Update 820: All but Tied: Polls in Bell Lap

Update 820 — All but Tied: Polls in Bell Lap;
Global Leaders Worry About Trump Tariffs

The final New York Times/Siena poll of the 2024 election cycle published yesterday shows, for the first time, a flat-footed tie at 48 percent each for presidential candidates Kamala Harris and Donald Trump. In all of the seven battleground states that will decide the election, the two candidates are locked in margins within the polls’ margin of error.

Polls also indicate that the majority in the House of Representatives next Congress is equally impossible to predict. We cover the most recent polls, as well as news from the IMF-World Bank global economic meeting, the Boeing strike, the tax gap, and other economic policy developments of the week below.

Good weekends all…

Best,

Dana


Headline

Election Update 

With election day just 11 days away, Vice President Kamala Harris and Donald Trump remain essentially tied in national polls, with the economy persisting as the leading issue for voters. Harris has gained considerable ground on this front since taking over the Democratic presidential nomination, narrowing the over 10-point gap Biden faced on voter trust on the economy just eight months ago. In the most recent poll conducted by the Financial Times and the University of Michigan Ross School of Business, 44 percent of registered voters trust Trump to handle the economy compared to 43 percent for Harris.

Both candidates have made economic policy a central part of their campaign platforms, with Trump focusing on cutting taxes and replacing some lost revenue with aggressive tariffs and Harris pitching new investments in the working and middle-class funded by tax hikes on the wealthy and large corporations. Both plans are likely to lead to a deficit, though Harris’ plan ($3.5 trillion deficit/10 years) is much more fiscally responsible than Trump’s ($7.5 trillion deficit/10 years). Harris’ economic plan has notably drawn favor with economists, with 23 recipients of the Nobel Prize in Economics – more than half of the award’s living recipients – calling it “vastly superior” to Trump’s in a letter released this week. For what it’s worth: among the 15 percent saying they are undecided in the NYT/Siena poll, 42 percent say they are leaning toward Harris, 32 toward Trump. 

Polling leaves both sides on edge, with neither candidate leading in any of the seven battleground states by more than 2 points. Many of the state averages done by 538 are down to a 0.2 to 0.3 point leads for either candidate. Nationally, Harris is up 1.7 points on the 538 average of the polls. In recent ratings changes, Minnesota and New Hampshire have both moved from Lean D to Likely D and North Carolina has moved from Lean R to Toss Up. 

If the candidates win all projected solid/likely/lean states, Harris would need 44 additional electoral votes and Trump would need 51. There are 93 electoral votes up for grabs, with state electoral numbers and current candidate averages listed below: 

  • PA: 19 electoral votes – average as of today, Trump +0.4
  • GA: 16 electoral votes – average as of today, Trump +1.6
  • NC: 16 electoral votes – average as of today, Trump +1.3
  • MI: 15 electoral votes – average as of today, Harris +0.6
  • AZ: 11 electoral votes – average as of today, Trump +1.9
  • WI: 10 electoral votes – average as of today, Harris +0.1
  • NV: 6 electoral votes – average as of today, even!

If Trump wins all the Toss Up states where he is polling slightly up and their 62 electoral votes he will clench the presidency again, but it’s anyone’s guess where most of these states will land. If Harris holds the “blue wall” states of Michigan, Pennsylvania, and Wisconsin, she will hit the magic 44, becoming the first woman elected President in American history. 

In other election news, Republicans have retained their lead in key Senate races, despite Texas moving from Likely R to Lean R and are now expected to flip the upper chamber. Control of the House remains highly contested, according to the Cook Political Report’s updated race ratings. The majority of race changes have favored Democrats, who only need to pick up four seats to earn back the majority. 

Some of the races, highlighted below, have shifted to support Democrats or Republicans while still being more up for grabs than safe. 

Republicans lost some advantages with some of the changes:

  • CA-45, Derek Tran (D) is running to unseat Michelle Steel (R), moved from Lean R to Toss Up
  • IA-01, Christina Bohannan (D) is running to unseat Mariannette Miller-Meeks (R), moved from Likely R to Lean R
  • NE-02, Tony Vargas (D) is running to unseat Don Bacon (R), moved from Lean R to Toss Up

Meanwhile, three key seats did shift toward the Republicans

  • NJ-07, Sue Altman (D) is running to unseat Tom Kean Jr (R), moved from Toss Up to Lean Republican
  • VA-07, Eugene Vindman (D) is running to replace Abigail Spanberger (D) who is leaving to run for Governor of Virginia, moved from Lean D to Toss Up 
  • AK-Al, Mary Peltola (D) is defending her seat from Nick Begich (R), the only Republican still in the race, moved from Lean D to Toss Up

Presuming all lean/likely/solid seats fall along the Cook Report’s projection, the majority in Congress will be determined by 26 toss-up seats in 15 states including Arizona, Michigan, North Carolina, and Pennsylvania. Democrats currently hold 11 of these seats and Republicans, 15. 

Other Developments

IMF: Leaders Brace for Uncertain Times

Against the backdrop of the presidential election in the United States and concerns about former President Donald Trump’s proposals to implement sweeping tariffs, global finance leaders from 190 countries are gathering in Washington, DC for the annual IMF-World Bank meetings to discuss the state and future of the global economy. 

Economic instability in the event of a Trump presidency surrounds the week’s meetings as the institutions and leaders remained reluctant to speak candidly about Trump by name. But with unmistakable reference to Trump’s campaign rhetoric of a 10 to 20 percent across-the-board tariff and a 60 percent tariff on Chinese goods, leaders throughout the week warn of: 

  • uncertainty and possible destabilization of standing trade agreements, 
  • risks of retaliatory tariffs or trade wars on multiple fronts,
  • and volatility in markets as companies rush to adapt through their own contract negotiations with international suppliers and possible stockpiling measures in preparation.

IMF Managing Director Kristalina Georgieva warned – without referring to Trump’s tariff proposals specifically – that a shift toward protectionism would mean trade would no longer be the “engine of the global economy.” She further urged leaders to lower the “geopolitical temperature.” Similar sentiments were echoed by European Central Bank President Christine Lagard on Wednesday as she recounted periods of trade barriers that have not been those of prosperity and would likely have a negative impact on growth. 

At the same time, the IMF’s World Economic Outlook released during the meetings details key global economic projections showing that the United States is offsetting the underwhelming GDP projections of the Euro-area and low-income countries. U.S. projections revised upward to 2.8 percent from 2.6 percent in July. Described as “stable yet underwhelming,” global growth is expected to remain steady at 3.1 percent over the next five years but expects a decrease from 3.3 percent in 2023 to 3.2 percent in 2024 and 2025. The meetings have also benefited from a generally positive tone with the characterization that the “global battle against inflation has largely been won” after real fears of recessions have subsided.

American economic leaders have grown vocal about these concerns as Trump continues his campaign for sweeping tariffs. Late last week, Treasury Secretary Janet Yellen warned – without naming the former President – that calls for high tariffs are “highly misguided” and would “raise prices for American families and make our businesses less competitive.” 

Americans at home and leaders abroad brace for the possibility of a second Trump presidency that could trigger geopolitical and economic volatility, signs of which are already apparent on the global scale.

$700 Billion Tax Gap and Next Year’s Tax Fight

Last week, the Internal Revenue Service (IRS) estimated that the tax gap, defined as the difference between estimated liabilities and taxes paid on time, totaled $696 billion for the 2022 tax year (TY) – 15 percent of total tax liability. Although this was largely in line with previous expectations for TY 2022 (the tax gap has fluctuated between 15 and 18 percent of total liabilities for the last 30 years), it brings up serious concerns as we continue to run high deficits that increase the national debt. No small matter: closing the tax gap entirely could fund almost all of non-defense discretionary government spending. 

The IRS generally splits the tax gap into three categories that represent different forms of non-compliance:

  • Nonfiling – Tax not paid on time by those who do not file on time
  • Underreporting – Tax understated on timely filed returns
  • Underpayment – Tax reported on time, but not paid on time

The majority of the TY 2022 tax gap was due to underreporting ($539 billion) compared to nonfiling ($63 billion) and underpayment ($94 billion). 

The growing tax gap is a good reminder of the importance of adequately funding the IRS. The agency received $80 billion in supplemental funding through the Inflation Reduction Act two years ago and funding for the IRS has been found to have an average return in revenue of six to one. Yet, Republicans have repeatedly tried (and succeeded) at rolling back funding for the IRS, most recently cutting $20 billion from the enforcement portion of the supplemental funding during the FY24 appropriations process. 

The IRS has already made big gains in addressing the tax gap with new funding, collecting over $1 billion in unpaid taxes from wealthy individuals since last fall. As we look forward to opportunities to reform the tax code in next year’s tax fight, it’s important to remember the crucial role the IRS plays in enforcement and compliance. For tax reforms to be successful or impactful, the IRS must have the resources to enforce the tax code. 

BNPL Industry Sues to Block CFPB Interpretive Guidance 

Last Friday, the Financial Technology Association filed a lawsuit against the Consumer Financial Protection Bureau (CFPB) in the U.S. District Court for the District of Columbia, seeking to block the Bureau’s recent effort to protect consumers who use so-called Buy Now, Pay Later (BNPL) products. BNPL is a short-term credit option for retail purchases offered by retailers through payment platforms – apps like Affirm, Afterpay and Klarna. 

In May, the CFPB issued an interpretive rule confirming that, for certain purposes, BNPL lenders are classified as credit card issuers, and therefore consumers are entitled to some of the same protections whether they receive credit through BNPL products or credit cards. The Bureau clarified that: 

  • consumers have a right to dispute charges and BNPL lenders must investigate those disputes, during which time lenders must pause payment requirements and at times must return payments.
  • consumers can demand refunds after returning products or canceling services purchased with a BNPL loan – as they can with traditional credit cards – and lenders must credit the refunds to consumers’ accounts.
  • BNPL lenders must provide consumers with account disclosures upon its opening and with periodic billing statements thereafter. 

The fintech trade group representing major BNPL providers like Klarna claims that the Bureau violated the Administrative Procedure Act’s requirement for a notice and comment period when it puts forward new rules.  But the CFPB’s recent BNPL interpretive rule simply clarifies the existing obligations of BNPL providers under existing law. The interpretive guidance is a key step towards protecting the over 8 million consumers in the United States who use BNPL products each year. 

Boeing Strike Continues as Workers Nix Latest Offer

Boeing workers on Wednesday rejected a tentative labor contract, with 64 percent of International Association of Machinists and Aerospace Workers members opposed to the company’s latest offer, six weeks into a strike that has brought production at several factories for one of the world’s largest aerospace manufacturers to a grinding halt. The offer would have included raises of 35 percent over four years, a $7,000 ratification bonus, and increased 401(k) contributions among other changes. 

The main issues at play:

  • Boeing’s workers feel that wages have not kept up with the cost of living and that they want to reinstate the pension that they lost in a previous contract in 2014.
  • Workers are also unhappy that Boeing has moved some of its production to non-union factories, such as its factory in South Carolina.

The strike costs Boeing about $1 billion each month that it lasts — a major blow to a company that has already had a rough year. Also on Wednesday, Boeing reported a quarterly loss of more than $6 billion, its largest such loss since 2020, driven by drops in revenue across the board. Boeing stated that it would likely continue to burn cash through 2025. The company’s new CEO, Kelly Ortberg, is under pressure to turn the company’s fortunes around, which would require him to negotiate an end to the strike as quickly as possible.


Look Ahead

Wednesday, October 30

  • GDP Q3 advance estimate 

Thursday, October 31

  • September PCE report

Friday, November 1

  • October jobs report