The Strategist

The potential implications of Biden’s withdrawal from the 2024 presidential race

The first 2024 presidential debate between Joe Biden and Donald Trump marked a critical juncture for Biden’s re-election campaign. Biden’s performance during the debate was notably poor; he appeared hesitant, his speech was sometimes unclear, and his responses did not alleviate concerns regarding his age and capability to continue campaigning, let alone run the world’s largest economy and strongest military power for another four years. These weaknesses were evident and only served to exacerbate existing doubts among democrats and the wider electorate. Even though Trump’s performance was not without its own issues, Biden’s stumbles were pronounced enough to cause significant alarm within his party. In addition, the probability of election success has now shifted significantly in favour of the Republican Party given the recent assassination attempt of Trump. Historically, presidential approval tends to rise after such events, as seen with Reagan, which is relevant even though Trump is a candidate rather than a sitting president. Any further actions against Trump will only energise the Republican base. Trump continues to lead in swing state polls while Biden struggles.

Date
Author
Sebastian Petric, LGT Senior FX Strategist, Tina Jessop, Senior Economist, LGT Private Banking
Reading time
10 minutes

Elections in the United States of America
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In light of this, there is increasing speculation about Biden potentially withdrawing from the presidential race. Should he decide to step down, this decision would need to be made relatively quickly to allow a replacement sufficient time to campaign effectively. The most straightforward and likely replacement would be Vice President Kamala Harris. This is due to both her current position as Vice President and the legal framework that permits the easy transfer of campaign funds from Biden to Harris, ensuring a seamless transition of campaign resources and focus. The existing campaign finance laws facilitate such transfers between the presidential and vice-presidential candidates within the same party, making Harris the most viable successor. 

Potential successors

Beyond Harris, other democratic figures such as Pete Buttigieg, Gavin Newsom, and Gretchen Whitmer are potential candidates, but Harris’s current role and the relative simplicity of her stepping into Biden’s place make her the most logical choice, although her poor approval ratings may instil resistance. The transition would be relatively smooth, legally and logistically, thus minimising disruptions to the campaign.

Should Harris or another democrat assume the candidacy, the party’s policy direction is expected to remain largely unchanged. The Democratic platform is centred on expansive social benefit programmes aimed at reducing the cost of childcare, enhancing parental labour market involvement, and investing significantly in education, healthcare, and housing. These initiatives are designed to support families and boost labour force participation, particularly among women. Tax policies under a Democratic administration would likely include higher taxes on corporations and wealthy individuals to fund these social programmes. Fighting climate change and promoting global collaboration, while taking a tough stance on China in matters related to US national security, would prevail. This approach aims to balance economic growth with social equity, addressing income disparity while fostering a robust, greener economy.

The Democratic agenda also projects a stronger medium to long-term economic outlook, despite potential initial inflation increases. Policies focused on family support and immigration are expected to increase labour force participation and boost GDP without significantly raising long-term inflation. This economic strategy underscores the party’s commitment to both immediate and sustainable growth.

Capital market implications: unity government or divided congress?

The implications for capital markets vary depending on whether Democrats achieve a unified government or face a split Congress. In the event of a Democratic win across the board, the implementation of the party’s full economic agenda could lead to substantial investments in social programmes and infrastructure, benefiting sectors such as green energy, and healthcare, due to increased funding and supportive policies. Conversely, if Congress remains divided, legislative gridlock could limit the scope of new policies. However, some bipartisan agreements might still be possible on key issues like infrastructure, potentially moderating market volatility in the lead-up to the elections. The long-term impacts would depend significantly on the final composition of Congress and its capacity to enact substantial legislation. We expect no material reduction in fiscal deficit spending.

In conclusion, the potential withdrawal of Biden from the presidential race would likely result in Kamala Harris stepping in as the candidate, maintaining the continuity of the current policy trajectory. This includes a strong focus on expansive social benefits and higher taxes for corporations and the wealthy. The election’s outcome will determine the extent to which these policies can be implemented, with a Democratic sweep enabling a comprehensive rollout of their agenda, whereas a split Congress would necessitate more moderate legislative progress, which tends to be even better for US equity markets.

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