US mid-term elections 2018

In mid-term elections held across the United States on 6 November 2018 for the 116th Congress, Democrats took a majority in the House of Representatives while Republicans extended their majority in the Senate.

• Given that Democrats will now have control of the House while Republicans will maintain their majority in the Senate, the likelihood of policy gridlock will almost certainly increase, with Republican efforts to make the 2017 individual tax cuts permanent or eliminate Obamacare likely off the table until following the 2020 presidential and congressional elections.
• Despite the election results, IHS Markit expects the Trump administration to rely on executive actions such as issuing executive orders and via promoting new regulations to pursue priorities associated with his America First agenda, particularly on sanctions, trade relations with China, and immigration.
• With control of such committees, Democrats will be authorized to issue subpoenas for the attendance of witnesses and the production of documents, increasing the likelihood of subpoenas being issued against members of the executive branch.

All 435 seats in the House of Representatives, the lower congressional house with important budgetary powers, were at stake. With Republicans currently holding 236 seats, to obtain a majority Democrats needed to gain 23 additional seats. At the time of publication Democrats had picked up 26 seats. In the Senate, the upper congressional house with crucial approval powers, only 35 of the 100 Senate seats were up for re-election. During the current congressional term Republicans held a two-seat majority (51-49). At the time of publication, Republicans had expanded their majority, gaining three seats by winning in Florida, Indiana, Missouri, and North Dakota, but losing a seat in Nevada. Additionally, Democrats appeared poised to take control of seven additional governorships.

Policy gridlock

Given that Democrats will now have control of the House while Republicans will maintain their majority in the Senate, the likelihood of policy gridlock will almost certainly increase, with Republican efforts to make the 2017 individual tax cuts permanent or eliminate Obamacare likely off the table until following the 2020 presidential and congressional elections. Despite the likely legislative impasse, certain policy areas lend themselves to bipartisanship, and are thus comparatively more likely to advance. One would be efforts to improve US infrastructure, where Trump has proposed a USD1.5-trillion 'Legislative Outline for Rebuilding Infrastructure in America'. Additionally, despite the recent lack of progress, a Democratic majority in the House would increase the likelihood of some sort of Deferred Action for Childhood Arrivals (DACA; individuals brought over by their families to the US as children without immigration status) for border-wall funding legislation to be approved in the next congressional term. Another area of compromise would likely be on pharmaceutical drug manufacturing, where the Democrats have advocated for increased transparency on how prices are determined.

Investigation implications

As the majority party in the House, Democrats will now have control over the chamber's various committees. With control of such committees Democrats will be authorised to issue subpoenas for the attendance of witnesses and the production of documents, increasing the likelihood of subpoenas being issued against members of the executive branch. Investigations not only dominate the time of staff members so that they are unable to focus on pursuing policy objectives, they can also lead to contract cancellations and amendments if found controversial or if they did not follow proper procedures.

Furthermore, under the Internal Revenue Code, the chair of the House Ways and Means Committee can submit a written request for any tax return or return information of any US citizen, increasing the likelihood Democrats request Trump's unreleased tax returns and then conduct further investigations based upon the information gathered. Accordingly, the administration will have to decide how much it will co-operate with such investigations, with disagreements over compliance likely to lead to legal cases brought before federal courts.

For Republicans, maintaining control of the Senate will be particularly beneficial to the Trump administration as it has the constitutional authority to approve the president's nominations, including for judicial, cabinet, and diplomatic positions, the importance of which was underscored by the September 2018 confirmation process for Judge Brett Kavanaugh's nomination to the US Supreme Court seat vacated by Anthony Kennedy.

Reliance on executive action

Outside of the 2017 congressional overhaul of the tax code, much of Trump's action as president has relied on using his executive authority outside the control of Congress. With Democrats taking control of the House, IHS Markit expects the Trump administration to rely even more on executive actions such as issuing executive orders and via promoting new regulations to pursue priorities associated with his America First agenda, particularly on foreign policy, trade, and immigration. In particular, Trump is likely to pursue renegotiations of additional trade agreements as well as further trade actions targeting trade imbalances with China and alleged Chinese intellectual property theft and forced technology transfers, which will probably receive Democratic support. The Trump administration has also applied sanctions and the threat of sanctions as a primary foreign policy tool. Additional deregulation efforts, particularly environmental and labor deregulation, are also a fundamental agenda item for the Trump administration, especially in relations to the energy, mining, and manufacturing sectors.

Increasing risk of politically motivated violence and urban protests

As evidenced by the series of mail bombs sent to a number of high-profile Democrats and media outlets in October, the risks of politically motivated violence for both politicians and the public remain high. IHS Markit expects similar episodes involving low-sophistication improvised explosive device (IEDs) or firearms to likely increase in the run up to the 2020 presidential election. Additionally, the likelihood of well-organised protests in the one-year outlook similar to the Women's March (21 January 2017) or the March for Our Lives (24 March 2018) and involving hundreds or even thousands across urban centers including Los Angeles, New York, San Francisco, and Washington DC remains elevated. These protests are predominantly issue-driven, including around immigration, gun control, the environment, or reproductive rights, and tend to be well organized and mostly peaceful. However, demonstrations by individuals associated with right-wing extremist organisations have become increasingly common, as have counter protests organised by members of the so-called anti-fascist (Antifa) movement.

Outlook and implications

The mid-term results highlight the ongoing political divisions within the country and the parties. Although Senate Republicans candidates did well in conservative rural states that voted heavily for Donald Trump in 2016, Democrats did far better in suburban House districts that voted for Hillary Clinton. Of note for the Democrats, many of their most prominent progressive candidates like gubernatorial candidates Stacey Abrams (Georgia), Andrew Gillum (Florida), and senatorial candidate Beto O'Rourke (Texas) lost their respective races. Democrats, therefore, will be more likely to jettison some of their more pronounced liberal policies like 'Medicare for All' or a guaranteed USD15-per-hour minimum wage once they take power in the House in January 2019. Incoming Speaker of the House Nancy Pelosi (D-CA) has already indicated that she will not seek impeachment charges against President Trump despite calls for such action by some of her more left-wing caucus. The progressive Senate losses will likely also help potential centrist Democratic presidential candidates in their search for the 2020 party nomination. Finally, as many moderate House Republicans lost their re-election efforts, a more conservative Republican caucus will emerge. The members remaining will be more inclined to support Trump policy objectives like taking a hard line on immigration and supporting socially conservative items.