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On 6 November 2018, the United States will hold national
mid-term elections to select members of the 116th Congress and 36
governors. Our analysts have run potential election outcome
scenarios and assessed the policy and procedural implications
arising from them.
Key findings
IHS Markit assesses that given current polling, Presidential
approval ratings, and Democratic performance in recent special
elections, Democrats will most likely retake the House, while
Republicans will retain their majority in the Senate.
Under the scenarios of either a split chamber or Democratic
majority in both chambers, the likelihood of policy gridlock would
increase, although opportunities for bipartisanship include
infrastructure and immigration reform.
Regardless of the outcome of November's mid-term elections,
executive actions are likely to continue to be used to pursue
renegotiations of additional trade agreements under a fast-track
Trade Promotion Authority; further tariff increases; additional
sanctions on individuals, firms, and countries; and deregulation
efforts.
Should Republicans retain their majority in both chambers, the
current administration would look to advance items on its domestic
policy agenda requiring congressional approval including making the
2017 individual tax cuts permanent, or eliminating the Affordable
Care Act, while on foreign policy the administration would likely
pursue additional trade tactics including reconsidering auto
tariffs and greatly expanding the current tariff regime against
China.
Scenario 1: Democrats win a majority in the House of
Representative, but Republicans maintain their control of the
Senate
Outlook
Should Democrats take the House of Representatives and
Republicans maintain a majority in the Senate, the likelihood of
policy gridlock would almost certainly increase, with Republican
efforts to make the 2017 individual tax cuts permanent, eliminate
Obamacare, or undertake substantial changes to social entitlements
likely off the table until following the 2020 presidential and
congressional elections (all House seats and one-third of Senate
seats) at the earliest, when they will have an opportunity to
regain their congressional majorities.
Policy implications
Despite the likely legislative impasse under this scenario,
certain policy areas lend themselves to bipartisanship, and are
thus comparatively more likely to advance.
One would be efforts to improve US infrastructure. Although a
House Democratic majority would resist efforts to deprioritize
environmental protections and push for greater federal funding than
Trump's plan contemplates, legislative compromise would likely
include investment in public transportation, ports, and water
systems, as well as veterans' facilities.
Immigration reform represents another potential opportunity for
bills to pass with bipartisan support, even under a split
Congress.
Scenario 2: Democrats win a majority in both the House
of Representatives and the Senate
Outlook
In the less-likely scenario in which Democrats gain majorities
in both congressional chambers, prospects for passage of the
current administration's legislative goals would essentially cease.
Accordingly, presidential policy initiatives would almost
exclusively be limited to executive orders and the normal
regulatory process. A complete Democratic takeover of Congress
would also raise the prospects of presidential veto authority
beings used over approved congressional legislation.
Policy implications
In May 2018, Democrats released 'A Better Deal': a policy
handbook outlining their policy goals including provisions on
health policy, infrastructure development, political transparency,
and labor rights. For infrastructure, they have promised to pass a
USD1-trillion infrastructure bill to build new schools, community
housing, bridges, rail tracks, airports, public housing, and sewer
systems.
As an anti-corruption measure, Democrats would look to pass new
guidelines restricting lobbying by former government
officials.
Finally, they have proposed increasing the number of registered
apprenticeships and work-based learning programs, while also
providing a new tax credit for businesses to train and hire new
workers. It should be noted that very few of these legislative
priorities, aside from infrastructure, will likely become law
without significant Republican support, as Republicans will retain
their capacity to filibuster legislation in the Senate.
If Republicans lose both chambers, the likelihood of government
shutdowns around budgetary matters increases given that Democrats
would have a unified congressional front in going head-to-head with
the president.
Scenario 3: Republicans hold on to majorities in both
the House of Representatives and the Senate
Outlook
In the low-probability, high-impact scenario in which
Republicans maintain their majorities in both the House and Senate,
they would likely view the election as a referendum on the current
administration's America First agenda, including the priorities
that have produced significant economic growth over 2018.
Policy implications
Under this scenario, we can expect Trump to resume pushing the
items on his domestic policy agenda that require congressional
approval.
Although Republicans would likely face a 60-vote threshold for
overcoming filibusters in the Senate, they can attempt to utilize
the process of budgetary reconciliation, which requires only a
majority. Likely priorities that would remain on the policy agenda
would be another effort to overturn or undermine the Affordable
Care Act, which fell short by one vote in 2017.
Republicans would likely also attempt further tax reform, such
as making the individual tax cuts passed in 2017 permanent. Some
Republicans would likely support further cuts to federal social and
entitlement programs like food stamps, Social Security, Medicare,
and Medicaid, although the president's appetite for this is
unclear.
On foreign policy, a Republican mid-term victory would
represent a referendum on the current administration's trade
agenda. With an expanded Republican congressional backing, it would
likely embolden the administration to pursue some of the more
aggressive trade strategies on its policy wish list including
imposing auto tariffs on Europe as part of the recently reinitiated
US-European Union Trade negotiations. It would also likely renew
Trump's calls for re-evaluating the US participation in the World
Trade Organization.