Heading into today's midterm elections, the pundits anticipate the balance of power in the Senate will shift to the Republicans. The GOP is also expected to strengthen its position in the House as well as in key state races. Historical patterns are working against the Democrats; albeit with minimal turnover overall, the President's party generally loses House and Senate seats during midterms. The average loss in the Senate is about four seats. With that in mind, the likely extent of the Democrats' losses is not atypical, nor is it a truly epic indictment of the president's policies.

Having lost the Senate in 2006 and eager to improve their collective prospects for the 2016 presidential bid, Republicans have every reason to demonstrate they can govern effectively. A mid-October survey by Pew (here) shows a large majority of voters have a dim view of Republicans' ability to play well with others (Democrats do not fare much better). The chances of winning over independents in two years' time improve if a reordering of the Senate proves to be an inflexion point in legislative effectiveness. It could go the other way. If a Republican victory emboldens the GOP on priorities such as federal spending, a brinksmanship dynamic between the parties on issues such as the debt ceiling or funding of government operations could drag on the short-term growth outlook.

In principle, reduced gridlock is good for growth. Both parties have a role to play in facilitating that outcome; the personalities we send back to Washington matter on this front. As for whether the specific policies under debate carry high stakes for the economic outlook, the views are mixed. Last week's NBC News/Wall Street Journal poll (here) shows voters are currently focused on the economy to a far greater extent than the headline-making threats from destabilization in the Middle East or a significant spread of Ebola beyond West Africa. Even so, there are few electoral outcomes today that might reflect an altered order of priorities. For that, wait two more years and vote for your preferred candidate at the top of the ticket.

A few specific policy issues will command broad attention, even if their path is unchanged by the outcome of the midterm election. Among them, little headway is expected on reforms to the tax code, adjustments to the Affordable Care Act, or an end to the conservatorship of Fannie Mae and Freddie Mac. Even if it passes at the state level in Alaska, Arkansas, Nebraska, and South Dakota today, a federal minimum wage hike is almost certainly off the table barring the unlikely scenario where Democrats improve their positions dramatically in the House and Senate. If Democrats are instead weakened substantially, bank regulation may be one of the few major areas where Republicans can extract visible concessions.

On balance, we do not expect a revision to our economic outlook on Wednesday morning. Our baseline forecast remains fairly reserved no matter who holds a slight advantage in the Senate. That forecast is characterized by relatively slow gains for the economy and the labor market, and is generally in line with consensus estimates. Suffice it to say the economic data do not elicit the same irrational enthusiasm as prevailing commecial real estate trends. Our biggest concern is still the absence of a clear focus in the Beltway on long-term economic challenges and what manner of serious reforms could spur growth closer to the American economy's potential.