A disputed election could cost the U.S. its ‘AAA’ credit rating
President Trump’s refusal to commit to accepting the results of next month’s presidential election isn’t just threatening America’s democratic norms—it could also damage the country’s pristine credit rating.
According to credit rating agency Fitch Ratings, it appears likely that the winner of the Nov. 3 election will “take longer to determine than usual,” as the coronavirus pandemic has resulted in a “sharp rise in mail-in voting this year” and will likely cause “logistical challenges at physical polling places.”
That means Americans could very well be deprived of the ritual of finding out the identity of their next President on election night or of waking up the next day to the results. Depending on how the contest plays out on a state-by-state basis, uncertainty around the winner of the election could conceivably last for “weeks” after the election, Fitch analysts said in a note on Monday.
Yet coupled with Trump’s continued refusal to commit to accepting the results and ensuring an orderly transfer of power should he be defeated, a delayed and perhaps contested election could have a corrosive effect on the order that “underpins the United States’ ‘AAA’ sovereign rating,” according to Fitch.
“Strong governance is essential to ‘AAA’ sovereigns, which are characterized by well-understood rules and processes for the transfer of power that are broadly accepted and executed,” Fitch said—adding that it would “view a departure from this principle negatively” in evaluating the U.S.’s rating.
The ratings agency warned that such a departure could indeed transpire, given the extent to which the pandemic could put America’s “electoral infrastructure under strain.” There will be fewer polling places than in previous elections and more mail-in voting in states historically unaccustomed to having such a large proportion of citizens cast their ballots by mail.
Not only could that delay the results—as many states won’t begin counting mailed ballots until Nov. 3—but it also increases the likelihood that results “will be disputed by one or both of the candidates or party organizations” given the various challenges that may arise around the voting process.
As Fitch notes, the U.S. Constitution sets out specific deadlines for resolving electoral disputes. For example, electors to the Electoral College from each state must be selected on Dec. 8, the Electoral College vote itself is scheduled for Dec. 14, and Congress typically certifies the election results on Jan. 6—all with an eye to inaugurating the winner as president on Jan. 20.
But the ratings agency said it would monitor the situation “for any departure” from that established framework,” with the U.S.’s credit rating very much tied to “an orderly retention or transition of power on Inauguration Day in January 2021.”
Fitch already downgraded the U.S.’s rating outlook to “negative” in July 2020, citing an “ongoing deterioration in the U.S. public finances” and the lack of a “credible fiscal consolidation plan.” The downgrade came in the wake of massive stimulus measures that—while designed to combat the economic fallout from the pandemic—have rapidly expanded the government’s deficit.
On Monday, the agency noted that the potential for a disputed election result reflects “deepening political polarization,” which could, in turn, hinder the next administration’s mandate and “how it approaches public policy decision-making on key issues.” That would result in “policy gridlock” among lawmakers and impede “the bipartisan cooperation necessary to efficiently address economic and fiscal challenges,” Fitch said.