Washington Matters

Ananta Insights

Washington Matters

Welcome to the first edition of Ananta’s insights on the United States of America. 

In this issue, we will decipher the American electoral college and election process, compare foreign policy outlooks of Harris and Trump, explore the future of the IRA in a Trump Presidency, assess if the US chip manufacturing boom is here to stay and understand the meaning of the Supreme Court overturning Chevron Deference. 

1. The Race to 270: Unpacking the Presidential Election Process. 

Electoral College after the 2020 election. Source: @TheChronology 

The Electoral College 

The U.S. Electoral College is a unique system. Instead of voting directly for a presidential candidate, U.S. voters elect a group of representatives called electors. There are 538 electors in total. To win the presidency, a candidate must secure at least 270 electoral votes. 

Each state is allocated electors equal to its total number of Senators and Representatives in Congress. For example, California has 2 Senators and 53 Representatives, so it has 55 electors/electoral votes. Wyoming, with 2 Senators and 1 Representative, has 3 electors and so on. The District of Columbia is allocated 3 electors and treated like a State for purposes of the Electoral College. 

The winning candidate’s State political party selects the electors. Typically they are state elected officials or party leaders. They could also be individuals affiliated to the Presidential candidate.   

Electors are expected to vote according to the popular vote outcome in their state. Some states legally bind their electors to that end while electors of other states are legally permitted to vote for whomever they want. Though rare, sometimes electors do flip at the last moment (see “seven faithless electors” in 2016). 

Most states use a “winner-takes-all” system, where the candidate receiving the most popular votes gets all the state’s electoral votes. In Maine and Nebraska electoral votes can be split based on the proportion of votes each candidate receives. 

The candidate who wins the nationwide popular vote has a good chance of winning the electoral college, but it is not guaranteed. In 2016, President Donald Trump won the electoral college and thus the election despite his opponent Hillary Clinton winning approximately 3 million more popular votes. Something similar occurred in 2000’s Gore V Bush. Before 2000, this mismatch in the popular and electoral votes had not occurred since 1888. 

The electoral college was established as a compromise by the Founding Fathers of America between those who wanted the President elected directly by the people and those who favored election by Congress. Over the past 200 years more than 700 proposals have been introduced in Congress to reform or eliminate the Electoral College but, for now, it persists. 

Swing States 

Most states have a historical and predictable pattern of voting red (Republican) or blue (Democratic). Some states do not consistently vote for one party and are called “Swing / Purple / Battleground States.” These states are the key to winning a Presidential election and candidates focus heavily on them. 

In 2016, Trump won the battleground states of Pennsylvania, Michigan, Wisconsin, Minnesota, Iowa, and Florida. Ultimately amassing 304 electoral votes to Clinton’s 227. In 2020, Biden flipped Pennsylvania, Wisconsin, Michigan, Georgia, Arizona, and Nebraska’s 1st Congressional District winning with 306 electoral votes to Trump’s 232. 

In the 2024 battle of Trump-Vance vs Harris-Walz, the swing states are Arizona, Georgia, Michigan, Nevada, North Carolina, Pennsylvania and Wisconsin:     

2024 Swing States. Source: https://www.bbc.com/pidgin/articles/ce38xep54j2o 

These seven states combine for 93 electoral votes with Pennsylvania carrying the biggest individual bulk of 19 votes. On-ground efforts will increasingly shift to these states as election day looms closer. 

On the Ballot 

The Presidential race is at the top of the ballot in November but there are more races being fought down the ballot. 

The US Senate, upper chamber of Congress, has 100 members, two from each state serving a six-year tenure. Every even year, a third of the Senate seats i.e. 33/34 out of 100 are up for election. 

The US House of Representatives, the lower chamber of Congress, has 435 members serving a two-year tenure. 

On November 5^th, Americans will be voting for a President, Vice President, 33 Senators, and 435 House Representatives. The election, thus, is for overall control in Washington not just the White House. Single-party control in Washington is common at the beginning of a presidency but tends not to last long. 

Down the ballot are state and local races for state legislators, state and city judges, attorney generals, mayors, city council members, local school board members, local sheriffs, district attorneys etc.

Beyond candidates, voters also find proposals for new laws or amendments to the State constitution down the ballot. These are called Ballot Measures, and they allow voters to make decisions on specific issues directly. Over the years, some successful down ballot measures have included legalization of marijuana in certain states, minimum wage increases etc. In 2024, abortion rights are expected to appear on state ballots.

The Election and Certification Process 

Election Day is the first Tuesday after the first Monday of November. In 2024, that lands on November 5 but the race begins as early as September 16 with early voting opening in Pennsylvania. Alabama, Mississippi, and New Hampshire are the only states that offer no early in-person voting, aside from absentee ballots. 

Popular votes are typically counted within a day or a few days of election day. In some states, if the vote difference is under a specific percentage point, an automatic recount is triggered. Depending on the state, candidates can also request recounts if they suspect close margins or irregularities. If Candidates are dissatisfied with the recount, the last recourse is a legal challenge. 

The electors meet in their respective state capitals in early December to cast their votes for President and Vice President and certify the state’s election results. The results are then sent to Congress. All recounts and legal filings in each state must be concluded before the result is sent to Congress.

In early January, Congress meets in a joint session to count the electoral votes and formally declare the winner of the presidential election. At noon on January 20, the President is inaugurated.

2. Harris-Walz vs Trump-Vance: Foreign Policy Comparison  

For this first time in 20 years, the US Presidential election has a slate of candidates who were not in Congress to vote for the invasions of Afghanistan or Iraq. A roster without the political baggage of the war on terror. Could this usher in a new era of American foreign policy? One that is ready to confront challenges of the future in different economies and theatres. 

Let us find out by comparing the candidates’ foreign policy positions: 

3. What happens to the IRA if Trump wins? 

The Inflation Reduction Act is a sweeping climate legislation passed under the Biden Administration in 2022. It provides US$369 billion in investment and tax incentives for clean technologies like wind, solar, storage, hydrogen, nuclear, carbon capture, and biofuels. 

As an incentives-based law, it moves away from the reliance on traditional regulation and enforcement. Its passage signalled a shift in American outlook towards climate action, a marked difference from the European carbon pricing/trading model to an industrial policy model. For the rest of the world, it signalled that America was focusing inwards. Many countries labelled the IRA as protectionist, focused only on bolstering US domestic energy transition by disproportionately favouring American industries and pulling investment away from other economies. 

Domestically, the incentives have spurred huge investment in the US towards decarbonizing transportation, industrial manufacturing, and the power sector. EV manufacturing has captured the single largest share of IRA-related investments — 142 projects and $81.2 billion in investments but the pace of these investments has been slowing significantly in 2024 compared with 2023.

Is there weight to the repeal fears?

In 2023, Donald Trump  announced his intention to enact Presidential authority for limiting “wasteful” congressional spending. In early September 2024, he said the IRA sets America back and he would rescind unspent funds. 

A Politico analysis from April 2024 estimated that while the IRA has spurred substantial private sector investment, the government has only committed US$60 billion out of the earmarked US$145 billion in direct funding. This value may have grown since April but there is still a long way to go to ensure all the money is formally spent and safe from recall. 

Despite these worries, current market consensus is that a full repeal of the act is unlikely because many of the benefits are concentrated in non-Democratic states. As of May 2024, more than $123 billion in investment and at least 105,454 jobs have been announced in 40 states and Puerto Rico since the IRA was enacted. Of these, 85% investments and 70% jobs have gone to Republican districts because nearly all new EV manufacturing was placed in districts that already had auto operations. Republican members of Congress with investments in their districts have already thwarted attempts of their colleagues to nix IRA subsidies as part of debt ceiling negotiations. 

A total repeal might be unlikely but a partial repeal remains a concern. 

Potential impact of a partial repeal 

The IRA has had a significant multiplier effect on the American economy. A partial repeal of the act and its provisions would negatively impact investment in multiple sectors. 

Based on the repeal attempts made by Republicans so far, that the most at risk sectors come November will be: EV tax credits, EV funding programs, clean energy funding, tax plus bonus credit features, and emissions standards. 

Removal of incentives in the EV sector would have ripple effects internationally.

Per Nomura’s Anchor Report from September 2024, South Korea would take a hit as the US market accounts for approximately 50% of their auto exports which is the biggest piece of their trade surplus. Simultaneously, Trump might also levy tariffs and restrictions on the Chinese EV and auto parts industries. Limited US market penetration of Chinese companies could potentially offset the hit on the Korean auto sector.  

India is a key supplier of auto parts to the US. An increase in import tariffs could impact this equation which could be managed by having local assembly plants while continuing back-end processes in India. 

4. Is the Chip Manufacturing Boom Still Booming?

In 2022, the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act was signed into law in Washington to reshore chip manufacturing after decades of offshoring. 

The Act allocated $53 billion in incentives for domestic semiconductor manufacturing and R&D but in the last two years the Commerce department has received requests for more than $70 billion in subsidies. Meanwhile, major companies have announced $450 billion in private sector investments since the law passed to increase manufacturing capacity. Within the next decade, the U.S. is expected to increase its domestic chip manufacturing by 203%. 

Till August 2024, 90 new semiconductor ecosystem projects have been announced across the U.S., and fab plant expansions are planned in 16 states.

Source: MCKINSEY & CO., as on May 2024.

Texas and Arizona have emerged as the leaders of semiconductor ecosystem investments. Samsung has committed investments of US$ 23 billion including three factories in Texas while TSMC and Intel have committed to building more factories in Arizona. 

The newly burgeoning US chip industry, however, is already facing hiccups. The first hiccup is labour shortage. The talent needed to meet the surge in chip demand spans three labour pools — construction craft labourers, engineers, and technicians. A TSMC fab plant in Arizona has already stalled due to problems finding in skilled labour for construction and has pushed back its completion date to 2025. 

Once construction is finished, these companies will have to find the technicians and engineers to staff the factory. Intel, TSMC, and Samsung are partnering with universities and community colleges to train students but so far, both US and international companies are not advertising properly or offering competitive compensations to attract the talent. 

US manufacturing semiconductor capacity increases are expected to create up to 48,000 jobs at fab plants in the next three years but these do not account for the rise in attrition. Workforce development programs introduced by the Department of Commerce are likely to add around 12,000 engineers and 31,500 technicians by 2029. For now, the massive shortfall continues. 

The CHIPS Act may have charged up a stagnating sector in America but the incentives and funds do not seem to be enough to fulfil with market needs. Especially not to fortify associated supply chains, including raw materials, reliable power and clean water, needed to produce semiconductors. 

Despite recent advancement, without additional policy actions to address supply chain vulnerabilities, improve fabrication capacity, and increase strength in advanced logic, design, EDA, and equipment, the progress so far will stagnate once again in the face of growing global competition. 

It is worth noting after the Act was passed, the stocks of Chinese semiconductor companies rose alongside US companies. In both U.S. and Chinese markets. So while the act spurred domestic investment in a bid to create resilience and American geostrategic heft, it also brought business for chipmakers with cheaper/alternate technology options in countries like China. 

5. Supreme Court overturns Chevron Deference 

Earlier this summer, in the judgment of Loper Bright Enterprises v. Raimondo, the US Supreme Court overturned a precedent set in 1984 that created a doctrine called “Chevron Deference.”

Chevron Deference required that in the case of ambiguity in a statute, the courts would defer to the interpretation by the relevant government agency. By overturning this doctrine, the courts have taken the responsibility of statutory interpretation away from the executive and given it to the judiciary.  

It could alter how federal agencies apply their own interpretations of statutes that Congress has tasked those agencies to administer while causing a flood of litigation fighting all governmental interpretations. 

Health and Human Services (HHS), U.S. Food and Drug Administration, HHS Office of Civil Rights and Centres for Medicare & Medicaid Services will likely face the highest proportion of litigation in the post Chevron era. 

It will lead to slower, more cautious rulemaking, and impact the way resolutions are drafted in Congress.

6. Wait, what? 

“They’re eating the dogs. They’re eating the cats. They’re eating the pets of the people that live there,” exclaimed Donald Trump in the middle of his Presidential debate against Kamala Harris on September 10. 

It was said as he lay emphasis on his point regarding Haitian immigrant taking over the city of Springfield, Ohio. 

This comment follows a viral but unsubstantiated narrative that was, till Debate day, only known to the chronically online Trump supporters. It originally rose from a Facebook post that claimed “Springfield Ohio residents are warning their pets and wildlife like ducks and geese are being eaten by Haitians.” A post that followed rising anti-immigrant sentiments in the city’s generational residents after the influx of immigrants arrived and soon blended into Springfield’s culture and commerce. 

ABC News moderator David Muir fact-checked this claim live by conveying Springfield’s city manager’s denial but that has not debunked it in the mythical annals of social media. The myth continues to grow as it is repeated by Trump’s running mate JD Vance and Texas Senator Ted Cruz. 

These rumours have started to cause unrest between the Haitian and other communities of Springfield. Haitians are now fearful and talking about selling their belongings to leave before tensions rise. 

7. Check these out:

• The India US Forum Essay series by the Ananta Centre. Bringing insights from the 7^th edition of the India US Forum.
• New Partnership with India to Explore Semiconductor Supply Chain Opportunities
• DoD Publishes 2024 US Arctic Strategy
• Cabinet nod soon for India to join US-led IPEF trade pact
• 2024 US Climate Investment Statements 
• Protonas raises seed funding to expand hydrogen fuel cell operations in North America and Asia
• Citi to boost investment banking headcount in India betting on deals surge
• The US antitrust ruling against Google and its implications for India