Here is the sign in all of the US political noise

I don’t know who is going to win the US election but there’s a great chance we end up with some kind of split of power in the three branches of US government. Even if we don’t, the margins will be narrow enough (and parties fractured enough) to keep too much from really changing.

So what matters?

I think it’s the things that the vast majority of politicians on both sides care about. The main one that I can identify right now is deficits:

“No one seems to care,” Retiring Senator Joe Manchin said today. “It’s a shame, $34.6 trillion in debt. No one cares about it.”

Goldman Sachs was out with this yesterday:

Goldman: “President Biden and former President Trump propose substantially different fiscal agendas, but they both face the same constraint: there is not nearly as much scope for fiscal expansion as either had at the start of their time in office.”

Now I can’t be sure if they’re talking about fiscal space here or political will but I disagree. Yes, US deficits are high and debt has ballooned but we’re far from the limit. Japan has proven that deficits and debt can run far beyond what anyone thought was impossible and the US has a far-more privileged currency position.

The bottom line is that there are two options here: Cut spending or raise taxes.

Neither are coming, not in a meaningful way. And if there is a change on one side of that equation, it will be given back on the other. Trump was promising tax cuts for everyone on the weekend.

“Instead of a Biden tax hike, I’ll give you a Trump middle class, upper class, lower class, business class big tax cut,” Trump said at a rally Saturday in Wildwood on the New Jersey shore.

While Republicans may cut spending, they’re also going to lower receipts. It would be the same thing on the other side (though I think there’s very little chance of Democrats holding onto the Senate anyway).

A split Congress might be the worst of both worlds as tax cuts would sail through while spending curbs will be blocked. It all adds up to a powerful combination to

There is talk about a ‘Liz Truss moment’ at some point but I think we’re still a long ways away from that in the US. It all means that US inflation will stay high and the dollar strong so long as the Fed maintains credibility.