Breakingviews - U.S. election dispute may demand months of hedging

A girl holds a U.S. flag next to a sculpture after a naturalization ceremony at The Metropolitan Museum of Art in New York July 22, 2014. REUTERS/Shannon Stapleton

SAN FRANCISCO (Reuters Breakingviews) - Investors worried about a dispute over this year’s U.S. presidential election had better plan for months of market maneuvers. The Bush v. Gore legal fight 20 years ago is a tame example. A confused, knife-edge late 19th century battle may be more relevant: The winner emerged only in March, just before the inauguration.

Democratic presidential candidate Joe Biden and incumbent rival Donald Trump are gearing up for a brawl. The former vice president is building his legal team. Trump said on Wednesday that he’ll see what happens when asked to guarantee a peaceful transfer of power if he loses.

Using the 2000 battle as a roadmap of how markets may react downplays the risks. A recount in Florida left the race between George W. Bush and Al Gore, the Democrat who won the popular ballot but was four electoral-college votes behind, in limbo for five weeks. The S&P 500 Index fell about 8% during that period. A U.S. Supreme Court decision favored Bush, and Gore conceded on Dec. 13.

The 1876 election dragged on much longer. Democrat Samuel Tilden won the popular vote against Republican Rutherford Hayes, but electoral votes for Tilden in four states were disputed. Florida and two others submitted two results that declared both men winners. Congress set up a commission in January 1877 to resolve the matter amid worries there could be another civil war. A compromise declared Hayes the winner on March 2, mere days before the inauguration deadline back then, and the following day he was sworn in behind closed doors to avoid the risk of an uprising.

Fast forward, and the jump in mail-in ballots because of Covid-19 increases the likelihood of something similar. Swing states like Michigan and Pennsylvania, which have Democratic governors and Republican legislatures, may not be done counting by a Dec. 8 deadline to certify electors for the college whose votes decide who becomes president.

That could prompt state submissions of both Trump and Biden as winners, which would move the action to Congress. If party control there is divided as it is now, that could mean further delays naming the next commander-in-chief. That’s aside from legal challenges that would also slow things down.

Technology supercharges the potential tension. Disinformation spread on Facebook and elsewhere could spur confusion and even violence. That makes the possibility of an election limbo even more fraught for investors.


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