Month: November 2018

Authored by RJ Reinhart via Gallup.com,

• 81% of Democrats worry about effect of continued GOP control of the House

• 64% of Republicans worry about effect of Democrats taking the House

• By 50% to 44%, Americans expect GOP will retain the House

More than eight in 10 Democrats and Democratic leaners (81%) say they are very or somewhat worried about what will happen if Republicans maintain control of one or both houses of Congress in Tuesday’s midterm elections. Alternatively, 66% of Republicans and Republican leaners say they are very or somewhat worried about what will happen if Democrats win one or both houses of Congress.

These data come from Gallup’s Oct. 15-28 survey, which asked Republicans about their worry if Democrats gain control of one or both houses of Congress, and Democrats about their worry if Republicans maintain control of both houses. Democrats are decidedly more worried than Republicans. Worry is particularly strong among two groups of Democrats, women and those who disapprove of the job that President Donald Trump is doing. Nearly nine in 10 (87%) in both groups are very or somewhat worried about what will happen if Republicans hold the House.

Worry about what will happen if the Democrats take control of the House is also particularly pronounced among two similar groups of Republicans, self-identified conservatives and those who approve of Trump. More than three-quarters, 77%, of conservative Republicans are very or somewhat worried about what would happen if Democrats take control of at least one house of Congress, while 72% of those who approve of Trump say the same.

Republicans Seen as Likely to Retain Control of the House and Senate

In separate questions, Gallup asked Americans which party they thought was likely to retain control of the House and the Senate. Half of Americans say Republicans will retain control of the House, while 44% say the Democrats will take control.

Gallup has asked U.S. adults which party would win control of the House in that year’s midterm elections in 10 such election years between 1946 and 2014. Notably, in each one, Americans’ prediction came true, although the current six-percentage-point gap in the Republicans’ favor is the narrowest in the trend. In the current poll, the preferences of a narrower group of likely voters on the generic congressional ballot find 54% saying they will vote for the Democratic candidate in their district, while 43% say they will vote for the Republican. This likely voter estimate indicates Democrats are in a good position to win the majority in the House.

While Americans are closely split about which party will take control of the House, a substantial majority say Republicans will keep control of the Senate. Sixty-one percent of Americans say the GOP will continue to control the Senate, while 33% predict Democrats will take control.

Not surprisingly, 87% of Republicans say the GOP will retain control of the House, while 74% of Democrats report their party will win. When asked who will control the Senate, 83% of Republicans believe their party will retain control, compared with 49% of Democrats who say their party will gain control.

Bottom Line

Democrats are substantially more worried about what will happen if the party fails to take the U.S. House of Representatives than Republicans are if Democrats take control of one or both houses. With the midterms largely and traditionally seen as a referendum on the president in office, this likely reflects the high levels of disapproval of Trump among Democrats, and their desire to check his power. A full 89% of Democrats and independents leaning toward the party say they disprove of Trump in the Oct. 15-28 survey.

If the Republicans retain control of the House, it would be seen as a major victory for Trump and give the GOP two additional years in which to advance their policies with little opposition.

Republicans’ lower level of worry about what will happen if Democrats take control of the House persists despite Trump’s efforts to paint a stark picture of what would happen under a Democratic-controlled House. Lower levels of worry among Republicans may simply be related to confidence among the partisan group that they will retain control of the House and Senate.

Both political parties have attempted to use worry about the potential effects of the other’s control of the houses of Congress as a tool to drive their supporters to the polls. It is possible that this fear has contributed to the high levels of voter turnout indicators favoring Democrats this election cycle and the 34% of registered voters who intend their vote as a message of opposition to Trump. However, it remains to be seen if higher levels of fear among Democrats will translate into victory at the ballot box.

via RSS https://ift.tt/2yX0e3k Tyler Durden

Hungarian billionaire and Florida’s richest man, Thomas Peterffy, had some choice words for fellow Hungarian billionaire George Soros during a conversation with CNBC about socialism and the 2018 US election. 

The 74-year-old founder of Interactive Brokers, who has a net worth of approximately $22.5 billion, suggested that people pushing socialism “basically don’t understand what they are talking about,” and likely “haven’t really studied the issue.” 

“Products like an iPhone, for example, could never happen in a socialist country,” he said. 

When asked about Soros, Peterffy said he should be “put in jail or even worse,” adding that Soros is an “enigma” and an “anarchist.” 

Peterffy: I was born and raised in Hungary, I lived there for the first 21 years of my life, and I know that most of these people who want socialism basically don’t understand what they are talking about. I don’t know if they have really studied the issue. I think that people have to be motivated, they have to be incentivized in order to produce more goods and services, or better goods and services. Products like an iPhone for example could never happen in a socialist country. I don’t think these people know what the impact could be.

Ross Sorkin: Thomas, what do you make of the both the personal attacks – the bomb that was sent to his home, uh, he was also born in Hungary, he’s also a billionaire, George Soros?

Peterffy: I don’t think that people should do things like that. It’s a terrible thing, I mean, you know, that person who should be put in jail or even worse – we should be civil to each other number one. Number two, we should have a debate instead of screaming and yelling at each other.

Ross Sorkin: Why do you think given both of your backgrounds – how would you explain where you ended up in terms of how you think about the world, and where he ended up in perhaps how he thinks about the world?

Peterffy: George Soros is an enigma. He’s a very bright man and I absolutely do not understand why he behaves the way he does. I think he’s basically an anarchist. He was against communism in the 70s, and he’s against free market capitalism today. So I don’t know what is in between. So I don’t understand it. 

Ross Sorkin: I’m not so sure that a, he’s an anarchist. I’m not so sure that he doesn’t believe in markets at all. I think that this might be an extreme version – the suggestion you’re making. I’d also make the argument that potentially, talk about socialism or socialism in Florida even, I’m not so sure that’s what is really on offer, so much as it’s about the pendulum swinging. 

Peterffy: Yeah, well, look – I mean you go to any socialist country.. you can’t find any country where socialism has been tried and where people are happy. It usually fails after some bloody interlude, it swings back to capitalism. Starting with the French revolution that has been through all throughout history. So ask yourself why is that? Why isn’t there a socialist country today where people are happy? 

Watch below: 

via RSS https://ift.tt/2yXOcGP Tyler Durden

It all begins at 6pm EST, and the very first results will likely provide a clue how the rest of the night will play out.

6:00PM EST

The main event in the first states to close will be the Indiana Senate race, where Democratic incumbent Senator Joe Donnelly holds a slim lead in polling over Republican Mike Braun, but has only averaged about 44% in absolute support. A Republican Senate win in Indiana would make it very difficult for Democrats to take the Senate majority. The Indiana race could also provide a hint regarding the outcome of the Democratic-held Senate seat in Missouri, where the polling is even closer.

In the House, the main race to watch is KY-06, a Republican-held seat which most analysts rate a toss-up. A Democratic win here would signal Democrats are on track to win the majority.

7:00PM EST

Florida and Virginia are likely to be most in focus. An upset win by Republican Governor Rick Scott over Democratic Incumbent Senator Bill Nelson would all but ensure a Republican Senate majority.

In the House, if Democrats cannot win the Republican-held seat in FL-27, they might not be on track for a majority after all. On the other hand, if Democrats win FL-26, they could be on track for a slim majority, and if they win FL-15, they could be on track for a large majority. In Virginia, there are three bellwether races: If Republicans hold onto VA-10, they might have a very good night. If they hold onto VA-07, they have a shot at maintaining the majority. By contrast, a Democratic win in VA-02 would signal a more substantial Democratic majority is likely.

7:30PM EST

Incumbent Democratic Senators Brown (OH) and Manchin (WV) appear very likely to win reelection but an upset would all but guarantee a Republican Senate majority. In the House, if Democratic challenger Dan McCready can wrest NC-09 from Republican control, Democrats will likely be on track for a majority. Democratic wins in NC-02 or NC-13 would send just as strong a signal. Democratic wins in OH-01 or OH-12 would suggest a Democratic majority is likely as well.

8:00PM EST

The outcome of the Senate majority should start becoming clear by 8pm. If Democratic incumbent Senator Claire McCaskill wins another term, it would be difficult for Republicans to gain net seats and could, depending on how other races go, keep open the path to a narrow majority. That path would also likely run through Tennessee, where former Governor Phil Bredesen is challenging Rep. Marsha Blackburn for the open Republican-held seat. Short of winning in Tennessee, Democrats would need to win the Senate seat in Texas held by incumbent Senator Ted Cruz, which looks even more challenging. If Democrats cannot win Missouri and Tennessee (or Texas) they are unlikely to win the Senate majority.

In the House, if a “blue wave” has formed it should be apparent in the results from states with polls closing at 8:00pm. Four Republican-held seats are expected to flip to Democrats as a result of redistricting in Pennsylvania (PA-05, PA-06, PA-07, PA-17), with another expected to flip to Republicans (PA-14). PA-01 could be a bellwether; if Democrats cannot win in this Clinton-won district they might have trouble winning the majority. In New Jersey, Democrats look likely to pink up at least 3 or 4 seats (NJ-02, NJ-03, NJ- 07, NJ-11); if they cannot manage to win more than two, Republicans might hold onto the majority. In Texas, the outcome in TX-32 should be watched; that district narrowly supported Sec. Clinton in 2016 at the same time it voted for Republican Rep. Pete Sessions by more than 50%. A Republican loss here would signal a high probability of a Democratic majority.

9:00PM EST

At this point the general direction of the House elections should have become clear, but the Senate might still be in play. The main focus will be the Republican-held seat in Arizona, which Is the Democrats’ best pick-up opportunity in the Senate this year.

10:00PM EST

Control of the Senate should become clear with the races that close at 10pm ET. Democratic Senator Heidi Heitkamp (N.D.) trails in most polling, but Democrats have a shot of offsetting a potential loss there with a pick-up in Nevada, where the race is close to tied. Incumbent Democratic Senator Jon Tester leads polling in his reelection effort, but with a fairly narrow margin.

11:00PM EST

If the House majority is shaping up to be a close call, the results in California and Washington state could be decisive. Democrats probably need to flip at least 3 or 4 of the Republican held seats in California and Washington to win the majority. This might not be too much of a challenge, given how many of these Republican-held seats voted for Hillary Clinton in 2016.

Source: Goldman Sachs

via RSS https://ift.tt/2JJSBS0 Tyler Durden

Even as President Trump effectively doubled-down on his controversial non-PC rhetoric on immigration in the final stretch before the election, the president said during an interview with Sinclair Broadcast Group that he “regrets” the tone he used during his first two years in office.

If he could redo one thing, Trump said, he would have liked to “soften” his tone. He added that there might be other things he would change, but “wouldn’t want to reveal all of them.”

Though Trump said he has doubts about this strategy. For example, the president worries that he might have been “swamped” by the other side if he had softened his tone.

“I would like to have a much softer tone. I feel to a certain extent I have no choice, but maybe I do,” Trump said. He attributed his tone during his first two years in office to wanting to get things done on his agenda, adding that he could have been softer in his delivery.

While Trump hopes there will be more “harmony” between Republicans and Democrats after Tuesday’s election, he still believes that “if you’re criticized, you have to hit back.” 

“I would love to get along, and I think after the election a lot of things can happen. But right now they are in their mode, and we are in our mode. And you know if you’re criticized you have to hit back, or you should,” Trump said.

Less acrimony in Washington would definitely be “better for the country,” he added.

“I hope so. It is certainly better for the country,” Trump remarked. “I hope that happens and we are certainly willing to do that. And think before anything else we have to get tomorrow over with.”

Of course, this isn’t the first time Trump has said something to this effect. After the shooting at a synagogue in Pittsburgh last month and the arrest of attempted mail bombing suspect Cesar Sayoc, Trump told a group of reporters that he wouldn’t compromise on his tone, but instead would “tone it up”. The media has tried to link Trump’s heated attacks on the press to the bombing attempts, and to the Pittsburgh shooting, alleging that Trump’s political successes have “mainstreamed” far-right ideologies like white supremacy and anti-semitism.

via RSS https://ift.tt/2PK8Io3 Tyler Durden

Authored by Raul Ilargi Meijer via The Automatic Earth blog,

Pollsters were so wrong in 2016 you’d think they would have changed jobs by now. Yeah, sure. We remember the 97% prediction for a Hillary win, right? And the 92% from the New York Times? Happy days. Now we have the same suspects plying their usual trade again. As if nothing has changed. And that’s a bit of an issue. It would be beneficial if pollsters asked themselves why they got 2016 so wrong, but since there’s been little to no consequence for their livelihoods, they haven’t.

Because of the frenzy whipped out over today’s midterms, with almost everyone declaring this the most important midterms, if not elections, of their lifetimes, more people have participated in early voting, and far more than usual have expressed their intention to go vote.

And so the pollsters look at that and apply their age-old models to it. More people voting is good for the Democrats, as is more early voting, according to them, and so is more young people voting. Ditto for black people, Hispanics. Because that’s how it’s always been. And it’s easier that way than to actually go talk to people about their votes, and the reasons behind these votes.

But it’s as if Trump never happened in 2016, when his performance made that entire polling industry look like useless fools. How about if Trump’s rallies and tweets are a major reason why more Americans, and more young Americans, will go and vote? Certainly doesn’t sound crazy.

Update: after I wrote the above last night, first thing in the morning came this graph from NBC. I feel at least partly vindicated.

The Democrats and their media allies have a bit of a Catch-22 going on. They want to sound enthusiastic and confident about the midterms, but not so much that it will make potential voters stay away. It doesn’t seem to work: they again sound like they got it in the bag.

Moreover, their entire schtick is based on one thing only: Trump. Not being Trump is supposed to be their ticket to ride. They don’t actually have programs or policies, at least not on a national level. They’re simply betting on being able to whip up enough hatred of the Donald.

In a nation as polarized as America is these days, that is both extremely easy and extremely hard.

• Easy, because the one half of Americans who already despise the man read and see that part of the media that cultivates that hatred from dusk till dawn every single day.

• Hard, because there are very few people left who are either on the fence or don’t hate the man, whose opinions could be changed by more of the same kind of ‘reporting’. The chips are down, the lines have been drawn.

If only the MSM could report on terrible economic numbers on top of labeling Trump a racist, misogynist, aniti-Semite, fascist. But the economy -on the surface- is doing fine, and it’s that, stupid. For many Americans, including fence-sitters, that’s what it’s all about.

One of the first things I read yesterday was a headline that said Hillary is still the Democrats’ best bet for 2020. I’m going to have to doubt that there’s a better illustration of what’s ailing the Democrats.

Even as there’s the issue of Schumer, Pelosi, Feinstein, Wasserman-Schultz and Waters still leading that party, while their only challengers insist on calling themselves ‘socialists’, which is to one’s election chances in America what a wooden stake is to a vampire’s odds of survival.

And they would still win by a wide margin if not for Trump. Because the Republicans have the exact same issues. They too are ruled by a bunch of sociopath pensioners who can’t and won’t let go of the thrill of power and the millions slipped to them under the table by banks and insurers and gunmakers.

There’s only one way for the nation to prevent being run by the cast of Cocoon, and that is Trump, and he’s 72 himself. A president has two terms, even if he’s under 50 years old, but Senators can stay forever even if they live to be 100. And changes to that are subject to decisions by that very same crew. It’s a bankrupt system in which voters can and do go bankrupt and politicians are all millionaires.

And yet the systems rolls out all it’s got to protect itself. But it’s gone overboard with that. There has been so much in the way of smear and allegations against Trump that turned out not be based on anything, that the MSM has muzzled itself, prevented itself from reaching anyone other than those who are already in their camp.

That’s what you get for confusing news and opinion. Of course it’s tempting, because it attracted so many viewers and readers, and so much money, but in the end, the WaPo, NYT and CNN have voluntarily given up access to half of America, and with them the Democrats have too. Down the line, that will prove to be a very costly ‘business model’.

In 2015 I predicted Trump would win the presidential elections. not based on his qualities so much, but the lack of qualities on Hillary’s side. This time I don’t want to predict the outcome of the midterms, but I just can’t see the Democrats win, let alone bigly, because they have nothing to offer other than not being the man responsible for more jobs and -so far- slightly, slowly higher wages.

If the Democrats do take the House, they can be expected to go after Trump and his administration, with more investigations in the vein of the Mueller one, endlessly protracted innuendo that doesn’t go anywhere. The polarization might well make America a de facto ungovernable country.

If they take the Senate as well, Trump may be a lame duck, and impeachment talk will rear its ugly head again.

If the Republicans maintain control of both House and Senate, they will demand thorough investigations of the Mueller files and much more, like the Kavanaugh accusations. Not a highly desirable thing either, because it will lead to even more polarization.

But how much deeper can they dig themselves into their trenches?

Both the Democrats and the MSM have painted themselves into a tight corner. They should engage in a dialogue with Trump, but how do you do that after publicly bashing someone 24/7 for 2 years and change?

That all said, it’s obvious that it truly will be an important day today. The only good outcome, regardless of the vote, would be for everyone to sit down and talk to each other. But what are the odds of that?

via RSS https://ift.tt/2PH19yo Tyler Durden

Things have been quiet in North Korea since Secretary of State Mike Pompeo enjoyed a harmonious surprise lunch with Kim Jong Un during a visit to Pyongyang last month, where Pompeo and the Hermit Kingdom’s ‘Dear Leader’ tentatively agreed to a second summit between President Trump and Kim to be held “as early as possible.” That lunch effectively signaled that denuclearization talks between the two sides had begun again in earnest after North Korea announced that it would dismantle its main nuclear facility and several missile testing sites under international scrutiny – something that Kim tried to spin as a “gesture of good will.”

However, talks during the intervening weeks has apparently been less than productive, as the North is once again growing tired of the US’s continued insistence that a complete denuclearization will need to take place before the painful economic sanctions facing the North can be lifted.

According to NBC News, North Korea threatened to restart its nuclear program on Tuesday if the US doesn’t lift economic sanctions. While the North has relapsed into similar bellicose rhetoric since the US-NK detente began early this year, this is perhaps the most aggressive threat in that time.

The reason talks denuclearization talks have effectively stalled, according to the Washington Post, is that the Trump administration has repeatedly insisted that sanctions remain in place until the North completely dismantles its nuclear program…

“A lot of work remains, but I’m confident that we will keep the economic pressure in place until such time as Chairman Kim fulfills the commitment he made to President Trump back in June in Singapore,” Pompeo said.

…while Kim has insisted that sanctions be lifted gradually as the North slowly unravels its program.

In the statement, North Korea stopped just short of threatening to break off talks.

The statement released by the Foreign Ministry Friday evening came amid a sense of unease between Washington and Seoul over the use of sanctions and pressure to get the North to relinquish its nuclear program.

The ministry said North Korea could bring back its “pyongjin” policy of simultaneously advancing its nuclear force and economic development if the United States doesn’t change its stance.

The North came short of threatening to abandon the ongoing nuclear negotiations with the United States.

But it accused Washington of derailing commitments made by North Korean leader Kim Jong Un and President Donald Trump at their June summit in Singapore to work toward a nuclear-free Korean Peninsula, without describing how and when it would occur.

What’s worse, the threatening statement seemingly came out of nowhere. On Friday, Pompeo said in an interview with Fox News’ Sean Hannity that he had planned to talk with his North Korean counterpart, senior North Korean official Kim Yong Chol, this week.

Though we can think of one reason why this development isn’t all that surprising. Given the interminable back-and-forth between President Trump and President Xi Jinping over the framework for talks between the two leaders at the G-20, which have been confirmed many times only for senior administration officials to deny the reports, or at the very least hedge them, China may once again be growing impatient with the US, which is understandable, given its slowing economy, blossoming corporate debt defaults and the looming threat that the US could slap more tariffs on another $200 billion-plus of Chinese goods entering the US. And this wouldn’t be the first time that China may have leaned on the North to up its bellicose rhetoric to try and distract the Trump Administration from the ongoing trade war.

via RSS https://ift.tt/2PgtdZU Tyler Durden

With just hours left until the first midterm elections results are released, banks are rushing to get their last-minute previews in, with Goldman the latest to opine that the contest for control of the House majority looks fairly competitive, and repeating what everyone by now knows: Democrats appear more likely to win the majority than the Republicans are to hold it. Meanwhile, in the Senate the picture is flipped, as Democrats have a very narrow path to a majority but Republicans appear much more likely at this point to maintain control.

So for anyone still looking for a last minute pre-election status check and missed our “complete midterm elections guide“, here is what Goldman’s clients are reading right now, courtesy of the bank’s political economic Alec Phillips.

A Final Pre-Election Status Check

On November 6, all 435 members of the House and 35 Senate seats will be up for election. In addition, gubernatorial elections will be held in 36 states.

Over the last couple of weeks, the key barometers for public sentiment regarding the election have been relatively stable:

• Generic ballot: The final generic ballot polling is averaging 7-8pp to the Democratic side. The Democratic share of the popular vote has historically underperformed the Democratic generic ballot vote share, and there has also typically been variation between popular vote share and seats won. That said, a generic ballot advantage of 7-8pp is likely to be sufficient to win at least a slim majority of House seats, in our view.
• Enthusiasm gap: The ABC/Washington Post poll asks voters whether they are “certain to vote” or have already voted. Compared with the 2014 midterms the figures look good for Democrats: The share of Democrats and Democratic-leaning independents who are “certain” to vote has increased by 11pp more than Republicans and Republican-leaning independents; the non-white share has increased by 15pp more, the young share (under 39) has increased by 14pp more than the senior share, and the self-described liberal share has increased by 18pp more than the self-described conservative share. In the final CNN poll, voters who are “very enthusiastic” about voting are 8pp more Democratic leaning than those who are “less enthusiastic” about voting.
• Bottom-up House polling: Polling in individual House districts shows a more competitive landscape than top-down measures. While House race polling is unreliable, the results are broadly intuitive: among seats that analysts rank as “likely” to go to one party or the other, the party leads polling in those races by around 10pp in an average of polls; among “lean” seats the average polling margin is about 5pp in the expected direction, and among “toss-up” seats the average poll is roughly tied. Taking the average of recent polls for each individual race at face value, we find that Democrats would win a net 26 seats, just a few more than the 23 they need to win the majority. As shown in Exhibit 1, the Democratic advantage in the 23rd through 26th seat averages less than 1pp, suggesting that from a bottom-up perspective the outlook for the House is fairly uncertain.

• Bottom-up Senate polling: Taken at face value, polling in the Senate implies both parties will emerge from Tuesday’s election with the same number of seats they have now (51 Republicans, 49 Democrats). In light of the large polling deficit Democrats face in North Dakota, the most plausible path to a majority would be to hold all other seats and win Arizona and Nevada plus either Tennessee or Texas. This suggests the marginal seat the Democrats would need to win the Senate majority is leaning around 5pp in the Republican direction at the moment.

• Prediction markets: The odds on one widely followed platform, PredictIt, imply a 65% chance of a Democratic House majority but only a 16% chance of a Democratic majority in the Senate. These probabilities are roughly in line, we believe, with the consensus view among market participants.

Divided Congress Is the Base Case

A Democratic House and Republican Senate is the clear consensus view among market participants and political analysts. As such, we would not expect a substantial market reaction to this result. From a policy perspective, we would expect the following under a divided Congress outcome:

• Taxes: We expect no major tax legislation under a divided Congress scenario. However, with no major policies due to expire in 2019 or 2020, this would have little effect on our baseline fiscal policy view that tax policy goes from growth-positive to growth-neutral by late 2019. It is likely in this scenario that the Democratic House would try to pass tax legislation that redistributes the 2017 tax cut toward lower income households while also reversing the limitation on the state and local tax deduction. However, it would be very unlikely to attain the 60 votes needed in the Senate in this scenario, if it even came up for a vote.
• Spending: Under a divided Congress, we would expect Congress to approve discretionary caps for defense and non-defense spending for FY2020 and FY2021 that are roughly flat in real terms with the spending caps for 2019 that Congress approved earlier this year. This is the assumption underlying our fiscal projections.
• Infrastructure: We expect that a major infrastructure program such as the President has proposed would be unlikely under any election scenario, though some funding could be diverted toward infrastructure out of other non-defense spending, as it was this year. While President Trump and congressional Democrats have both supported infrastructure programs, the details differ substantially and, more importantly, Democrats might not be motivated to reach an agreement with the White House prior to the 2020 presidential election.
• Trade Policy: A Democratic House would be more likely than a Republican House to block the implementing legislation for the US-Mexico-Canada Agreement (USMCA), but we expect that the deal would eventually be approved. However, potential opposition could prompt President Trump to initiate the withdrawal process from the current NAFTA, forcing the House to choose between the new deal or none at all. In the absence of a legislative agenda in this environment, the White House would be more likely to pursue additional tariffs on imports from China, in our view (implementation of further tariffs by early 2019 is our base case).
• Regulatory: Control of the House would have little direct impact on the regulatory agenda, since (1) it would likely be blocked in the Senate and (2) most regulatory changes under the Trump Administration have been carried out with existing authority and have not needed congressional approval. That said, it is likely that regulatory scrutiny of some regulated industries (health care, financial services) could increase through House committees.
• Fiscal deadlines: Fiscal deadlines become riskier under a divided Congress. The next spending deadline is December 7, 2018 (before election results take effect) but this is likely to be pushed to either Q1 2019 or September 30, depending on what Congress decides after the election. Under a divided Congress, there will be a substantial risk of shutdown at the next spending deadline in 2019, though whether it happens will depend on the political environment at that point. The debt limit will be reinstated March 1, 2019 and we expect Congress will need to raise it by August. We note that the two most disruptive debt limit debates in recent memory, in 2011 and 2013, both occurred in a divided Congress.

A Republican Sweep Would Lead to More Fiscal Easing

While not widely expected, we believe many market participants view a Republican sweep as a real possibility. From a policy perspective, this outcome would differ in several respects from a divided Congress:

• Taxes: If Republicans keep control of both chambers, we would expect another tax cut in the range of $60-70bn (0.3% of GDP) as a base case, though the size would depend on the size of Republican majorities in the House and Senate (larger majorities, particularly in the Senate, would likely make room for slightly larger tax cuts). Such legislation could pass via the reconciliation process with only 51 votes in the Senate, bypassing Democratic opposition.
• Spending: Under a Republican Congress, the spending caps for FY2020 and FY2021 might be raised to a lower amount than under a divided or Democratic Congress, but we would not expect spending to be cut by the 5% the President has proposed, which would work out to around $65bn (0.3% of GDP). In this scenario, we would expect small nominal cuts of $15-30bn (0.1% of GDP) off of the FY2019 cap level.
• Infrastructure: Compared to a divided or Democratic Congress, infrastructure would likely receive less legislative attention.
• Trade Policy: USMCA passage would likely be easier in this scenario than under a divided Congress. The probability of a de-escalation of US-China trade tensions might also rise in this scenario, as the White House becomes more focused on the legislative agenda, such as passage of tax cuts, which would require the support of Republican members of Congress, including those who are concerned about the effect of retaliatory tariffs on US agriculture, among other industries.
• Regulatory: The regulatory tone might be more industry-friendly under this scenario than in others, though the odds of enactment of any major deregulatory initiatives under this scenario would be low, in our view, as it would be unlikely to attain the 60 votes necessary to pass the Senate.
• Fiscal deadlines: The spending and debt limit deadlines in 2019 would be somewhat less eventful under an all-Republican scenario, in our view. That said, growing deficits (we project a $1 trillion deficit in FY2019) and the need to secure bipartisan support for any spending extension might nevertheless make next year’s deadlines somewhat more eventful than they were over the last two years.

The Policy Consequences of a Democratic Sweep Would Be Similar to a Divided Congress

From a policy perspective, a Democratic House and Senate would be similar to a divided Congress in most respects, though there would be a few differences:

• Taxes: Using the budget reconciliation process, Democrats could pass legislation reversing some of last year’s tax cuts. President Trump would likely veto but the process could increase uncertainty, particularly regarding the medium-term fate of the tax cuts after the 2020 presidential election.
• Healthcare: President Trump and congressional Democrats have used similar rhetoric regarding drug pricing, but so far the Administration has not made substantial policy changes (though it has proposed some). Using the budget reconciliation process, a Democratic Congress would likely send legislation to the President’s desk that reduces spending on pharmaceutical and biotech products.
• Infrastructure: An infrastructure package would become at least slightly more likely under a Democratic sweep than a divided Congress, but we would not expect a major package to be enacted.
• Trade policy: The outlook would be similar to a divided Congress. A Democratic Senate would present less of a hurdle for passage of the USMCA than a Democratic House. Control of the Senate seems unlikely to alter the Administration’s stance on US-China trade.
• Regulatory: Since 60 votes are necessary in the Senate for any regulatory legislation, a Democratic majority would not be sufficient for passage. That said, the Senate is responsible for confirming nominees for regulatory agencies, so replacing departing agency heads could become more difficult.
• Fiscal deadlines: A Democratic Congress would likely have nearly as much difficulty agreeing on spending legislation or raising the debt limit as a divided Congress, in our view.

* * *

Finally, for the TL/DR crowd, here is SocGen’s simple one chart summary of the above:

 

via RSS https://ift.tt/2OqB9m5 Tyler Durden