What just happened?

November 7, 2024

  • Former President Trump won both the electoral college vote and the popular vote to win his second non-consecutive term in the White House, a feat that has only happened once before in U.S. history – in 1893 when Grover Cleveland won a second non-consecutive term (making President Biden Benjamin Harrison in this analogy).
  • Not only did Trump win, but he also won decisively – outperforming his performance in 2020 literally everywhere.  While we will get more reliable exit data in a few weeks, it looks like Trump did very well among Latino and Black men, as well as younger men of all stripes, while also holding off defections among other demographics, including white women (see here).  He was able to do well in rural areas, well enough in the suburbs, and in many places, he also ate into Democrats’ strongholds in the cities; in NYC, for instance, Trump had the strongest performance of any Republican running for the White House since 1992 (here).
  • For a change, polling was actually more right than wrong – all state polls had Trump and Harris within a margin of error (~3% or so), and Trump looks like he will beat Harris by 1-3% across the swing states when all of the votes are counted (here).
  • How about Congress? 
  • The Senate flipped to Republican control, with Republicans easily picking up the most vulnerable Senate seats in WV, OH, and MT, but also likely picking up the Senate seat in Pennsylvania.  As of now, the Senate looks likely to be 53-47Republican, although Nevada is very close, so it could be 54-46 when all votes are counted (which could take weeks).   When Trump came into office in 2017, he had a 52-48 Senate.  
  • The House is still being calculated, but Republicans are very likely to keep the House, although it looks to be very close in some key House districts (here).  As of now, Republicans look to be on a path to have a similar narrow majority (+3 to +4 seats) as they do now, but that could be smaller (or slightly larger) depending on how some of the western districts turn out (reminder: 218 votes need to pass a bill).  When Trump came into office in 2017, he had a more decisive House majority – at 241 votes, i.e., a +23 seat majority. 
  • The majorities matter, but the margins of the majorities also matter.The expected narrow Republican majority in the House, especially, could make what Trump has talked about on the campaign trail more challenging to pass, including some of the additional tax cuts (e.g., Trump’s no taxes on tips, no taxes on Social Security, corporate tax cut to 15%).  This also means that the $2 trillion cuts that Elon Musk has referred to have little chance of ever passing; these cuts would take an act of Congress, regardless, and most likely require 60 votes in the Senate given the existence of the filibuster and would be difficult to pass in such a narrow House anyway.
  • What could President Trump (2.0) do unilaterally on his first day of office?  Much of this will depend on personnel and is a work in progress, but some things we could see a Trump 2.0 include:
  • Roll-back of executive orders, including in the energy sector (e.g., the LNG export ban and prohibitions of drilling on federal lands);
  • Announce new executive orders, including on the border.  We assume that restricting migration across the southern border and prioritizing criminal deportations via the Department of Justice are more straightforward “day 1” activities than a broad-based deportation program, given that such a program is likely logistically more challenging to set up and could require funds from Congress depending how it is structured.  Other Executive Orders could look similar to Trump 1.0 EOs (here);
  • Replace directors at the Consumer Financial Protection Bureau (CFBP) and possibly Federal Housing Finance Authority (FHFA)should he want to; these agencies are structured as single-directorships, and the Supreme Court has rendered that the president has the authority to fire directors of such agencies, so should Trump want to replace these folks, he could on day 1;
  • Replace FTC director (Lina Khan) as her term has expired (end of September) with an existing Republican commissioner should he want to; Trump can also replace the acting Director of the OCC (banking regulator).  In all cases, it will take some time to get permanent people nominated and confirmed, but temporary folks can be placed in these agencies via different legal methods (e.g., “The Vacancies Act”);
  • Trump could impose tariffs on China on day 1 using the existing Section 301 investigation on China (the same tool with which Trump imposed the China tariffs in 2018 and the same one which President Biden used to increase those tariffs more recently), but other tariffs – if announced and implemented – will require a relatively laborious “investigation process,” which takes months (and would require a USTR to be confirmed most likely).  Of course, the tariff decisions will ultimately be made by Trump, but Trump’s trade advisors are laser-focused on reducing the trade deficit and remaking trade policy, so they are worth taking seriously.
  • Keep in mind that the Supreme Court’s decision on the Chevron Doctrine puts some limitations on executive authorities so that we could see some actions litigated in some areas (akin to courts blocking efforts like student loan forgiveness under Biden)
  • What about fiscal? For fiscal expansion—tax and spending—Trump will still have to go through Congress, and the likely narrow majorities in the House could limit what can be done.
  • As long as Republicans ultimately keep the House, even with a limited majority, a full extension of the expiring Trump tax cuts is likely, but possibly only extended for a shorter period of time (vs. the ten years) to keep the “score” of the package down given already high deficits of 6.5%
  • We could see efforts to reduce spending marginally. Still, any significant (Elon Musk-like) spending cuts will be challenging to get through the House and difficult to do on reconciliation (which only requires 50 votes in the Senate); everything else likely requires 60 votes.
  • Reminder: The Supreme Court has made it clear that the executive branch has very limited authority on spending cuts.
  • The debt ceiling, which will not have to be dealt with on day 1, but later in the spring, will easily be lifted given assuming Republican majorities in both chambers
  • What about the Fed?  No changes at the Federal Reserve are expected for the foreseeable future; Fed Chairman Powell’s term is not up until spring 2026 (see below), the first Fed governor vacancy is not until January 2026, and it is clear that the president cannot fire a Fed governor without cause.  In other words, the Fed that Biden has now will be the Fed Trump likely has, at least until 2026.
  • Bottom line:  While we will have more in the coming days about what we can expect from a Trump 2.0, former President Trump will come to office with a solid mandate and, in many ways, will be less encumbered by the potential political considerations of having to run for office again (and no, he cannot run for a third term without changing the U.S. constitution).  While he can do quite a bit unilaterally on smoothing/rolling back Biden EOs/regulatory efforts, tariffs, and immigration, on fiscal, it looks likely he will be marginally constrained by what looks to be a narrow House majority (although we won’t likely know for a while – potentially for weeks). 

Regardless, we can all cheer the end of the election and a clear outcome that was decided more or less on election night without many hiccups like the 2020 or 2000 elections.

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