As Republicans prepare for the midterm elections, they have focused their campaign on the failure of President Joe Biden’s administration to alleviate the cost of living crisis and rein in high inflation.
On the other hand, their economic promises have caused widespread concern, as they include cuts in federal spending as well as cuts to Social Security and Medicare programs.
With Republicans close to controlling the House of Representatives, there is no doubt that the trajectory of the US economy will lead to sharp clashes between the two parties.
In this context, here are five economic issues that will be directly affected by the outcome of the midterm elections;
1-Federal spending
Republicans focused on voters’ concerns about rising inflation and the possibility that the US could slip into recession next year.
Party members have vowed to rein in federal spending if they win majorities in the House of Representatives and the Senate.
A Republican majority in both chambers would give them the power to block any spending bill they deem costly, forcing Democrats to make concessions.
Brian Gardner, chief policy strategist at investment bank Stifel, said: “The midterm elections essentially led to a stalemate given the split between the two parties. So passing government spending bills and raising the debt ceiling will be more difficult than expected.”
2- Debt ceiling
The US faces the threat of a debt default that Republicans may try to use as leverage in federal spending negotiations.
While Republican Party leaders have pledged that the country will not default, they may struggle to convince conservative lawmakers to strike a deal with Democrats on raising the debt ceiling.
The US has previously suffered the repercussions of cross-party disagreements over raising the public debt ceiling, following credit downgrades and financial market turmoil in 2011 and 2013.
Jason Furman, Chairman of the White House Council of Economic Advisers under former US President Barack Obama, wrote on Twitter;
“The probability of something worse than 2011 is higher than ever and the consequences will be worse than ever. The near-miss in 2011 led to a massive collapse in confidence, financial market repercussions and a downgrade of US debt.”
3- Stimulus packages
The third contentious issue is stimulus packages, as observers worry that in the event of a recession, Republicans will drag their feet in supporting the Biden administration to strengthen the economy.
Observers believe that Republicans may find it difficult to support new aid packages after blaming the economic aid Biden approved in March 2021 for high inflation.
If Republicans can blame them for the recession, they may find it easier to defeat Biden and the Democrats in the next presidential election.
4-The candidacy issue
If Republicans succeed in gaining control of the Senate, it would prevent Biden from nominating officials who could win sufficient bipartisan support.
Senate Minority Leader Republican Mitch McConnell kept some executive and judicial seats open when he led the Senate during Obama’s last two years.
He could possibly force Biden to find common ground with Republicans to fill other seats.
Potential vacancies at the Treasury Department, the Federal Reserve and other financial regulators could cause a sharp clash between Democrats and Republicans in the Senate.
These challenges will also result in Biden’s inability to solidify part of his economic agenda.
5- Limiting the legislative agenda
If Republicans gain control in the House or Senate, federal financial regulators can expect intense oversight from Republican-led committees and more political pressure on several polarizing initiatives.
Republicans have strongly opposed efforts by Biden appointees to increase attention to climate-related financial risks, expand disclosures from publicly traded companies and step up efforts to oversee cryptocurrencies.
