Given a President who inspires and provokes controversy on an international scale, the recent national midterm elections were widely anticipated. While it was broadly hoped that the Democrats would sweep both houses, they managed only to take the majority of seats in Congress. This led to speculation as to the balance of power, and what we might expect from the next two years’ of the Trump Presidency. And, most important, the impact of the midterm election results on the current state of the United States economy. Rather than focus on the impact of a Democratic Congress, the slant of this article will migrate to what usually happens to important issues when the House and Senate are controlled by two different political parties.
Up to the midterm, White House reports were grandiose in scale and have claimed responsibility for posting some of the highest employment rates in recent decades, along with the lowest unemployment rates for as long as this author can remember. And if we are doing so well, why has the stock market, granted it is ever volatile, just taken one of the wildest plunges in recent months? What does it all mean? And, most important, what does it mean to most Americans?
For those of us who cannot understand why the value of things are still measured in items such as pork bellies, stocks and bonds are never going to make sense. What real people need to understand is, “Will I have a job tomorrow?” “What is my spending power?” “Will my house sell for top dollar next year?” “My car has 180,000 miles on it. Can I afford to buy a new one or should I look at used cars instead?” And how does the Democratic party holding some semblance of power going to affect these outcomes one way or another?
It is important to assess what the Congress can and cannot do. A gridlocked House and Senate may not impact the economy as they do not control it. The House and Senate do not control economic growth, influence the willingness of consumers and commerce to spend, nor do either the House or Senate make monetary policy decisions. That is the job of the Federal Reserve. The Reserve as well as the U.S.’ chief trading partners, namely Europe and China, and our nation’s ongoing relationship with same influence the U.S.’s economic growth.
That means that increases and decreases in interest rates will eclipse corporate tax cuts to become the leading economic drivers. As the 2020 elections loom, congressmen and women who want to be reelected will shy away from any trickle down legislation that could possibly disrupt the economic cycle. In short, any major actions that affect the U.S. economy will be White House-driven, probably in the form of imposed trade tariffs, and not from the House.
Again, mindful of the the next election, it is unlikely that much legislation that could impact the economy will be passed, other than bills to improve our infrastructure (buildings and highways). This means the tax cuts or increases we enjoyed or bemoaned over the last two years are over. It also means that the current healthcare system will remain in place, and no more sweeping reforms or entitlements allocated to any economic sector.
Watchdog groups warn that an absence of legislation to curb the ever-expanding deficit will come home to roost, likely within the next 10 years. Taxpayers, brace ourselves! Perhaps the worst outcome from a gridlocked House and Senate is the negative impact the daily salvos have upon public confidence. It just makes voter turnout at the polls more difficult as the American public loses faith in their elected officials.
The Pros: Frivolous or ill-conceived legislation, such as allocating up to $25 billion to construct a wall the entire length of the U.S.and Mexican border will be reexamined, and likely highly modified. Also, in light of the recent disclosure that emails of top GOP officials were themselves hacked during the 2018 election, Hillary Clinton’s 2017 email debacle will finally be put to rest.
The Cons: Regardless of their political party, having the upper hand seems to go to the heads of those in power. In the name of Justice, time will be spent to uncover campaign wrongdoings, shots will be fired, most likely toward impeachment proceedings for both the sitting President and recent Supreme Court appointed judge, Brett Kavanaugh. With the term of office more than half over, these actions are pretty much a moot point, since the President, despite his veto, is a lame duck. Therefore efforts aimed at disgracing the 45th President would be a waste of time as well as a waste of taxpayer dollars.
Sadly, nothing can be done to prevent those early morning Presidential Tweets, read rants, that for many, have become ‘must read’ entertainment.
To summarize: The President retains veto power and the senate is notoriously known, regardless of which party controls it, as ‘the place bills go to die”. Therefore the upshot of the Democratic congress, especially for those seeking reelection, is not to forget why they are there: to serve the people. And if they (we) don’t, well, there is another national election in 2020. Stay tuned!
