Mid-Term Elections: Split Decision

After months of noise, pearl clutching and teeth-gnashing, the midterms are over and the political course of the next two years is largely in place.  What are my quick takeaways from 11/6?

  • Donald Trump will be spending a lot more time (and tax-payer money) fending off subpoenas from a variety of congressional committees.  This will dominate the news as polarizing figures like Nancy Pelosi, Maxine Waters and Jerry Nadler personify the attacks that will be coming at the presidency.  In a regime built on chaos, it is unclear whether this will distract the presidency and torpedo any effectiveness or galvanize their resolve.

  • The rise of women and people of color in the political process took a significant step forward.  100+ women are now a part of Congress.  The first openly gay Governor in Colorado was just elected- Jared Polis.  Remember the name Amy Klobuchar- new Democratic Senator from MN . . . she will be mentioned prominently in the 2020 ticket selection process.
  • Trump (and by extension the Republican Party) lost major ground in the suburban pockets of the country.  The swing in the House represents a clear backslide in Trump support in those regions.
  • The uptick in Republican Senators indicates that the base will turn out in some measure for Trump.  It also indicates that the polls still have not figured out how to fully measure the support of Trump and the candidates that track him and his policies.
  • The election serves as a popular rebuke to Trump’s immigration and health care policies.  It will be interesting to see if he softens his stance on the areas.  I imagine that health care provides more areas for wiggle room than his strident stance on immigration.  This is a dangerous result for both parties.  The split decision doesn’t give the Democrats the mandate upon which to drive the national narrative.  They may feel like they won on many issues.  However, I think the Dems have to be careful in extrapolating larger meaning from a result that is more of a reflection on how the public feels about one man.  The people have given the Dems a tool to slow Trump down.
  • By extension, the people have told the Republican party that they can’t have carte blanche in deciding the future of the country and that inclusiveness and messaging is important.  The Republicans also forgot Clinton Rules 1 and 2:  Rule 1: It’s the economy, stupid.  Rule 2: See Rule 1.  The Republicans had good statistical economic news to use and they didn’t.  That was a political whiff.
  • The Beto/Gillum losses, the House swing, and Governor and Senate uptick reflect a “purplization” rather than a blue wave.  That said, I don’t think voters are becoming more nuanced, but rather the differences between the rural and urban settings are becoming starker.
  • Although Cruz won Texas, the down ticket races indicate that the state can no longer reliably be counted on as “red.”  Texas is a purple battleground state from here on out.
  • As my colleague, Bill Coate, has said many times, “#FloridaNeverDisappoints” and in this election it certainly didn’t.  With the constant replenishment of aging economically engaged voters from other states to replace the ones that die off and newly minted immigrants, the “rules” for this state will be rewritten every two years- especially as the population grows and the strain of the states finances increases to meet the needs of this sleeping giant.
  • New York is fully Democratic with full and official control of all three branches in the hands of one party.  The head of the State Senate is an African American woman, Andrea Cousins-Stewart.  Look for massive emphasis to be placed on New York City concerns (and funding).  Upstate New York may find the coming years to be challenging as the focus of power dials in further to the south.  The Cuomo/DiBlasio relationship will be particularly interesting as the State Democratic party begins to envision a post-Cuomo environment.  (Also of note for Libertarians, Larry Sharpe got 90,000 votes on the Libertarian line which guarantees access on the ballot for the party for the first time in history.)
  • NY Post Script:  I don’t think there is anything to keep the tax burden for the state down going forward.  With the federal tax code hitting NY residents hard (especially property owners) and a state and city government with gigantic wish lists (infrastructure and otherwise), constituencies to appease and actual bills to pay (including ballooning pension liabilities with regressing demographics), I think the NYS and NYC tax payer is going to get hit hard in every way.  Taxes will be going up.
  • Get ready for gridlock.  I wouldn’t expect much to get done . . . and that which does get done will happen via executive fait.  For legislation to happen, Donald Trump has to deal with Nancy Pelosi . . . ahead of his re-election efforts in 2020.  Think about that statement for a minute.

  • The big regulatory rollback for financial institutions took a big hit.  A divided congress and Maxine Waters’ leadership in the House financial services committee will gum up those works.
  • If you were fatigued by political coverage before, just wait until the partisan bickering starts.  Now that Trump has specific people to call out politically, you can expect the full power of his dis-intermediated Twitter attacks to be directed at them.  Political coverage will continue to harden around the political fault-lines.
  • With the exception of North Dakota, the gradual decriminalization at the state level and national acceptance of marijuana continues.
  • The United States’ political process, imperfect as it is, performed when it counted and in a measured way.  Wherever you stand on Trump, the public vitriol over his dealings manifested themselves in the political process.  Another way of saying this is that the will of the people (many of them anyway) came to the fore in the midterm elections.  The Founding Fathers’ balance of structure and flexibility is what makes this country so resilient and productive.

No predictions for 2020 yet!

For more on the impact of public policy on investing and commentary on the 2018 midterms, I will be leading a policy investing webinar with EVENTSHARES. It’s free and online.

Register here:  https://www.eventshares.com/conference

 

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