There are three possible outcomes in the upcoming midterm elections: Republicans retain control of both houses of Congress, Democrats take control of one chamber, or Democrats win big and seize control of both the House of Representatives and the Senate.
A split Congress is the most likely outcome, with Democrats winning the House but not the Senate. Democrats need a net gain of 23 seats to take the House, a margin of victory well within the norm for midterms, when the president’s party typically loses ground. In the 2010 midterms, President Obama’s Democrats lost 63 seats. In the 2006 midterms, President Bush’s Republicans lost 27 seats. In both cases, the president’s party lost control of the House.
On the eve of the elections, the University of Virginia’s Center for Politics rates 212 House seats as likely Democratic wins, with 21 toss-up elections. Since it takes 218 seats to control the House, Democrats would only need to win one-third of the toss-ups to take the House. Stats site FiveThirtyEight gives Dems an 87% chance of winning the House, but just a 16% chance of taking the Senate.
Even if Democrats win both houses, President Trump would be able to veto Democratic legislation, and there’s no chance Democrats will have a veto-proof majority. So there aren’t likely to be major policy changes emanating from Congress for the next two years. The Trump tax cuts and other GOP measures affecting business and markets will stay in place.
But the outcome in November could still trigger changes that will affect workers and investors. Here’s the outlook for six pocketbook issues, plus the controversial investigation of special counsel Robert Mueller:
The overall direction of stocks. Markets have probably priced in a Democratic victory in the House, and split control of Congress. If so, there might be a traditional relief rally once the election is over. Stocks typically struggle in the weeks before a midterm – which has certainly been the case this year–then rise once the voting is over. If Republicans surprise by keeping control of Congress, that opens the door to further tax cuts and other business-friendly measures, which would probably give stocks an added boost. But if Democrats sweep both houses, markets could take it as a sign voters want a rollback of the Trump tax cuts, more regulation and more costly social programs. That could ding stocks.
[See why a Democratic sweep in November could hurt stocks]
Taxes. Republicans say they’re not done cutting taxes. They still want to make permanent some of the temporary tax cuts that went into effect this year, while also perhaps cutting the capital gains tax. And President Trump has now floated an additional 10% tax cut for middle-class families, as a last-minute sop to voters. If Republicans keep both houses of Congress, more tax cuts are plausible. And if tax cuts are limited to the middle class, some Democrats might get on board. In a split Congress, however, Dems would block any further tax cuts for businesses or the wealthy. What Democrats won’t be able to do is roll back the Trump tax cuts, since Trump would enthusiastically wield his veto.
Trade. Trump is waging his protectionist trade wars with little input from Congress, but he will need a Congressional vote of approval to enact the newly negotiated United States Mexico Canada Act, which modestly updated the old North American Free Trade Agreement. Getting Congressional approval might be harder if Democrats control one or both houses, but Dems will probably go along eventually, since there’s not much to gain by imperiling trade with Canada and Mexico. Trump’s trade war with China is a different matter. That has been intensifying, with Trump expanding the list of Chinese imports subject to new tariffs. By early next year, Trump may impose new tariffs on substantially all imports from China, and there’s little Congress could do to stop him.
Health care. There’s a slim chance a split Congress could pass a bipartisan health care law, along the lines of one introduced last year, that would shore up the Affordable Care Act and provide a few additional options for people struggling with high out-of-pocket costs. But that would require Republicans and Democrats to get along, in what could be an even more toxic political environment than we’ve seen this year. If Republicans control Congress, they may try again to repeal the ACA, even though the move was unpopular with voters and Republicans lacked a backup plan. If Democrats control both houses, they could start pushing elements of Bernie Sanders’ Medicare for all plan, which Trump would veto if anything passed. But Dems are trying out Medicare for all as a 2020 offering, so you could hear a lot more about it.
Drug prices. Many Democrats favor new laws to cap or reduce prescription drug prices—something Trump has advocated. But Trump’s moves, so far, have had minimal impact, and he has avoided calling for a new law allowing Medicare to negotiate prices with drugmakers, a priority for many Democrats. The drug industry is a formidable lobbying power, and has held off efforts to give Medicare more negotiating muscle, and lower prices in other ways. With a split Congress, Republicans would probably kill any new drug-pricing legislation. But a fully Democratic Congress could pass legislation to lower drug prices, and dare Trump to sign it.
Infrastructure. Many Democrats support new infrastructure spending, as Trump does. So this is one area where a split Congress might be able to agree on legislation. The problem is, there’s no money, and Congress may be unwilling to add even more to annual deficits that are approaching $1 trillion per year. So meaningful action is unlikely, under any election scenario.
The Mueller probe. The outcome of the 2018 midterms could have momentous implications for special counsel Robert Mueller’s investigation into Russian interference in the 2016 elections, and other things. If Republicans pull a surprise upset and hold onto both houses of Congress, that could embolden Trump to fire Mueller, as he has tacitly threatened to do for months, since a Republican Congress would be less inclined to hold hearings or further investigate. But if Democrats take at least one house, they seem likely to launch investigations into nearly every Trump controversy. Trump might be less likely to fire Mueller if he knew Democrats with subpoena power would pounce.
That suggests a modest Democratic win in November may be the best path to an orderly conclusion to the Mueller investigation, and whatever comes next. But 2019 looks uproarious, no matter who wins.
Editor’s note: This is an updated version of a story originally published on Sept. 7, 2018.
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Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman