White House insider: ‘America is not red or blue anymore, it’s purple’

The US election proved a closer-run event than many pundits predicted, but this overlooked the fact that traditional Democratic and Republican heartlands are quietly and effectively merging.

That is according to Dr Pippa Malmgren, political and economic expert and former adviser to President George W. Bush.

Speaking at Citywire Berlin Virtual, Malmgren said the expected ‘blue wave’ had failed to materialise for the simple reason that the US populace was not ready to make a substantial shift to the left, which was partly explained by cities and states experiencing a blurring of historical political allegiances.

‘I come away from this election thinking America is not red and it is not blue, it is literally turning purple. Kind of like the colour of a really bad bruise after a punch up. I mean that practically as well, because the election was so close because we were moving from the coastline into the mainland. So, why was Nevada so tight in favour of Biden?

‘It was always a Republican state but everyone is moving out of California due to high taxation, big government and the same in New York. People are moving to Nashville and Texas, which means a place like Texas, where Austin is with the new centre of the Silicon Valley, becomes very liberal and a borderline state.

‘America is literally turning purple and the middle is becoming less conservative. That changes the flavour.’

Malmgren last spoke at Citywire Berlin 2016, in the immediate aftermath of Donald Trump’s rise to power. Speaking at the time, she said it was the dawn of the ‘reality TV’ era for one of the most powerful roles in politics.

Speaking at this year’s event, she reflected: ‘What I said four years ago was it is reality TV. Now, what would you expect from reality TV except for an election to have a nail-biting finish?’

While the last result may have been unprecedented to some, Malmgren said this year’s vote would also have a lasting legacy, driven by the ways in which people voted. For example, the rise of postal and digital voting posed new challenges for the polls.

‘The last time we had a contested election was when I worked for President Bush and we had the famous ‘hanging chads’. This time we are digital. There are physical votes and I am sure there will be hanging chads but the bigger issue this time is the digitisation of the voting process and what does and doesn’t count, and these will be unprecedented conversations.’

The meaning of a Biden victory

Malmgren said the immediate aftermath of Biden’s victory – which saw tech stocks jump strongly on 4 November – was a sign of things to come. She said this was borne out of the fact that Biden had not won by a landslide and there was also no change in leadership within Congress.

‘Biden is not going to be able to move the country very far to the left,’ she said. ‘If the country really wanted to move to the left, we would have seen it. They had the opportunity. We would have seen this blue wave. It didn’t happen.

‘The message from the public is: we are not actually ready to go over into, what they would consider, a more socialist direction. This is important for markets and it will actually encourage markets to go higher sooner.’

She said the US will now be the fastest growing economy in the developed world after the election. ‘The fact we have a split Congress is actually something the market loves. They love it when Washington is all hung up and cannot make a decision. Stasis is actually good for markets, because it means no bad news coming down the line.

Speaking before Pfizer delivered its breakthrough Covid-19 announcement, Malmgrem explained: ‘I may be the only optimistic economist on the planet right now. I think the stock market response to the election confirms that the markets are looking for an excuse to go up. Markets are starting from such a low base because there has been such destruction caused by Covid that I think we are going to see a whole bunch of things that are positive.’

Pointing to encouraging developments, Malmgren said limitless central bank support would now underpin more positivity in the market, while she expects a wave of entrepreneurial spirit to develop as a result of record levels of cash in the market.

‘When you have record sums of capital looking for a home and a huge wave of entrepreneurial spirit, and those two things find each other, then that can be very powerful,’ she said.