A rebalancing of power could occur after US mid-term elections with a significant economic impact

President Trump has led an extraordinarily stormy first year and a half which has created unprecedented political vitriol. He has failed to fulfill some campaign promises such as repealing and replacing Obamacare (although he has weakened it) and thus far has not built “the wall”. Yet he has also had significant political victories as well, including passing the tax package, deregulation, increased military spending, bringing North Korea to the negotiating table, appointing a conservative Supreme Court justice, and nominating another, the collapse of ISIS, and most importantly, a strong economy.  He doesn’t talk about the almost doubling of the US budget deficit over the last three years, but you can’t blame him, as Republicans - who used to be budget hawks - have become largely indifferent to it now that President Obama has left office. Someday, but not now, this might change.

However, the mid-term elections are approaching in November, giving the Democrats an opening to counter or even reverse some of Trump’s policies. Indeed Trump is loved by about 40 percent of the electorate but intensely reviled by another 40 percent. Up for grabs in this election are the twenty percent of the voters who may not have made up their minds, or whose views are more nuanced. A good economy and the feeling that the majority of people in the country believe it is moving in the right direction gives the Republicans comfort. On the other hand, the President’s popularity is only in the mid 40’s and this is a particularly bad omen when the country is almost at full employment. Public opinion polls give the Democrats a 7 percent edge against the Republicans on a national basis. Should this remain or increase, it likely that the Democrats would take control of the House of Representatives, and stand a 50/50 chance of reclaiming the Senate. Because of how the Congressional Districts are composed Republicans can still maintain control of the House of Representatives if they lose the national aggregated vote by less than 4 percent. Anything in between makes it anybody’s guess.

The outcome of these elections could have more importance than any mid-term elections in recent memory as with a new Democratic Majority, the Congress can not only stop the Trump legislative agenda at its roots, but could use the next two years to engage in all sorts of investigations designed to make the White House and the Government agencies a miserable place to work for Trump political appointees and probably the President as well.

Historically, the President’s party has lost ground in the mid-terms elections. On average, over the past 21 midterm elections, the President’s party has lost 30 seats in the House and 4 seats in the Senate. If that were to happen this time, it would give the Democrats a slim majority of between three and five votes in the House. In the Senate, Democrats (including independents) would hold a 53-47 vote margin over the Republicans.

Republicans are blessed by an excellent Senate map in which there are 33 seats up for a vote, with 23 being held by the Democrats. Five of them (North Dakota, Missouri, Indiana, Montana and West Virginia) are held by Democrats, but were carried by President Trump by more than 20 percent in 2016, making them promising targets for the Republicans. Still, these five Democratic Senators have won before and with deep local ties, and fully warned, each of them has a fairly decent fighting chance to hang on and win again.

There are therefore three possible scenarios:

  1. Democrats take the House but not the Senate. This is the most likely case with a probability estimated of around 60%
  2. Democrats take both the House and the Senate, with a probability of 25%
  3. Republicans maintain the majority in both the House and the Senate, with a probability of only 15%