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US Politics: Elections have consequences

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The Democratic victory in the House will become a major distraction for the Trump administration. With certainty, various House Committees will open investigations into the President, members of his administration and his family.  Whether the inquiries are justified is a political question and irrelevant. They and the subpoenas they will issue are legal and will have to be answered by the administration. This will be a burden on its time and impede the functioning of the executive. From a political perspective that is one of their main purposes.

If the House decides to draw up Articles of Impeachment and provokes a Senate trial this will further drain the resources of the Trump administration. The potential for the President to be convicted in a Senate trial and removed from office is very small. The bar for conviction is a two-thirds majority of the 100 member Senate. There will be 53 Republicans, the President’s party in the upper house in 2019

The Democratic and Republican agendas will find little common ground in the House next year where all budget bills must originate. It will be a major challenge for the leadership of both parties simply to pass the necessary budget bills to fund the operations of the government.

There will be few initiatives of either party passed into law. Democratic bills from the House will die in the Senate and Republican ideas from the Senate will terminate in the House

Gridlock on Capitol Hill is not necessarily bad for the economy. If no beneficial legislation is passed neither is anything detrimental enacted. The equity markets have a good record in divided Congresses. This may be especially true next year as the tax bill of 2017 will continue to provide economic benefits and the administration’s regulatory reform and other executive policy changes will continue unimpeded.

The major political threat to the economy is psychological. Will the rhetorical and legal contests between the parties in Congress and between the Democratic House and the Trump administration become so damaging that they undermine the business and consumer optimism in the country at large?  The nation has a good history of ignoring the political squabbles in Washington. But the din next year will likely be unprecedented since the resignation of Richard Nixon in 1974.


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