The One Washington Scenario That Would Stun the Markets
Author: Greg Valliere
November 14, 2022
BUT THERE’S ONE SCENARIO that would be a stunner in Washington and on Wall Street: Democrats’ retention of the House, which is doubtful but not totally out of the question as recounts continue this week.
MOST ANALYSTS, INCLUDING US, think the Republicans will win just enough seats to capture the House, perhaps with a majority of a half dozen seats. That’s dramatically lower than we expected a week ago, but it’s enough to give the GOP an effective veto over progressive legislation proposed by President Biden and the Democrats.
THIS COULD GET MESSY FOR THE REPUBLICANS, who face a simmering revolt from the far right, which could block the election of Rep. Kevin McCarthy, the very shaky favorite to become House Speaker. What initially appeared to be a disappointing election for the GOP could be a disastrous outcome if the party can’t pick a Speaker for weeks to come.
McCARTHY WILL HAVE TO MAKE CONCESSIONS to the far right, which would reinforce the GOP’s albatross: moderate voters think Republicans are too extreme, yet McCarthy will have no choice but to deal with the Freedom Caucus and other House hard-liners.
PRESIDENT BIDEN, MEANWHILE, now has a Senate majority that doesn’t depend on Sen. Joe Manchin, and Biden will prevail with dozens of judicial appointments, which require a simple majority. Biden would like to press ahead with more spending and tax hikes, but that would be blocked in the House — assuming the Republicans maintain control.
WE THINK GRIDLOCK will dominate, with bitter battles over spending that will resume soon. Between now and Jan. 3, when the next Congress convenes, a lame duck session will heat up over spending; Biden and the Democrats are determined to raise the debt ceiling and agree on a massive budget package before the current deal expires in mid-December.
REPUBLICANS ON THE DEFENSIVE: They’re bitter over the election surprise, which showed more support for Democrats than the polltakers — wrong again — had predicted among young women, Hispanics and independents. Now the GOP has to deal with Donald Trump.
THE INTENSE ANTIPATHY TOWARD TRUMP within the party is now out in the open. Trump was besieged with pleas this weekend as party leaders — and the Murdoch news empire — begged Trump not to announce his candidacy tomorrow. But it appears that he’s determined to announce nearly two years before the next election, dividing the party even more.
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