Washington - Republican control of the House of Representatives is under pressure heading into the November midterms, but a change in the lower chamber would probably do little to halt President Donald Trump’s central policy priorities, according to Paul Ashworth, Chief North America Economist at Capital Economics.
Ashworth points out that many of the administration’s moves on immigration, trade and foreign policy have been carried out through executive action rather than new laws passed by Congress. Given that pattern, he says a Democratic majority in the House would ‘‘do little to slow down or reverse Trump’s agenda’’ because most of the key initiatives do not depend on fresh legislation.
That does not mean a Democratic takeover would be without political consequences. A House led by Democrats could open investigations or start impeachment proceedings, Ashworth cautions, but without control of the Senate there would be no realistic prospect of a conviction.
At present Republicans hold a narrow 218-213 majority in the House. Betting markets have reacted to the president’s weakened approval rating since his return to the White House and now imply roughly an 80% probability that Democrats will regain the lower chamber in November.
All 435 House seats are set to be contested on November 3, and a number of special elections in the months before that vote are expected to provide early signals about the magnitude of any voter swing.
The Senate picture looks less favorable for Democrats. Of the 35 Senate seats up for election, including two special contests, Ashworth believes the balance is unlikely to flip. Republicans currently maintain a 53-47 advantage in the upper chamber, and only a small subset of the seats at play are seen as genuinely competitive.
"If it’s a 50-50 tie, then Vice President Vance gets the casting vote, so the Democrats need to pick up four seats for a majority," Ashworth writes, noting that betting markets place the chance of Democrats flipping the Senate at around 35%.
Even in an outcome where Democrats were to secure both chambers, Ashworth highlights structural hurdles that would limit their capacity to overturn the administration’s course. They would still be well short of the 60 votes required to defeat a filibuster, and far from the two-thirds majorities in each chamber needed to override presidential vetoes.
Those institutional realities, he argues, would leave the president with continued latitude to press forward on immigration, trade and foreign policy through executive means.
Aside from legislative dynamics, Ashworth examines how the electoral calendar might alter fiscal decision-making. He suggests that political pressure could build for Republicans to deploy last-stage fiscal stimulus to buoy their standing before the vote. However, he expresses scepticism that such measures will be forthcoming.
The rationale for his caution is fiscal: the budget deficit is already close to 6% of GDP and could approach 7% if IEEPA-related tariffs are declared illegal and the Treasury is obliged to return in excess of $100 billion previously collected. Under those potential circumstances, Ashworth doubts that Republican deficit hawks would back another round of direct stimulus checks.
Ashworth also flags more unconventional risks tied to the electoral process itself. He raises the possibility that President Trump might try to intervene in or challenge the elections, pointing to claims of Democratic "rigging" or possible civil unrest related to immigration enforcement actions.
While he does not expect constitutional safeguards surrounding elections to be trumped, Ashworth warns that such efforts could be poorly received by financial markets. He further cautions that if Republicans lose seats, the president could seek to contest the outcome during the lame-duck period, since the next Congress is not scheduled to convene until January 2027.
Summary
Capital Economics' Paul Ashworth contends that a Democratic takeover of the House is probable according to markets but would not necessarily obstruct President Trump’s policy agenda because many measures have been executed through executive authority. Senate control, filibuster rules and veto protections limit the capacity of Congress to reverse those actions. Ashworth also highlights fiscal constraints and electoral legal risks as additional areas of concern for markets and policymakers.
Key points
- Betting markets put the probability of Democrats retaking the House at about 80%, while the odds of flipping the Senate are roughly 35%. These outcomes influence expectations in political and financial markets.
- The president has relied heavily on executive action for immigration, trade and foreign policy, which reduces the need for congressional legislation and constrains the practical impact of a House switch. This has particular implications for trade-sensitive sectors and companies exposed to regulatory policy, as well as markets monitoring policy continuity.
- Fiscal dynamics - with the deficit near 6% of GDP and the potential to rise toward 7% if certain tariffs must be refunded - make renewed, large-scale fiscal stimulus unlikely, affecting fixed-income markets and sectors sensitive to consumer stimulus.
Risks and uncertainties
- Political risk: A Democratic House could initiate investigations or impeachment proceedings, but without Senate control there is no prospect of conviction. This uncertainty can create volatility in equities and fixed income.
- Fiscal risk: A ruling that IEEPA-related tariffs are illegal and require refunds of more than $100 billion would worsen the deficit, making additional stimulus politically difficult. Bond markets and interest-rate expectations could be affected.
- Electoral process risk: The possibility of presidential attempts to intervene in or contest the election, or of civil unrest tied to immigration enforcement, could be poorly received by financial markets even if constitutional protections hold. Broad market sentiment could be sensitive to such developments.
Tags
politics, elections, economy, markets