference Board reported experiencing large enough distress to close their businesses temporarily within the next three months and 47% responded that their closure would probably be permanent.

On a more macro level the Weekly Economic Indicator published by the New York Federal Reserve shows continued improvement registering at -2.56%. At its low in April the WEI registered -11.81%. The progress has been steady though still registering recessionary GDP levels. Motor vehicles, home furnishings, groceries, home repair, existing home sales, new homes and home renovation all continue to expand while clothing, travel, retail stores, restaurants, hospitality, and entertainment continue their decline.

President-elect Biden has been releasing his cabinet and agency appointee recommendations that he will take to congress for those that need congressional approval, and simply appoint for those that do not require consent. As these appointees become firmer, economists will be able to forecast the implications to economic policy, both fiscal and monetary. Currently the consensus is that interest rates will remain at zero with respect to Fed policy for at least the next twenty-four months. With former Fed Chair Janet Yellen heading up the Treasury Department, there will likely be a focus on small business capital access and lending opportunities.

2020 is a year many would like to have fade away. Lives have been lost, careers and educational plans delayed, lifelong and sometimes generational businesses lost, marriages deferred. For millennials, the second major life-interrupting global event in a twelve-year time span occurred. Adult children have moved back with their parents, often in their childhood homes, and about one third of the work force is now working remotely, experiencing both the positive and negative effects of doing so. The summer of discontent amplified by the killing of George Floyd and sustained street protests focusing on criminal justice reform, diversity equity inclusion and the end to racism remains fresh yet overpowered by the new wave of COVID-19 infections and deaths. And, as if this were not enough to digest, we experienced a long and divisive presidential election.

To the extent that the holiday season can bring restorative hope to you and your families, we certainly hope that it will do so. Chaos can bring opportunity. Disasters are a time for collective actions and learning. Families brought together by economic and pandemic related circumstances have renewed togetherness and relationship bonding that they might not have had in a very long time. Remote learning and working has forced us to use more and different tools and become good at it in the process. Losing the taken-for-granted opportunities to be with one another may make us value it more when we can once again do it safely. Our renewed and awakened awareness of the tremendous work done by front line workers in health care, education and public safety gives us new perspectives to retain when we return to a new normal, and therefore new opportunities to offer respect. At about this time every year we relish and look forward to gathering in the holiday spirit with our Greenleaf Trust clients. It is truly our favorite event of the year and gives us all the occasion to renew and restore relationships. We regret being unable to do so in 2020 but look forward to the promise and opportunity to gather once again in 2021 and to do so with even greater gusto. We wish the very best for you and those you hold dear this holiday season.