The stalemate means it’s showtime in the US

If you thought the last two years of American politics were entertaining, the next two will be spectacular.

The Democrats have taken the lower house of US Congress. But Republicans gained seats in the Senate. Which ruined the Democrats’ narrative of a blue wave.

But the swing towards the Democrats in the House of Representatives was big. So how did the Republicans gain in the Senate?

Because only a third of Senate seats are up for grabs in each election, electoral change filters through much more slowly there.

The entire House of Representatives held their elections, so that’s a much better measure of the mood of the country.

The swing to the Democrats in the House was fairly big, by historical comparisons. Which isn’t a surprise given they haven’t held the House since 2010.

Now you might think all this makes logical sense. If the House can swing every two years, but the Senate moves more slowly in thirds, then you’d expect the House to go against the president first. The idea is that presidents tend to lose their popularity over time and the House is up for grabs first.

Having had a look at the data, I can’t find much of a trend though. There’s just too much else going on.

Who can claim victory on election night doesn’t matter anyway. Both sides always do regardless. Politics is about framing what happens, not what happens.

But the election results are clearly not the sort of rebuke that Donald Trump was supposed to get if you ask the left. They’ll be mystified by the result. But not shocked. 

The question is what the Democrats will do next. My bet is, they’ll be very, very entertaining.

Democrats gone wild

Where does the election result leave us?

It’s complicated. But it’s also sure to be amusing.

Many of Trump’s controversial policies are based on his presidential powers. He doesn’t need Congress’ approval for those actions. Foreign policy is one example. And some parts of the trade war too.

So we’re likely to see Trump’s international drama continue. Thanks to Congress’ exclusive power to declare war being ignored by presidents for many years now, Trump could escalate matters in Iran too.

As far as British investors are concerned, little has changed on the issues where the US affects us directly.

And internal politics in the US is unlikely to change much either when it comes to policy.

Although this barely holds true any more, the Senate’s job is to filter the laws the House of Representatives comes up with. That means there’s a stalemate when one party controls the House and the other the Senate. A stalemate in terms of which laws actually get passed.

Stalemates tend to deliver good stockmarket returns because the government can’t meddle as much. Political causes and corporate profits don’t go well together.

The trouble is, Trump’s politics have benefited the stockmarket. And he’d promised more of the same. If he’s stopped, will this slow stocks down? More on that in a second.

There’s one thing the political quagmire of a divided Congress doesn’t prevent. In fact, it enhances it. And that’s political drama.

If policy isn’t going anywhere, that just leaves showmanship.

Unaccountable claims, dead in the water initiatives, and mudslinging are what you can expect over the next two years. There’s even a schedule for what the Democrats have planned. Not on policy, but on tearing apart Trump’s image.

Until today, the Democrats’ attempts to investigate Trump’s various scandals have all been frustrated by the Republican control of the lower house of Congress. The Democrats have a list of 64 times this occurred on one committee alone. Another list features 67 angles a second committee plans to challenge Trump on.

Now the Democrats have free reign to pursue all those claims.

Where will they lead? Probably not far, unless they embarrass Trump enough to get him to resign.

The House of Representatives can request information and launch investigations, while the Senate tends to oversee or vote on any actual accountability. You can see how this sets up the next two years. Trump’s dirty laundry is about to hit the news cycle more than ever before. But it’s unlikely to lead anywhere, legally speaking.

With lawmaking in the doldrums for two years, the real aim of the Democrats will be to create as dysfunctional a government as possible to frame the next elections with.

The worry for Democrats is simple. First of all, they might be held accountable for the dysfunctional government at the next elections instead of Trump. Trump’s way of doing politics is not popular. But his policies and their results are fairly popular. If the Democrats refuse to work with him on principle, they’ll be seen as the pot calling the kettle black. And cries of racism won’t work.

The best example of this is the economy. Thanks to their election victory, the Democrats are about to cop the blame for any downturn in the economy. If they do not support Trump’s economic plans, which include further tax cuts and the trade war measures within Congress’ remit, then any downturn will be laid at the Democrats’ feet.

Another worry for the Democrats is their leadership group. None of the Democrat leaders have come off anything other than second best against Trump so far. And the midterms delivered little change at the top of the Democratic Party.

Even Democrats are openly questioning whether the old guard should remain in charge. The base of the party is changing, as Labour’s did. Leadership should too.

So the good news is, US politics is about to resemble a fake realty TV show more than ever. The former Australian Prime Minister Paul Keating is famous for calling his opponents “all tip and no iceberg”. The next two years of Trump vs the Democrats will be all tips and no icebergs.

Until next time,

Nick Hubble
Capital & Conflict

Category: Geopolitics

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