Progress? Gridlock? How midterm vote could affect US economy
President Donald Trump has warned that if Democrats regain political power in the midterm elections, the U.S. economy would essentially implode. Democrats, he insists, would push tax hikes and environmental restrictions that stifle growth. Undocumented immigrants would steal jobs and unleash a crime wave that would halt commerce. Health insurance would devolve into a socialist program offering shoddy care at unsustainable cost. “At stake in this election,” Trump declared at a rally in Houston, “is whether we continue the extraordinary prosperity that we’ve all achieved or whether we let the radical Democrat mob take a giant wrecking ball and destroy our country and our economy.” Almost no private economist agrees with Trump’s portrait of a financial apocalypse. If Democrats win control of the House in next week’s congressional elections, their legislative priorities wouldn’t likely much alter a $20 trillion economy. For one thing, Trump would remain able to block Democratic initiatives — just as they could stop his plans for more tax cuts and a 5 percent cut to Cabinet department budgets. What instead would likely result is continued gridlock — perhaps even more entrenched than what exists now in Washington. Arrayed against a stout Republican majority in the Senate, a Democratic House majority couldn’t do much to reorder the economy, which typically hinges more on the willingness of consumers and businesses to spend and on the state of the global economy than on government policy priorities. “It’s probably not that much of a change,” Beth Ann Bovino, chief U.S. economist at S&P Global, said of the likely outcome. “While you might see further gridlock if the Democrats take the House, that doesn’t mean it would tip the boat and slow growth.” Many polls and analyses suggest — though hardly assure — that the Democrats could regain a majority in the House if their voters turn out in sufficient numbers in key races. If so, Trump would have to contend with a divided government instead of one with Republicans in complete control. Yet depending on voter turnout, it’s also possible that the Republicans could maintain their hold on both the House and the Senate. Analysts at Goldman Sachs and Morgan Stanley foresee a divided government as most probable. So do their peers at Oxford Economics and Keefe Bruyette & Woods. “The most likely political consequences would be an increase in investigations and uncertainty surrounding fiscal deadlines,” Goldman Sachs concluded in a client note. Oxford Economics’ senior economist, Nancy Vanden Houten, has suggested that the Republicans’ legislative agenda would stall if they lost the House. “A Democrat-controlled House would, in our view, be a line of defense against further tax cuts, reduced entitlement spending and efforts to repeal the Affordable Care Act,” she said The economy has enjoyed an acceleration in growth this year — to a gain estimated to be 3 percent after deficit-funded tax cuts. Unemployment is at a 49-year low of 3.7 percent, and employers continue to post a record number of jobs openings. The economic expansion is already the second-longest on record. But annual growth is widely expected to dip back to its long-term average of near 2 percent by 2020. It’s even possible that the economy could slip into a recession within a few years as growth inevitably stalls — for reasons unrelated to who controls the White House or Congress. A global slowdown could, for example, spill over into the United States. Or higher interest rates, spurred by the Federal Reserve, might depress economic activity. Trump would still have plenty of discretion on some key economic issues. His trade war with China and his drive to reduce regulations are two of them. The president has managed to pursue those priorities without Congress’ involvement, though his updated trade agreement with Canada and Mexico would need congressional approval. “Trade stuff is being done administratively; regulatory stuff is being done administratively,” said Douglas Holtz-Eakin, president of the right-of-center American Action Forum. “There’s just not that much on the table legislatively.” In an appearance this month at Harvard University, the House Democratic leader, Nancy Pelosi, outlined her agenda should her party regain the chamber’s majority and she the speakership. Within the first 100 days, Pelosi said, she would seek to reduce the influence of large campaign donors and groups that aren’t legally required to disclose their funding sources. She would also push for infrastructure funding — to rebuild roadways, rail stations or airports, for example — and seek protections for undocumented immigrants who came to the United States as children, among other priorities. Any such initiatives, though, could be blocked by a Republican Senate — or by Trump. Budget and deficit issues will also surface after the election. Congress will likely need to raise the government’s debt limit and approve spending packages before October 2019. And mandatory government spending caps are set to kick in for the 2020 fiscal year after having been suspended for two years. Those spending limits could dampen economic growth. Lewis Alexander, chief U.S. economist at Nomura, said Republicans might renew their focus on reducing the national debt, after having approved tax cuts last year that swelled annual budget deficits by $1.5 trillion over the next decade. Alexander noted that shrinking the deficit has historically become a higher priority when competing parties have controlled the White House and Congress. If the government seeks to pare the deficit, it could possibly slow the economy, which in the past year has been fueled in part by government spending. It’s likely Trump would blame Democrats if growth falters, just as he might absorb criticism for his economic stewardship as Democratic presidential campaigns accelerate into a higher gear. The hostile rhetoric makes it unlikely that Democrats and Republicans would join to pass any meaningful legislation for the economy, such as for infrastructure rebuilding. “The way parties are talking about it right now, I don’t think anybody is dying to cooperate,” said Michael Madowitz, chief economist at the Center for American Progress, a liberal think tank. Still, if Democrats
Primary takeaways: Establishment loses, diversity grows
President Donald Trump got his man in battleground Florida, but he watched a prominent immigration ally fall in Arizona in what was another eventful night in the 2018 midterm season. Arizona and Florida held primaries Tuesday, both of which tested Trump’s influence. There were also new signs of diversity on the Democratic side. Takeaways from one of the final rounds of voting ahead of midterm elections: FLORIDA ESTABLISHMENT FAIL The political establishment in both parties had a bad night in Florida’s high-profile race for governor. On the Republican side, Trump got his man, Republican congressman Ron DeSantis, who beat out the establishment favorite, state Agriculture Commissioner Adam Putnam. Despite Trump’s support, DeSantis was not the strongest general election candidate in the race, operatives in both parties suggest. The three-term Republican congressman who makes frequent Fox News appearances is known as an immigration hard-liner in a state where Hispanic voters hold outsized sway. And lest there be any question about his allegiance to Trump’s divisive immigration policies, DeSantis encourages his toddler to “build the wall” with blocks in one campaign ad. That’s a message that may play well among a general electorate in West Virginia, where Trump won by more than 40 percentage points in 2016, but Trump carried Florida by only a single percentage point. On the Democratic side, liberal champion Andrew Gillum, the mayor of Tallahassee, bested a crowded field that included establishment favorite Gwen Graham, the former congresswoman and daughter of Florida political icon Bob Graham. Graham, who was considered a centrist, was viewed as a more attractive general election candidate in the purple state. Gillum is more liberal, having earned the backing of Vermont Sen. Bernie Sanders and billionaire Tom Steyer. To win the governor’s office for the first time since 1999, Democrats will have to come together quickly. The results on both sides underscore the outsized influence of each party’s most passionate voters in lower-turnout off-year elections. McSALLY’S CHALLENGE Martha McSally won the GOP nomination for Arizona Senate, but the results show how divided the party is and the challenge that lies ahead. A significant number of Republicans backed former Maricopa County Sheriff Joe Arpaio and fellow immigration hard-liner Kelli Ward. Now McSally has to bring together the party — including some of Trump’s most devoted supporters — going into the fall against Democrat Krysten Sinema, who is widely considered well-positioned. The race gives Democrats one of their best pickup opportunities in the nation. Meanwhile, it would be wrong to assume that McSally’s win is a repudiation of the tough rhetoric of her challengers, who essentially split the conservative vote. The 86-year-old man known nationwide as Sheriff Joe, who personifies the tough immigration policies that define the modern-day Republican Party, may never serve in public office again after his loss Tuesday. (For those who forget, Arpaio was convicted of criminal contempt last year for ignoring a judge’s order to stop detaining immigrants in the country illegally. Trump later pardoned him.) MISSING: BLUE WAVE IN FLORIDA If a Democratic wave is coming to Florida, it may have to be supplied by independents. With just a handful of precincts left to count, Republicans cast more than 1.6 million Florida ballots, while registered Democrats were on track to fall just below 1.5 million. Beyond the raw vote totals, the GOP count also was a larger share of its last presidential election turnout. That measure is a useful way to assess which party is more excited about a midterm election, and it’s particularly useful in Florida because the state limits primaries only to voters registered by party. The GOP total came to almost 35 percent of what Trump won in Florida in 2016. The Democrats’ total was about 33 percent of Hillary Clinton‘s 2016 turnout. Of course, it doesn’t mean Republicans are guaranteed big wins in Florida this fall. But it does show the GOP base in Florida is anything but depressed, turning out in solid numbers to nominate DeSantis after he was endorsed by Trump. The scenario cuts against the grain of a midterm election cycle that’s been defined by energy on the left in other states, and it puts an added burden on Florida Democratic candidates to attract voters who didn’t participate in Tuesday’s primaries. FLORIDA MONEY PIT There was less drama on the Senate side in battleground Florida, but the stage is now set for what will likely be the nation’s most expensive midterm contest. Florida Gov. Rick Scott easily captured the Republican nomination in the GOP’s bid to unseat Democratic incumbent Sen. Bill Nelson. At 75 and seeking his fourth term, Nelson is considered particularly vulnerable as voters continue to show disdain for candidates with deep ties to the establishment. Scott, an independently wealthy businessman, has already spent more than $27 million on the race compared to Nelson’s $6 million. The conservative Koch network has identified the Senate seat as a top target, and outside groups on both sides are expected to dump millions more in the contest. The extraordinary price tag of running a statewide campaign in Florida, which features 10 media markets, will test each side’s resolve and resources — particularly on the Democratic side. Republicans know Scott can and will dump millions more of his own personal wealth into his campaign. Democrats aren’t so lucky. National Democrats are already weighing how best to invest their limited dollars considering their challenges in other states where their incumbents are on the defensive. Yet if Democrats lose Nelson’s seat in Florida, their already narrow path to the Senate majority becomes virtually nonexistent. DIVERSITY WAVE GROWS In his upset victory, Gillum joins two other African-American gubernatorial nominees on the November ballot, Georgia Democrat Stacey Abrams and Maryland Democrat Ben Jealous, in what may be the party’s most diverse midterm class in history. No state is currently represented by a black governor. The nominations, of course, do not mean the candidates will continue to re-write history. Republicans have cast Gillum, like the other black nominees, as part
