Will a Shift in the Senate Alter Our Economic Outlook

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.