With the American mid-term elections finally over, it’s worth celebrating the return of divided government.
From January Republicans will have a slim majority in the House of Representatives, Democrats a slim majority in the Senate.
Why applaud divided government? Because it curtails the government’s ability to spend money. In the absence of a financial crisis, the days of massive fiscal stimulus are over. From 2020 to 2022 with Democrats controlling the presidency and both houses of Congress a record six trillion dollars of spending was approved.
With hindsight only half of that spending can be justified as essential support for a Covid-ravaged economy. The remainder was excessive and a principal cause of the country’s 8% inflation.
Michael Barone, a dean of American political analysts, says both President Biden and former president Donald Trump are losers from the mid-terms. The only real winner, says Barone, is Republican Florida governor Ron DeSantis, who was handily re-elected, winning even heavily Democratic areas in Miami. DeSantis – at this stage Trump’s most serious rival – is given high marks for efficiently managing the preparation for and clean-up after the devastating hurricane that swept across the state in late September. Having campaigned on parental rights in schools and opposition to sexual orientation and gender discussions in primary grades, DeSantis declared: ‘Florida is where WOKE goes to die.’ Fast-growing Florida is, with 21 million residents, now the third most populous US state.
Barone argues that Biden is a loser because he won’t be able to pass major legislation during the remaining two years of his presidency. His pro-union, progressive agenda can be implemented only at the margins through executive decree. Biden, now 80, is leaning towards seeking a second term in 2024.
Better than expected
Contrary to predictions there was no Republican red wave. Democrats did much better than expected winning at least a one-person majority in the Senate.
Trump-backed candidates who Republicans needed to win in Pennsylvania, Arizona and Nevada lost. On the House side Republicans did turn the 435-member chamber from blue to red, but their majority is thin. While Republicans hoped to turn over 15 to 20 seats, they gained only five. Their mantra of crime, high inflation and border security that they thought would energise voters resonated far less than anticipated.
The Republican House majority brings to an end the contentious speakership of 82-year-old Nancy Pelosi who on 18 September resigned from party leadership. She will continue to serve in the House, having easily retained the safe San Francisco seat she has held for 35 years. The speaker’s gavel will now likely pass to current Republican minority leader, 57-year-old Kevin McCarthy.
Donald Trump remains the wild card. As expected, the former president defied Republican leadership, declaring his 2024 candidacy only one week after the mid-term election.
Mick Mulvaney, budget director and chief of staff in the Trump administration, believes the former president will secure the nomination because he controls the biggest voting bloc within the party. Mulvaney opposes the Trump candidacy, as does former House speaker Paul Ryan, who says ‘any Republican except Donald Trump’ will easily defeat Joe Biden. Trump is under serious threat of indictment from the Department of Justice.
Economically, the US economy continues to perform well despite eight consecutive interest rate increases by the Federal Reserve. Two-hundred sixty thousand jobs were created in October and the unemployment rate is a low 3.7%. Defying forecasts of recession, the economy showed positive growth in the third quarter after weakness in the previous six months.
Only minimal pain
The housing market is suffering from the doubling of mortgage interest rates since January. However, 7% mortgage rates so far have been absorbed with only minimal pain. Nationally, home prices are still rising, albeit at a slower pace.
The real damage is in the equity market. Collectively, Americans have lost $9 trillion this year. While the Dow Jones Industrials have performed best, losing only 7% through mid-November, the broader indices, the Standard and Poor’s 500 is down 17%, while the tech-laden Nasdaq is down a whopping 29%.
Three months ago there were fears that the harsh medicine of higher rates to tame inflation would trigger a recession. That still could happen but given a strong stock market bounce in October there are tentative signs that the Fed might succeed in engineering a soft landing, meaning slower growth but no recession. With price rises decelerating, there is evidence that the inflationary peak may have occurred in July when inflation touched 9%.
The conclusion? American democracy is alive and well. Nearly 100 million people voted in the mid-terms, a percentage nearly as high as in 2018 when 49% of eligible voters cast ballots. Candidates spent a stunning $50 billion campaigning.
But there is the problem of early voting with each of the 50 states having its own rules. In some jurisdictions as many as 40% of the ballots were cast before election day. But local rules in no way excuse the embarrassment of Arizona and Nevada requiring more than a week to determine election results.
The views of the writer are not necessarily the views of the Daily Friend or the IRR
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