WASHINGTON – A US election fought under moderately favourable economic conditions, with a Republican electorate divided and openly unhappy with its standard-bearer, should normally seal the presidency for the Democrat, in this case former secretary of state Hillary Clinton.  Yet this is anything but a ‘normal’ political cycle in the United States.

Control Risks believes Clinton will be the next president of the United States, the first female ever to serve in that position. But a number of eye-widening firsts in this presidential contest obligates us to take very seriously the possibility that her Republican rival, Donald Trump, can overcome his disadvantages and wind up in the White House.

Beyond a core of about 20% of the electorate on each side that hold favourable views of their candidate of choice, it appears that for the most of the electorate, the more they see of either candidate, the less inclined they are to vote for him or her. Turnout is likely to be very low.

President Hillary Clinton

Still, given the complex state-by-state calculus that underpins US presidential elections, we believe that Clinton will win the 8 November vote. Aided by a slightly greater aversion to Trump than to herself, she will also lead the Democrats to narrowly win back the Senate with a small majority. The House of Representatives will remain Republican (GOP), but with a slightly narrowed majority.

On the world stage, Clinton will step up airstrikes on Islamic State, press China to abide by international rulings in the South China Sea and continue contentious Obama administration openings towards Iran and Cuba. She will remain a strong supporter of economic sanctions on Russia, dealing a blow to efforts to cooperate in Syria. However, while Clinton is not the economic nationalist that her rival Trump is, her presidency marks the end of an era in which Democratic presidents championed free trade accords. With Republicans, too, now unwilling to make the case for free trade publicly, January 2017 in effect ends the post-war era of US leadership on global trade liberalization.

In Washington, even with her Democrats now holding the Senate by a slim margin, the Republican-led House and the GOP’s large minority faction in the Senate will remain a disruptive force throughout Clinton’s first term. For Republicans, Trump’s defeat does nothing to solve the internal contradictions that have raged inside the party since the near collapse of the US economy in 2008. The GOP will remain split between a populist Trump faction, a values-focused Christian evangelist wing aligned with former Republican presidential candidate Senator Ted Cruz, and the free trade, more moderate remnants of the party’s establishment embodied by the House Speaker, Paul Ryan. In such a situation, Clinton will be able to exploit GOP divisions and pass some legislation – possibly on immigration reform, with many in the GOP see as an electoral necessity, and on corporate tax reform, where there is cross party support. But the parliamentary gridlock that characterised the last six years of President Barack Obama’s tenure will otherwise persist, leading Clinton to rely on executive action to expand federal regulations on the energy and financial services sectors and in the US labour market.

A Clinton presidency in nine lines

  • Before Clinton is inaugurated, Republicans in the outgoing Congress help Obama ratify the Trans-Pacific Partnership (TPP) free trade accord. The move relieves Clinton of the need to backtrack on her campaign scepticism of the deal due to pressure from the progressive left of her party. Meanwhile, talks on a separate trans-Atlantic version, the Transatlantic Trade and Investment Partnership (TTIP), remain stalled. Clinton does not champion free trade accords of any kind, given the ferocity of her party’s opposition and increasing scepticism among populist, Trump supporters.
  • Early in her term, Clinton appoints her own nominee to the pivotal vacancy in the Supreme Court, providing constitutional backing for executive rulemaking and other initiatives. The court has been split (4-4) on many ideologically charged issues since the death of associate justice Antonin Scalia in February 2016. A Clinton appointment tips the balance in key issues, including the extent of executive (presidential) rulemaking authority over clean water and air statutes, the executive’s ability to impose new capital and other requirements on financial institutions, and its ability to conclude ‘non-treaty’ international agreements (like the 2015 Iran nuclear deal) that do not require Senate approval.
  • Clinton, blocked in Congress, uses executive powers to expand the Environmental Protection Agency (EPA)’s regulation of carbon emissions and water quality. Making good on campaign promises, Clinton also moves to raise tax incentives for alternative energy and seeks to extend federal regulation to fracking wellheads that are now overseen by state agencies. She also moves to impose new federal regulations on airline greenhouse gas emissions.
  • Clinton reverses some Obama policies and bans all offshore Alaska oil drilling. Clinton has repeatedly criticised Obama’s decision to open certain US reserves in northern Alaska – in the Chukchi and Beaufort seas – to exploration, and she halts work on these efforts. She affirms Obama’s decision to reverse his lifting of a decades-old moratorium on oil drilling along the south-eastern Atlantic seaboard in March 2016 by extending his 2015 two-year ban on drilling in other Arctic areas.
  • Clinton presses new rules on the financial services sector, proposing a follow-on to the 2010 Dodd-Frank financial reforms aimed at preventing further consolidation in the banking industry, imposing a ‘risk fee’ on large financial institutions, imposing new capital and reporting requirements on broker-dealers and examining the break-up of systemically significant banking institutions after new, vigorous stress testing.
  • Clinton’s proposals to vastly expand infrastructure and education spending spark a new round of fiscal brinksmanship with the GOP Congress. Renewed threats from austerity-minded Republicans during negotiation of the FY18 budget lead to periodic bouts of market jitters during Clinton’s first year in office as she tests her ability to pass legislation to create a new student loan benefit, appropriate new funds for infrastructure and a new law creating a federal ‘equal pay’ standard in the private sector economy (one already exists for public employees).
  • Clinton steps up airstrikes and counterinsurgency raids but refuses to reintroduce major combat units to Iraq or Syria. Republican opposition to Clinton’s foreign policies – on Iran, Islamic State (IS), China and Russia, among others – remains fervent but ineffective. Democrats remain sceptical about the wisdom of re-introducing troops into Iraq, but the president has virtually unfettered constitutional authority to conduct foreign policy – including the deployment of troops in emergency situations. The campaign raises the risk of further ‘self-radicalised’ lone-wolf attacks by US born or naturalised supporters of IS.
  • Clinton presses forward with Obama’s initiative with Cuba, but the Republicans’ hold on the lower house makes a full removal of the economic embargo impossible. The Republicans will face increasing pressure from businesses and Cuban-American groups to consider lifting the Helms-Burton Act and other tenets of the embargo.
  • The long term downward trend in crime rates continues, though active shooter, domestic and terror threats remain a problem. Self-radicalised US citizens continue to mount multiple fatality attacks on US territory, adding to mass casualty events perpetrated by non-ideological lone-wolf attackers and political violence related to racial tensions. The Clinton administration launches an initiative aimed at winning the support of major technology companies, many of them supporters of her campaign, to track and uncover radicalisation efforts by IS before they come to fruition.