US Vice President and 2024 Democratic presidential candidate Kamala Harris and her running mate, Minnesota Governor Tim Walz, wave to the crowd at the campaign rally in Milwaukee, Wisconsin . Market movements have apparently been a good predictor of the incumbent party’s chance of winning the White House, and the fact that share prices have risen sharply this year means she has a 64 per cent chance of doing so.
Three basic points. One is that her policies are largely unformed, or deliberately vague. That makes sense because anything other than generalisations is going to upset one group of voters or another. Crucially, we have very little feeling for what might happen to the massive US Federal budget deficit, currently 6.3 per cent of GDP, and estimated by the Congressional Budget Office to reach 134 per cent of GDP by 2034. At the moment the US’s safe haven status enables it to borrow the money, but market moods can and do shift.In Washington the deficit is a side issue. Yes, of course it’s unsustainable, I was told.
On the face of it, this is not Harris country. But I did learn something else: the fact that the US might have its first female president was a really big deal among several moderate middle-class women. Italy is a clear case of this. At present, it is running both an overall fiscal deficit and a primary deficit, that is not counting debt service payments. But for much of the past 20 years it has been in primary surplus, and arguably that has been a key factor in its poor growth record.