Votes continue to be counted in key battleground states, and no clear winner has emerged. Yet the US election result as-is still holds some clues as to what the next four years of governance in the United States might look like:

Serious tax hikes unlikely, regardless of presidential winner

It looks as though a ‘blue wave’ of Democrat control of all three levels of government has failed to materialize. Even if Biden emerges as the winner of the presidential contest, he will still probably have to contend with a Republican-controlled Senate.

One wrinkle here is that we won’t know for sure until Senate runoff elections are conducted for Georgia in January; the Warnock-Loeffler race has already triggered a run-off, and the Ossoff-Perdue race is also currently pointing to one, albeit by the narrowest of margins.

Different composition outcomes in the Senate essentially boil down to differing degrees of difficulty for the Democratic Party implementing its policy platform, a platform that will hinge on the question of taxes.

Looking ahead to the next presidential term, bolstering government revenues was always going to be less about funding ambitious new spending programs (whether to repair infrastructure or invest in healthcare or green technology) and more about shoring up the long-term fiscal stability of the United States of America.

President Trump’s Tax Cuts and Jobs Act of 2017, which slashed corporate and individual taxes across the board, also tore an estimated $2.3 trillion hole in government finances over the next decade (assuming individual cuts are made permanent in 2025).

Then there’s the fiscal impact of COVID-19, which represents $4 trillion dollars in unplanned spending (and likely more to come next year). The 2020 budget deficit hit $3.13 trillion, tripling from the year previous, and enough to push the United States past the 100% debt-to-GDP mark for the first time since World War II.

Divided government will complicate efforts to right the fiscal ship over the short-term, especially when the economic pressures of COVID-19 are sure persist well into the new year. This could have profound implications, not just in terms of limiting the range of policy options for any new administration, but also in terms of unsettling a global trade system that operates on an assumed infallibility of the US dollar.