WHAT A DEMOCRATIC (OR REPUBLICAN) CONGRESS MAY MEAN FOR YOU

In the 2016 presidential election, roughly 60% of eligible voters cast a ballot, which is common and shows that the majority of Americans think picking a president is worth the effort. But in midterm elections, typically only 40% of eligible voters bother to turn up at the polls.

The Trump Train

Clearly, many people disagree with President Trump’s policies, and even more people are put off by his Twitter comments and off-handed remarks from the stage. But he was still elected.

Almost half of the nation approves of his work, and he’s overseen a healthy economy. What’s more, President Trump has followed through on many campaign promises. Many of the president’s policies are outside the scope of economics, such as moving the U.S. embassy in Israel to Jerusalem and building a wall along the Mexican border.

But Trump is pushing many business-friendly policies that have immediate effects. He’s cut 22 regulations for every one imposed, so far, and has opened more federal land for energy exploration. He’s also directed the Federal Drug Administration to fast-track new drugs and generics while working on reducing drug costs.

And, of course, at the top of the business-friendly list is the budget-busting Tax Reform, which moved $1 trillion from national taxpayers to corporate balance sheets by increasing the national debt.

We can debate all day about whether or not these policies are right for the country but it won’t change the fact that investors have cheered such moves by pushing stock prices higher. The S&P 500 is up 33% in less than two years since Trump’s election, and the Nasdaq 100 is up a whopping 63%. Corporate earnings are up more than 20% in just the past year.

Largely due to tax reform, GDP growth shot above 4% this year and unemployment has fallen below 4%. Those are economic numbers that other countries would kill for.

He didn’t raise taxes on companies or high earners. Of course, it’s not all fun and games. In addition to cutting some regulations and relaxing others, President Trump also started a trade war with just about everybody.

He demanded that Canada and Mexico revisit NAFTA, and he’s put tariffs on goods from the European economic bloc. China has incurred his greatest trade wrath, by far. The president imposed tariffs on roughly $30 billion worth of goods from China, and just recently imposed tariffs on another $200 billion worth of goods. He noted that if the Chinese retaliate, he’ll slap tariffs on just about everything else we import from China, which is another $267 billion worth of goods.

The president claims to be defending America from unfair trade practices. With the Chinese, it’s absolutely true. We already had a venue for dealing with that, it’s called the World Trade Organization, but our president isn’t one for international bodies.

In addition, conservatives also controlled both chambers of Congress. That sweep gave President Trump the ability to push through some of his agenda, but the easy days are over.

The Party Might be Over

The midterm elections are here, and Republican congressmen are retiring in droves. What’s more, midterm elections don’t favor the political party that controls the White House, and that’s before we factor in Trump’s polarizing style.

In 36 of the 39 elections since the Civil War, the president’s party has lost ground, giving up an average of 26 seats in the midterm election following his ascent to office, which is a bit more than the 23 seats the Democrats need to establish a majority next month. The numbers in the Senate are quite different

If the Democrats won all 35 Senate seats that are up for election, that would only give them a 58 to 42 majority because Democrats occupy many of the seats in play. Such a landslide is highly unlikely since some of those Senate seats are in very conservative states. Republicans likely will retain control of the Senate.

If the Republicans Win the House

The president will keep up his rapid pace of nominating conservative judges for district and appeals courts no matter what, because these matters only go through the Senate. Maintaining a majority also in the House will allow him to push Congress to confirm his political appointments within his administration.

We can expect Trump to come out swinging on matters large and small, from Stormy Daniels to Kim Jong-Un. He’ll beat the table about more tariffs on China, demand greater concessions from the European Union, and pound his chest on his success in redrafting NAFTA.

If the Democrats Win the House

Just like the Republicans in 2010, the Democrats are giddy with excitement over the midterm elections. With history and current polling on their side, a victory in the House of Representatives looks all but assured.

People don’t want details. They want bold strokes. Now the Democrats have assumed a new slogan: “For the People,” which residents in the Southeast will recognize at as the tagline for personal injury attorney John Morgan.
The “For the People” platform is sparse, calling for lowering health care and prescription drug costs, increasing worker pay, and cleaning up corruption. But don’t let the lack of words fool you. The Democratic plan for winning the House is to let local politicians run races best suited to them, with minimal interference from the national Democratic leadership.

Like Republicans, the Democrats want to focus on infrastructure, but they have a different way to fund such a push. Trump has called for a yet-to-be-defined public-private partnership that would cost American taxpayers little. No one is sure of the details, but it seems unlikely.

The only way to get private dollars for public use facilities is to provide a path for revenue, such as toll roads; and even then, it’s tough. One of the greatest hurdles to infrastructure building is the length of time it takes to get permits and start actual construction. A 2014 study by the Government Accountability Office found that government permitting in general took 4.6 years.

For Democrats, the path to infrastructure is easier—simply raise gasoline taxes.

The current federal gasoline tax of 18.4 cents per gallon of gas and 24.4 cents per gallon of diesel were last raised in 1993 and aren’t indexed to inflation, which is up more than 65% since then.
In addition to raising taxes on fuel, the Democrats plan to provide greater access to healthcare, most notably by allowing some groups to buy into Medicare before they reach 65. One proposal calls for allowing anyone over 55 to join Medicare, which will appeal to many state governments.

A recent study found that retiree healthcare benefits for public employees are underfunded by $862 billion dollars! If those retirees were allowed to buy into Medicare for their years between 55 and 65, it would dramatically reduce the cost of providing the benefits even if the cities and states paid the monthly premiums.

The money for the difference has to come from somewhere—that would be the American taxpayer. If the current trend continues, Medicare will go bankrupt in less than five years.

Adding more people to the system won’t help the situation, unless than can pay their own way, plus some. The chances of that happening are zero. That would leave the government to pick up the tab.
Obviously, the Democrats have other priorities, such as gun control, a resolution of the Dreamer Act, protecting the Affordable Care Act, and bringing back state and local tax (SALT) exemptions.

But, along with their plans for infrastructure and Medicare, all of these items require legislative action that must be approved by the Senate and then signed by the president. That’s not very likely over the next two years.
The main goal of a Democratic House of Representatives will be to stymie President Trump and his agenda at every turn. The House leadership will use the power of the vote to derail any legislative agenda emanating from the White House, as expected. But it won’t stop there.

Through the power of subpoena and investigation, the various committees in the House will bury the administration with demands for documents and testimony relating to Russian election interference, hush money, and anything else that comes to mind.

The push will be made in the name of rooting out corruption and increasing transparency, and many people will throw around the word impeachment. That’s a distraction, though.

With a Republican majority in the Senate, it’s almost certain that such a trial wouldn’t happen. Even if it did, it takes 67 votes to impeach a president, which would be an impossibly high bar, unless new information comes to light.

Besides, if they actually impeached Trump or somehow convinced him to resign, they’d be left with a very credible President Mike Pence. While Democrats might take issue with his political stances, it would be much harder to attack his character.

Democrats hate Donald Trump. The national media loathe him. Republicans fear what he might say or twee next. But investors can’t get enough of the guy.

Sure, the tax reform adds more than $1 trillion to the U.S. debt over the next 10 years, and, yes, trade deficits actually happen when a country does well, but let’s not dwell on specifics.

There’s no doubt that President Trump has ushered in a golden age for businesses, and therefore investors.

So, now it’s up to you to decide who will control the Congress.

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1 Comment

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One response to “WHAT A DEMOCRATIC (OR REPUBLICAN) CONGRESS MAY MEAN FOR YOU

  1. Great piece. I read it twice. The second time I changed the headline to read: WHAT A DEMOCRATIC (OR REPUBLICAN) CONGRESS MAY MEAN FOR … ‘AMERICA’
    As I was reading the second time, my thoughts were about character, honesty, liberty and justice for all, environmental protection and all those hopes, dreams and beliefs people everywhere think when recognizing the USA as the greatest country in the world.

    My children are having a very difficult time explaining to my grandchildren about the constant lies, and misogyny constantly on display. The character of our leadership is overshadowing the economic statistics in these households. They have not benefited from tax cuts and eventually will suffer because of the tariffs.

    America is a great country and we will prove it again when we overcome another con-man, would-be tyrant.

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