Will the “Blue Tsunami” midterm elections, which ushered in Democratic majorities in both the House and Senate, have a direct impact on our wallets?
Experts say we shouldn’t expect to see any real effect immediately as Washington struggles to govern beyond its divisions.
Scott Anderson, the Chief Economist and Managing Director for BMO Capital Markets said that the shift in power is unlikely to produce any major pieces of new legislation.
“I know Americans are hungry to see some progress on affordability,” he said. “It will be difficult to move the needle, at least over the bear term on inflation, economic growth or interest rates.”
Other experts say the impact on your wallet will likely be indirect and gradual, not immediate. Democrats gained Congressional power while a Republican president remains in office, creating a divided government. Major legislation would still require presidential approval or a veto override.
Here are the areas most likely to affect an average household:
Taxes
Most middle-income households should not expect an immediate tax increase or tax cut as a result of the election. The same divided governing situation will make major tax changes difficult. Analysts are expecting Democrats to propose changes to portions of recent tax legislation, larger child tax credits, or other tax relief measures, but any significant change would still need presidential approval.
Prices and Inflation
Many voters said it was the high cost of living and inflation as major issues driving them to the polls on Tuesday. Congress, however, has little short-term influence over gas prices, grocery inflation or housing costs. They are affected more by interest rates, energy markets and broader economic conditions.
Anderson said a major driver for higher costs is the war in Iran. Ending the war could see a drop in oil prices and lower prices for transportation.
Tariffs
Democrats campaigned in part against some Trump administration tariffs that many voters believed were raising costs. Whether tariffs are reduced will depend heavily on presidential actions, since trade policy is largely controlled by the executive branch.
Health Care and Benefits
You may see proposals involving health insurance subsidies, Medicare, Medicaid, or tax credits. But with divided government, the likelihood of sweeping changes is lower than if one party controls both Congress and the White House.
Anderson also warns of potential government shutdowns later this year or early next year in Republicans and Democrats cannot reach an agreement on raising the debt ceiling.
The bottom line: your bottom line is unlikely to change drastically any time soon because of the new Congress.
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