Policy Implications of Various Midterm Election Scenarios – Washington Policy Research
Policy implications of the November 8 midterms vary based on the election outcome scenarios. A good deal of uncertainty remains, particularly with regard to the Senate races. This is likely to be a close election and the 2023 Congress will likely be closely divided, increasing the need for compromise to enact policy.
With less than a month until the midterm elections, there is still a good deal of uncertainty about the outcome and what that will mean for policy coming out of Washington. Republicans need to win a net five seats to gain control of the House. That seems likely given that: 1) the president’s party historically loses seats in the president’s first midterm election; 2) President Biden’s approval rating is in the low 40s, consistent with losses for his party; and 3) Republicans stand to gain seats from redistricting conducted this election cycle. In the Senate, Republicans need to win a net one seat to gain control. Control of the Senate is more in flux, with polling in the key races within the margin of error, indicating that they will be close. Here, we take a look at the policy implications of each of the three potential election scenarios.
Democrats retain control of the House and Senate. Congress will look to increase spending on pre-K, childcare, a child tax credit, and renewable energy, with potential tax increases to pay for the spending. We believe this is the least likely outcome of the three possible scenarios because of the fundamentals noted above. If Democrats do not retain control of Congress, tax increases are off the table in 2023.
Republicans win the House; Democrats keep the Senate. This would lead to a gridlock scenario where little would get done in the new Congress without compromise. Nevertheless, we’d expect a very active “lame duck” session of Congress as retiring members look to get their priorities passed and current members look to clear the decks ahead of the new Congress in January. During the lame duck, the FY23 budget, higher defense spending, and retirement legislation are all likely to be enacted. Additionally, in 2023, the options for bipartisan legislation under a split government scenario include legislation to re-shore or “friend shore” supply chains, legislation to improve US competitiveness with respect to China, a US-Taiwan trade agreement, privacy legislation, stablecoin regulation, and energy legislation.
Republicans win control of the House and Senate. This would also lead to a gridlock scenario, but one less open to compromise than a split Congress. President Biden would have the ability to veto any legislation passed for the next two years, and we could see a fight over raising the debt ceiling in 2023. Republicans in Congress would focus on immigration and energy policy, with US energy independence likely in focus given higher gasoline prices and the recent decision by OPEC+ to cut oil production.
Regardless of the outcome, all indications are that this could be a very close election in November, which means that neither party will have an outsized majority in 2023. Compromise will be needed to enact policy.
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