Navigating the US Political Landscape: Finding the Signal Amidst the Noise

As the US election approaches, the possibility of a split of power in the three branches of the US government looms large. With narrow margins and fractured parties, the chances of significant change seem slim.

One key issue that politicians on both sides seem to care about is the growing deficits. Retiring Senator Joe Manchin expressed concern over the $34.6 trillion debt, lamenting that no one seems to care about it. Goldman Sachs also highlighted the constraints faced by both President Biden and former President Trump in terms of fiscal expansion.

The options to address the deficit are clear: cut spending or raise taxes. However, neither option seems likely to be implemented in a meaningful way. President Trump has promised tax cuts, while Republicans may focus on cutting spending, leading to a potential deadlock in Congress.

A split Congress could result in tax cuts being passed easily while spending cuts are blocked, creating a challenging situation for addressing the deficit. The possibility of a ‘Liz Truss moment’ in the US remains distant, indicating that significant changes may be far off.

Overall, the uncertainty surrounding the US election and the potential for a split of power in the government could have significant implications for the country’s fiscal policy, inflation rates, and the strength of the dollar. As the election draws near, the focus on deficits and the government’s response to them will be a key issue for voters to consider.